Exhibit 10.2
 
CONFIDENTIAL TREATMENT REQUESTED.
CONFIDENTIAL PORTIONS OF THIS DOCUMENT
HAVE BEEN REDACTED AND HAVE BEEN FILED
WITH THE COMMISSION.

 
 
 
AMENDED AND RESTATED
 
ENGINEERING, PROCUREMENT AND CONSTRUCTION AGREEMENT
 
by and between
 
OAK GROVE MANAGEMENT COMPANY LLC
 
and
 
FLUOR ENTERPRISES, INC.
 
dated June 8, 2007
 

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TABLE OF CONTENTS

 
 
1.
 
DEFINITIONS AND RULES OF INTERPRETATION
Page
2
 
1.1
Definitions
2
 
1.2
Exhibits
16
 
1.3
Interpretation
16
 
1.4
Headings
17
 
1.5
Conflicts in Documentation
17
 
1.6
Documentation Format
17
2.
RESPONSIBILITIES OF OWNER
17
 
2.1
Project Representative
17
 
2.2
Operating Personnel
18
 
2.3
Ministerial Assistance
18
 
2.4
Owner Acquired Permits
18
 
2.5
Access to Site and Owner Furnished Equipment
18
 
2.6
Owner Provided Facilities and Services
18
 
2.7
Owner Furnished Equipment
19
 
2.7.1
Access
19
 
2.7.2
Upgrade Contracts
19
 
2.8
Commodity and Transmission Scheduling
19
3.
RESPONSIBILITIES OF CONTRACTOR
19
 
3.1
Turnkey Basis
19
 
3.2
Performance of Work
20
 
3.3
Design and Construction of Project
20
 
3.4
Project Director
20
 
3.5
Owner Furnished Equipment
20
 
3.5.1
Assumption or Execution of Upgrade Contracts
20
 
3.5.2
Assignment of Upgrade Contracts
20
 
3.5.3
Management of Upgrade Contracts
21
 
3.5.4
Inspection, Delivery and Installation of Owner Furnished Equipment
21
 
3.5.5
Costs
21
 
3.5.6
Upgrade Suppliers
21
 
3.5.7
Existing Boiler Components
22
 
3.5.8
Owner Furnished Equipment Not Utilized
22
 
3.6
Utilities and Services
23
 
3.6.1
Provision of Services
23
 
3.6.2
Payment
23
 
3.6.3
Supply of Construction Facilities
23
 
3.6.4
Operating Consumables
23
 
3.7
Inspection by Contractor
23
 
3.8
Organization
24
 
3.9
Contractor Acquired Permits
24

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TABLE OF CONTENTS
(continued)

 
3.10
Hazardous Materials Disposal System
24
 
3.11
Maintenance of Site
24
 
3.12
Site Security
25
 
3.13
Safety
25
 
3.14
Expediting
26
 
3.15
Applicable Laws and Permits
26
 
3.16
Quality Assurance Programs
27
 
3.17
Access
27
 
3.18
Delivery of Documents; Owner Review
27
 
3.18.1
Submittals
27
 
3.18.2
Operational Documents
27
 
3.19
Training of Operating Personnel
27
 
3.19.1
Commencement of Training
27
 
3.19.2
Design and Review of Training Program
28
 
3.20
Spare Parts.
28
 
3.20.1
Spare Parts Schedules
28
 
3.20.2
Start-up Spare Parts
28
 
3.20.3
Spare Parts Procurement
28
 
3.21
Start Up Personnel
28
 
3.22
Commodity Scheduling
29
 
3.23
Contractor as Agent
29
4.
COVENANTS, WARRANTIES AND REPRESENTATIONS
29
 
4.1
Contractor
29
 
4.1.1
Organization, Standing and Qualification
29
 
4.1.2
Professional Skills
29
 
4.1.3
Due Authorization; Enforceability
30
 
4.1.4
No Conflict
30
 
4.1.5
Government Approvals
30
 
4.1.6
No Suits, Proceedings
30
 
4.1.7
Intellectual Property
30
 
4.1.8
Business Practices
30
 
4.1.9
Owner Provided Information
31
 
4.1.10
Legal Requirements
31
 
4.1.11
Financial Condition
31
 
4.1.12
Licenses
31
 
4.1.13
Exclusivity
31
 
4.2
Owner
32
 
4.2.1
Organization, Standing and Qualification
32
 
4.2.2
Due Authorization; Enforceability
32
 
4.2.3
No Conflict
32
 
4.2.4
Governmental Approvals
32
 
4.2.5
No Suits, Proceedings
32
 
4.2.6
Owner Parent Guarantee
32
 
4.2.7
Agency Subcontracts
33

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TABLE OF CONTENTS
(continued)

5.
COST OF WORK
33
 
5.1
Separated Target Price
33
 
5.2
Separated Contract Price
34
 
5.3
Open Book Review
34
 
5.3.1
Leased Equipment
34
 
5.3.2
Development of Schedule of Payment Values and Estimated Cancellation Costs
34
 
5.4
All Items of Work Included
34
 
5.5
Bonuses
35
 
5.5.1
Schedule Bonus
35
 
5.5.2
Performance Bonus
35
 
5.6
Payment of Bonuses
36
 
5.7
Texas Sales and Use Taxes
36
 
5.7.1
Separated Contract
36
 
5.7.2
Texas Direct Payment Permit and Other Matters
36
 
5.7.3
Certain Reimbursements
36
 
5.7.4
Statements and Other Information
36
 
5.8
Other Taxes
37
 
5.9
Cooperation Regarding Taxes
37
 
5.10
Credit for Payments made by Owner under the STG Upgrade Contract
38
 
5.11
Labor Committees
38
6.
TERMS OF PAYMENT
39
 
6.1
Invoice Payments
39
 
6.2
Progress Assessment
39
 
6.3
Contractor’s Invoices
39
 
6.3.1
During Open Book Review
39
 
6.3.2
After Completion of Open Book Review
39
 
6.4
Subcontractor Statements
40
 
6.5
Subcontractor Invoices
41
 
6.6
Owner Review
41
 
6.7
Payments
41
 
6.8
Retainage
42
 
6.8.1
Retainage
42
 
6.8.2
Letter of Credit
42
 
6.8.3
Release of Retainage
42
 
6.9
Final Payment
43
 
6.10
Method of Payment
44
 
6.11
Disputes Regarding Payments
44
 
6.12
Holdbacks
45
 
6.12.1
Owner Holdbacks
45
 
6.12.2
Notice of Withholding; Notice of Correction
46
 
6.12.3
Payment Following Notice of Correction
46
 
6.12.4
Limitation on Contractor’s Rights
46

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TABLE OF CONTENTS
(continued)

 
6.13
Application of Monies
46
 
6.14
Release of Liability
46
 
6.15
Certifications
47
 
6.15.1
Payment Certifications
47
 
6.15.2
Certifications on Final Payment
47
7.
COMMENCEMENT AND SCHEDULING OF THE WORK
47
 
7.1
Notices to Proceed
47
 
7.1.1
Pre-Contract Letter of Authorization
47
 
7.1.2
Phase One EPC Activities
48
 
7.1.3
Full Notice to Proceed
48
 
7.2
Contractor’s Acknowledgment
48
 
7.3
Prosecution of Work
48
 
7.4
Project Schedule
48
 
7.4.1
Project Schedule
48
 
7.4.2
Milestone Items
49
 
7.5
Progress Reporting
49
 
7.6
Meetings
49
8.
FORCE MAJEURE and AN EXCUSABLE EVENT
49
 
8.1
Force Majeure
49
 
8.2
Notice
50
 
8.3
Scope of Suspension; Duty to Mitigate
50
 
8.4
Removal of Force Majeure
50
 
8.5
Responsibility of Contractor
51
 
8.6
Contractor’s Remedies
51
 
8.6.1
Force Majeure
51
 
8.6.2
Excusable Event
51
 
8.6.3
Changes In Work
52
 
8.7
Owner’s Right to Terminate
52
9.
SUBCONTRACTORS AND VENDORS
52
 
9.1
Use of Subcontractors
52
 
9.2
Agency Subcontracts Prior to Assignment
52
 
9.3
Use of Contractor’s Affiliates
53
 
9.4
Assignment
53
 
9.5
Information and Access
53
 
9.6
Terms in Subcontracts
53
 
9.7
Minority and Women-Owned Businesses
55
10.
LABOR RELATIONS
55
 
10.1
General Management of Employees
55
 
10.2
Worker Recruitment and Training Program
55
 
10.3
Labor Disputes
56
 
10.4
Personnel Documents
56

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TABLE OF CONTENTS
(continued)

 
10.5
Key Personnel
56
 
10.6
Replacement of Employees and Other Persons at Owner’s Request
56
11.
INSPECTION; EFFECT OF REVIEW AND COMMENT
57
 
11.1
Right to Reject Work
57
 
11.2
Inspection
57
 
11.3
Contractor Submittals Table
57
 
11.4
Owner Review of Documents
57
 
11.5
Remedy of Flaws
58
12.
SITE CONDITIONS
58
 
12.1
Site Conditions
58
 
12.2
Differing Site Conditions
58
 
12.3
Unforeseen Site Conditions
58
13.
PERFORMANCE GUARANTEES AND TESTS
58
 
13.1
Performance Guarantees and Other Requirements
58
 
13.2
Start up and Commissioning Procedures
59
 
13.3
Acceptance Test Procedures
59
 
13.4
Acceptance Test Schedules
59
 
13.5
Testing
59
 
13.6
Non-Conforming Work
59
 
13.7
Certificate of Completion of Testing
60
 
13.8
Revenues
60
 
13.9
Post Test Modifications
60
14.
SUBSTANTIAL COMPLETION AND FINAL COMPLETION
60
 
14.1
Punchlists
60
 
14.1.1
Creation of Punchlists
60
 
14.1.2
Completion of Punchlists
61
 
14.1.3
Owner’s Punchlist Option
61
 
14.2
Substantial Completion
62
 
14.3
Notice of Substantial Completion
62
 
14.4
Final Completion
63
 
14.5
Notice of Final Completion
64
 
14.6
Contractor’s Access After Substantial Completion and Final Completion
64
15.
LIQUIDATED DAMAGES
65
 
15.1
Liquidated Damages for Delay in the Substantial Completion Dates
65
 
15.2
Intentionally Omitted
65
 
15.3
Liquidated Damages for Failure to Satisfy Net Unit Capacity and Net Unit Heat
Rate Guarantees
65
 
15.4
Actions During the Cure Period
66
 
15.4.1
If Minimum Performance Criteria are Satisfied
66
 
15.4.2
Remedial Plans
66

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TABLE OF CONTENTS
(continued)

 
15.4.3
Prosecution of Remedial Plan
67
 
15.4.4
Additional Remedial Plans
67
 
15.4.5
Election of Option
67
 
15.4.6
Buy-Down Not Available
67
 
15.4.7
Access During Cure Period
67
 
15.4.8
Operations During Cure Period
68
 
15.4.9
Shut Downs During Cure Period
68
 
15.5
Extension of Cure Period
69
 
15.6
Sole Remedy; Liquidated Damages Not a Penalty
69
 
15.7
Enforceability
69
 
15.8
True-Up
70
16.
CHANGES IN THE WORK
70
 
16.1
Change In Work
70
 
16.2
By Owner
71
 
16.3
Adjustment to Substantial Completion Guaranteed Dates and Separated Contract
Price Due to Certain Events.
71
 
16.3.1
Adjustments to Substantial Completion Guaranteed Dates
71
 
16.3.2
Adjustments to Separated Target Price and Separated Contract Price
72
 
16.3.3
Adjustments to Separated Contract Price
72
 
16.4
Preparation of Change In Work Form
72
 
16.5
Execution of Change In Work Form
73
 
16.6
No Obligation or Payment Without Executed Change In Work Form
73
 
16.7
Owner Directives
73
 
16.8
Disputed Changes In Work
74
 
16.9
Changes in Work All Inclusive
74
 
16.10
No Suspension
74
 
16.11
Change for Contractor’s Convenience
74
17.
WARRANTIES CONCERNING THE WORK
74
 
17.1
Work Warranty
74
 
17.2
Materials Warranty
75
 
17.3
Warranty Period
75
 
17.4
Enforcement by Owner
75
 
17.5
Exclusions
76
 
17.6
Subcontractor Warranties
76
 
17.7
Correction of Errors or Omissions and Defects
77
 
17.7.1
Notice of Warranty Claim
77
 
17.7.2
Owner Performance
78
 
17.7.3
Replaced Components Demonstrations
78
 
17.7.4
Continual Failure of Component
78
 
17.7.5
Owner’s Warranty Option
79
 
17.8
Limitations On Warranties
79

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TABLE OF CONTENTS
(continued)

18.
EQUIPMENT IMPORTATION; TITLE
79
 
18.1
Importation of Equipment and Materials
79
 
18.2
Title
80
 
18.2.1
Condition
80
 
18.2.2
Transfer
80
 
18.2.3
Custody During Performance
80
 
18.3
Protection
80
 
18.4
Owner Possession
80
19.
DEFAULT
80
 
19.1
Contractor Events of Default
80
 
19.2
Owner’s Rights and Remedies
82
 
19.3
Damages for Contractor Default
83
 
19.4
Owner Event of Default
83
 
19.5
Contractor’s Remedies
84
20.
TERMINATION FOR CONVENIENCE AND SUSPENSION
85
 
20.1
Termination for Convenience
85
 
20.1.1
Owner’s Right to Terminate; Payment
85
 
20.1.2
Limitation on Payment
85
 
20.1.3
Owner’s Right to Elect to Assume Obligations with Subcontractors
85
 
20.2
Contractor Conduct
86
 
20.3
Nature of Termination Payments
86
 
20.4
Suspension by Owner
86
 
20.4.1
Contractor’s Termination Right
86
 
20.4.2
Extension of Time and Compensation Rights
87
 
20.5
Claims for Payment
87
 
20.6
Suspension for Cause
87
21.
INSURANCE
88
 
21.1
Owner Controlled Insurance Program
88
 
21.1.1
OCIP Coverages
88
 
21.1.2
OCIP Costs
88
 
21.1.3
OCIP Deductibles
88
 
21.1.4
Participation
89
 
21.1.5
Enrollment
89
 
21.1.6
OCIP Administration
89
 
21.1.7
Coverage
90
 
21.1.8
OCIP Insurance Policies
90
 
21.1.9
Commencement of Work
90
 
21.1.10
Non-Violation
90
 
21.1.11
Payroll Reports
90
 
21.1.12
Audit Rights and Closeout Reports
91
 
21.1.13
Dividends and Refunds
91

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TABLE OF CONTENTS
(continued)

 
21.1.14
Safety and Accident Reporting
91
 
21.1.15
Modification and Termination
91
 
21.1.16
Duplication; Cancellation
91
 
21.1.17
Work After Termination of OCIP Coverage
92
 
21.2
Contractor’s Additional Insurance
92
 
21.2.1
Insurance Policies
92
 
21.2.2
Effectiveness
92
 
21.2.3
General Requirements
92
 
21.3
Subcontractors’ Insurance
93
 
21.4
Subrogation Waivers
93
 
21.5
Insurance Coverages
93
 
21.6
Failure to Maintain Insurance
94
 
21.7
Claims Compensation
94
22.
RISK OF LOSS OR DAMAGE
94
 
22.1
Contractor Assumption of Risk
94
 
22.1.1
Risk of Loss
94
 
22.1.2
Repair or Replacement
94
 
22.1.3
Payment Amounts
95
 
22.2
Risk of Loss After Substantial Completion
95
23.
INDEMNIFICATION
95
 
23.1
By Contractor
95
 
23.2
By Owner
97
 
23.3
Patent Infringement and Other Indemnification Rights
98
 
23.4
Use of Electronic Data Files
99
 
23.5
Claim Notice
99
 
23.6
Survival of Indemnity Obligations
100
24.
TREATMENT OF CONFIDENTIAL INFORMATION
100
 
24.1
Confidential Information
100
 
24.2
 Applicable Law Disclosures
101
 
24.3
Ownership of Confidential Information
101
 
24.4
Remedies
102
 
24.5
Exclusions
102
25.
INVENTIONS AND LICENSES
102
 
25.1
Invention, License
102
 
25.2
Contractor Deliverables
103
 
25.3
Software Licenses
103
 
25.4
Warranty
103
 
25.5
Subcontractors
103
26.
ASSIGNMENT BY OWNER
104
 
26.1
Assignment
104

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TABLE OF CONTENTS
(continued)

 
26.1.1
Assignment to Financing Entities
104
 
26.1.2
Assignment to an Affiliate of Owner
104
 
26.1.3
Assignment to Other Persons
105
 
26.1.4
Assignment in Violation
107
 
26.1.5
Owner Indemnitee to Include Successors and Assigns
107
 
26.2
Transfer of Work; Third-Party Beneficiaries
107
27.
ASSIGNMENT BY CONTRACTOR
107
28.
Hazardous Materials
107
 
28.1
Use by Contractor
107
 
28.2
Remediation by Contractor
107
 
28.3
Notice of Hazardous Materials
108
 
28.4
Suspension and Mitigation
108
 
28.5
Pre-Existing Contamination
108
 
28.6
Handling Pre-Existing Contamination as part of the Work
108
29.
Non-Payment Claims
109
30.
NOTICES AND COMMUNICATIONS
110
 
30.1
Requirements
110
 
30.2
Effective Time
110
 
30.3
Representatives
110
31.
LIMITATIONS OF LIABILITY AND REMEDIES
111
 
31.1
Limitations on Damages
111
 
31.2
Limitations on Contractor’s Liability
111
 
31.2.1
Maximum Liability Amount
111
 
31.2.2
Maximum Liquidated Damages
112
 
31.2.3
Calculation of Liability
112
 
31.3
Specific Performance
112
 
31.4
Limitation on Owner’s Liability
112
 
31.5
Releases, Indemnities and Limitations
113
 
31.6
Representations and Remedies
113
 
31.7
Limitation on Remedies
113
32.
DISPUTES
113
 
32.1
Negotiations
113
 
32.2
Disputed Invoice Payments and Changes In Work
114
 
32.3
Work to Continue
114
33.
MISCELLANEOUS
114
 
33.1
Severability
114
 
33.2
Governing Law; Consent to Jurisdiction and Venue
114
 
33.3
Survival of Termination
115
 
33.4
No Oral Modification
115
 
33.5
No Waiver
115

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TABLE OF CONTENTS
(continued)

 
33.6
Review and Approval
115
 
33.7
Time
116
 
33.8
Third Party Beneficiaries
116
 
33.9
Financing Matters
116
 
33.9.1
Contractor Cooperation
116
 
33.9.2
Documents Requested by Financing Entities
117
 
33.10
Other Assistance
117
 
33.11
Further Assurances
117
 
33.12
Record Retention
117
 
33.13
Binding on Successors, Etc
117
 
33.14
Merger of Prior Contracts
117
 
33.15
Counterparts
118
 
33.16
Opinions of Contractor’s Counsel
118
 
33.17
Set-Off
118
 
33.18
Attorneys’ Fees
118
 
33.19
Announcements; Publications
118
 
33.20
Independent Contractor
118
 
33.21
Non-Solicitation
119
 
33.22
Audit
119

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EXHIBITS

A-1
 
Statement of Work and Specifications –       General Requirements (Div. 1 & 1A)
A-2
Statement of Work and Specifications –        Air Quality Control Equipment
(Div. 3A)
(Purchase Order # A2YF-4-0501-00 /
A2YF10009)
A-3
Statement of Work and Specifications –        Balance of Plant Equipment
(Div. 1, Appendix A, B & C)
A-4
Statement of Work and Specifications –        Steam Generator Completion
Contracts for \
Unit 1 (Purchase Order # A2YF-4-0502-00 /
A2YF10011) and Unit 2 (Purchase Order #
A2YF-4-0503-00 / A2YF10010)
B
Owner Furnished Equipment and Materials
B-1
STG Upgrade Contract
C
Owner and Contractor Acquired Permits
D
Schedule of Payment Values and Estimated Cancellation Costs
E
Change In Work Form
F
Form of Contractor’s Invoice
F-1
Conditional Waiver and Release Upon Milestone or Progress Payment
F-2
Intentionally Omitted
F-3
Conditional Waiver and Release Upon Final Payment
F-4
Unconditional Waiver and Release Upon Final Payment
G
Milestone Items and Project Schedule
H
Open Book Review Process
I-1
Performance Guarantees, Acceptance Tests and Testing Procedures
I-2
Performance Calculations
J
Key Personnel
K
Form of Monthly Progress Report
L
Legal Description of Oak Grove Property
M
Project Plant and Site Drawing
N-1
Contractor Provided Insurance
N-2
OCIP Insurance Coverage
N-3
Form of OCIP Enrollment Summary
O
Approved Subcontractors and Suppliers
P
Form of Letter of Credit
Q
Intentionally Omitted
R
Interface Requirements
S
Check-out, Start up and Initial Operations
T
Separated Target Price
U
Intentionally Omitted
V
Construction Requirements
W
Owner Provided Information
X
Form of Assignment and Assumption Agreement
Y
Contractor’s Rate Schedule
Z-1
Contractor Parent Guaranty
Z-2
Owner Parent Guaranty
AA
Owner’s Draft Air Permit for the Project

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EXHIBITS
(continued)
BB
Separated Contract Price
CC
Phase One EPC Activities
DD
Open Items
EE
Craft Labor Compensation
   

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This AMENDED AND RESTATED ENGINEERING, PROCUREMENT, AND CONSTRUCTION AGREEMENT
(this “Agreement”) is made and entered into as of this 8th day of June, 2007
between OAK GROVE MANAGEMENT COMPANY, LLC ( “Owner”), and FLUOR ENTERPRISES,
INC. ( “Contractor”), to amend and restate the Engineering, Procurement and
Construction Agreement entered into by Owner and Contractor as of June 2, 2006
(the “Original Agreement”), as amended by the Amendment to the Engineering,
Procurement and Construction Agreement entered into by Owner and Contractor as
of February 5, 2007 (the “Amendment”).  Each of Owner and Contractor is
sometimes individually referred to herein as a “Party” and both are sometimes
collectively referred to herein as the “Parties.”
 
RECITALS
 
A.           Owner desires to develop, finance, construct, own and operate an
approximately 1,600 megawatt (net load) coal-fired generation facility to be
located approximately 40 miles southeast of Waco in Robertson County, Texas.
 
B.           Pursuant to the Original Agreement, Owner engaged Contractor to
design, engineer, procure, install, construct, test, commission and start up the
Project and to train the persons who will operate and maintain the Project, for
the Separated Contract Price stated herein and on a turnkey basis, and
Contractor agreed to provide such services, all in accordance with the terms and
conditions set forth in this Agreement, including Sections 3.1 and 3.2.
 
C.           Owner owns the Owner Furnished Equipment that will be used in the
Project.  Contractor shall be responsible for incorporating the Owner Furnished
Equipment into the design and installing the Owner Furnished Equipment as part
of the Project as applicable and in accordance with the terms of this Agreement.
 
D.           Contractor has: (1) been provided and reviewed the conceptual
drawings for the Project and all other documents relating to the Project,
including the Upgrade Contracts and information regarding the OCIP,
(2) inspected the real property on which the Project shall be constructed and
the Owner Furnished Equipment, and (3) performed or reviewed such other
investigations, studies, and analyses that Contractor has determined to be
necessary or prudent in connection with entering into this Agreement.
 
E.           Contractor is willing to guarantee the timely completion and
operating performance of the Project, in accordance with the terms and
conditions hereof.
 
F.           WHEREAS, the Parties desire to amend and restate the Original
Agreement to incorporate the terms of the Amendment.
 
NOW, THEREFORE, in consideration of the sums to be paid to Contractor by Owner
and of the covenants and agreements set forth herein, the Parties agree as
follows:
 
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AGREEMENT
 
1.           DEFINITIONS AND RULES OF INTERPRETATION 
 
1.1           Definitions.  For the purposes of this Agreement, except as
otherwise expressly provided or unless the context otherwise requires, the
following terms shall have the following meanings.
 
“Abandons” means for the purposes of Section 19.1(h), that Contractor has
substantially reduced personnel at the Site or removed required equipment from
the Site such that Contractor would not reasonably be capable of maintaining
progress sufficient to achieve Substantial Completion of a Unit by such Unit’s
the Substantial Completion Guaranteed Date.
 
“Abnormally Severe Weather Conditions” means abnormally severe or extreme
storms, including hurricanes, tornadoes, rain, snow or hail storms or abnormally
severe lightning, taking into consideration the period of time when such storms
occur and the location of the Site.
 
“Acceptance Tests” means the Performance Tests and the Emission Tests.
 
“Acceptance Tests Procedures” means the written test procedures, standards,
protective settings, and testing programs for the Acceptance Tests as set forth
in Section 13.3 and Exhibit I.
 
“Affiliate” means with respect to any Person, another Person that is controlled
by, that controls, or is under common control with, such Person.  For purposes
of this definition, “control” with respect to any Person shall mean the ability
to effectively control, directly or indirectly, the operations and business
decisions of such Person whether by voting of securities or partnership
interests or any other method.  Without limiting the foregoing, an Affiliate of
a Person shall include any other Person in which such Person holds twenty
percent (20%) or more of the outstanding equity or ownership interests.
 
“Agency Subcontracts” shall have the meaning set forth in Section 3.23.
 
“Agreement” means this Amended and Restated Engineering, Procurement, and
Construction Agreement, including all Exhibits hereto, as the same may be
modified, amended, or supplemented from time to time in accordance with the
terms hereof, and the Submittals as approved or accepted, as applicable, by
Owner.
 
“Ancillary Sites” means the Forest Grove site located near Athens, Texas and the
warehouse located approximately five (5) miles from the Site at which Owner has
stored portions of the Owner Furnished Equipment, both of which are owned and
controlled by Owner or an Affiliate of Owner.
 
“Applicable Laws” means and includes any applicable statute, license, law, rule,
regulation, code, ordinance, judgment, decree, writ, legal requirement, order or
the like, of any national, federal, provincial, state or local court or other
Governmental Authority, and the written interpretations thereof, including any
statute, law, rule, regulation, code, ordinance, judgment, decree, writ, order
or the like, regulating, relating to or imposing liability or standards of
conduct concerning: (i) Contractor, the Site or the performance of any portion
of the Work or the Work
 
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taken as a whole, or the operation of the Project; or (ii) safety and the
prevention of injury to persons and the damage to property on, about or adjacent
to the Site or any other location where any other portion of the Work shall be
performed; or (iii) protection of human health or the environment or emissions,
discharges, releases or threatened releases of pollutants, contaminants,
chemicals or industrial, toxic or hazardous substances or wastes into the
environment including ambient air, surface water, ground water, or land, or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport, or handling of pollutants, contaminants,
chemicals, Hazardous Materials or other industrial, toxic materials or wastes,
as now or may at any time hereafter be in effect.
 
“Applicable Permits” means each and every national, state, local or other
license, consent, appraisal, authorization, ruling, exemption, variance, order,
judgment, decree, declaration, regulation, certification, filing, recording,
permit or other approval with, from or of any Governmental Authority, including
each and every environmental, construction, operating or occupancy permit and
any agreement, consent or approval from or with any other Person, that is
required by any Applicable Law or that is otherwise necessary for the
performance of the Work or operation of the Project, including the Owner
Acquired Permits and the Contractor Acquired Permits.
 
“Boilers” means the boilers and the auxiliary components associated therewith
described on Exhibit B hereto, which shall be installed and incorporated into
the Project by Contractor.
 
“Boiler Upgrade Contracts” means that certain Purchase Order to be executed
between Contractor and Alstom Power Inc. for the upgrade of the Unit 1 Boiler
and that certain Purchase Order to be executed between Contractor and The
Babcock & Wilcox Company for the upgrade of the Unit 2 Boiler.
 
“Boiler Upgrade Suppliers” means Alstom Power Inc. and The Babcock & Wilcox
Company.
 
“Business Day” means a day, other than a Saturday or Sunday or a public holiday,
on which banks are generally open for business in Dallas, Texas and New York,
New York.
 
“Change In Law” means the enactment, adoption, promulgation, modification, or
repeal after the date of the Amendment of any Applicable Law, or the
modification after the date of this Agreement of any Applicable Permit issued or
promulgated by any Governmental Authority that establishes requirements that
affect Contractor’s costs or schedule for performing the Work or the issuance,
after the date of this Contract, of any Applicable Permit that includes
requirements, that affect Contractor’s costs or schedule for performing the
Work; provided, however, a change in any national, federal, state, provincial or
any other income or franchise tax law shall not be a Change In Law pursuant to
this Agreement.
 
“Change In Work” means a change in the Work as defined in Section 16.1.
 
“Change In Work Form” means the form attached hereto as Exhibit E.
 
“Claim Notice” shall have the meaning set forth in Section 23.5.
 
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“Component” shall have the meaning set forth in Section 17.7.3.
 
“Conditional Waiver and Release Upon Final Payment” means a written statement in
the form attached hereto as Exhibit F-3, containing a waiver and release of
liens prepared and executed by Contractor or a Major Subcontractor, as
applicable, pursuant to which a Person conditionally waives and releases all
mechanic’s liens, stop notices and bond rights with respect to all Work,
conditioned only upon final payment.
 
“Conditional Waiver and Release Upon Milestone or Progress Payment” means a
written statement in the form attached hereto as Exhibit F-1, containing a
waiver and release of liens prepared and executed by Contractor or a Major
Subcontractor, as applicable, pursuant to which a Person conditionally waives
and releases all mechanic’s liens, stop notices and bond rights with respect to
all Work for which Contractor requested payment in the current Contractor’s
Invoice, conditioned only upon payment of the amount set forth therein.
 
“Confidential Information” means information, ideas or materials, including such
information, ideas or materials containing elements of Owner’s or its
Affiliates’ proprietary operating system, now or hereafter owned by or otherwise
in the possession or control of, or otherwise relating to, one Party or any of
its Affiliates, including proprietary or non-public information concerning such
Party’s or its Affiliates’ business, operations, financial condition,
projections, or assets, historical information, inventions, business or trade
secrets, know-how, techniques, data, reports, drawings, specifications,
blueprints, flow sheets, designs, or engineering, construction, environmental,
operations, marketing or other information, disclosed by one Party (the
“transferor”) to the other Party or any of its Affiliates or any of their
respective directors, employees or agents (the “transferee”); provided, however,
“Confidential Information” of Owner shall also mean information, ideas or
materials related to the Work or the Project that are: (a) obtained, developed
or created by or for Contractor directly through the use of Owner’s Confidential
Information in connection with the Work; (b) disclosed by Owner or any of its
Affiliates; or (c) deduced by Contractor or any of its Affiliates or any of
their respective directors, employees or agents from Confidential Information
supplied by Owner or of its Affiliates or agents, or as a result of visits by
Contractor or any of its Affiliates or any of their respective directors,
employees or agents to the premises of Owner or any of its respective
Affiliates, which relate to the Project.
 
“Contractor” shall have the meaning set forth in the preamble.
 
“Contractor Acquired Permits” shall have the meaning set forth in Section 3.9
and shall be those set forth in Exhibit C.
 
“Contractor Deliverables” means all of the design criteria, system descriptions,
Required Manuals, Submittals, design calculations, quality assurance reports and
all other material documents relating to the Project to be delivered to Owner
for review and comment in accordance with the requirements of Exhibit A and
Section 11.3.
 
“Contractor Event of Default” shall have the meaning set forth in Section 19.1.
 
“Contractor Lien” shall have the meaning set forth in Article 29.
 
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“Contractor’s Indemnitee” shall have the meaning set forth in Section 23.2.
 
“Contractor’s Invoice” means an invoice from Contractor to Owner in accordance
with Section 6.2 and in the form of Exhibit F hereto.
 
“Contractor Submittals Table” means the table of Contractor Deliverables to be
prepared by Contractor in accordance with Section 11.3 of this Agreement.
 
“Craft Labor Compensation Escalation Amount” means the amount calculated as set
forth in and in accordance with Exhibit EE.
 
“Critical Path Item(s)” means the items identified as critical path items on the
Project Schedule.
 
“Cure Period” means for each Unit the period beginning on the Substantial
Completion Date for such Unit and ending one hundred eighty (180) days later, as
adjusted pursuant to Section 15.5.
 
“Defect” means any Equipment and Materials, or installation or other workmanship
(including the installation of the Owner Furnished Equipment) that: (a) does not
conform to the Statement of Work or the Submittals; (b) is of improper or
inferior workmanship or material in that it fails to comply with Industry
Standards, as applicable; or (c) is otherwise inconsistent with Industry
Standards, and satisfies any of the following conditions: (i) could materially
and adversely affect the mechanical, electrical or structural integrity of the
Project; or (ii) could materially and adversely affect the normal, efficient,
effective or safe operation of the Project during the Project’s design life.
 
“Delay Liquidated Damages” shall have the meaning set forth in Section 15.1.
 
“Delay Notice” shall have the meaning set forth in Section 8.2.
 
“Discharge Permit” means the TPDES Permit to Discharge Wastes No. WQ0001986000
renewal issued January 31, 2005.
 
“Dollars” or “$” means United States dollars.
 
“Emissions Tests” means the tests as set forth in Exhibit I-1 to determine
whether a Unit or the Project satisfies the Environmental Compliance Guarantees.
 
“Environmental Compliance Guarantees” shall have the meaning set forth in
Exhibit I-1.
 
“Equipment and Materials” means all materials, supplies, apparatus, devices,
machinery, equipment, parts, tools, special tools, components, instruments,
appliances, spare parts and appurtenances thereto, including the Owner Furnished
Equipment, that are required for the design, construction or operation of the
Project in accordance with Industry Standards, and described in, required by or
reasonably inferable from the Statement of Work or the Submittals.
 
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“ERCOT” means the Electric Reliability Council of Texas.
 
“Errors or Omissions” means any design or engineering Work, including any
Submittals that: (a) does not conform to the Statement of Work; (b) fails to
comply with Industry Engineering Standards, as applicable; or (c) could
materially and adversely affect the mechanical, electrical or structural
integrity of the Project, or the normal, efficient, effective or safe operation
of the Project during the Project’s design life.
 
“Executive Labor Committee” means a committee to be formed by Owner and
Contractor consisting of four (4) senior executive representatives of Owner and
Contractor (i.e., two representatives from each Party), that shall meet as
needed, in person or by conference call or as otherwise mutually agreed, in
response to a recommendation(s) from the Program Labor Committee.
 
“Excusable Event” means an event that adversely impacts Contractor’s performance
of the Work, to the extent such event is actually and demonstrably attributable
to: (a) Owner’s failure or delay to perform any covenant or contractual
obligation of Owner, as applicable hereunder; (b) to the extent set forth in
Section 7.1.3, Owner’s failure to issue a Full Notice to Proceed by March 1,
2007; (c) a Change In Law; (d) an Unforeseen Site Condition; (e) a difference in
the actual conditions encountered or the final permits issued from the Owner
Provided Information, or (f) Owner’s failure to obtain an amendment or
modification of the Discharge Permit that will permit Owner to discharge a total
volume of up to 1,556 million gallons of once-through cooling water and
auxiliary cooling water during any twenty four (24) hour period by the date
Contractor commences conducting the Performance Tests for Unit 1 or Unit 2, as
the case may be.
 
“Exhibits” means each Exhibit attached hereto.
 
“Final Completion” means satisfaction by Contractor or waiver by Owner of all of
the conditions for Final Completion set forth in Section 14.4.
 
“Final Completion Date” means the date on which the last of the conditions to
Final Completion of a Unit as set forth in Section 14.4 occurs.
 
“Final Contractor’s Invoice” means the final Contractor’s Invoice submitted for
Final Payment with respect to a Unit in accordance with Section 6.9.
 
“Final Payment” means the final payment made by Owner or the Financing Entities
to Contractor with respect to a Unit in accordance with Section 6.9.
 
“Financial Closing” means commitments of the Financing Entities to fully finance
the engineering, procurement and construction of the Project in accordance with
this Agreement and all conditions precedent to such commitments have been met to
close financing and fund the Project.
 
“Financing Entities” means the holders of, or the agent(s) or trustee(s)
representing the holders of, any debt, lease, or equity financing for, of or
secured by the Project, including any Person(s) that owns the Project or any
portion thereof and leases the Project or such portion to
 
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Owner or an Affiliate of Owner, as applicable, under a lease, sale leaseback or
synthetic lease structure, or the Person(s) providing a letter or letters of
credit or other guarantees or insurance in support of any such debt, lease or
equity financing or providing any other letter of credit in connection with the
construction or development of the Project, but excluding Owner and any
Affiliate shareholders or Affiliate constituent members of Owner as of the date
hereof.
 
“Force Majeure” means events demonstrably beyond the reasonable control of the
Person claiming the event of Force Majeure, including each of the following
events, matters, or things:  war, blockade, revolution, insurrection, riot, act
of terrorism (or threats of terrorism involving the Work), or public disorder or
acts of emergency; expropriation, requisition, confiscation, or nationalization;
export or import restrictions (but not to the extent due to an increase in
export or import duties or taxes) by any Governmental Authority; embargoes or
sanctions; closing, damage or accidents to harbors, docks, canals, or other
assistances to or adjuncts of the shipping or transportation industry; rationing
or allocation, at the request or insistence of any Governmental Authority;
action or inaction of Governmental Authority; explosions; fire; flood;
earthquake; volcano; tide, tidal wave, or perils of the sea; Abnormally Severe
Weather Conditions; an epidemic or quarantine; acts of God; or labor strikes,
disputes or disruptions; the unavailability or shortages of labor or Equipment
and Materials if caused by an event of Force Majeure.  The Person claiming the
event of Force Majeure shall reasonably demonstrate that the effect of such
event would not have been avoided had such Person used reasonable care or acted
in compliance with Industry Standards.  The following events, matters or things
shall not constitute an event of Force Majeure: (i) the absence of sufficient
financial means to perform obligations or the failure to make payments in
accordance with this Agreement; (ii) any labor disturbance, strike or dispute of
Contractor’s workers or personnel or any Subcontractor’s workers or personnel or
any independent contractor engaged by Contractor or any of its Subcontractors
occurring at the Site (unless such event is part of a national or regional
disturbance, strike or dispute) or any labor disturbance, strike or dispute
limited to employees of Contractor; (iii) mechanical failures unless caused by
an event of Force Majeure; (iv) storms and other climatic or weather conditions
other than Abnormally Severe Weather Conditions; and (v) the unavailability or
shortages of labor or Equipment and Materials unless itself caused by an event
of Force Majeure.
 
“Full Notice to Proceed” means a written Notice signed by a duly authorized
representative of Owner to Contractor authorizing Contractor to commence and
complete all Work under this Agreement, including on-Site construction of the
Units.
 
“Full Notice to Proceed Date” means the Business Day after Owner provides
Contractor with the Full Notice to Proceed.
 
“Governmental Authorities” means applicable national, federal, state,
provincial, and local governments and all agencies, authorities, departments,
instrumentalities, courts, corporations, other authorities lawfully exercising
or entitled to exercise any administrative, executive, judicial, legislative,
police, regulatory or taxing authority or power, or other subdivisions of any of
the foregoing having or claiming a regulatory interest in or jurisdiction over
the Site, the Project, the Work or the Parties.
 
“Guaranteed Amount” shall have the meaning set forth in Section 4.2.6.
 
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“Hazardous Materials” means any substance or material regulated or governed by
any Applicable Permit, or any substance, emission or material now or hereafter
deemed by any Governmental Authority to be a “regulated substance,” “hazardous
material,” “hazardous waste,” “hazardous constituent,” “hazardous substance,”
“toxic substance,” “radioactive substance,” “pesticide” or any similar
classification, including by reason of deleterious properties, ignitability,
corrosivity, reactivity, carcinogenicity or reproductive toxicity.
 
“Indemnitee” means an Owner Indemnitee or a Contractor Indemnitee, as the
context may require.
 
“Independent Expert” means a technical or scheduling expert experienced in and
knowledgeable of the engineering, procurement and construction industry and the
particular subject matter of a dispute between the Parties.
 
“Industry Engineering Standards” means those standards of care and diligence
normally practiced by recognized engineering and design firms in performing
engineering and design services of a similar nature for power projects in the
United States similar to this Project and in accordance with Applicable Laws and
Applicable Permits, as practiced at the time the engineering Work is performed.
 
“Industry Standards” or“Industry Grade” means those standards of construction,
workmanship, Equipment and Materials, and components specified in Exhibit A;
provided, however, if the relevant standard is not so specified or is ambiguous
therein, “Industry Standards” or “Industry Grade” shall mean those standards of
care and diligence normally practiced by engineering and construction firms in
performing services of a similar nature for power projects in the United States
similar to this Project and in accordance with Applicable Laws and Applicable
Permits, as practiced at the time the Work is performed.
 
“Intellectual Property Claim” means a claim or legal action for unauthorized
disclosure or use of any trade secret, patent, copyright, trademark or service
mark arising from Contractor’s performance (or that of its Affiliates or
Subcontractors) under this Agreement that:  (a) concerns any Equipment and
Materials or other items or services provided by Contractor, any of its
Affiliates, or any Subcontractor under this Agreement; (b) is based upon or
arises out of the performance of the Work by Contractor, any of its Affiliates,
or any Subcontractor, including the use of any tools or other implements of
construction by Contractor, any of its Affiliates, or any Subcontractor; or
(c) is based upon or arises out of the design or construction of any item by
Contractor under this Agreement or the operation of any item according to
directions embodied in Contractor’s final process design, or any revision
thereof, prepared or approved by Contractor; provided that such claim or legal
action does not result from Contractor’s following the written instructions of
Owner to use, incorporate, or install the offending or infringing process or
item.
 
“Intellectual Property Rights” means all licenses, trade secrets, copyrights,
patents, trademarks, proprietary information and other ownership rights related
to the Work or otherwise necessary for the ownership and maintenance of the
Project, including all Project-related documents, models, computer drawings and
other electronic expressions, photographs and other expressions.
 
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“Invention” shall have the meaning set forth in Section 25.1.
 
“Key Personnel” means the natural persons named and assigned to the identified
positions set forth on Exhibit J.
 
“Leased Equipment” shall have the meaning set forth in Section 5.3.1.
 
“Loss(es)” means subject to Section 31.1, any and all liabilities (including
liabilities arising out of the application of the doctrine of strict liability),
obligations, losses, damages, penalties, claims, actions, suits, judgments,
costs, expenses and disbursements and, in the case of third-party claims,
whether the foregoing be founded or unfounded (including legal fees and expenses
and costs of investigation), and whether arising in equity, at common law, or by
statute, or under the law of contracts, torts or property, of whatsoever kind
and nature, including claims for property damage, personal injury (including
emotional distress) and third-party economic loss.
 
“Major Subcontractor” means a Subcontractor whose contract or contracts (in the
aggregate) with Contractor, or any of its Subcontractors require payments by
Contractor (or Subcontractor) of at least One Million Dollars ($1,000,000).
 
“Materials Warranty” means the warranty of Contractor under Section 17.2.
 
“Mechanical Completion” means satisfaction of the following requirements:
 
(a)           the Unit is mechanically, electrically, and structurally
constructed in accordance with the requirements of this Agreement, the Statement
of Work and Industry Standards, except for Non-Critical Deficiencies; and
 
(b)           the Unit and each sub-system thereof, including all emissions or
environmental compliance systems and all other critical systems, is
mechanically, electrically and functionally complete and ready for initial
operations, adjustment and testing, except for Non-Critical Deficiencies.
 
“Milestone Item(s)” means a discrete portion of the Work as set forth in
Exhibit G, and scheduled to be completed by the applicable dates set forth in
the Project Schedule.
 
“Minimum Performance Criteria” means at least *** percent (***%) of the Net Unit
Capacity Guarantee during a Net Unit Capacity Test and not more than *** percent
(***%) of the Net Unit Heat Rate Guarantee during a Net Heat Rate Performance
Test while meeting all requirements of the TPDES General Permit to Dispose of
Wastes Under the Clean Water Act Section 402 Permit WQ0001986000, approved Texas
Commission Environmental Quality Air Permit No. 76474 and Prevention of
Significant Deterioration Permit (PSD-TX-1056), including all variances and
waivers that may be applicable thereto.
 
“Minimum Tangible Net Worth” shall have the meaning set forth in
Section 26.1.2(a).
 
*** CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION.
 
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“Monthly Progress Report” means a written monthly progress report prepared by
Contractor in form and content generally in accordance with Exhibit K.
 
 “Net Unit Capacity” means the capacity of the Unit in kilowatts equal to the
sum of the steam generator output minus generator transformer losses and
auxiliary power losses.
 
“Net Unit Capacity Guarantee” means the Net Unit Capacity shall be between ***
and *** kilowatts for Unit 1 and shall be between *** and *** kilowatts for
Unit 2, at the conditions specified in Exhibit I-1.
 
“Net Unit Heat Rate” means gross heat input to the steam generator divided by
the sum of generator output minus generator transformer losses and auxiliary
power usage.
 
“Net Unit Heat Rate Guarantee” means the Net Unit Heat Rate shall be between ***
and *** Btu/kWh for Unit 1 and shall be between *** and *** Btu/kWh for Unit 2,
at the conditions specified in Exhibit I-1.
 
“Non-Critical Deficiencies” means each item of Work that: (a) Owner or
Contractor identifies as requiring completion or containing Defects or Errors or
Omissions; (b) does not impede the safe operation of a Unit or the Project in
accordance with Industry Standards; and (c) does not affect the capacity,
efficiency, reliability, operability, safety or mechanical or electrical
integrity of a Unit or the Project.
 
“Notice” or “notice” means a written communication between the Parties required
or permitted by this Agreement and conforming to the requirements of Article 30.
 
“Notice For Payment of Performance Liquidated Damages” means a Notice from Owner
to Contractor specifying the Performance Liquidated Damages and the actual
performance levels of the Project during a Performance Test used in calculating
the Performance Liquidated Damages.
 
“Notice of Correction” means a Notice from Contractor to Owner that a condition
has been corrected in accordance with Section 6.12.2.
 
“Notice of Final Completion” means a Notice from Contractor to Owner in
accordance with Section 14.4 that a Unit has satisfied the requirements for
Final Completion.
 
“Notice of Substantial Completion” means a Notice from Contractor to Owner in
accordance with Section 14.3 that a Unit has satisfied the requirements for
Substantial Completion.
 
“Notice of Withholding” means a Notice from Owner to Contractor of amounts to be
withheld from a payment in accordance with Section 6.12.2.
 
*** CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION.
 
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“O&M Manual Supporting Documents” means with respect to the Project,
Subcontractor, Upgrade Suppliers, and Supplier operation and maintenance manuals
for Equipment and Materials, including piping and instrumentation diagrams,
narrative descriptions, heat and material balances, and system design and
operating parameters, including procedures and operator responses to alarms.
 
“OCIP” shall have the meaning set forth in Section 21.1.1.
 
“OCIP Administrator” shall have the meaning set forth in Section 21.1.6.
 
“Open Book Review” shall mean the process for determining the scope of the Work
and the Separated Contract Price, as described in Section 5.3.
 
“Operating Consumables” means operating consumables, including lubricants,
filters, lamps, light bulbs, and other consumable equipment and materials,
necessary for the operation and maintenance of the Project, but excluding any
and all production inputs that are the responsibility of Owner pursuant to
Section 2.8.
 
“Operating Personnel” means the personnel hired by Owner, or by an entity
providing operating or maintenance services for Owner, to operate and maintain
the Project (including all operators, maintenance personnel, instrument
technicians and supervisors).
 
“Other Owner Furnished Equipment” means the Owner Furnished Equipment other than
the Boilers and the STGs.
 
“Outage Period” shall have the meaning set forth in Section 15.4.9.
 
“Owner” shall have the meaning set forth in the preamble.
 
“Owner Acquired Permits” shall have the meaning set forth in Section 2.4.
 
“Owner Directive” shall have the meaning set forth in Section 16.7.
 
“Owner Event of Default” shall have the meaning set forth in Section 19.4.
 
“Owner Furnished Equipment” means all of the equipment and the materials
provided by Owner to Contractor for installation and incorporation into the
Work, including the Boilers and the STGs, as more particularly described on
Exhibit B hereto, and the existing foundations and partial installation of
structural steel with respect to Unit 1.
 
“Owner Indemnitee” shall have the meaning set forth in Section 23.1.
 
“Owner Provided Information” means the information provided by or on behalf of
Owner, including such information as set forth on Exhibit W.
 
“Owner Provided Facilities and Services” means the substation and the office
space at the Site and the Ancillary Sites, if any, made available to Contractor
by Owner in Owner’s sole discretion, until the Full Notice to Proceed has been
issued and the Contractor has mobilized its
 
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construction trailers to the Site, the laydown area, rights-of-way and
easements, and access to Owner’s potable water supply, phone lines and
electrical service as more particularly described in Exhibit A-1–Section 01560.
 
“Owner’s Certificate of Final Completion” means a certificate of Owner
certifying that Final Completion has occurred.
 
“Owner’s Certificate of Substantial Completion” means a certificate from Owner
certifying that Substantial Completion of a Unit has occurred.
 
“Owner’s Draft Air Permit” means the draft air permit issued by the Texas
Commission on Environmental Quality Air Permit No. 76474 and the Prevention of
Significant Deterioration Permit (PSD-TX-1056).
 
“Owner’s Engineer” means any engineering firm or firms or other engineer or
engineers (which may be employees of Owner) selected and designated by Owner.
 
“Performance Bonus” shall have the meaning set forth in Section 5.5.2.
 
“Performance Guarantees” means the Net Unit Capacity Guarantee, the Net Unit
Heat Rate Guarantee and the Environmental Compliance Guarantees, as more
particularly defined in Exhibit I-1.
 
“Performance Liquidated Damages” means the amounts, if any, paid or to be paid
by Contractor pursuant to Section 15.3 in the event Contractor fails to satisfy
certain of the Performance Guarantees.
 
“Performance Tests” means the tests for measuring the Net Unit Capacity and Net
Unit Heat Rate as described in Exhibit I-1–Section 5.03.
 
“Permit Requirement” means any requirement or condition on or with respect to
the issuance, maintenance, renewal or transfer of any Applicable Permit or any
application therefore.
 
“Person” means any individual, corporation, company, voluntary association,
partnership, incorporated organization, trust, limited liability company, or any
other entity or organization, including any Governmental Authority.
 
“Phase One EPC” means the period beginning on the date on which Owner and
Contractor execute this Agreement and ending on the Full Notice to Proceed Date,
during which Contractor shall perform the Phase One EPC Activities.
 
“Phase One EPC Activities” shall mean the activities set forth on Exhibit CC.
 
“Pre-Authorization” shall have the meaning set forth in Section 7.1.1.
 
“Program Labor Committee” means a committee to be formed by Owner and Contractor
consisting of six (6) project and program level representatives of Owner and
Contractor (i.e., three representatives from each Party), that shall meet, in
person or by
 
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conference call or as otherwise mutually agreed, on a quarterly basis or such
shorter time period as requested by either Party or upon one (1) Business Day’s
notice from either Party, or as soon as practicable thereafter, to discuss and
recommend potential changes to craft labor hiring practices and policies
(including the composition of, and the salary and benefits (based upon
Exhibit EE), to be paid to craft labor, collectively referred to as “Craft Labor
Compensation”) that Contractor believes are appropriate and necessary to
continue to attract and retain skilled craft to perform the Work in an efficient
and timely manner at the Project and at other construction projects in which
Owner and Contractor may be engaged in Texas.
 
“Project” means the complete coal-fired power generation facility to be
designed, engineered, procured, constructed, tested and commissioned under this
Agreement, together with all ancillary equipment and subsystems, all equipment,
supplies and materials necessary to produce the Project outputs of electricity
(including the Equipment and Materials and the Owner Furnished Equipment),
together with all supporting improvements and interconnections, as generally
described in, and including all items described, in or inferable from, this
Agreement.
 
“Project Director” means the Project Director designated by Contractor and
approved by Owner pursuant to Section 3.4.
 
“Project Representative” means the Project Representative designated by Owner
pursuant to Section 2.1.
 
“Project Schedule” means a critical path schedule prepared by Contractor and
meeting the requirements set forth in Exhibit A-1–Section 01320 describing the
time of completion by Contractor of the Milestone Items and all of the other
Work items, as such schedule may be modified in accordance with Section 7.4.1.
 
“Proposed Punchlist” shall have the meaning set forth in Section 14.1.1.
 
“Punchlist” means schedules of Non-Critical Deficiencies for each Unit developed
pursuant to Section 14.1.1.
 
“Remedial Plan” shall mean a plan prepared by Contractor regarding the actions
to be taken and the schedule to remedy failures to meet the Performance
Guarantees, as submitted to and approved by Owner pursuant to Sections 15.4.2.
 
“Required Manuals” means all operating data and manuals, spare parts manuals,
integrated and coordinated operation and maintenance manuals and instructions,
and training aids, whether created by Contractor or  any Subcontractor, which
are reasonably necessary to safely and efficiently commission, test, start up,
operate, maintain and shut down the Project (including those manuals identified
on Exhibit A-1–Section 01330).
 
“Retainage” shall have the meaning set forth in Section 6.8.
 
“Schedule Bonus” shall have the meaning set forth in Section 5.5.1.
 
“Schedule of Payment Values” means the Schedule of Payment Values reflecting the
Separated Contract Price assigned to the Work upon completion of the Open Book
Review and
 
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attached hereto as Exhibit D, and developed in accordance with Section 5.3.2 and
Exhibit A-1–Section 01320, establishing payment amounts in connection with
achieving Milestone Items, setting forth the estimated date of completion of
such Milestone Items and setting forth estimated cancellation costs.
 
“Separated Contract Price” means the total sum payable by Owner developed during
the Open Book Review in accordance with Section 5.2 as stated in Exhibit BB for
all labor, all materials, and all equipment, which sum shall be due in
accordance with the terms of this Agreement as consideration for the performance
of the Statement of Work to be performed by or through Contractor on a “turnkey”
basis in order to complete the Project, all in strict accordance with the terms
of this Agreement, which sum shall only be subject to adjustment in accordance
with this Agreement.
 
“Separated Target Price” shall have the meaning set forth in Section 5.1.
 
“Site” means the real property described in Exhibit L located in Robertson
County and Limestone County, Texas on which the Project shall be constructed, as
more particularly defined in Exhibit M.
 
“Site Conditions” means the physical and other conditions at the Site and the
surrounding area as a whole, including conditions relating to the environment,
transportation, access, waste disposal, handling and storage of materials, the
availability and quality of electric power, the availability and quality of
water, the availability and quality of roads, climatic conditions and seasons,
topography, air and water (including raw water) quality conditions, ground
surface conditions, surface soil conditions, sound attenuation, subsurface
geology, nature and quantity of surface and subsurface materials to be
encountered (including Hazardous Materials), the geological and subsurface
conditions of the Site, and the location of underground utilities, and equipment
and facilities needed before and during performance of Contractor’s obligations
under this Agreement.
 
“Spare Parts Schedule” shall have the meaning set forth in Section 3.20.1.
 
“Statement of Work” means the requirements regarding the Work set forth in this
Agreement, including the specifications and other requirements included in the
Exhibits attached hereto.
 
“STGs” means the steam turbines and generators described on Exhibit B hereto,
together with all major components and auxiliary components thereto, which Owner
will provide for installation or incorporation into the Project by Contractor.
 
“STG Upgrade Contract” means that certain Steam Turbine Generator Agreement
dated as of March 31, 2006, between TXU Energy Company LLC, an Affiliate of
Owner, and General Electric International, Inc. for the upgrade and completion
of two General Electric model steam turbines and generators, attached hereto as
Exhibit B-1, as assigned to Owner on August 3, 2006.
 
“STG Upgrade Supplier” means General Electric International Inc.
 
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“Subcontractor” means any Person, including any Supplier, other than Contractor
or its Affiliates, that performs any portion of the Work (including any
subcontractor of any tier) in furtherance of Contractor’s obligations under this
Agreement.
 
“Submittals” means the drawings, specifications, drawing logs, conformed
technical specifications, manufacturers’ drawings and data, plans and designs,
and any other information that has been prepared by Contractor, or any
Subcontractor or Supplier with respect to the Work, and that have been submitted
to and accepted or approved by the Owner in accordance with the provisions of
this Agreement.  Submittals and the time periods available for Owner’s review,
acceptance or approval thereof, are defined in Exhibit A-1–Section 01330.
 
“Substantial Completion” means satisfaction or waiver of all of the conditions
set forth in Section 14.2 with respect to each Unit.
 
“Substantial Completion Date” means the date on which Substantial Completion
actually occurs.
 
“Substantial Completion Guaranteed Date” means, with respect to the first Unit,
the date of ***, and, with respect to the second Unit, the date of ***, as such
dates may be modified in accordance with the terms hereof.
 
“Successfully Run” means with respect to an Acceptance Test that the applicable
Acceptance Test was completed in accordance with the procedures, conditions and
requirements for the proper performance of such test set forth in Exhibit I-1
and the other provisions of this Agreement applicable to such test.
 
“Suppliers” means persons that supply Equipment and Materials to Contractor or
any Subcontractor in connection with the performance of the Work.
 
“Suspension for Cause” shall have the meaning set forth in Section 20.6.
 
“Tangible Net Worth” shall mean the sum of (i) assets, including permits,
contracts and leases, less (ii) intangible assets, including goodwill, patents,
copyrights and trademarks, less (iii) total liabilities.
 
“Threshold Rating” shall mean a credit rating equal to or greater than BBB- by
Standard & Poors, BBB- by Fitch or Baa3 by Moody’s.
 
“Unconditional Waiver and Release Upon Final Payment” means a written statement
in the form attached hereto as to Exhibit F-4, containing a waiver and release
of liens prepared and executed by Contractor or a Major Subcontractor, as
applicable, pursuant to which a Person unconditionally waives and releases all
mechanic’s liens, stop notices and bond rights with respect to all Work.
 
“Unforeseen Site Conditions” shall have the meaning set forth in Section 12.3.
 
*** CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION.
 
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“Unit” means a boiler, steam turbine generator, emission control and related
equipment.  The first Unit to be completed pursuant to this Agreement, together
with facilities common to both Units such as the water treatment system, is
sometimes referred to herein as “Unit 1.”  The second Unit to be completed is
sometimes referred to herein as “Unit 2.”
 
“Upgrade Contracts” shall mean the STG Upgrade Contract and the Boiler Upgrade
Contracts, collectively.
 
“Upgrade Suppliers” shall mean the STG Upgrade Supplier and the Boiler Upgrade
Suppliers, collectively.
 
“Warranty Payment Option” shall have the meaning set forth in Section 17.7.5.
 
“Warranty Period” shall have the meaning set forth in Section 17.3.
 
“Warranty Procedures” shall have the meaning set forth in Section 17.7.1.
 
“Work” means all obligations, duties, and responsibilities assigned to or
undertaken by Contractor under this Agreement with respect to the Project,
including all engineering, design and construction of the Project, cleaning of
the components of the Boilers, cleaning and refurbishment of the Other Owner
Furnished Equipment, all procurement and provision of Equipment and Materials
(other than Owner Furnished Equipment), all erection and installation of
Equipment and Materials, and all training, start up (including calibration,
inspection, and start up operation), and testing included in or required for the
Project.  Where this Agreement describes a portion of the Work in general, but
not in complete detail, the Parties acknowledge and agree that the Work includes
any work required:  (a) for the design and construction of the Project in
accordance with Industry Standards; and (b) for the Project to be capable of
being operated in accordance with Industry Standards.  Notwithstanding the
foregoing, Contractor’s obligations with respect to Owner Furnished Equipment
are as specified in Section 3.5.
 
“Work Warranty” means the warranties of Contractor under Section 17.1.
 
1.2           Exhibits.  This Agreement includes the Exhibits annexed hereto and
any reference in this Agreement to an “Exhibit” by letter designation or title
shall mean one of the Exhibits identified in the table of contents and such
reference shall indicate such Exhibit herein.  Each Exhibit attached hereto is
incorporated herein in its entirety by this reference.
 
1.3           Interpretation.  
 
(a)           Terms defined in a given number, tense, or form shall have the
corresponding meaning when used in this Agreement with initial capitals in
another number, tense, or form.  The meaning assigned to each term defined
herein shall be equally applicable to both the singular and the plural forms of
such term and vice versa, and words denoting either gender shall include both
genders as the context requires. Where a word or phrase is defined herein, each
of its other grammatical forms shall have a corresponding meaning.
 
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(b)           The terms such as “hereof,” “herein,” “hereto,” “hereinafter,” and
other terms of like import are not limited in applicability to the specific
provision within which such references are set forth but instead refer to this
Agreement taken as a whole.
 
(c)           When a reference is made in this Agreement to an Article, Section,
subsection or Exhibit, such reference is to an Article, Section, subsection or
Exhibit to this Agreement unless otherwise specified.
 
(d)           The word “include,” “includes,” and “including” when used in this
Agreement shall be deemed to be followed by the words “without limitation,”
unless otherwise specified shall not be deemed limited by the specific
enumeration of items, but shall be deemed without limitation.  The term “or” is
not exclusive.
 
(e)           A reference to any Party to this Agreement or any other agreement
or document shall include such Party’s predecessors, successors and permitted
assigns.
 
(f)           Reference to any Applicable Law means such Applicable Law as
amended, modified, codified, replaced or reenacted, and all rules and
regulations promulgated thereunder.
 
(g)           The Parties have participated jointly in the negotiation and
drafting of this Agreement. Any rule of construction or interpretation otherwise
requiring this Agreement to be construed or interpreted against any Party by
virtue of the authorship of this Agreement shall not apply to the construction
and interpretation hereof.
 
1.4           Headings.  All headings or captions contained in this Agreement
are for convenience of reference only, do not form a part of this Agreement and
shall not affect in any way the meaning or interpretation of this Agreement.
 
1.5           Conflicts in Documentation.  This Agreement, including the
Exhibits hereto shall be taken as mutually explanatory.  If there is an express
conflict between the provisions of this Agreement or any Exhibit hereto,
Contractor shall immediately notify Owner of such conflict.  Owner, in its
reasonable discretion, shall choose which conflicting provision it requires
Contractor to follow.  In the event of a conflict between any provision within
Articles 1 through 33 of this Agreement and an Exhibit, the provisions of
Articles 1 through 33 of this Agreement shall take precedence over any of the
Exhibits.  In the event of a conflict between the Exhibits and any Submittals,
the Exhibits shall take precedence over any Submittals.
 
1.6           Documentation Format.  This Agreement and all documentation to be
supplied hereunder shall be in the English language and all units of measurement
in the design process, specifications, drawings and other documents shall be
specified in dimensions as customarily used in the United States.
 
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2.           RESPONSIBILITIES OF OWNER
 
Owner shall, at Owner’s cost and expense:
 
2.1           Project Representative.  As of the date of the Amendment, Owner
has designated a Project Representative as identified in Section 30.1, who shall
act as the point of contact for Contractor with respect to the prosecution of
the Work and any issues relating to this Agreement (but who shall not by virtue
of such designation be authorized to execute a Change In Work Form or make any
amendments to, or provide waivers under, this Agreement).  The Project
Representative’s authority to execute a Change In Work Form shall be as set
forth in Section 16.5.  Owner may designate Owner’s Engineer as its Project
Representative and may designate more than one Project Representative, and may
designate a different Project Representative from time to time by written notice
to Contractor.
 
2.2           Operating Personnel.  Commencing six (6) months prior to first
fire for a Unit as set forth in the Project Schedule, as updated from time to
time by Contractor, provide Operating Personnel with general power plant
experience for training by Contractor as provided pursuant to Section 3.19 and
to provide ordinary operating and maintenance support to Contractor for testing,
start up and commissioning of the Project as provided in Section 3.19.1.  Until
Substantial Completion, the Operating Personnel provided by Owner pursuant to
this Section 2.2 shall provide normal operating maintenance support under
the supervision and direction of Contractor’s start-up manager; provided,
however, that such Operating Personnel shall not be deemed employees or
Subcontractors of Contractor.  Notwithstanding anything to the contrary in the
foregoing, Contractor shall remain solely responsible for performing the Work in
accordance with this Agreement, including Contractor’s obligation to achieve
Substantial Completion of each Unit by the applicable Substantial Completion
Guaranteed Dates.  Except to the extent prohibited by any applicable bargaining
unit agreement, Contractor shall be entitled to require Owner to remove any
Operating Personnel from the Site that Contractor reasonably demonstrates (i) is
creating a safety hazard, (ii) has committed such actions or refused to take
such action as would amount to insubordination, or (iii) is causing or has
caused material interference with Contractor’s completion of the Work by the
Substantial Completion Dates as indicated on the Project Schedule.
 
2.3           Ministerial Assistance.  Provide such ministerial assistance as
Contractor may reasonably request in connection with obtaining Contractor
Acquired Permits.  
 
2.4           Owner Acquired Permits.  Obtain, with Contractor’s reasonable
assistance (to be provided at no cost to Owner), and pay for all the Applicable
Permits set forth on Exhibit C as a permit to be acquired by Owner and all other
Applicable Permits excluding the Contractor Acquired Permits (collectively, the
“Owner Acquired Permits”), as set forth on Exhibit C.
 
2.5           Access to Site and Owner Furnished Equipment.  Owner shall make
the Site and the Ancillary Sites, the Owner Furnished Equipment and the Owner
Provided Facilities and Services available to Contractor and shall allow
Contractor unencumbered access thereto as necessary for Contractor to proceed
with the Work and assure rights of ingress and egress to and from the Site for
Contractor for performance of the Work; provided, however, that Contractor shall
coordinate with and cooperate with Owner regarding entry onto the Site, the
Ancillary Sites
 
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or any part thereof, and with Owner’s security procedures.  Owner hereby grants
Contractor the right to, and to allow the Upgrade Suppliers to, remove the Owner
Furnished Equipment to be refurbished pursuant to the Upgrade Contracts, from
the Site and the Ancillary Site, in accordance with the terms thereof.  
 
2.6           Owner Provided Facilities and Services.  Provide the Owner
Provided Facilities and Services.  Notwithstanding anything in this Agreement to
the contrary, Contractor’s sole remedy for the failure of Owner to provide or
cause to be provided any of the Owner Provided Facilities and Services in
accordance with the terms of this Agreement is the relief granted in
Section 8.6.2.  Any such failure shall not be considered a breach of any
covenant, condition, representation or warranty of Owner, and shall not be
construed as an Owner Event of Default.
 
2.7           Owner Furnished Equipment.  
 
2.7.1                      Access.  Provide or cause to be provided to
Contractor and the relevant Upgrade Suppliers, access, physical possession and
control of the Owner Furnished Equipment (as identified from time to time during
the term of this Agreement).  Notwithstanding anything in this Agreement to the
contrary, Contractor’s sole remedy for the failure of Owner to provide or cause
to be provided any of the Owner Furnished Equipment in accordance with the terms
of this Agreement shall be the relief granted to Contractor under
Section 8.6.2.  Any such failure shall not be considered a breach of any
covenant, condition, representation or warranty of Owner, and shall not be
construed as an Owner Event of Default.
 
2.7.2                      Upgrade Contracts.  Cause its Affiliate, TXU Energy
Company LLC, to appoint Contractor as Owner’s agent with respect to the STG
Upgrade Contract, and assign such STG Upgrade Contract to Contractor on such
date as Owner and Contractor mutually agree, but in any event on or before
Financial Closing.  Upon execution of the Boiler Upgrade Contracts and with
respect to the STG Upgrade Contract, Owner shall advise the Upgrade Suppliers
that Contractor shall act as agent for and on behalf of Owner with respect to
all matters concerning the Upgrade Contracts and that such Upgrade Suppliers
shall take directions and instructions from Contractor in the performance of
their obligations under their respective Upgrade Contract.  
 
2.8           Commodity and Transmission Scheduling.  Owner shall schedule
(i) delivery of sufficient coal meeting the specifications as set forth in
Exhibit A; and (ii) off take of test power (during the Acceptance Tests),
including arranging for and scheduling transmission of such test power, in each
case in the amounts and at such times as may be required to support Contractor’s
obligations with respect to start up, commissioning and testing of each Unit as
indicated by Contractor pursuant to Section 3.22.  In addition, Owner shall,
upon reasonable advance notice from Contractor, provide Contractor (i) access to
and availability of cooling water (with respect to adequate quantities and
quality), (ii) backfeed power, (iii) limestone, (iv) ammonia, (v) natural gas,
and (vi) such other consumables that are to be provided by Owner pursuant to
Exhibit S, in the amounts and at such times as may be requested by Contractor
from time to time to support Contractor’s obligations with respect to start up,
commissioning and testing of each Unit, as indicated by Contractor pursuant to
Section 3.22.
 
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3.           RESPONSIBILITIES OF CONTRACTOR
 
Contractor shall:
 
3.1           Turnkey Basis.  On a turnkey basis, Contractor shall perform,
furnish, be responsible for, and, except for such equipment purchase agreements
or purchase orders for which Contractor is acting as Owner’s agent, pay the cost
of, all of the Work, including all services, labor, Equipment and Materials and
supervision necessary to provide an operable Project to the extent and in
accordance with the provisions of this Agreement.  References to the obligations
of Contractor under this Agreement as being “turnkey” and performing the Work on
a “turnkey basis” means that Contractor is obligated to complete the Work such
that the Project satisfies the applicable terms, conditions, Performance
Guarantees, Substantial Completion Guaranteed Dates, the other guarantees as set
forth in Exhibit I-1 and the requirements set forth in this Agreement, all for
the Separated Contract Price.  
 
3.2           Performance of Work.  Perform and complete all of the Work, and
cause each Subcontractor to perform and complete each such Subcontractor’s
respective work, without any Defects or Errors or Omissions, in accordance with
the terms of this Agreement and with Industry Engineering Standards, Industry
Standards, and in compliance with Applicable Laws, Permit Requirements and
Applicable Permits.  Without limiting the foregoing, Contractor shall, subject
to the terms and conditions of this Agreement, including Section 15.1, perform
the Work so as to achieve Substantial Completion of each Unit by such Unit’s
Substantial Completion Guaranteed Date.  
 
3.3           Design and Construction of Project.  Design, engineer and
construct the Project so that it meets the requirements of the Submittals, and
is capable of operation, at the design levels specified in the Statement of Work
and in compliance with Industry Engineering Standards, Industry Standards,
Applicable Laws, Permit Requirements and Applicable Permits in effect at the
time of Substantial Completion; provided that Owner acknowledges that Contractor
has designed the Project to discharge a total volume of up to 1,556 million
gallons during any twenty four (24) hour period of once-through cooling water
and auxiliary cooling water, rather than the volume limitation of 1,470 million
gallons during any twenty four (24) hour period currently provided in the
Discharge Permit.  Contractor shall provide all necessary engineering and design
services necessary to set forth in detail the specifications, drawings and
requirements for the procurement of Equipment and Materials (other than the
Owner Furnished Equipment) and for the construction of the entire Project in a
manner which satisfies the requirements of this Agreement.  Contractor shall
preserve all permanent survey construction monuments and benchmarks during its
performance of the Work.
 
3.4           Project Director.  Contractor shall designate a Project Director,
subject to Owner’s prior written approval, who shall have full responsibility
for the prosecution of the Work and shall act as a single point of contact in
all matters on behalf of Contractor.  The Project Director shall be one of the
Key Personnel for purposes of this Agreement.  Contractor’s initial Project
Director is designated on Exhibit J. 
 
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3.5           Owner Furnished Equipment.
 
3.5.1                      Assumption or Execution of Upgrade
Contracts.  Contractor represents that it has conducted a detailed review of the
commercial and technical terms, conditions and requirements contained in the STG
Upgrade Contract.  As of the date of the Original Agreement with respect to the
Boiler Upgrade Contracts and as of August 16, 2006 with respect to the STG
Upgrade Contract, until the date of assignment to and assumption of the Upgrade
Contracts in full by Contractor, Contractor shall act as agent for and on behalf
of Owner with respect to all matters concerning the Upgrade
Contracts.  Contractor has been authorized to and has executed the Boiler
Upgrade Contracts directly with the Upgrade Suppliers as agent for and on behalf
of Owner, subject to Owner’s review and approval of the Boiler Upgrade
Contracts.    
 
3.5.2                      Assignment of Upgrade Contracts.  Upon Contractor’s
appointment as agent of the STG Upgrade Contract and the execution of the Boiler
Upgrade Contracts, Contractor shall be responsible to administer all aspects of
the Upgrade Contracts and shall oversee the Upgrade Suppliers’ performance
thereunder, including technical review and coordination.  Subject to
Section 4.2.7(b), Owner shall, in writing and in the form attached hereto as
Exhibit X, assign its rights and obligations under the Boiler Upgrade Contracts
and the STG Upgrade Contract to Contractor, and upon such assignment, Contractor
shall assume all of Owner’s rights and obligations under the Boiler Upgrade
Contracts and the STG Upgrade Contract, including the payment obligations
thereunder.  
 
3.5.3                      Management of Upgrade Contracts.  While acting as
agent for Owner and following assignment of the Upgrade Contracts to Contractor,
Contractor shall conduct receiving inspection, off-loading, Site storage and
maintenance of the Boilers and the STGs until Substantial Completion, and shall
incorporate the Boilers and the STGs into the Project.  Contractor shall
schedule and otherwise manage the technical consulting time provided by each
Upgrade Supplier pursuant to the Upgrade Contracts, it being the responsibility
of Contractor to efficiently manage such Upgrade Supplier’s consulting time and
otherwise coordinate with each Upgrade Supplier to require that its technical
consultants are available at the Site as and when required by the Project
Schedule and the overall progress of the Work.
 
3.5.4                      Inspection, Delivery and Installation of Owner
Furnished Equipment.  Contractor acknowledges that the Other Owner Furnished
Equipment is currently stored in various locations at the Site and at the
Ancillary Sites, and that the Boilers and the STGs are undergoing inspection and
condition assessment by the Upgrade Suppliers and may be required to undergo
repair and upgrade at each respective Upgrade Supplier’s place of
business.  Notwithstanding the foregoing, as between Owner and Contractor, the
Owner Furnished Equipment shall fall under the care, custody and control of
Contractor.  Contractor shall be responsible for inspecting, refurbishing,
cleaning and causing the Other Owner Furnished Equipment to be delivered to the
Site, as necessary, for cleaning the components of the Boilers and for causing,
or coordinating with the Upgrade Suppliers to cause, the Boilers and the STGs to
be delivered to the Site.  Owner shall obtain insurance in the amount of the
replacement value of the Owner Furnished Equipment identified to be refurbished,
insuring against any damage or loss to the Owner Furnished Equipment while in
transit to and from the Site.   Contractor shall be responsible for the
installation, commissioning and testing of the Owner Furnished Equipment.  
 
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3.5.5                      Costs.  All necessary costs for inspection, cleaning,
refurbishing, handling, shipping, storage, erection, commissioning and start up
of any Owner Furnished Equipment, and all costs and expenses relating to the
technical administration of the Upgrade Contracts, review of Upgrade Supplier
drawings, and expediting and inspection of the Owner Furnished Equipment shall
be borne by Contractor to the extent not paid by Owner prior to the date hereof
and are included in the Separated Contract Price.
 
3.5.6                      Upgrade Suppliers.  Notwithstanding any other
provision of this Section 3.5, Contractor shall:
 
(a)           deliver a copy of any correspondence or other communication
relating to warranties or asserting claims against Contractor or Owner that
Contractor may receive from each Upgrade Supplier to Owner immediately after
Contractor’s receipt thereof;
 
(b)           provide Notice to Owner promptly after Contractor becomes aware of
any material failure by any Upgrade Supplier to perform its respective
obligations under the Upgrade Contracts (including any work performed by
Contractor or any Upgrade Supplier that does not conform to the requirements of
the Upgrade Contracts or developments that affect Critical Path Items); and
 
(c)           record each Upgrade Supplier’s performance under the Upgrade
Contracts, respectively, after delivery of the respective Owner Furnished
Equipment to the Site.
 
Notwithstanding the foregoing, Contractor’s authority in connection with the
Upgrade Contracts shall be limited such that Contractor shall neither do nor
undertake to do any of the following without Owner’s prior written consent in
each case:
 
(i)           materially amend or modify the Upgrade Contracts;
 
(ii)           waive or exclude performance by any Upgrade Supplier of their
respective obligations under the Upgrade Contracts; or
 
(iii)           release, compromise or waive any claim against any of the
Upgrade Suppliers.
 
3.5.7                      Existing Boiler Components.  Owner and Contractor
acknowledge that the existing Boiler components were manufactured under the
then-applicable ASME codes.  If any Governmental Authority, including for these
purposes an ASME authorized inspector, or the State of Texas Board of Inspectors
or its equivalent, determines that the existing Boiler components must be
modified to comply with another version of the ASME code, Contractor shall be
entitled to a Change In Work with respect to such modifications.
 
3.5.8                      Owner Furnished Equipment Not Utilized.  Owner and
Contractor acknowledge and agree that Contractor will be evaluating existing
equipment of Owner’s to be provided for the Project as identified on Exhibit B,
and may choose or may not be able to utilize all of such existing equipment for
the Project.  To the extent Contractor does not utilize any of the existing
equipment provided by Owner, Contractor shall promptly notify Owner of its
election or decision not to use or utilize such existing equipment, such
election or decision to be
 
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subject to Owner’s reasonable approval if the cost of replacing such equipment
exceeds an aggregate of One Million Dollars ($1,000,000), and in any event such
elections and decisions to be completed during the Open Book Review and before
determination of the Separated Contract Price.  If the decision not to utilize
existing equipment is subject to Owner’s approval, Owner shall withhold or
provide such approval within ten (10) days after receipt of a written notice
from Contractor specifying the existing equipment is not being used and the
reasons why.  If Contractor elects not to use any of the Owner Furnished
Equipment, and where applicable, Owner approves Contractor’s decision, such
equipment shall not be included in the Owner Furnished Equipment for purposes of
this Agreement.  Accordingly, risk of loss of such existing equipment not
included in the Owner Furnished Equipment shall remain with Owner at all
times.  Contractor acknowledges that some of the existing equipment not being
utilized in the Project is stored in the same locations as the Owner Furnished
Equipment.  Contractor shall use reasonable care to avoid any damage to any of
Owner’s existing equipment and shall promptly notify the Project Representative
if Contractor needs to move any of the existing equipment to complete the
Work.  Contractor and Owner shall cooperate to move the existing equipment not
utilized as Owner Furnished Equipment.  If Contractor moves any such existing
equipment, the cost of moving such equipment shall be part of the Separated
Contract Price, which shall not be adjusted as a result of any such relocation
of existing equipment by Contractor.
 
3.6           Utilities and Services.  
 
3.6.1                      Provision of Services.  Contractor shall install,
connect, and maintain at its own expense during its performance under this
Agreement all utilities, facilities, and services as set forth in
Exhibit A-1–Section 1560 (other than or in excess of the utilities, facilities,
and services provided as part of the Owner Provided Facilities and Services)
required for the performance of the Work.  All actions taken by Contractor
concerning the utilities, facilities, and services used or provided hereunder
shall follow all Applicable Laws and the standards of performance set forth in
this Agreement.
 
3.6.2                      Payment.  Contractor shall pay when due all
construction utility usage charges and shall arrange with local authorities and
utility companies having jurisdiction over the Site for the provision of
utilities other than or in excess of the utilities provided as part of the Owner
Provided Facilities and Services.
 
3.6.3                      Supply of Construction Facilities.  Other than the
Owner Provided Facilities and Services, Contractor shall obtain and provide all
supplies or services required for the performance of the Work but which do not
form a permanent part of the completed Work, including all temporary structures
and other facilities as set forth in Exhibit A-1–Sections 1520 and 1560 required
for the proper and safe performance and completion of the Work but that does not
form part of the Work such as office trailers, boarding, fences, covered ways,
temporary footways and stairs, protection for workers such as guardrails,
fences, notices, temporary lights, construction power, non-potable water and
other consumables, construction utilities and services, erection structures and
equipment such as shoring, falsework, forming materials, scaffolding, temporary
stairs, staging, and all sanitary, safety, and first aid and fire prevention
facilities of a temporary nature, and obtain and pay for an adequate supply of
fuel, water, power, and all other necessary construction utility services
(including fuel for construction equipment), all construction chemicals,
lubricants, and construction consumables, and disposal of sewage, waste
 
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material, rubbish, and spoils generated by Contractor and its Subcontractors, in
each case as necessary for Contractor’s performance of the Work (but excluding
utilities, facilities and services provided as part of the Owner Provided
Facilities and Services).
 
3.6.4                      Operating Consumables.  Contractor
shall:  (a) provide all Operating Consumables  necessary or appropriate for the
construction, start up, testing, commissioning, operation or maintenance of the
Project (other than the consumables to be provided by Owner as set forth in
Exhibit S) until Contractor achieves Substantial Completion; (b) at Substantial
Completion, provide an inventory of Operating Consumables provided by Contractor
at full storage capacity; and (c) provide to Owner, at least one hundred
eighty (180) days prior to the Substantial Completion Date, a detailed list of
suppliers of all Operating Consumables provided by Contractor.
 
3.7           Inspection by Contractor.  Contractor shall perform all
inspection, expediting, quality surveillance, and other like services required
for performance of the Work, including inspecting all Equipment and Materials
that comprise the Project or that are to be used in the performance of the Work.
 
3.8           Organization.  Contractor shall maintain staff that are dedicated
to the furnishing and completion of the Work, and that have the technical and
managerial expertise to control and execute the Work in accordance with the
requirements of this Agreement, including key staff members for the management
of the Work both on and off-site who shall be supported by area and discipline
superintendents and personnel as required.  Contractor shall maintain a
qualified and competent organization at the Site with adequate capacity and
numbers of construction and start up personnel, equipment, and facilities to
execute the Work in a safe, efficient, environmentally sound, and professional
manner at a rate of progress in accordance with the Project Schedule.  
 
3.9           Contractor Acquired Permits.  Obtain all Contractor Acquired
Permits required to be obtained by Contractor as set forth on Exhibit C,
including all: (a) building permits required for the construction of the
Project; (b) labor or health standard permits and approvals reasonably related
to construction of the Project; (c) business permits necessary for the conduct
of the operations of Contractor in any location where such permits may be
required (including all contractors’ licenses and related documents);
(d) permits, approvals, consents or agreements from or with any Person necessary
for the performance by Contractor of the Work or its warranty obligations
hereunder, for the transportation or importation of Equipment and Materials or
for the transportation or importation of equipment, tools, machinery and other
items used by Contractor in performance of the Work; and (e) permits, visas,
approvals and certifications necessary for Contractor’s employees to legally
perform the Work in any location where performed (including documentation of
citizenship or legal residency in the United States) (all of the foregoing,
collectively, the “Contractor Acquired Permits”).  Without limiting the
foregoing, Contractor Acquired Permits include permits for temporary
construction utilities and temporary sanitary facilities, dump permits, road use
permits, permits related to Contractor’s or any Subcontractor’s use, storage and
disposal of Hazardous Materials, and permits issued pursuant to any building,
mechanical, electrical, plumbing or similar codes, each as required by
Applicable Law in order to permit Contractor to perform the Work, and such
permits not set forth on Exhibit C that would customarily be obtained by
Contractor in its name as may be
 
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necessary to perform the Work.  Contractor shall cause its Subcontractors to
obtain such permits as may be necessary to perform their portion of the Work.  
 
3.10           Hazardous Materials Disposal System.  Contractor shall prepare
and maintain accurate and complete documentation of all Hazardous Materials used
in connection with the Project, and of the disposal of any such materials,
including transportation documentation and the identity of all Subcontractors or
Suppliers providing Hazardous Materials disposal services to Contractor or any
Subcontractor.  Contractor shall provide Owner with copies of such documentation
from time to time upon Owner’s request and shall provide Owner with a complete
set of such documents within thirty (30) days after the Substantial Completion
Date of Unit 2.  
 
3.11           Maintenance of Site.  Maintain the Site and the Ancillary Sites
clear of debris, waste material, and rubbish.  Contractor shall dispose of such
debris, waste material, and rubbish in accordance with Applicable Law.  Prior to
Final Completion, Contractor shall remove from the Site and the Ancillary Sites
all of its waste materials, tools, equipment, machinery, and surplus materials
not part of the Project, in Owner’s discretion.
 
3.12           Site Security.  During the performance of the Work at the Site
and the Ancillary Sites, Contractor shall provide all necessary and reasonably
appropriate safeguards at the Site or any Ancillary Site at which Contractor
conducts the Work or any part thereof, for the protection of the Work, the
Project, and all persons and other property related thereto, including lights
and barriers, guard service, controlled access, and other measures reasonably
required to prevent vandalism, theft, and danger to the Project and personnel,
except that Owner may maintain such security measures at the Site or the
Ancillary Sites as Owner deems appropriate or necessary, including such measures
as described on Exhibit A-1-Section 01530.  Contractor shall cooperate with and
follow all such security measures of Owner.  Within thirty (30) days after the
Full Notice to Proceed Date, Contractor shall provide a draft security assurance
program that satisfies the requirements of Exhibit A-1-Section 01530 to Owner
for Owner’s review and approval.  Contractor shall follow the approved security
assurance program during the performance of the Work. 
 
3.13           Safety.  During the performance of the Work at the Site and the
Ancillary Sites, Contractor shall be responsible for the safety of the Persons
at the Site and for the safe performance of the Work.  Contractor shall give
notices and comply with applicable laws, ordinances, rules, regulations and
lawful orders of public authorities bearing on the safety of persons or property
or their protection from damage, injury or loss.  Within thirty (30) days after
the Full Notice to Proceed Date, Contractor shall provide a draft safety program
specifically designed for the Site and any Ancillary Sites to Owner for Owner’s
review and approval, describing the safety program to be used by Contractor and
the Subcontractors in the performance of the Work.  Contractor’s safety program
shall be designed to provide a safe and healthful environment at the Site and
any Ancillary Site during the performance of the Work at such location and
shall, among other things, seek to achieve an incident free performance of the
Work.  Such safety program shall include a drug and alcohol program (which shall
include a drug testing policy) that at a minimum complies with all Applicable
Laws and shall otherwise satisfy the requirements of Exhibit A-1-Section 01530
and any additional requirements of the OCIP, to the extent such requirements
impose additional or more stringent requirements.  
 
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Contractor shall be solely responsible for implementing and following the
approved safety program at the Site and the Ancillary Sites and shall perform
the Work, and shall cause the Subcontractors to implement, follow and perform
the Work, in accordance with such approved program.  Owner shall have the right
to review and comment on Contractor’s draft safety program and to provide it to
the OCIP Administrator and the OCIP insurance carriers for review and
comment.  Contractor shall cooperate with Owner, the OCIP safety representative
and the OCIP insurance carriers to incorporate changes into the safety program
addressing such comments, and resubmit the safety program to Owner for further
review, until approved.  Contractor shall designate a safety representative with
the necessary qualifications and experience to supervise the implementation of
and monitoring of all safety precautions and programs related to the Work.  The
safety representative shall make routine inspections of the Site and shall hold
safety meetings with Contractor’s personnel, Subcontractors and others, as
Contractor reasonably deems appropriate.  Contractor acknowledges and agrees
that safety representatives designated by the OCIP insurance carriers may from
time to time, and without advance notice, conduct periodic safety reviews of
Contractor and any Subcontractor, and Contractor shall, and shall cause the
Subcontractors to, cooperate with such safety representatives, including by
correcting any safety deficiencies identified during such reviews.  Contractor
shall promptly provide Owner with:
 
(a)           written reports reflecting any incidents or accidents that occur
on the Site or any Ancillary Site;
 
(b)           such reports regarding the safety program as reasonably requested
by the OCIP Administrator;
 
(c)           written accident reports for O.S.H.A. lost time and recordable
accidents that occur at the Site, prepared in accordance with the safety program
approved by Owner pursuant to this Section 3.13; and
 
(d)           copies of all written communications, including notices, with
Governmental Authorities and insurance companies that have provided the
Project-specific insurance coverage required of Contractor pursuant to
Section 21.2 and Exhibit N-1 (but not other insurance coverage that Contractor
may happen to carry) with respect to accidents that occur at the Site, and
thereafter provide such written reports relating thereto as Owner may reasonably
request.
 
In the event that three (3) or more lost time accidents occur at the Project
Site during performance of the Work, whether relating to Work performed by
Contractor or any Subcontractor, Contractor shall, upon written request of
Owner, prepare and submit to Owner for review and comment a revised safety
program intended to remedy the safety issues presented by such incidents or
accidents.
 
3.14           Expediting.  Arrange for complete handling of all Equipment and
Materials, and construction equipment, including inspection, expediting, quality
assurance, shipping, loading, unloading, customs clearance, receiving, storage,
and claims.  All Equipment and Materials shall be stored and maintained in
storage in strict accordance with the applicable manufacturer’s
recommendations.  Contractor shall normally cause all Equipment and Materials
transported to
 
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the Site via blue water or ocean transit to be stored during such travel below
deck of the applicable transport vessel, but Contractor may permit above-deck
storage for certain Equipment and Materials where below-deck storage is not
customary.  Within thirty (30) days after the Full Notice to Proceed Date,
Contractor shall provide a Notice to Owner describing the shipping plan which
Contractor shall follow in shipping all Equipment and Materials to the Site, for
Owner’s review and approval.  If Owner fails to respond within thirty (30) days,
Owner shall be deemed to have approved the plan submitted by
Contractor.  Contractor shall comply with the approved shipping plan.
 
3.15           Applicable Laws and Permits.  Promptly provide all technical
support and information, and other reasonably requested information at no
additional cost, to enable Owner to apply for, obtain and maintain Owner
Acquired Permits.  During and in connection with the Work, Contractor shall and
shall cause its Subcontractors to comply in all respects with all Applicable
Laws and Applicable Permits relating to the Site or the performance of the Work.
 
3.16           Quality Assurance Programs.  Use effective quality assurance
programs, acceptable to Owner and consistent with the requirements of
Exhibit A-1–Section 01440 in performing the Work.  During the Open Book Review,
Contractor shall prepare a quality assurance/quality control program and provide
a Notice to Owner, for Owner’s approval, describing such quality assurance
programs to be used by Contractor in the performance of the Work.  Contractor
shall comply with the approved quality assurance program throughout the
performance of the Work.
 
3.17           Access.  Use only the entrance(s) to the Site specified by Owner
for ingress and egress of all personnel, Equipment and Materials and vehicles.  
 
3.18           Delivery of Documents; Owner Review.  
 
3.18.1                      Submittals.  Without limiting the obligations
contained in Sections 5.3 and 11.3, Contractor shall issue Submittals with
respect to the design, engineering, procurement, installation and construction
of the Project to Owner for Owner’s acceptance or approval within the times set
forth in Exhibit A-1-Section 01330 under Item 1.03 (Approval Required Compliance
Submittals (ARCS) or Technical Submittals), as applicable, prior to the
commencement of any fabrication, construction or installation with respect to
the Project.  Upon acceptance or approval by Owner, as applicable, the
Submittals may not thereafter be amended or modified without the consent of
Owner.  
 
3.18.2                      Operational Documents.  Provide all operating data
and preliminary, construction and final record drawings necessary to safely and
efficiently start up, test, operate, shut down, and maintain the Project
(including the O&M Manual Supporting Documents).  In order to facilitate
observations and inspections, Contractor shall maintain at the Site in a safe
place one working copy of all Submittals, including the Project Schedule,
drawings, specifications, addenda, executed Changes in Work, graphic or written
instructions, and interpretations and clarifications related to Submittals, in
good order and marked currently to record all material changes made during
construction, commissioning and start up.  Such working copies shall be
available to Owner and the Financing Entities, if any, for reference, copying
and use.  
 
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3.19           Training of Operating Personnel.
 
3.19.1                      Commencement of Training.  Commencing six (6) months
prior to first fire for a Unit as set forth in the Project Schedule, Contractor
shall, or where applicable shall cause the Subcontractors to, train the
designated Operating Personnel in the requirements for the start up, shut-down,
operation and maintenance of, and safety, general process understanding and
emergency procedures for, the Project and all of its sub-systems all in
accordance with the training program approved by Owner pursuant to
Section 3.19.2.  Without limiting the generality of the foregoing, Contractor
shall cause the Subcontractor that provides the plant control system to train
the Operating Personnel on the operation and maintenance of such
equipment.  Notwithstanding anything to the contrary herein or in Exhibit A
hereto, the training program shall provide that at least a minimum number of
Operating Personnel shall have completed all necessary training to safely
operate the relevant Unit on or before the Substantial Completion Date for such
Unit.
 
3.19.2                      Design and Review of Training Program.  Contractor
shall design, and prepare a written narrative description of, the training
program (in accordance with the provisions of Exhibit A) and the proposed
written materials to be used in the training program and submit such description
to Owner, for Owner’s review, by no later than the date that is three (3) months
prior to the date the first of the Operating Personnel are scheduled to commence
Work at the Site.  Contractor shall train the Operating Personnel in accordance
with the approved training program, and shall provide Owner with paper and
electronic copies of the final versions of all materials used in the training
program.
 
3.20           Spare Parts.
 
3.20.1                      Spare Parts Schedules.  Contractor shall deliver to
Owner a schedule (the “Spare Parts Schedule”) describing the spare parts that
Contractor believes necessary for the operation and maintenance of each Unit, as
well as a price list setting forth the unit cost for such parts with pricing
valid for a minimum of six (6) months.  Such schedules shall, at a minimum, list
the manufacturer’s part number or easily identifiable ordering number, to the
extent available.  Contractor shall deliver the Spare Parts Schedule for each
Unit to Owner at least six (6) months prior to the then-scheduled Substantial
Completion Date.  The Spare Parts Schedule shall be updated from time to time as
additional spare parts are identified by Contractor or Owner.  Contractor may
designate “required spare parts” on the Spare Parts List with an aggregate
procurement cost not to exceed Two Million Dollars ($2,000,000).  Owner shall
order such required spare parts so that such required spare parts are available
at the Site before Contractor commences commissioning and start up.  
 
3.20.2                      Start-up Spare Parts.  Contractor shall procure the
spare parts such as gaskets, filters and other consumables customarily obtained
by a prudent contractor in connection with the start up and testing of power
generation facilities comparable to the Units, and arrange for delivery of such
spare parts to the Site in time to support the scheduled start up of each
Unit.  
 
3.20.3                      Spare Parts Procurement.  Until the Final Completion
Date, Contractor shall provide procurement support with respect to Owner’s
procurement of all operational and
 
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maintenance spare parts.  Contractor shall be allowed to use all spare parts
acquired by Owner pursuant to Section 3.20.1.  Contractor shall, at its own
cost, promptly replace, recondition or procure for delivery any operational or
maintenance spare parts it uses prior to the Substantial Completion Date and
shall, at its own cost, replace, recondition or procure for delivery to Owner
any operational or maintenance spare parts used by Contractor during testing
following the Substantial Completion Date or in its attempt to cure performance
during the Cure Period, all such replaced, reconditioned or procured spare parts
to be free and clear of any liens, claims, charges, security interests, and
encumbrances whatsoever (except with respect to such liens, security interests,
pledges, and other such encumbrances given by Owner in favor of the Financing
Entities) when delivered to the Site.  
 
3.21           Start Up Personnel.  Contractor shall provide or cause to be
provided appropriate installation and start up representatives from
Subcontractors of major equipment and control systems, all necessary supervising
personnel, all equipment, tools, construction and temporary material and all
other labor necessary for all of the Work to complete commissioning and start
up.
 
3.22           Commodity Scheduling.  Within one hundred eighty (180) days prior
to the scheduled first fire on coal date for each Unit, Contractor shall provide
a Notice to Owner of the amount of coal, limestone and other commodities to be
provided by Owner pursuant to Section 2.8, including scheduling off-take of
power, and required for such Unit for the period beginning on such scheduled
first fire on coal date and ending on the Substantial Completion Date of such
Unit.  
 
3.23           Contractor as Agent.  In addition to acting as agent for and on
behalf of Owner with respect to the STG Upgrade Contract, Contractor has also
been authorized by Owner to execute, and has executed, as agent for and on
behalf of Owner, the Boiler Upgrade Contracts and the air quality control system
equipment purchase order (such agreement, together with the Upgrade Contracts,
the “Agency Subcontracts”), and has been authorized act as agent for and on
behalf of Owner thereunder.  While acting as agent with respect to the Agency
Subcontracts, Contractor agrees to promptly make payments to such Suppliers,
subject to Owner having paid Contractor, and to administer all other aspects of
the Agency Subcontracts and shall oversee the Suppliers’ performance under the
Agency Subcontracts, including technical review and coordination.  Contractor’s
authority in connection with the Agency Subcontracts shall be limited such that
Contractor shall not materially amend or modify the Agency Subcontracts, waive
or exclude performance by any Supplier of their respective obligations under the
Agency Subcontracts, or release, compromise or waive any claim against any of
such Suppliers, without Owner’s prior written consent in each case.  Pursuant to
and in accordance with Section 4.2.7(b), Owner shall, at such time as provided
in Section 4.2.7(b), in writing and in the form attached hereto as Exhibit X,
assign its rights and obligations under the Agency Subcontracts to Contractor,
and upon such assignment, Contractor shall assume all of Owner’s rights and
obligations under such Agency Subcontracts, including the payment obligations
thereunder.  
 
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4.           COVENANTS, WARRANTIES AND REPRESENTATIONS
 
4.1           Contractor.  
 
4.1.1                      Organization, Standing and Qualification.  Contractor
warrants and represents that it is a corporation, duly organized, validly
existing, and in good standing  under the laws of the State of California, and
has full power and authority to execute, deliver and perform its obligations
hereunder and to engage in the business it presently conducts and contemplates
conducting, and is and will be duly licensed or qualified to do business and in
good standing under the laws of the State of Texas and in each other
jurisdiction wherein the nature of the business transacted by it makes such
licensing or qualification necessary and where the failure to be licensed or
qualified would have a material adverse effect on its ability to perform its
obligations hereunder.
 
4.1.2                      Professional Skills.  Contractor represents that it
has and will have all the required authority, ability, skills, experience and
capacity necessary to perform and covenants that it shall diligently perform the
Work in a professional manner, utilizing sound engineering principles, project
management procedures, construction procedures and supervisory procedures, all
in accordance with Industry Standards.  Contractor represents that it has the
experience and skills necessary to determine, and Contractor represents that
Contractor can perform the Work for the Separated Contract Price and in
accordance with the Project Schedule.
 
4.1.3                      Due Authorization; Enforceability.  Contractor
represents and warrants that this Agreement has been duly authorized, executed,
and delivered by or on behalf of Contractor and is, upon execution and delivery,
the legal, valid, and binding obligation of Contractor, enforceable against
Contractor in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency or similar laws affecting
creditors’ rights generally and by general equitable principles.
 
4.1.4                      No Conflict.  Contractor represents and warrants that
the execution, delivery and performance by Contractor of this Agreement will not
conflict with or cause any default under: (a) its organizational documents;
(b) any indenture, mortgage, chattel mortgage, deed of trust, lease, conditional
sales contract, loan or credit arrangement or other agreement or instrument to
which Contractor is a Party or by which it or its properties may be bound or
affected; or (c) any Applicable Laws; and will not subject the Project or any
component part thereof or the Site or any portion thereof to any lien other than
as contemplated or permitted by this Agreement.
 
4.1.5                      Government Approvals.  Contractor covenants that the
Contractor Acquired Permits either have been obtained by Contractor and are in
full force and effect on the date hereof or will be obtained by Contractor and
will be in full force and effect on or prior to the date on which they are
required, under this Agreement and Applicable Law, to be in full force and
effect, so as to permit Contractor to commence and prosecute the Work to
completion in accordance with the Project Schedule.  Other than with respect to
the Contractor Acquired Permits, neither the execution nor delivery by
Contractor of this Agreement requires the consent or approval of, or the giving
of notice to or registration with, or the taking of any other action in respect
of, any Governmental Authority.  
 
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4.1.6                      No Suits, Proceedings.  Contractor represents that
there are no actions, suits, proceedings, patent or license infringements, or
investigations pending or, to Contractor’s knowledge, threatened against it at
law or in equity before any court (United States or otherwise) or before any
Governmental Authority (whether or not covered by insurance) that individually
or in the aggregate could result in any materially adverse effect on the
business, properties, or assets or the condition, financial or otherwise, of
Contractor or in any impairment of its ability to perform its obligations under
this Agreement.  Contractor has no knowledge of any violation or default with
respect to any order, writ, injunction, or decree of any court or any
Governmental Authority that may result in any such materially adverse effect or
such impairment.
 
4.1.7                      Intellectual Property.  Contractor represents and
covenants that it owns, has, or shall have (prior to commencement of the
applicable Work), the right to use all patents, trademarks, service marks, trade
names, copyrights, licenses, franchises, and permits necessary to perform the
Work without conflict with the rights of others.
 
4.1.8                      Business Practices.  Contractor represents that none
of it or its representatives have made any payment or given anything of value,
and Contractor covenants that it will not, and Contractor will direct its
employees, agents, and Subcontractors, and their employees or agents to not,
make any payment or give anything of value, in either case to any government
official (including any officer or employee of any Governmental Authority) to
influence his, her, or its decision or to gain any other advantage for Owner or
Contractor in connection with the Work to be performed hereunder.  Contractor
shall follow its Business Ethics and Conduct policy with respect to all of the
Work, including the selection of Subcontractors.  Contractor shall not, and none
of its employees or agents shall, take any action with respect to this Agreement
or any of the Work that in any way violates the United States Foreign Corrupt
Practices Act or any similar Applicable Law, and Contractor shall use all
commercially reasonable efforts to cause its Subcontractors and their employees
and agents to not take any action with respect to this Agreement or any of the
Work that in any way violates the United States Foreign Corrupt Practices Act or
any similar Applicable Law.  Contractor shall immediately notify Owner of any
violation of this covenant by Contractor, its Subcontractors or any of their
respective employees or agents.
 
4.1.9                      Owner Provided Information.  Contractor acknowledges
that Owner does not make any representation or warranty with respect to the
accuracy or completeness of any Owner Provided Information or any other
documents or information (including oral statements) or opinions expressed by
Owner, except for the Owner Provided Information as set forth on Exhibit W on
which Contractor shall be entitled to rely without verification.  Contractor
represents and warrants that except for the Owner Provided Information as set
forth on Exhibit W, it is not relying on Owner for any information, data,
inferences, conclusions, or other information with respect to Site Conditions,
including the surface conditions of the Site and the surrounding areas.  
 
4.1.10                      Legal Requirements.  Contractor has knowledge of all
of the Applicable Laws that must be followed in performing the Work and
Contractor’s warranty obligations herein.  The Project can and shall be built in
conformity with Applicable Laws and Applicable Permits.  The Work and
Contractor’s warranty obligations herein will be performed in conformity with
all Applicable Laws and Applicable Permits.
 
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4.1.11                      Financial Condition.  Contractor represents and
warrants that it has a senior unsecured long-term debt rating of not less than
BBB by Standard & Poors and Baa2 by Moody’s, or within five (5) business days of
the date of the Amendment will have provided a guarantee, substantially in the
form attached hereto as Exhibit Z-1, by an entity having such a rating.  
 
4.1.12                      Licenses.  Contractor covenants that all Persons who
will perform any portion of the Work have and will have all business and
professional certifications if and as required by Applicable Law to perform the
services under this Agreement.
 
4.1.13                      Exclusivity.  Contractor covenants and agrees that
for the period from and after the date hereof until the Final Completion Date of
the last Unit to be completed, Contractor will not act in the role of an
engineering, procurement or construction contractor with respect to any coal
fired power generation plant located or to be located within the ERCOT region,
except for Owner or Owner’s Affiliates.  
 
4.2           Owner.  
 
4.2.1                      Organization, Standing and Qualification.  Owner
represents and warrants that Owner is a limited liability company, duly formed,
validly existing, and in good standing under the laws of the State of Delaware,
and has full power and authority to execute, deliver and perform its obligations
hereunder and to engage in the business Owner presently conducts and
contemplates conducting, and is and will be duly licensed or qualified to do
business and in good standing in each jurisdiction wherein the nature of the
business transacted by it makes such licensing or qualification necessary and
where the failure to be licensed or qualified would have a material adverse
effect on its ability to perform its obligations hereunder.
 
4.2.2                      Due Authorization; Enforceability.  Owner represents
and warrants that this Agreement has been duly authorized, executed, and
delivered by or on behalf of Owner and is, upon execution and delivery, the
legal, valid, and binding obligation of Owner, enforceable against Owner in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency or similar laws affecting creditors’ rights
generally and by general equitable principles.
 
4.2.3                      No Conflict.  Owner represents and warrants that the
execution, delivery and performance by Owner of this Agreement will not conflict
with or cause any default under:  (a) its organizational documents; (b) any
indenture, mortgage, chattel mortgage, deed of trust, lease, conditional sales
contract, loan or credit arrangement or other agreement or instrument to which
Owner is a Party or by which it or its properties may be bound or affected; or
(c) any Applicable Laws.
 
4.2.4                      Governmental Approvals.  Owner covenants that no
authorization, approval, exemption, or consent by any Governmental Authority is
required in connection with the execution, delivery, and performance of this
Agreement by Owner.  Owner Acquired Permits either have been obtained and are in
full force and effect on the date hereof or will be obtained and will be in full
force and effect, so as to permit Contractor to commence and prosecute the Work
to completion in accordance with the Project Schedule.
 
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4.2.5                      No Suits, Proceedings.  Owner represents that there
are no actions, suits, proceedings, or investigations pending or, to Owner’s
knowledge, threatened against it at law or in equity before any court (United
States or otherwise) or before any Governmental Authority (whether or not
covered by insurance) that individually or in the aggregate could result in any
materially adverse effect on the business, properties, or assets or the
condition, financial or otherwise, of Owner or in any impairment of its ability
to perform its obligations under this Agreement.  Owner has no knowledge of any
violation or default with respect to any order, writ, injunction, or any decree
of any court or any Governmental Authority that may result in any such
materially adverse effect or such impairment.
 
4.2.6                      Owner Parent Guarantee.  Within five (5) business
days of the date of the Amendment, Owner has provided a guarantee from TXU US
Holdings Company to guarantee Owner’s payment and performance obligations
hereunder, in the form attached hereto as Exhibit Z-2, and in an amount (the
“Guaranteed Amount”) equal to the sum of (i) Contractor’s estimated charges for
Work to be performed for the next three (3) consecutive Invoice Payments (based
on estimated reimbursable costs or on the Schedule of Payment Values of
milestones estimated to be completed during such period, as applicable) to be
made prior to Financial Closing, not to include such charges related to the
Agency Subcontracts, (ii) breakage costs, cancellation costs, or termination
fees that would be incurred by Contractor upon termination of Equipment and
Materials purchase agreements or purchase orders, other than the Agency
Subcontracts, (iii) amounts past due hereunder by Owner to Contractor as of such
date, and (iv) the positive or negative difference in the Separated Contract
Price based on Changes In Work during the last calendar quarter.  If TXU Energy
Company LLC loses its status as a direct wholly-owned subsidiary of TXU US
Holdings Company, Owner shall provide Contractor with a guarantee from TXU Corp.
in the form as set forth in Exhibit Z-2 and in the same amount as the guarantee
provided by TXU US Holdings Company.  Upon Financial Closing or assignment to a
permitted assignee pursuant to Section 26.1.2, the guarantee shall be released
in its entirety and terminated, except as otherwise provided in
Section 26.1.2(d).  
 
4.2.7                      Agency Subcontracts.
 
(a)           Until assignment of the Agency Subcontracts to Contractor, Owner
shall not materially amend or modify the Agency Subcontracts, waive or exclude
performance by any Supplier of their respective obligations under the Agency
Subcontracts, or release, compromise or waive any claim against any of such
Suppliers, without Contractor’s prior written consent in each case.
 
(b)           During the period between the Full Notice to Proceed Date and
before the date of Financial Closing, (i) Owner may assign any or all of the
Agency Subcontracts to Contractor if Owner provides a letter of credit from
a bank that has senior unsecured debt rated at least A- by Standard & Poors or
A3 by Moody’s (or an equivalent rating from a similar rating agency), in an
amount equal to the total cancellation exposure under the Agency Subcontracts
assigned to Contractor pursuant to this clause (i), consisting of (A) the
termination or cancellation charges payable under such Agency Subcontracts at
the time of assignment, less (B) payments made by Owner under such Agency
Subcontracts prior to such assignment (the “Total Cancellation Exposure”), and
(ii) Owner shall assign each Agency Subcontract to Contractor when the Total
Cancellation Exposure under such Agency Subcontract is zero.  All of
 
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the Agency Subcontracts that were not previously assigned to Contractor shall be
assigned to Contractor as promptly as practicable after there has been a
Financial Closing.  If Financial Closing has not occurred and the
Total Cancellation Exposure is greater than zero, Owner shall assign
to Contractor upon Contractor’s written request any remaining
Agency Subcontracts that have not been previously assigned to Contractor,
provided that Owner shall not be required to provide a letter of credit upon
such assignment.  Upon assignment of the Agency Subcontracts to Contractor,
Owner shall also pay Contractor an amount equal to the amount of liquidated
damages paid to Owner by the Subcontractors pursuant to such subcontracts prior
to such assignment.
 
5.           COST OF WORK
 
5.1           Separated Target Price.  Subject to the determination of the
Separated Contract Price as provided in Section 5.2, Contractor has provided an
estimated price amount on the basis and as set forth in Exhibit T (the
“Separated Target Price”), to be paid to Contractor by Owner as full
compensation for the Work and all of Contractor’s obligations hereunder unless
and until Contractor and Owner agree upon the Separated Contract Price in
accordance with Sections 5.2 and 5.3.  Payments made during the Open Book Review
shall be made on a reimbursable cost basis for all Work performed by Contractor
in accordance with Article 6 and Exhibit Y, which shall provide an estimate of
the next three (3) months payments and shall be updated monthly.  Payments made
after the Open Book Review shall be made in accordance with the Schedule of
Payment Values developed pursuant to Section 5.3.2.  
 
5.2           Separated Contract Price.  As full compensation for the Work and
all of Contractor’s obligations hereunder, Owner shall pay to Contractor a
separated contract price amount (the “Separated Contract Price”) as determined
during the Open Book Review conducted pursuant to Section 5.3, such Separated
Contract Price to be set forth in the form provided in Exhibit BB.  Once finally
determined, the Separated Contract Price shall be changed only as expressly set
forth in this Agreement.  The Separated Contract Price shall be paid in
accordance with Article 6.  The Separated Contract Price shall be determined
during the Open Book Review and in any event no later than the date that is
eight (8) months from the date hereof.  Contractor and Owner shall memorialize
the agreed upon Separated Contract Price in writing executed by the duly
authorized representatives of the Parties, including a final Exhibit BB.  Owner
may terminate this Agreement by Notice to Contractor at any time before the
Separated Contract Price is determined if after good faith negotiations, and
subject to the management negotiation procedures set forth in Section 32.1, the
Parties fail by absence of mutual written agreement to finalize the Separated
Contract Price.  Upon such termination, Contractor shall be entitled to receive
the payments as set forth in Section 20.1.1.  
 
5.3           Open Book Review.  As of the date of the Amendment, Contractor and
Owner have completed an Open Book Review of the Project.
 
5.3.1                      Leased Equipment.  Contractor acknowledges and agrees
that Owner may enter into, or request that Contractor enter into, arrangements
for the installation of certain systems of a Unit that will be owned and
operated by a Supplier and leased to Owner upon Substantial
Completion.  Contractor agrees to cooperate with Owner and such Suppliers and to
assist Owner in procuring such Leased Equipment, including by entering into
agreements with
 
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such Suppliers to install such Leased Equipment at the Site.  In the event Owner
determines that it will utilize any Leased Equipment, Owner shall notify
Contractor and Contractor shall be entitled to a Change In Work in accordance
with Article 16.  
 
5.3.2                      Development of Schedule of Payment Values and
Estimated Cancellation Costs.  During the Open Book Review described in this
Section 5.3, Contractor and Owner shall mutually agree upon a Schedule of
Payment Values for each Unit, which shall be consistent with the Separated
Contract Price setting forth payments to be made upon completion of the Work or
portions thereof as set forth in such schedule.  The final, mutually approved
Schedule of Payment Values, together with an estimate of cancellation costs, has
been attached hereto as Exhibit D.  
 
5.4           All Items of Work Included.  Subject to Section 5.7, the Separated
Contract Price will include payment for:  (a) all costs of Equipment and
Materials (excluding payments made by Owner pursuant to the Upgrade Contracts
prior to the date hereof), temporary equipment, labor, transportation,
engineering, design and other services relating to Contractor’s performance of
its obligations under this Agreement and the Work (including any intellectual
property rights licensed under this Agreement, expressly or by implication)
provided by Contractor or its Subcontractors and (b) all costs associated with
and payments due under the Upgrade Contracts (including payments made by Owner
pursuant to the Upgrade Contracts prior to the date hereof).  Contractor
represents and warrants that the Separated Target Price does not and the
Separated Contract Price shall not include any sales or use taxes.  
 
5.5           Bonuses.  
 
5.5.1                      Schedule Bonus.  Contractor shall be entitled to a
bonus if Substantial Completion of a Unit is achieved prior to such Unit’s
Substantial Completion Guaranteed Date (a “Schedule Bonus”) in an amount equal
to (i) *** Dollars ($***) per day for each full day before the Substantial
Completion Guaranteed Date on which the Substantial Completion Date of such Unit
actually occurs, for the first thirty (30) days before the Substantial
Completion Guaranteed Date of such Unit, and (ii) *** Dollars ($***) for each
full day before the Substantial Completion Guaranteed Date on which the
Substantial Completion Date actually occurs, for the period starting on the
thirty first (31st) day before the Substantial Completion Guaranteed Date;
provided that the Schedule Bonus shall not exceed an aggregate amount of ***
Dollars ($***) for each Unit..  The Parties agree that for purposes of this
Section 5.5, Substantial Completion shall be deemed to have been achieved on the
date of Contractor’s notice of Substantial Completion with respect to a Unit
that was accepted by Owner pursuant to an Owner’s Certificate of Substantial
Completion for such Unit.  Notwithstanding anything to the contrary in the
foregoing, in the event the Substantial Completion Guaranteed Date is adjusted
to a later date from that set forth herein due to the occurrence of one or more
events of Force Majeure, for the sole purpose of calculating the amount of
Schedule Bonus to be paid to Contractor pursuant to this Section 5.5.1, the
number of days prior to the Substantial Completion Guaranteed Date on which
Substantial Completion was achieved shall be reduced by one-half (½) the number
of days by which the Substantial Completion Guaranteed Date was adjusted due to
such events of Force
 
*** CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION.
 
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Majeure, and the Schedule Bonus that Contractor would otherwise receive shall be
calculated using such adjusted number of days.
 
5.5.2                Performance Bonus.  With respect to each Unit, provided
that Contractor has met the Minimum Performance Criteria with respect to the Net
Unit Capacity and Net Unit Heat Rate for both Units, Contractor shall be
entitled to a bonus (a “Performance Bonus”) (i) if the Unit achieves Net Unit
Capacity in excess of the Net Unit Capacity Guarantee in an amount equal to ***
Dollars ($***) per kilowatt for each kilowatt by which the Unit exceeds the Net
Unit Capacity Guarantee, and (ii) if the Unit achieves a Net Unit Heat Rate
below the Net Unit Heat Rate Guarantee in an amount equal to *** Dollars ($***)
per Btu/kilowatt hour for each Btu/kilowatt hour by which the Unit achieves a
Net Unit Heat Rate lower than the Net Unit Heat Rate Guarantee.  Owner
acknowledges and agrees that if Contractor does not receive a Performance Bonus
pursuant to this Section 5.5.2, Contractor may invoice Owner and Owner shall pay
Contractor pursuant to and in accordance with the provisions of Article 6 an
amount equivalent to the bonuses paid to the STG Upgrade Supplier and the Boiler
Upgrade Suppliers by Contractor if such Subcontractors are entitled to, and
Contractor pays them, a performance bonus for achieving the performance criteria
that correspond to the Performance Bonus as contemplated in this Section 5.5.2,
pursuant to the Upgrade Contracts. 
 
5.6           Payment of Bonuses.  Owner shall pay any Schedule Bonus to
Contractor monthly within twenty (20) Days of receipt of Contractor’s invoice
delivered after the Substantial Completion Date for such Unit.  All Performance
Bonuses will be paid with the Final Payment for the second Unit.  
 
5.7           Texas Sales and Use Taxes.
 
5.7.1                      Separated Contract.  Owner and Contractor agree that
for Texas sales and use tax purposes, this Agreement is a “separated contract”
as such term is defined in 34 Texas Administrative Code § 3.291(a)(12).  This
Agreement, the Separated Target Price, and the Separated Contract Price will be
further divided as provided in Section 5.7.3.
 
5.7.2                      Texas Direct Payment Permit and Other Matters.  Owner
will provide Contractor with a blanket Texas Direct Payment Exemption
Certification covering each sale, lease or rental of a “taxable item” (as
hereinafter defined) by Contractor to Owner in connection with the Work, and
will provide any Suppliers for whom Contractor is acting as an agent for Owner
pursuant to this Agreement, with a similar Texas Direct Payment Exemption
Certification, which will negate Contractor’s obligation to collect Texas sales
and use taxes from Owner with respect to such taxable items.  Contractor shall
issue, and shall cause the applicable Subcontractors and Upgrade Suppliers to
issue, properly completed Texas Resale Certificates and/or other exemption
certifications or other documentation, as appropriate, to all applicable
Subcontractors and Upgrade Suppliers, and shall take such other actions as are
necessary or advisable, in order to claim, obtain and/or evidence that the sale
of such taxable items is exempt or otherwise not taxable for Texas sales and use
tax purposes.  Owner shall have no liability to
 
*** CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION.
 
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Contractor under this Agreement or otherwise for any sales and use taxes paid,
directly or indirectly, by Contractor, any Subcontractor or any Upgrade Supplier
to any Subcontractor or Upgrade Supplier with respect to such taxable items,
including by reason of Contractor’s failure to comply, or to cause any
Subcontractor or Upgrade Supplier to comply, with the immediately preceding
sentence or otherwise to avail itself of the benefit of any exemption it may
receive, including the resale exemption.  As used in this Section 5.7, the term
“taxable item” has the meaning assigned to that term in Section 151.010 of the
Texas Tax Code.
 
5.7.3                      Certain Reimbursements.  Contractor shall pay and be
responsible for, and Owner shall reimburse Contractor (without duplication) for,
all sales and use taxes imposed on Contractor’s equipment, materials, tools,
supplies, consumables, services and overhead not incorporated into the Project
related to the design, construction, or operation of the
Project.  Notwithstanding anything to the contrary in the foregoing, Owner shall
not reimburse Contractor for sales and use taxes on such equipment, materials,
tools, or supplies used or to be used on projects other than the Project.
 
5.7.4                      Statements and Other Information.  
 
(a)           Contractor shall provide to Owner a statement of information for
sales and use tax purposes which shall break down in detail by month the
aggregate amount of the Separated Contract Price by clearly and separately
listing and identifying mutually agreed items, categories of items (including
any service relating to the repair, remodeling, maintenance or restoration of
tangible personal property or real property) and the amount of the cost related
thereto.  Contractor shall also provide Owner with any additional information
regarding tax matters concerning such statements of information, and sales and
use tax matters relating thereto, requested by Owner.  Contractor and Owner will
reconcile cost allocation listing by the agreed tax categories at the beginning
and at completion of the Project.
 
(b)           Owner and Contractor shall develop a schedule of discrete unit and
plant components that Owner will designate as “units of property” necessary for
maintenance, accounting and tax record keeping purposes.  Upon Final Completion,
Contractor shall provide Owner a schedule of the “units of property” showing the
appropriate allocable construction cost for each such unit of
property.  Contractor agrees to identify such units of property on the final
record drawings and shall physically identify or tag such “units of property”
during the construction process according to Contractor’s standard
identification and tagging procedures.
 
5.8           Other Taxes.  Except with respect to sales and use taxes covered
by Section 5.7.3, the Separated Target Price includes, and the Separated
Contract Price will include, all taxes, duties, levies, imposts, fees, royalties
or charges of any kind imposed on Contractor, the Subcontractors or the Upgrade
Suppliers with respect to any Equipment and Materials (other than any such
taxes, duties, levies, imposts, fees, charges and royalties paid by Owner with
respect to the Owner Furnished Equipment prior to the date hereof), labor, or
services provided under this Agreement.  Accordingly, Contractor shall pay and
be responsible for, and shall not be reimbursed by Owner for, and there shall be
no adjustments to the Separated Contract Price for, any of such taxes, duties,
levies, imposts, fees, royalties or charges.  The taxes covered hereby include
occupational, excise, unemployment, FICA, ownership, value-added, gross
receipts, state and federal gasoline and fuel taxes, property taxes on
Contractor’s construction equipment, tools
 
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and supplies and any and all other taxes and duties on any item or service that
is part of, incurred in, or result from Contractor’s performance of the Work,
whether such tax is normally included in the price of such item or service or is
normally stated separately.  Notwithstanding the foregoing provisions of this
Section 5.8, Contractor shall not be liable for (i) any property taxes imposed
on the Site, Owner Furnished Equipment, and Equipment and Materials that have
been incorporated into the Project, or (ii) any corporate income taxes with
respect to Owner’s profits.  
 
5.9           Cooperation Regarding Taxes.  Owner and Contractor shall cooperate
in good faith with each other, and shall use their commercially reasonably
efforts, to minimize sales and use taxes and other taxes relating to this
Agreement and the Work, including taking advantage of applicable exemptions and
consulting and cooperating in good faith with each other in order to effectively
handle and contest any audit, examination, investigation, or administrative,
court or other proceeding.  In connection therewith, Contractor shall assign to
Owner its rights to any refund of sales or use taxes which have been paid or
reimbursed by Owner to Contractor in order to enable Owner to contest the
determination of taxability and recover any overpayment of such
taxes.  Contractor shall grant or cause to be granted to, and shall cause its
Affiliates, and shall use commercially reasonable efforts to cause its
Subcontractors, to grant to Owner or Owner’s representatives access at all
reasonable times during the course of the Work and for a period six (6) years
after the Final Completion Date to all of the information, books, and records
relating to the Work within their possession or control (including, the right to
take extracts therefrom and make copies thereof) in connection with tax matters
(including sales and use tax matters) to which this Agreement
relates.  Contractor shall also furnish or cause to be furnished to Owner or
Owner’s representatives the assistance and cooperation of personnel of
Contractor and its Affiliates, and shall use commercially reasonable efforts to
cause all of its Subcontractors to furnish or cause to be furnished such
assistance and cooperation, as Owner may reasonably request in connection which
such tax matters.  Without limiting the foregoing, Owner and Contractor
acknowledge and agree that certain of the Agency Subcontracts provide that the
respective Subcontractors will cooperate with audits and provide information
requested in the course of an audit by federal or state Governmental
Authorities.
 
5.10           Credit for Payments made by Owner under the STG Upgrade
Contract.  Owner and Contractor acknowledge that prior to January 31, 2007,
Owner made payments directly to the STG Upgrade Supplier in accordance with the
terms of the STG Upgrade Contract.  As soon as practicable after the date
hereof, Owner shall provide a written certification to Contractor of the
aggregate amount that Owner has paid to the STG Upgrade Supplier under the STG
Upgrade Contract prior to the date hereof, and Owner and Contractor shall verify
that the Schedule of Payment Values and Estimated Cancellation Costs accurately
reflects such payments and, if necessary, shall agree upon an adjustment to the
Schedule of Payment Values and Estimated Cancellation Costs to accurately
reflect such payments.  Owner and Contractor agree that the Schedule of Payment
Values and Estimated Cancellation Costs includes all payments due to the STG
Upgrade Supplier after January 31, 2007 under the terms of the STG Upgrade
Contract.  
 
5.11           Labor Committees.  Contractor and Owner shall each designate in
writing its representatives to serve on the Program Labor Committee and the
Executive Labor Committee within thirty (30) days after the execution of this
Amendment.  A Party may designate alternate representatives or change its
representatives from time to time upon written notice to the other
Party.  Should the representatives of either Party on the Program Labor
Committee believe that a
 
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need exists to adjust the Craft Labor Compensation on the Project or at other
construction projects at which Owner and Contractor may be engaged in Texas, the
Program Labor Committee shall communicate in writing to the Executive Labor
Committee the recommendations of the Parties with respect to the proposed
adjustment to such Craft Labor Compensation, within two (2) Business Days after
the start of the meeting.  Each of Owner’s and Contractor’s representatives on
the Program Labor Committee shall act in good faith and reasonably on, among
other things, the escalation of Craft Labor Compensation for purposes of this
Agreement.  The Executive Labor Committee shall review the recommendations of
the Parties’ representatives on the Program Labor Committee, and shall agree
upon proposed adjustments to Craft Labor Compensation.  Each of Owner’s and
Contractor’s representatives on the Executive Labor Committee shall act in good
faith in reaching agreement, such agreement not to be unreasonably withheld, on,
among other things, the escalation of Craft Labor Compensation for purposes of
this Agreement.  All decisions by the Executive Labor Committee shall be
unanimous and shall be made within three (3) Business Days after receipt of any
Program Labor Committee recommendation.  In no event shall Contractor’s
representatives on the Program Labor Committee request an escalation in Craft
Labor Compensation in order to improve the Project Schedule, or to recover the
Project Schedule based upon conditions unrelated to craft labor availability,
and in connection with any request for escalation, Contractor’s representatives
shall reasonably demonstrate that the requested escalation in Craft Labor
Compensation is necessary in order for Contractor to attract or retain
sufficient qualified craft labor personnel to perform the on-Site Work as
necessary for Contractor to maintain the Project Schedule.
 
6.           TERMS OF PAYMENT.  Payments to Contractor shall be made as follows:
 
6.1           Invoice Payments.  Subject to Owner’s right to withhold payments
as provided in this Article 6, Owner shall make payments to Contractor in
accordance with Sections 6.3 and 6.7, and Section 6.5 with respect to the
Subcontractor Invoices.  Contractor shall be paid on a reimbursable cost basis
with respect to Work performed during the Open Book Review, and after the Open
Book Review is completed and the Separated Contract Price has been agreed upon
by the Parties, in accordance with the Schedule of Payment Values for each of
the Units in accordance with Exhibit A-1–Section 01320 as set forth in Exhibit D
less the amount of any payments made to Contractor during the Phase One
EPC.  After completion of the Open Book Review, each Invoice Payment shall be
due and payable only to the extent it is supported by signed notices of
completion of Schedule of Payment Values or other milestones pursuant to
Section 6.2.  No Invoice Payment shall be made to the extent of any improperly
performed Work.  
 
6.2           Progress Assessment.  After completion of the Open Book Review,
Contractor shall from time to time notify Owner’s Project Representative upon
completion of each Schedule of Payment Values milestone for signature by Owner’s
Project Representative or designee, such signature not to be unreasonably
withheld.  In connection with such notifications, during on-Site construction,
representatives of Contractor and Owner shall periodically, and in any event at
least twice each month, review the Work completed and assess the progress of
on-Site Work completed and completion of the related Schedule of Payment Values
milestones.  
 
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6.3           Contractor’s Invoices.  
 
6.3.1                      During Open Book Review.  During the period before
completion of the Open Book Review, on or about the first (1st) day of each
month, Contractor shall furnish Owner two (2) copies of its Contractor’s Invoice
covering the estimated cost of the Work to be completed during the next
succeeding twenty (20) days, on an estimated reimbursable cost basis.  After the
initial invoice, each subsequent invoice shall reflect the total amount of the
Work completed to date, plus the Work to be completed through the first twenty
(20) days of the current month, less the total amount paid through the last
invoice period.  Each Contractor’s Invoice shall separate the Work to be
completed as represented by such invoice into engineering services, construction
services and costs of equipment, shall be reasonably detailed and shall be
accompanied by reasonable supporting documentation with respect to the Work
completed and the costs related thereto set forth on such
invoice.  Notwithstanding anything to the contrary in Sections 6.3.2 or 6.7,
until completion of the Open Book Review, Contractor shall invoice Owner and
Owner shall make payments to Contractor with respect to the Subcontractors in
accordance with Section 6.5.  Contractor acknowledges and agrees that Owner may
request the Contractor’s Invoices be submitted in electronic form and agrees to
use commercially reasonable efforts to comply with Owner’s reasonable requests
for the use of electronic invoices.
 
6.3.2                      After Completion of Open Book Review.  Beginning on
the first (1st) day of the month after the month in which the Open Book Review
Period is completed, and on or about the first (1st) day of each month
thereafter, Contractor shall submit two (2) copies of its Contractor’s Invoice
for the Work completed on each Unit in the immediately preceding month in the
form of Exhibit F to Owner by delivering one such copy to the Project
Representative and such Person in the finance or accounting department as
designated in writing by Owner.  Contractor acknowledges and agrees that Owner
may request the Contractor’s Invoices be submitted in electronic form and agrees
to use commercially reasonable efforts to comply with Owner’s reasonable
requests for the use of electronic invoices.  Contractor specifically agrees
that it shall not request in any Contractor’s Invoice the payment of any sum
attributable to Work: (a) for which Contractor has already been paid; (b) which
has been rejected by Owner or Contractor and has not subsequently been accepted
in accordance with the terms hereof; or (c) for which Contractor and Owner have
not signed a notice of completion of a Schedule of Payment Values milestone as
provided in Section 6.2.  Each Contractor’s Invoice: (x) shall identify:
(i) which activities described on the Schedule of Payment Values have been
completed; (ii) the related payments set forth on the Schedule of Payment Values
that are then due as of the end of the immediately preceding calendar month;
(iii) any other amounts then payable by Owner to Contractor under Article 16 or
any other provision hereof; (iv) shall be accompanied by reasonable supporting
documentation with respect to the Work completed; (v) shall not limit Owner’s
right to dispute any amounts requested for payment; (y) shall include the
notices of completion of Schedule of Payment Values milestones signed during the
preceding month; and (z) shall include a Conditional Waiver and Release Upon
Milestone or Progress Payment of Contractor for payments to be made pursuant to
such Contractor’s Invoice.  Contractor understands and agrees that any
Contractor’s Invoice that is inaccurate or incomplete or that lacks reasonable
detail, specificity, or supporting documentation required by this Section 6.3,
Section 6.4, Section 6.5 and, with respect to a Contractor’s Invoice requesting
a Final Payment, Section 6.9, shall not, to the extent of such deficiency,
constitute a valid request for payment.
 
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6.4           Subcontractor Statements.  In addition to the requirements of
Section 6.3 and 6.5, with each applicable Contractor’s Invoice, or each invoice
received from a Subcontractor prior to the Open Book Review and delivered to
Owner pursuant to Section 6.5, Contractor shall submit to Owner from each of
Contractor’s direct (i.e. first tier) Major Subcontractors, and shall use its
commercially reasonable efforts to obtain and submit from each other Major
Subcontractor:  (a) unless the applicable Major Subcontractor has already
delivered a Conditional Waiver and Release Upon Final Payment, a Conditional
Waiver and Release Upon Milestone or Progress Payment, and (b) if such Major
Subcontractor has completed all Work that such Major Subcontractor is to
perform, an Unconditional Waiver and Release Upon Final Payment; provided,
however, if Contractor is unable to obtain the foregoing, Contractor may provide
Owner with a bond or other security in form, substance and amount reasonably
acceptable to and if reasonably requested by Owner based on the existence of
outstanding claims, if any, with such Major Subcontractor, to indemnify Owner
against and discharge any lien or other claim by such Major Subcontractor with
respect to its right to be paid in connection with performance of the
Work.  Contractor shall provide Owner with a list of Contractor’s direct (i.e.,
first tier) Major Subcontractors and its other Major Subcontractors as soon as
practicable after the date hereof and from time to time thereafter to reflect
changes in such list, but no less than monthly on the same date that
Contractor’s Invoice is delivered to Owner if there have been any changes to
such list in the prior month, by delivering one copy of such list to the Project
Representative and one copy to such Person in the finance or accounting
department as designated in writing by Owner.
 
6.5           Subcontractor Invoices.  Prior to completion of the Open Book
Review, Contractor shall submit two (2) copies of any invoices received from its
Subcontractors to Owner by delivering one such copy to the Project
Representative and such Person in the finance or accounting department as
designated in writing by Owner pursuant to Section 6.3.  Each such invoice shall
be reasonably detailed and shall be accompanied by reasonable supporting
documentation with respect to the Work completed and the costs related thereto
set forth on such invoice, and by the statements required pursuant to
Section 6.4.  Contractor acknowledges and agrees that Owner may request such
invoices be submitted in electronic form and shall use commercially reasonable
efforts to obtain the Subcontractors’ compliance with such requests.  Contractor
understands and agrees that any invoice that is inaccurate or incomplete or that
lacks reasonable detail, specificity, or the supporting documentation required
by this Section 6.5 shall not, to the extent of such deficiency, constitute a
valid request for payment.  By submitting such invoice to Owner, Contractor
shall be deemed to represent to Owner that the milestone required for payment
has been achieved or the Work required to be completed has been completed, as
applicable.  Notwithstanding anything to the contrary in Section 6.3, Owner
shall pay Contractor the entire amount of the invoice, subject only to
Retainage, in immediately available funds by electronic means using banking
transfer instructions provided by Contractor within fifteen (15) days after
Owner receives such invoice.  
 
6.6           Owner Review.  Without limiting Owner’s rights of review under
Article 11, within ten (10) days after Owner receives a Contractor’s Invoice and
all accompanying documentation required by Sections 6.2 and 6.4, Owner shall
notify Contractor concerning any dispute over the accuracy of the submitted
invoice and the basis for such dispute.  Disputed invoices or portions thereof
that are corrected before the date that is five (5) days prior to the date
payment is due pursuant to Section 6.7, shall be paid on such due date.  
 
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6.7           Payments.  Within twenty (20) days after receipt of a Contractor’s
Invoice (except as otherwise provided in Section 6.5), Owner shall pay, subject
to Sections 6.8 and 6.12, all undisputed amounts that are then payable as set
forth in the then current Contractor’s Invoices (each, an “Invoice
Payment”).  Owner and Contractor agree that payment of amounts due under this
Agreement may be by electronic means of immediately available funds using
banking transfer instructions provided by the receiving Party of any such
payment at least five (5) business days before such payment is due and
payable.  Upon receipt of any Invoice Payment from Owner, Contractor shall
promptly pay each Subcontractor out of such Invoice Payment the amount to which
said Subcontractor is entitled pursuant to the applicable subcontract or
purchase order.  Owner shall not have any obligation to pay any Subcontractor
with respect to the Work completed by such Subcontractor on the Project.  Any
delinquent payment shall bear interest at the prime rate as published in “The
Money Rates” Section of The Wall Street Journal (U.S. Edition), plus one percent
(1%) per annum, until paid, but not to exceed the maximum rate permitted by the
applicable usury laws.  The payment of interest unaccompanied by payment of the
delinquent payment shall not excuse or cure any default or delay in such
payment.  In the event interest accrues on any delinquent payment, Contractor
shall reflect such amount in each subsequent billing invoice.  
 
6.8           Retainage.
 
6.8.1                      Retainage.  Owner shall withhold from each Invoice
Payment for a Unit an amount (the “Retainage”) equal to five percent (5%) of the
portion of the Separated Target Price or the Separated Contract Price, as
applicable, to be paid for the applicable month pursuant to Contractor’s
Invoice.  In the event Contractor’s, or if applicable its guarantor’s, rating
falls below BBB- by Standard & Poors or Baa3 by Moody’s, Owner shall be entitled
to withhold additional Retainage of five (5%) for a total Retainage of ten
percent (10%) from Contractor’s Invoices submitted after such decline in
Contractor’s or its guarantor’s rating.
 
6.8.2                      Letter of Credit.  Notwithstanding the obligations
set forth in this Section 6.8 regarding Retainage or Section 6.12 regarding
Owner’s right to holdback or withhold payment, Contractor may provide in lieu of
Retainage, or receive a refund of the Retainage (if cash Retainage has already
been withheld) and amounts withheld by Owner pursuant to Section 6.12, upon
delivery of an irrevocable standby letter of credit whereupon Owner shall no
longer maintain such cash Retainage and shall pay such amounts withheld pursuant
to Section 6.12 to the extent covered by such Letter of Credit.  If Contractor
desires to deliver one or more Letters of Credit, Contractor shall, at its own
expense, cause a financial institution that has senior unsecured debt rated at
least A by Standard & Poor’s or A2 by Moody’s (or an equivalent rating from such
other equivalent rating agency as may be approved by Owner) to issue and
maintain, by renewal or replacement, for the periods specified herein, one or
more irrevocable, unconditional, transferable, standby, revolving letters of
credit in favor of Owner consistent with the requirements of this Section 6.8.2,
in form and substance as set forth on Exhibit P herein (individually and
collectively, the “Letter of Credit”).  If the amount of such Letters of Credit
are insufficient to cover the Retainage with respect to the Contractor’s
Invoices, Owner shall be entitled to withhold cash Retainage and such amounts as
Owner may be entitled to withhold pursuant to Section 6.12 from payments made
with respect to such Contractor’s Invoice.  The terms of release of Retainage as
set forth in Section 6.8.3 and payment with respect
 
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to amounts withheld pursuant to Section 6.12 following a Notice of Correction
shall apply mutatis mutandis with respect to the Letter of Credit.  
 
6.8.3                      Release of Retainage.  Owner shall release the
Retainage to Contractor as follows:
 
6.8.3.1                      Release at Substantial Completion.  No later than
eighty (80) days after achieving Substantial Completion of a Unit, or if a
pre-lien notice pursuant to Section 53.056 of the Texas Property Code, has been
received by Owner, one hundred twenty (120) days after such Substantial
Completion Date, Owner shall release to Contractor an amount of Retainage equal
to fifty percent (50%) of the amount retained to date related to such Unit;
provided that Contractor is on schedule to achieve Substantial Completion by the
Substantial Completion Guaranteed Date for the remaining Unit and is not
otherwise in default under the terms of this Agreement.  If Retainage is not
released following Substantial Completion of the first Unit because Contractor
is not on schedule to achieve the Substantial Completion Guaranteed Date of the
second Unit, Owner shall release such fifty percent (50%) Retainage related to
the first Unit within fifteen (15) days after the earlier of the date Contractor
reasonably demonstrates it is back on schedule to achieve Substantial Completion
by the Substantial Completion Guaranteed Date for the remaining Unit or
Contractor achieves Substantial Completion of the second Unit; provided that
Contractor is not otherwise in default under the terms of this Agreement.  If
Retainage is not released upon Substantial Completion of a Unit due to
Contractor being in default under the terms of this Agreement, Owner shall
release such fifty percent (50%) Retainage related to the first Unit within ten
(10) days after Contractor reasonably demonstrates that such default has been
cured; provided that Contractor is on schedule to achieve Substantial Completion
by the Substantial Completion Guaranteed Date for the remaining Unit.
Concurrently with Owner’s release of Retainage pursuant to this Section 6.8.3.1,
Owner shall provide to Contractor, or take any actions to cause the financial
institutions holding any Letters of Credit, written confirmation of the amounts
released under this Section 6.8.3.1.
 
6.8.3.2                      Release at Final Completion.  Within eighty (80)
days (one hundred twenty (120) days if Owner receives a pre-lien notice pursuant
to Section 53.056 of the Texas Property Code before or during such eighty (80)
day period) after the Final Payment for a Unit, and subject to compliance with
and completion of all requirements regarding reports, audits and closeout
reports as set forth in Section 21.1.11 by Contractor and each Subcontractor
enrolled in the OCIP, Owner shall release to Contractor all of the amount
retained to date related to such Unit then held by Owner; provided that if such
Retainage is related to Invoice Payments for the first Unit to be completed,
whether Unit 1 or Unit 2, Contractor is on schedule to achieve the Substantial
Completion Guaranteed Date for the other Unit and is not otherwise in default
under the terms of this Agreement.  If Retainage is not released following Final
Completion of the first Unit because Contractor is not on schedule to achieve
the Substantial Completion Guaranteed Date of the second Unit, Owner shall
release such Retainage related to the first Unit within fifteen (15) days after
the earlier of the date Contractor reasonably demonstrates it is back on
schedule to achieve the Substantial Completion Guaranteed Date for the remaining
Unit or Contractor achieves Substantial Completion of the second Unit; provided
that Contractor is not otherwise in default under the terms of this
Agreement.  If Retainage is not released upon Final Completion of a Unit due to
Contractor being in default under the terms of this Agreement, Owner shall
release the remaining Retainage related to the first Unit within ten (10) days
after
 
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Contractor reasonably demonstrates that such default has been cured; provided
that Contractor is on schedule to achieve the Substantial Completion Guaranteed
Date for the remaining Unit.
 
6.8.3.3                      Release upon Termination.  In the event this
Agreement is terminated prior to completion of the Work for any reason other
than a Contractor Event of Default, all Retainage on payments made to Contractor
prior to such termination shall be released to Contractor upon the later to
occur of (a) eighty (80) days (one hundred twenty (120) days if Owner receives a
pre-lien notice pursuant to Section 53.056 of the Texas Property Code before or
during such eighty (80) day period) after the date of such termination, and
(b) ten (10) days after all disputes between Owner and Contractor have been
resolved and all amounts due from Contractor have been paid (as applicable);
provided that in each case Contractor and each of its direct (i.e., first tier)
Major Subcontractor has delivered, and that Contractor has used commercially
reasonable efforts to cause each of its other Major Subcontractors to deliver,
Unconditional Waivers and Releases Upon Final Payment to Owner prior to such
release of the Retainage.
 
6.9           Final Payment.  Upon the delivery of Owner’s Certificate of Final
Completion of a Unit, Contractor shall submit a final Contractor’s Invoice for
such Unit (a “Final Contractor’s Invoice”) which shall set forth all amounts due
to Contractor that remain unpaid in connection with such Unit (including amounts
relating to the items on the Punchlist for such Unit), and shall attach all
reports required of Contractor and each Subcontractor enrolled in the OCIP
pursuant to Section 21.1.  Upon approval of such Final Contractor’s Invoice by
Owner based on Contractor having performed its Work in accordance with this
Agreement, Owner shall pay to Contractor the amount due under such Final
Contractor’s Invoice (“Final Payment”).  Owner shall make Final Payment to
Contractor within thirty (30) days after receipt of the Final Contractor’s
Invoice if and only if Contractor has delivered the following items to Owner:
 
(a)           with respect to each Major Subcontractor, either:
 
(i)           an Unconditional Waiver and Release Upon Final Payment of
Subcontractor; or
 
(ii)           a bond in form and substance reasonably acceptable to Owner to
indemnify and fully protect Owner against any claim by such Subcontractor with
respect to its right to be paid in connection with the Project or the
performance of the Work;
 
(b)           with respect to Contractor and each Subcontractor enrolled in the
OCIP, completion of all requirements regarding reports, audits and closeout
reports in connection with the OCIP under Section 21.1; and
 
(c)           with respect to Contractor, a Conditional Waiver and Release Upon
Final Payment.
 
Contractor covenants that it shall deliver to Owner an Unconditional Waiver and
Release Upon Final Payment no later than two (2) Business Days after
Contractor’s receipt of Final Payment.  Concurrently with Owner’s release of
Retainage pursuant to Section 6.8.3.2, Owner shall surrender to Contractor, or
take such actions as reasonably necessary to cause such surrender of, any
Letter(s) of Credit held in lieu of Retainage.
 
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6.10           Method of Payment.  All payments to be made to Contractor under
this Agreement shall be paid in Dollars and shall be paid electronically (via
ACH or wire) in immediately available funds on the date due or, if such date is
not a Business Day, on the immediately succeeding Business Day to such account
as may be designated by Contractor from time to time by Notice to Owner in
accordance with Article 30.
 
6.11           Disputes Regarding Payments.  Subject to Contractor’s rights and
remedies under Section 19.4(f) and Section 19.5, failure by Owner to pay any
amount disputed in good faith until resolution of such dispute in accordance
with this Agreement shall not alleviate, diminish, modify nor excuse the
performance of, Contractor’s obligations to perform hereunder in any respect,
including Contractor’s obligation to meet the Substantial Completion Guaranteed
Dates.  Contractor’s acceptance of any payment shall not be deemed to constitute
a waiver of amounts that are then in dispute.  Contractor and Owner shall use
their reasonable efforts to resolve all disputed amounts reasonably
expeditiously and in accordance with the provisions of Article 32.  No payment
made hereunder shall be construed to be acceptance or approval of that part of
the Work to which such payment relates or to relieve Contractor of any of its
obligations hereunder.  If a Contractor’s Invoice was properly submitted in
accordance with all of the provisions of this Agreement and amounts disputed by
Owner in regards to such invoice are later resolved in favor of Contractor,
Owner shall pay interest on such disputed amounts due Contractor at the rate set
forth in Section 6.7, from the date on which the payment was originally due
pursuant to such invoice until payment was received by Contractor.
 
6.12           Holdbacks.
 
6.12.1                      Owner Holdbacks.  Notwithstanding anything to the
contrary herein, in addition to the Retainage, upon the occurrence and
continuance of any of the following events, Owner, upon Notice to Contractor in
accordance with Section 6.12.2, may withhold or retain such portion (including
all) of any payment due to Contractor under this Agreement as Owner deems
appropriate in Owner’s reasonable discretion to confirm that performance of the
Work will be effected in accordance with this Agreement or to protect fully the
rights of Owner hereunder:
 
(a)           Any part of such payment is attributable to Work which is not
materially in compliance with this Agreement;
 
(b)           Owner has received a notice of lien from any Subcontractor,
Upgrade Supplier or Supplier or any other Person claiming payments due with
respect to the Work;
 
(c)           Contractor’s failure to comply with the requirements of
Article 21;
 
(d)           Owner has paid or is required to pay any amount pursuant to an
official notice from a state agency, or employee benefit trust fund, for which
Owner is or may reasonably be liable for Contractor or any Subcontractor, in
accordance with Applicable Law; and
 
(e)           As one or more of the following shall occur:
 
(i)           A Contractor Event of Default shall have occurred hereunder;
 
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(ii)           a lien claim has been filed for which Contractor is obligated to
obtain a release pursuant to Article 29 and Contractor has not obtained such
release within fifteen (15) days after such lien claim was filed;
 
(iii)           Contractor shall have failed to deliver any Contractor
Deliverable included in Contractor’s Invoice to Owner on or before the date of
such Contractor’s Invoice or any such Contractor Deliverable shall not have been
prepared by Contractor in good faith;
 
(iv)           Contractor shall have failed to provide appropriate evidence of
insurance in conformance with the requirements of this Agreement;
 
(v)           Owner shall have determined that any portion of the Work for which
payment has already been made pursuant to a previous Contractor’s Invoice shall
contain one or more Errors or Omissions or Defects; provided that the amount so
withheld shall not exceed the amount reasonably expected to correct such Error
or Omission or Defect; and
 
(vi)           a third-party claim has been filed for which Contractor is
obligated to indemnify Owner pursuant to any of the provisions of Article 23 and
Contractor has failed to provide the indemnification for such claim in
accordance with Section 23.5 within the ten (10) day period provided therein.
 
6.12.2                      Notice of Withholding; Notice of Correction.  If,
pursuant to Section 6.12.1, Owner intends to withhold any amount from a payment
to be made to Contractor, Owner shall, on or before the date that the applicable
payment is due to Contractor hereunder, provide a Notice of Withholding to
Contractor of any amount that will be so withheld.  Such Notice of Withholding
delivered pursuant to this Section 6.12.2 shall identify the amount that will be
withheld from Contractor, give a reasonably detailed explanation of the reason
Owner will withhold such amount, and shall be signed by an authorized agent of
Owner.  If Contractor receives a Notice of Withholding from Owner pursuant to
this Section 6.12.2, Contractor may provide a Notice of Correction to Owner of a
condition described in such Notice of Withholding delivered pursuant to this
Section 6.12.2.  Such Notice of Correction shall be sufficient to identify the
scope and manner of the corrective actions to be taken to correct the conditions
that are the subject of Section 6.12.1 as identified in such Withholding Notice,
and shall be signed by an authorized representative of Contractor.  
 
6.12.3                      Payment Following Notice of Correction.  If Owner
receives a Notice of Correction describing the actions taken to correct any
condition described in a Notice of Withholding delivered pursuant to
Section 6.12.2, Owner shall pay the amount withheld by Owner for that condition
on the date the next payment is due Contractor hereunder, or object to the scope
and manner of the correction of the condition, on or before the date the next
payment is due to Contractor, in a written statement that sets forth the reason
for the objection and otherwise complies with the provisions of
Section 6.12.2.  If Owner objects to the scope and manner of the corrective
actions to be taken with respect to a condition, Owner shall pay to Contractor,
along with payment made pursuant to Contractor’s next payment request, the
amount withheld for the correction of conditions to which Owner no longer
objects.
 
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6.12.4                      Limitation on Contractor’s Rights.  Notwithstanding
the provisions of Sections 19.5 and 32.3, Contractor shall not have any rights
of termination or suspension under Section 19.5 as a result of Owner’s good
faith exercise or attempted exercise of its rights under this Section 6.12.
 
6.13           Application of Monies.  Contractor shall use the sums paid to it
pursuant to this Article 6 for the purpose of performing the Work and designing,
furnishing, equipping, testing and commissioning the Project in accordance with
the Statement of Work and this Agreement, including payment of the
Subcontractors.  No provision hereof shall be construed, however, to require
Owner or any Financing Entity to see to the proper disposition or application of
the monies so paid to Contractor.
 
6.14           Release of Liability.  Acceptance by Contractor of the Final
Payment shall constitute a release by Contractor of Owner, their respective
Affiliates, the Financing Entities, if any, and every officer, director and
employees thereof from all liens (whether statutory or otherwise and including
mechanics’ or suppliers’ liens), claims for compensation hereunder with respect
to any Work performed or furnished in connection with this Agreement, except
claims for which Contractor has delivered a Notice of dispute to Owner.  
 
6.15           Certifications.
 
6.15.1                      Payment Certifications.  Upon Notice from Owner
requesting the same (which Notice shall not occur more frequently than
quarterly), Contractor shall use commercially reasonable efforts to obtain and
submit within ten (10) Business Days after the date of such Notice a
certification from each direct (i.e., first tier) Major Subcontractor to the
effect that:
 
(a)           Contractor has paid such Subcontractor currently and there are no
payments due in accordance with the terms of such subcontract from Contractor to
such Subcontractor in connection with the Work except for disputed payments as
identified in such certification or amounts that are not yet due and owing; and
 
(b)           Contractor has paid such Subcontractor all amounts other than
retainage that will be paid for all Work completed by such Subcontractor through
the end of the preceding month.
 
6.15.2                      Certifications on Final Payment.  Concurrently with
Contractor’s delivery of the Final Contractor’s Invoice, Contractor shall
deliver to Owner:
 
(a)           With respect to each Major Subcontractor contracting directly with
Contractor, a certification from such Subcontractor to the effect that such
Subcontractor has been paid all amounts that are owing or may become owing to
such Subcontractor with respect to the Project and the performance of the Work,
except for disputed payments as identified in such certification; and
 
(b)           With respect to Contractor, a certification to the effect that:
 
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(i)           Contractor has been paid in full all amounts owing or that may
become owing to Contractor with respect to the Project and the performance of
the Work except for amounts requested in the Final Contractor’s Invoice; and
 
(ii)           Contractor has paid all amounts that Contractor will be required
to pay in connection with the performance of the Work, including all amounts to
be paid any Subcontractor with respect to the Project and the performance of the
Work, except for amounts identified in such certification; and
 
(iii)           all amounts remaining to be paid by Contractor with respect to
the Work are in the aggregate less than the amount of the Final Payment.
 
7.           COMMENCEMENT AND SCHEDULING OF THE WORK
 
7.1           Notices to Proceed.
 
7.1.1                      Pre-Contract Letter of Authorization.  Owner and
Contractor have executed a Pre-Contract Letter Authorization dated April 7, 2006
(the “Pre-Authorization”), whereby Owner authorized Contractor to perform
certain engineering, professional and certain other services to be performed in
advance of the Parties execution of the Original Agreement.  Work performed by
Contractor pursuant to the Pre-Authorization was governed by and subject to the
terms of the Original Agreement effective as of the execution thereof.  Upon
execution of the Original Agreement, the Pre-Authorization was terminated and
had no further force and effect and the Original Agreement superseded the
Pre-Authorization in all respects.  Payments made by Owner to Contractor
pursuant to the Pre-Authorization shall be credited against the Separated Target
Price and Separated Contract Price, as applicable.  
 
7.1.2                      Phase One EPC Activities.  Upon the execution of the
Original Agreement, Contractor was authorized to perform the Work identified in
the Phase One EPC Activities set forth in and attached hereto as Exhibit CC, and
Contractor shall diligently perform the Work pursuant to such Phase One EPC
Activities, assigning to it a priority as necessary for each Unit to achieve
Substantial Completion on or before the Substantial Completion Guaranteed Date
for such Unit.  Notwithstanding Contractor’s authorization to proceed with Phase
One EPC Activities, in no event shall Contractor proceed with procurement of any
Equipment or Materials during the Open Book Review period costing in the
aggregate in excess of One Hundred Thousand Dollars ($100,000) without Owner’s
prior written approval, such approval or denial to be provided within five (5)
days.  The scope of the Work to be completed pursuant to the Phase One EPC
Activities may be altered or expanded from time to time pursuant to one or more
further written authorizations until Owner has issued a Full Notice to
Proceed.  
 
7.1.3                      Full Notice to Proceed.  On the Full Notice to
Proceed Date, Contractor shall commence with the performance of the remainder of
the Work in accordance with the Project Schedule and shall thereafter diligently
pursue the Work assigning to it a priority as necessary for each Unit to achieve
Substantial Completion on or before the Substantial Completion Guaranteed Date
for such Unit.  If the Full Notice to Proceed Date is later than March 1, 2007,
such delay in the Full Notice to Proceed Date shall be an Excusable Event for
purposes of this Agreement.  
 
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7.2           Contractor’s Acknowledgment.  Contractor expressly agrees that the
period of time specified to complete all Work and the timely achievement of the
Substantial Completion Guaranteed Dates includes allowance for coordination with
Owner, Owner’s Engineer and for all hindrances and delays incident to the Work
(other than an Excusable Event or an event of Force Majeure).  No claim shall be
made by Contractor for hindrances or delays for any cause during the progress of
the Work, except as provided under Articles 8 and 16.
 
7.3           Prosecution of Work.  Contractor shall prosecute the Work in
accordance with the Project Schedule.  Contractor shall cause Substantial
Completion of each Unit to occur on or before the applicable Substantial
Completion Guaranteed Date.
 
7.4           Project Schedule.
 
7.4.1                      Project Schedule.  Within sixty (60) days after the
date hereof, Contractor shall provide Owner with an electronic and hard copy of
the Project Schedule that satisfies the requirements set forth in
Exhibit A-1–Section 01320.  Until Final Completion, Contractor shall update its
Project Schedule to reflect the current status of the Work.  At a minimum, the
updates shall be performed and provided to Owner (in electronic and hard-copy
form) on a monthly basis as part of the Monthly Progress Report.  Except for the
Substantial Completion Guaranteed Dates, which may only be revised or adjusted
with Owner’s prior written approval pursuant to a Change In Work Form,
Contractor shall revise the Project Schedule from time to time to reflect the
current schedule, including Contractor’s then scheduled date of Substantial
Completion.  Contractor shall employ a project management system capable of
providing schedule monitoring and analysis which shall include a comparison of
the Project Schedule with the actual progress for each time period with all
variances noted.  Schedule analysis shall include a determination of the impact
of such variance, if material, on the Project Schedule and any action necessary
to correct the variance.  
 
7.4.2                      Milestone Items.  Included within the Project
Schedule set forth in Exhibit G are the Milestone Items, including the Project
Guaranteed Dates, and the applicable dates of scheduled completion for each such
Milestone Item.  Except for the Substantial Completion Guaranteed Dates, which
shall not be amended, adjusted or revised without Owner’s prior written approval
pursuant to a Change In Work Form, Contractor shall revise the Project Schedule
from time to time to reflect any changes to the scheduled dates of completion
for each Milestone Item.  Notwithstanding anything to the contrary in the
foregoing, Contractor shall promptly advise Owner of any proposed changes in the
scheduled completion of Milestone Items of more than thirty (30) days and the
reasons therefor.  
 
7.5           Progress Reporting.  From and after the date hereof, Contractor
shall prepare a true and correct Monthly Progress Report in the form of
Exhibit K and submit it to Owner within ten (10) days after the end of each
calendar month.  In addition, Contractor shall keep, and furnish to Owner at
Owner’s request, such information as Owner may reasonably require to determine
that the Work is progressing according to the Milestone Items in the Project
Schedule and for the purpose of confirming that Invoice Payments are due
hereunder.  Contractor also shall keep daily logs at the Site and shall provide
to Owner weekly reports of actual construction progress as compared with
scheduled progress.
 
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7.6           Meetings.  Contractor shall schedule and conduct monthly meetings
with Owner in accordance with the requirements of Exhibit A-1–Section 01320 at
the Site, or such other location as the Parties may agree, for the purpose of
reviewing the progress of the Work and adherence to the Project Schedule.  The
frequency of such meetings shall be established and modified, from time to time,
by mutual agreement of the Parties; provided, however, such meetings shall occur
no less frequently than monthly; provided, further, if Owner believes that
Contractor will complete fewer than all of the Milestone Items within ten (10)
days after the date scheduled on Exhibit G for such Milestone Items to be
achieved, Owner shall be entitled to require that meetings occur as frequently
as weekly.  At Owner’s reasonable request, Contractor shall cause a
representative of any Subcontractor to attend such meeting.  After commencement
of the on-Site Work, Owner, Contractor, and any Major Subcontractor then
performing Work on the Site shall each designate a representative to attend
meetings as required under this Section 7.6 to review and discuss the progress
of the Work.  Contractor’s representative at such meetings shall provide a
rolling four-week look ahead schedule outlining the Work to be performed at the
Site during the four calendar weeks following such meetings.
 
8.           FORCE MAJEURE AND AN EXCUSABLE EVENT
 
8.1           Force Majeure.  No failure or omission to carry out or observe any
of the terms, provisions, or conditions of this Agreement shall give rise to any
claim by either Party against any other Party hereto, or be deemed to be a
breach or default of this Agreement if such failure or omission shall be caused
by or arise out of an event of Force Majeure.  No obligations of either Party
that matured before the occurrence of an event of Force Majeure causing the
suspension of performance shall be excused as a result of such
occurrence.  Notwithstanding anything to the contrary in the foregoing, the
obligation to pay money in a timely manner shall not be subject to the Force
Majeure provisions.
 
8.2           Notice.  If either Party’s ability to perform its obligations
under this Agreement is affected by an event of Force Majeure or an Excusable
Event, such Party shall, within ten (10) days after the Project Director in the
case of Contractor and the Project Representative in the case of Owner, or their
respective designees in the Project Director’s or Project Representative’s
absence, becomes aware or reasonably should have become aware of such delay,
give Notice to the other Party (a “Delay Notice”) of the occurrence of such
event, including as to when such Project Director or Project Representative, as
applicable, became aware of the occurrence of such event of Force
Majeure.  Within ten (10) Business Days after delivery of such Notice, the Party
claiming an event of Force Majeure or an Excusable Event shall provide
reasonable preliminary information to the other Party of the nature of the
event, its anticipated duration and effect upon the performance of such Party’s
obligations, and any action being taken to avoid or minimize its effect.  The
Party claiming an event of Force Majeure or an Excusable Event shall have a
continuing obligation to deliver to the other Party additional documentation and
analysis supporting its claim regarding an event of Force Majeure or an
Excusable Event promptly after such information is available to the Party
claiming such event of Force Majeure or an Excusable Event.  The burden of proof
shall be on the Party claiming to be affected pursuant to this
Section 8.2.  Within ten (10) Business Days after an event of Force Majeure or
an Excusable Event has ended, the Party that was affected by such event of Force
Majeure
 
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or an Excusable Event shall give Notice to the other Party of: (i) the length of
time such event of Force Majeure or an Excusable Event was in effect; and
(ii) the effect such Party claims such event of Force Majeure or an Excusable
Event had on the applicable Substantial Completion Guaranteed Date.
 
8.3           Scope of Suspension; Duty to Mitigate.  The suspension of or
impact on performance due to an event of Force Majeure or an Excusable Event
shall be of no greater scope and no longer duration than is required by such
event.  The excused Party shall use its reasonable efforts:
 
(a)           to mitigate the duration of, and costs arising from, any
suspension or delay in, or other impact to the performance of its obligations
under this Agreement;
 
(b)           to continue to perform its obligations hereunder; and
 
(c)           to remedy its inability to perform, as applicable.
 
When the affected Party is able to resume performance of its obligation under
this Agreement, such affected Party shall give the other Party Notice to that
effect.
 
8.4           Removal of Force Majeure.  If, within a reasonable time after the
occurrence of an event of Force Majeure that has caused Contractor to suspend or
delay performance of the Work, Owner has identified and recommended to
Contractor commercially reasonable action to be undertaken, and Contractor has
failed within five (5) days after receipt of Notice from Owner thereof to take
such action as Contractor could lawfully and reasonably initiate to remove or
relieve either the event which caused such an event of Force Majeure or its
direct or indirect effects, Owner may, in its sole discretion and after Notice
to Contractor, initiate such reasonable measures as will be designed to remove
or relieve such an event of Force Majeure or its direct or indirect effects and
thereafter require Contractor to resume full or partial performance of the
Work.  
 
8.5           Responsibility of Contractor.  Subject to the limitations on
liability contained in this Agreement, damages or injuries to persons or
properties resulting from an event of Force Majeure during the performance of
the obligations provided for in this Agreement shall not relieve Contractor of
any responsibility it may have pursuant to the terms of this Agreement to bear
the cost of the damage or injuries as provided herein.
 
8.6           Contractor’s Remedies.
 
8.6.1                      Force Majeure.  As Contractor’s only remedy for the
occurrence of an event of Force Majeure, and provided Contractor has otherwise
complied with the provisions of Sections 8.2 and 8.3, if an event of Force
Majeure occurs:  (i) the applicable Substantial Completion Guaranteed Dates
shall be extended and the Project Schedule, Milestone Items and any related
modifications to the Work shall be correspondingly adjusted by the period of
time, if any, that Contractor is actually and demonstrably delayed in the
performance of the Work as a result of the impact of such an event of Force
Majeure, less any extensions of such event of Force Majeure that occur due to
Contractor’s failure to take action as requested by Owner pursuant to
Section 8.4, and (ii) and the impact of such event of Force Majeure delays the
Work for five (5) or more consecutive days with respect to any one Force Majeure
event, or the impact of multiple Force Majeure events delays the Work for
greater than fifteen (15) days in the
 
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aggregate, and Contractor’s costs actually and demonstrably increase despite
Contractor’s commercially reasonable efforts to mitigate any such increases, the
Separated Contract Price shall be adjusted.  
 
8.6.2                      Excusable Event.  As Contractor’s only remedy for the
occurrence of an Excusable Event, and provided that Contractor has otherwise
complied with the provisions of Sections 8.2 and 8.3, if an Excusable Event
occurs: (i) the applicable Substantial Completion Guaranteed Dates shall be
extended and the Project Schedule, Milestone Items, and any related
modifications to the Work shall be correspondingly adjusted by the period of
time, if any, that Contractor is actually and demonstrably delayed in the
performance of the Work as a result of the impact of such an Excusable Event,
less any extensions of such Excusable Event that occur due to Contractor’s
failure to take action as requested by Owner pursuant to Section 8.4, and
(ii) if Contractor’s costs actually and demonstrably increase despite
Contractor’s commercially reasonable efforts to mitigate any such increases, the
Separated Contract Price shall be adjusted. Notwithstanding anything to the
contrary in the foregoing or in this Agreement, upon the occurrence of an
Excusable Event as described in subsection (f) of the definition of Excusable
Event, Contractor’s only remedy for such Excusable Event shall be an adjustment
of the Net Unit Capacity Guarantee and Net Unit Heat Rate Guarantee for Unit 1
or Unit 2, as the case may be, to the extent necessary to reflect the total
volume discharge limitations in the current Discharge Permit, and Contractor
shall not be entitled to a Change In Work adjusting the Substantial Completion
Guaranteed Date or Separated Contract Price in connection with such Excusable
Event.  Contractor and Owner shall document the adjusted Net Unit Capacity
Guarantees and Net Unit Heat Rate Guarantees in writing, which shall be signed
by duly authorized representatives of both such Parties.
 
8.6.3                      Changes In Work.  Upon the occurrence of an event of
Force Majeure or an Excusable Event to which Contractor is entitled to a change
in the applicable Substantial Completion Guaranteed Dates, Separated Contract
Price or modifications to the Work pursuant to this Section 8.6, Contractor and
Owner shall prepare a Change In Work form in accordance with Article 16.  
 
8.7           Owner’s Right to Terminate.  If an event of Force Majeure has
occurred and continues for more than six (6) months, Owner may terminate this
Agreement by notice to Contractor.  Upon such termination, Contractor shall be
entitled to receive the payments as set forth in Section 20.1.1.
 
9.           SUBCONTRACTORS AND VENDORS
 
9.1           Use of Subcontractors.  Attached hereto as Exhibit O is a schedule
of certain Equipment and Materials and services, and the subcontractors,
suppliers and vendors approved by Owner with whom Contractor may contract
(whether by contract or purchase order) for the acquisition of such Equipment
and Materials and services.  Contractor shall notify Owner of any additional
subcontractors, suppliers or vendors with whom Contractor anticipates
subcontracting and any portion of the Work to be performed by such proposed
subcontractor, supplier or vendor, for Owner’s review, and approval with respect
to Major Subcontractors; provided that after completion of the Open Book Review,
Exhibit O shall not be amended with respect to any Major Subcontractor
previously approved by Owner without Owner’s written approval, and
 
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Contractor shall notify Owner of any changes to Exhibit O with respect to any
additional subcontractors, suppliers or vendors with whom Contractor anticipates
subcontracting and any portion of the Work to be performed by such proposed
subcontractor, supplier or vendor, for Owner’s review, and approval with respect
only to direct (i.e., first tier) Major Subcontractors.  Contractor shall update
and amend Exhibit O by Notice to Owner from time to time as necessary to reflect
additions or changes thereto.  Contractor shall use commercially reasonable
efforts to ensure that each Subcontractor is licensed or qualified to do
business and is in good standing under the laws of the jurisdiction where the
Work is to be performed, including the State of Texas or otherwise not to
contract with such Subcontractor for any portion of the Work.  Contractor
acknowledges and agrees that Owner’s selection of Contractor to perform the Work
was due in part to Contractor’s commitment to, and Contractor hereby agrees to,
directly hire and self perform the majority of mechanical and electrical
construction portions of the Work.
 
9.2           Agency Subcontracts Prior to Assignment.  Prior to assignment of
the Agency Subcontracts to Contractor pursuant to Section 4.2.7(b), Contractor
shall act as Owner’s agent to prepare and execute the Agency Subcontracts
(including an amendment to the STG Upgrade Contract), subject to Owner’s
approval of such Agency Subcontracts prior to execution thereof.  Owner and
Contractor shall cooperate to negotiate and finalize the Agency Subcontracts,
including amending the STG Upgrade Contracts to the extent mutually agreed upon
by Owner and Contractor, as required and by such dates so as to avoid delays to
the Work.  In the event the negotiation and execution of any such Agency
Subcontracts is delayed and the Project Schedule is adversely impacted (provided
that Contractor is not acting in a commercially unreasonable manner), Contractor
shall be entitled to a Change In Work to the extent such delay actually and
demonstrably impacts the Substantial Completion Guaranteed Date for the
applicable Unit or the Separated Contract Price.  With respect to the STG
Upgrade Contract, Owner shall, or shall cause TXU Energy Company LLC to appoint
Contractor as Owner’s or TXU Energy Company LLC’s agent, respectively.  While
acting as Owner’s agent, Contractor shall administer and enforce the Agency
Subcontracts as necessary to accomplish the Work.  
 
9.3           Use of Contractor’s Affiliates.  Notwithstanding the above,
Contractor may have portions of the Work performed by certain of its Affiliates
or their employees, in which event Contractor shall be responsible for such
Work, Owner will look solely to Contractor as if the Work were performed by
Contractor, and such Affiliates shall comply with the obligations of Contractor
hereunder to the extent applicable to the Work they perform.  
 
9.4           Assignment.  No subcontract or purchase order shall bind or
purport to bind Owner, but each subcontract and purchase order entered into by
Contractor with respect to the Work where the applicable subcontract price or
purchase order value exceeds One Hundred Thousand Dollars ($100,000) shall
provide for assignment of such subcontract as set forth in Section 9.6.  
 
9.5           Information and Access.  Contractor shall furnish such information
and access relative to the identity of and scope of services or supply of its
Subcontractors as Owner may reasonably request; provided that nothing herein
shall be deemed to limit Owner’s rights to information and access to
Subcontractors during the Open Book Review; provided, further, that Owner shall
be entitled to such information as reasonably necessary to enable Owner to
verify compliance with the provisions of Section 9.6.
 
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9.6           Terms in Subcontracts.  All subcontracts between Contractor and
its direct (i.e., first tier) Subcontractors, as well as Subcontractors which
have contract values in excess of $1,000,000 or provide critical parts or
components, shall be consistent with the requirements of this Agreement, insofar
as applicable.  All Work performed for Contractor by such direct (i.e., first
tier) Subcontractors shall be pursuant to an appropriate written agreement
between Contractor and the Subcontractor that contains provisions that:
 
(a)           reasonably preserve and protect all the rights of Owner under this
Agreement and to the Work to be performed under the subcontract, so that the
subcontracting thereof will not prejudice such rights;
 
(b)           require that such Work be performed in accordance with the
applicable requirements of this Agreement;
 
(c)           require such Subcontractor to make available a representative with
whom Owner or the Financing Entities, if any, may, subject to Contractor’s
coordination and participation, discuss questions regarding the Work being
performed by the Subcontractor;
 
(d)           with respect only to Subcontractors that are supplying goods for
which functional spare parts are customarily provided, require such
Subcontractors which have contract values in excess of $250,000 or provide
critical parts or components to notify Contractor and Owner in the event such
Subcontractor decides to discontinue supplying any functional spare parts at any
time within five (5) years after completion of such Subcontractor’s portion of
the Work, so that Owner may seek to order any quantity of any of such parts at
the prices prevailing at the time of such order, prior to such discontinuance of
supply;
 
(e)           require such Subcontractor to participate in the OCIP if eligible
and to provide and maintain adequate insurance consistent with its obligations
related to this Agreement (as adjusted by Contractor and Owner pursuant to
Section 21.2.3);
 
(f)           when such Subcontractor performs Work at the Site, require such
Subcontractor to participate in the approved safety program for the Site and the
Ancillary Sites;
 
(g)           require such Subcontractor to enter into a new contract directly
with Owner on substantially the same terms and conditions as such subcontract in
the event that any trustee in bankruptcy for Contractor rejects the subcontract,
or the Subcontractor terminates such subcontract as a result of the bankruptcy
of Contractor;
 
(h)           allow assignment, including any performance assurance provided by
such Subcontractor, of such agreement to Owner, to another contractor providing
engineering, procurement and construction services to Owner that replaces the
Contractor as designated by Owner, or at Owner’s request, to the Financing
Entities, if any, upon the termination or expiration of this Agreement in
accordance with its terms, upon notice to Subcontractor but not subject to
Subcontractor’s consent provided that any such assignee (except for collateral
assigns) shall have sufficient creditworthiness to meet its payment obligations
to Subcontractor and provided further that any such assignee shall not be a
direct competitor of such Subcontractor;
 
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(i)           require such Subcontractor to remove any employee or independent
contractor of such Subcontractor used in the Work at the Site or in such
Subcontractor’s warranty obligations within ten (10) days after receiving notice
from Contractor that Owner requires  removal of such employee or independent
contractor;
 
(j)           if commercially obtainable, provide that if this Agreement is
terminated before Final Completion, such Subcontractor shall not be entitled to
any profit or fee to the extent any portion of its Work has not been completed;
 
(k)           require such Subcontractor to abide by Contractor’s
confidentiality obligations hereunder and to otherwise hold in strict confidence
all of Owner’s Confidential Information; and
 
(l)           require such Subcontractor to deliver to Owner any “stop-work”
notice or termination notice delivered to Contractor pursuant to Applicable Law.
 
Notwithstanding the foregoing, Owner acknowledges and agrees that the STG
Upgrade Contract was initially entered into by an Affiliate of Owner and may not
contain all of the provisions set forth in the foregoing.  Contractor shall use
commercially reasonable efforts to incorporate the missing provisions into the
STG Upgrade Contract.
 
In addition to the provisions of this Section 9.6, this Agreement contains
numerous references expressly requiring Contractor to cause its Subcontractors
to perform certain actions or adhere to certain requirements (such additional
required actions or requirements, “Flowdowns”).  Contractor may exercise its
reasonable discretion, in consultation with Owner, in negotiating the terms of
its subcontracts with its Subcontractors that result in either excluding the use
of certain Flowdowns that are not applicable to a particular Subcontractor based
on the scope and nature of the subcontracted work or scope of supply, or
modifying the terms of such Flowdowns in order to effect a reasonable commercial
agreement with such Subcontractors, and Contractor’s exclusion or modification
of such Flowdowns in such subcontracts shall not be considered a breach of this
Agreement; provided that notwithstanding the foregoing, Contractor shall require
each Subcontractor, insofar as applicable, to take such actions or adhere to
such requirements as provided in Section 3.13, Section 4.1.8, Section 5.7.2,
Section 10.4 (with respect to Subcontractors that perform Work on the Site),
Section 21.3 and Article 28 (with respect to Subcontractors that perform Work on
the Site).  Contractor acknowledges and agrees that the provisions of this
paragraph shall not constitute a waiver or modification by Owner of any of
Contractor’s other obligations hereunder.
 
9.7           Minority and Women-Owned Businesses.  Contractor acknowledges that
Owner and its Affiliates are committed to the development, utilization and
inclusion of certified women and minority owned businesses, as well as small
businesses, businesses owned by veterans and service-disabled veterans, and
businesses located in historically underutilized business zones, in Owner’s and
its Affiliates’ sourcing and procurement processes.  Contractor shall provide
Owner with reasonably satisfactory evidence that Contractor considered such
businesses for inclusion in Contractor’s Subcontractors and
Suppliers.  Contractor acknowledges that Contractor’s Invoices shall include
information regarding the amount of such Invoices reflecting utilization of and
amounts spent with such businesses by Contractor, and to the extent such
information can be
 
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obtained from the Subcontractors using commercially reasonable efforts, by the
Subcontractors, and Contractor agrees to provide such additional information,
and to use commercially reasonable efforts to cause the Subcontractors to
provide such information, regarding utilization of such businesses as Owner
reasonably requests. Contractor shall further provide Owner with reasonably
satisfactory evidence that its Subcontractors and Suppliers were selected in a
non-discriminatory manner and, at least in part, on the basis of their
qualifications and capabilities.  
 
10.           LABOR RELATIONS
 
10.1           General Management of Employees.  Subject to Section 10.6, and
notwithstanding the provisions of Section 10.3, Contractor shall preserve its
rights to exercise and shall exercise its management rights in performing the
Work.  Such management rights shall include the rights to hire, discharge,
promote, and transfer employees; to select and remove foremen or other persons
at other levels of supervision; to establish and enforce reasonable standards of
production; to introduce, to the extent feasible, labor saving Equipment and
Materials; to determine the number of craftsmen necessary to perform a task,
job, or project; and to establish, maintain, and enforce rules and regulations
conducive to efficient and productive operations.
 
10.2           Worker Recruitment and Training Program.  Contractor shall
implement a worker recruitment and training program targeting local residents
(Persons with current zip codes within one hours driving distance of the Site)
with respect to the Project.  Contractor shall submit its proposed program
regarding local worker recruitment to Owner within sixty (60) days after the
date hereof, and Owner and Contractor shall agree upon such program by the end
of the Open Book Review.  Contractor shall submit its proposed program regarding
its proposed worker training program to Owner for review within sixty (60) days
after the date hereof.  Contractor shall implement and follow the approved
program during the performance of the Work.  
 
10.3           Labor Disputes.  Contractor shall use reasonable efforts to adopt
policies and practices designed to avoid work stoppages, slowdowns, disputes and
strikes, and to minimize the risk of labor-related delays or disruption of the
progress of the Work.  Contractor shall promptly take any and all reasonable
steps that may be available in connection with the resolution of violations of
collective bargaining agreements or labor jurisdictional disputes, including the
filing of appropriate processes with any court or administrative agency having
jurisdiction to settle, enjoin, or award damages resulting from violations of
collective bargaining agreements or labor jurisdictional disputes.  Contractor
shall advise Owner promptly, in writing, of any actual or threatened labor
dispute of which Contractor has knowledge that might materially affect the
performance of the Work by Contractor or by any of its
Subcontractors.  Notwithstanding the foregoing, the settlement of strikes,
walkouts, lockouts or other labor disputes shall be at the discretion of the
Party having the difficulty.
 
10.4           Personnel Documents.  Contractor shall ensure that at the time of
hiring, all its personnel and personnel of any Subcontractors performing the
Work are in possession of all such documents (including visas, driver’s licenses
and work permits) as may be required by any and all Applicable Laws.
 
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10.5           Key Personnel.  Contractor shall provide staff to supervise and
coordinate the work of Contractor and Subcontractors on the Site.  The Key
Personnel shall at all times hold the positions and be dedicated to the
performance of the duties described in Exhibit J.  Any replacement of the Key
Personnel shall be subject to the prior written consent of Owner, which consent
shall not be unreasonably withheld.  If Owner fails to respond to a request for
consent within five (5) Business Days after Contractor’s request, Owner shall be
deemed to have consented to the proposed individual.
 
10.6           Replacement of Employees and Other Persons at Owner’s
Request.  Within ten (10) days after receiving a written request by Owner
identifying the lawful reason for such request, Contractor shall remove from the
Project, the Site and from any performance of the Work, and cause any
Subcontractor to remove from the Project, the Site and from any performance of
the Work, as soon as reasonably practicable, any Person performing the Work
(including any of the Key Personnel other than the Project Director and his
direct reports) whom Owner reasonably demonstrates to be creating a material
safety hazard or risk of either:  (a) non-achievement of any of the Substantial
Completion Guaranteed Dates for either Unit; or (b) material non-performance by
Contractor in accordance with this Agreement.  Contractor acknowledges that
Owner desires to maintain a positive perception of the Project and a good
working relationship with the surrounding communities and that actions of
Contractor’s employees or agents, including the Subcontractor’s employees may
affect the local communities.  Accordingly, Contractor shall also remove, and
cause its Subcontractors to remove, any employee, agent or other Person engaged
in the performance of the Work for Contractor or such Subcontractor, as the case
may be, whose off-Site conduct Owner reasonably demonstrates is harming or
having a negative effect on the perception of the Project or Owner’s
relationship with the surrounding community.  In the event Contractor disagrees
that any such Person should be removed pursuant to this Section 10.6, Owner and
Contractor shall submit such disagreement to their executive management pursuant
to Section 32.1.  
 
11.           INSPECTION; EFFECT OF REVIEW AND COMMENT
 
11.1           Right to Reject Work.  Prior to Final Completion, regardless of
whether payment has been made therefor, Owner shall have the right to reject any
portion of the Work that contains any Error or Omission or Defect.  Upon such
rejection, Contractor shall remedy, at its sole cost and expense, any Error or
Omission or Defect that is identified by Owner as giving rise to such
rejection.  
 
11.2           Inspection.  Contractor understands that Owner, its
representatives and any other person authorized in writing by Owner, including
the Financing Entities and their agents, if any, have the right to reasonably
observe and inspect the Work, any item of Equipment and Materials (including
Equipment and Materials under fabrication), design, engineering, service, or
workmanship (including all Contractor Deliverables, technical details and
inspection and testing reports) to be provided hereunder and to observe all
quality inspections and tests, results and data pertaining to the Work and the
Project (including factory or other tests performed at a location other than the
Site).  Contractor shall allow Owner and its representatives, including Owner’s
Engineer and the Financing Entities, if any, and their representatives and
agents, reasonable access to the Work (including Equipment and Materials under
fabrication) and the Project during business hours for the Project and upon
reasonable advance notice given, provided such access
 
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does not unreasonably interfere with Contractor’s prosecution of the
Work.  Contractor shall incorporate all such inspection rights in all Equipment
and Materials purchase orders and subcontracts.  To facilitate such observations
and inspections, Contractor shall maintain at the Site a complete set of all
Submittals, Supplier reports, and current Project Schedule.
 
11.3           Contractor Submittals Table.  Within fifteen (15) Business Days
after the date hereof, Contractor shall provide a Notice to Owner attaching an
initial proposed Contractor Submittals Table identifying all Contractor
Deliverables to be delivered to Owner for review and comment in accordance with
Exhibit A-1–Section 01330, the deadline for delivery thereof, and reference to
this Agreement or Exhibit where such submittal is required.  Owner shall have
the right to review and approve such Contractor Submittals Table.  Contractor
shall update such Contractor Submittals Table from time to time throughout the
Open Book Review process, until finalized.  
 
11.4           Owner Review of Documents.  Contractor shall submit to Owner for
review, and approval or acceptance as provided herein, hard (printed) copies and
soft copies (in a format agreed to by Owner) of all Contractor Deliverables in
accordance with the requirements of Exhibit A-1-Section 01330 and the Contractor
Submittals Table.  Owner shall have the right to make all such materials
available to Owner’s Engineer and the Financing Entities, if any.  Owner
reserves the right to reject any submittals for lack of legibility, accuracy or
completeness and shall retain the full time period for review of such submittal
in accordance with the review period specified in the Contractor Submittals
Table.  Notwithstanding anything in Article 6 to the contrary, if Contractor:
(a) issues any purchase order based on any Contractor Deliverable; (b) releases
any Contractor Deliverable for use in connection with the Work; (c) authorizes
any Subcontractor or Supplier to proceed with any of the Work; or (d) submits
any Contractor’s Invoice with respect to any Contractor Deliverable, before
Owner has completed its review, Contractor shall do so at its own risk and shall
remain responsible for any costs incurred before Owner indicates its approval or
acceptance, if at all.  
 
11.5           Remedy of Flaws.  If Owner identifies any errors or omissions
with respect to any Contractor Deliverable submitted for review, Contractor
shall incorporate changes into such Contractor Deliverable addressing and
remedying the errors and omissions and resubmit the same to Owner, and such
incorporation of changes to address Owner’s comments shall not be considered a
Change In Work and shall not affect the Substantial Completion Guaranteed Dates.
 
12.           SITE CONDITIONS
 
12.1           Site Conditions.  Owner has advised Contractor of any Site
Conditions known to Owner; provided that Contractor acknowledges that Owner has
not had and will not have any duty to investigate or review any information
regarding any Site Conditions.  Contractor represents and warrants that
Contractor has investigated the Site and each other location, including the
Ancillary Sites, where any portion of the Work shall be performed and
surrounding locations to the full extent Contractor deems necessary for
Contractor’s purposes and that Contractor is familiar with, and has satisfied
itself with respect to, the nature and location of the Work and Site
Conditions.  
 
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12.2           Differing Site Conditions.  Contractor specifically acknowledges
and accepts the Site Conditions and agrees that, except as set forth in
Section 12.3, no Substantial Completion Guaranteed Date shall be extended, the
Separated Contract Price shall not be modified, and Contractor shall not be
entitled to request or be granted any Change In Work, as a result of any Site
Conditions or any variance between the condition of the Site indicated by this
Agreement or expected to exist by Contractor, and the Site Conditions, including
any unknown physical conditions above the surface of the ground.
 
12.3           Unforeseen Site Conditions.  In the event any conditions
(including the presence of any Hazardous Materials, any archeological resources
or any man-made subsurface conditions) are found at the Site that differ
materially from those set forth in, or which could not reasonably have been
concluded from a review of, the available information regarding the Site,
including information derived from Contractor’s investigation pursuant to
Section 12.1 (each such materially differing condition, an “Unforeseen Site
Condition”), Contractor shall promptly notify Owner of such Unforeseen Site
Condition and Owner and Contractor shall agree upon a plan to mitigate or
remediate such condition.  Any changes to the Work required to mitigate or
remediate such condition shall be deemed a Change In Work initiated by Owner and
shall be subject to the provisions of Article 16.
 
13.           PERFORMANCE GUARANTEES AND TESTS
 
13.1           Performance Guarantees and Other Requirements.  Subject to
Section 15.4.1(a), Contractor shall perform the Work so that each Unit satisfies
the Performance Guarantees and the tests applicable to such Unit as set forth in
Exhibit I-1.  Contractor shall demonstrate that each Unit satisfies the
Performance Guarantees  and the tests applicable thereto set forth in
Exhibit I-1 prior to Final Completion by satisfactorily running and completing
the Acceptance Tests and such other tests as set forth in Exhibit I-1; provided
that results of the applicable Acceptance Test of each Unit reflect achievement
of the Minimum Performance Criteria prior to Substantial Completion.  Contractor
shall conduct and collect the data produced during the Performance Tests and
shall prepare the reports in accordance with Section 13.3.  
 
13.2           Start up and Commissioning Procedures.  Contractor shall provide
for Owner’s review and approval detailed start up and commissioning procedures
in accordance with the requirements of Exhibit S.
 
13.3           Acceptance Test Procedures.  Contractor shall develop detailed
Acceptance Test procedures in accordance with Exhibit I-1 and shall provide such
procedures to Owner for Owner’s review and approval not less than one hundred
twenty (120) days prior to the date on which Contractor anticipates the
commencement of the testing of Unit 1.
 
13.4           Acceptance Test Schedules.  Contractor shall agree on Acceptance
Test schedules for each Unit with Owner and shall give Owner Notice of the first
of each Acceptance Test at least twenty (20) days prior to commencing any such
test.  Contractor shall keep the Project Representative continuously apprised of
the specified schedule, and changes therein, for the commencement and
performance of Acceptance Tests, and shall give the Project Representative at
least three (3) Business Days prior Notice of the re-performance of any
Acceptance Test; provided that such period of prior notice may be reduced if the
Project Representative is at the
 
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Site and receives reasonable prior notice of re-performance of any Acceptance
Test.  An Acceptance Test conducted without the required Notice shall not be
valid for the purposes of this Agreement.
 
13.5           Testing.  Contractor shall achieve Mechanical Completion, start
up each Unit and shall satisfy all of its other obligations under this Agreement
with respect to each Unit to complete the Unit in accordance with the terms of
this Agreement and properly adjust and test components as Contractor determines
is necessary prior to conducting the Acceptance Tests.  Contractor shall conduct
the Acceptance Tests in accordance with the approved Acceptance Test Procedures
and Exhibit I-1.  Representatives of Owner, Owner’s Engineer, the Financing
Entities and their agents, if any, shall have the right to be present during any
Acceptance Tests performed by Contractor under this Article 13.  Notwithstanding
the foregoing, Contractor shall not be obligated to delay such Acceptance Tests
so long as the Notices required under Section 13.4 have been properly
given.  Contractor must submit a preliminary test report for each Acceptance
Test within forty eight (48) hours after the completion of such Acceptance Test
providing a summary of each Acceptance Test and raw data taken during such
Acceptance Test, and a final test report within thirty (30) days
thereafter.  Contractor shall include sufficient results of testing in the
preliminary test reports to allow Owner to reasonably determine that the final
test results are expected to be satisfactory for the purposes of obtaining
Substantial Completion.
 
13.6           Non-Conforming Work.  At any time during and promptly after
completion (whether or not successful) of the Acceptance Tests under
Section 13.3 (or any re-performance of any Acceptance Test under Section 13.5,
Section 13.9 or pursuant to any Remedial Plan), Owner shall advise Contractor
and Contractor shall advise Owner in writing of any Error or Omission or Defect
that was discovered during an Acceptance Test.  Contractor shall, at
Contractor’s sole cost and expense, correct any Error or Omission or Defect
(except if such Error or Omission or Defect is a Non-Critical Deficiency, in
which case it shall be included on the Punchlist for the relevant Unit) and
promptly provide Notice to Owner in writing that such corrective measures have
been completed.  Any dispute regarding the existence or correction of any such
Error or Omission or Defect shall be resolved pursuant to Article 32.
 
13.7           Certificate of Completion of Testing.  Upon the Successful Run of
an Acceptance Test as demonstrated by a test report delivered to Owner by
Contractor, Owner shall issue a Notice that such test has been Successfully Run.
 
13.8           Revenues.  Any revenues generated by the Project during start up
and commissioning, or the performance of any Acceptance Test or any other
testing otherwise performed shall be paid to and for the benefit of Owner.
 
13.9           Post Test Modifications.  If prior to Substantial Completion of a
Unit:
 
(a)           an Acceptance Test has been completed;
 
(b)           a certificate of completion of such Acceptance Test has been
issued pursuant to Section 13.7;
 
(c)           Contractor or any Subcontractor makes any modification to such
Unit; and
 
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(d)           such modification could have had a material effect on the outcome
of such Acceptance Test, if it had been made before the completion of such
Acceptance Test, then such Acceptance Test shall be re-run, as a condition to
achieving Substantial Completion for such Unit.
 
14.           SUBSTANTIAL COMPLETION AND FINAL COMPLETION
 
14.1           Punchlists.  
 
14.1.1                      Creation of Punchlists.  When Contractor believes
that a system of a Unit is ready for commissioning and start up, Contractor
shall prepare and submit to Owner a punchlist of Work remaining to be completed
with respect to such system in accordance with Exhibit S.  Any Non-Critical
Deficiencies with respect to each system of a Unit will be included on a list of
items of Work that may be completed after the Substantial Completion Date, which
list shall include, for each Non-Critical Deficiency, a proposed schedule and
estimated cost for the completion or repair of such Non-Critical Deficiency (the
“Proposed Punchlist”).  Owner and Contractor shall determine whether the
Proposed Punchlist for a Unit includes all Non-Critical Deficiencies for such
Unit, whether the Proposed Punchlist includes only Non-Critical Deficiencies and
whether the Unit is complete except for those items described in the Proposed
Punchlist.  If Owner’s inspection discloses any Non-Critical Deficiency that has
been excluded from the Proposed Punchlist, any item described on the Proposed
Punchlist that is not a Non-Critical Deficiency, any item of Work included in
the system that is incomplete or not in accordance with this Agreement (other
than Non-Critical Deficiencies described on the Proposed Punchlist), Owner shall
deliver Notice thereof to Contractor.  If Owner does not deliver such a Notice
to Contractor within a reasonable period of time not to exceed ten (10) days,
the Proposed Punchlist shall be deemed acceptable to Owner.  If Owner delivers
such a Notice to Contractor, Contractor shall complete any items of Work other
than Non-Critical Deficiencies, revise the Proposed Punchlist to include all
Non-Critical Deficiencies identified by Owner (whether or not such items are
disputed by Contractor) and resubmit the revised Proposed Punchlist to Owner for
review.  Until the Substantial Completion Date, Owner may re-inspect the Unit
and the foregoing process shall continue on an iterative basis until Owner has
approved the Proposed Punchlist for such Unit.  If the Proposed Punchlists are
prepared or separated by systems of a Unit, the aggregate of all Proposed
Punchlists for a Unit that are acceptable or deemed acceptable to Owner shall
sometimes be referred to as the “Punchlist.”  If the Punchlist for a Unit is not
finalized by the Substantial Completion Date for such Unit, the Proposed
Punchlist as modified by Owner shall be deemed the Punchlist for such Unit for
all purposes hereunder until the Parties resolve such dispute and otherwise
finalize the Punchlist.  Contractor shall note on such Proposed Punchlist the
items under dispute.  Prior to the Substantial Completion Date of each Unit, any
Non-Critical Deficiencies discovered by Contractor or identified by Owner after
the initial inspection of each system of such Unit by Owner and Contractor or
during the testing of the Unit shall be added to the Punchlist.
 
14.1.2                      Completion of Punchlists.  Contractor shall proceed
promptly to complete and correct all items on the Punchlist for a Unit in
accordance with the schedule to complete such items to be agreed upon by the
Parties as soon as practical after Substantial Completion of such
Unit.  Contractor shall complete all items on the Punchlist promptly after Owner
receives such Punchlist and in any event in accordance with the schedule set
forth in such Punchlist.  On a
 
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weekly basis after Substantial Completion of each Unit, Contractor shall revise
and update the Punchlist for such Unit to include the date(s) that items listed
on such Punchlist are completed by Contractor and accepted by
Owner.  Notwithstanding any of the foregoing, the items listed on such Punchlist
shall not be considered complete until Owner shall have inspected such
Non-Critical Deficiencies and acknowledged, by notation on the updated
Punchlists, that such item of Work is complete.  If Owner does not so inspect
and deliver such notations on the updated Punchlists to Contractor within a
reasonable period of time, and Contractor has actually completed and corrected
all items on the Punchlist, the Punchlist shall be deemed completed on the date
that is twenty (20) days after Contractor submits the updated Punchlist to Owner
after having completed the last Punchlist item.
 
14.1.3                      Owner’s Punchlist Option.  At any time after the one
hundred eightieth (180th) day after the Substantial Completion Date of a Unit,
Owner may elect, by Notice to Contractor to deduct and keep from the Retainage
or draw from the Letter of Credit an amount equal to one hundred fifty percent
(150%) of the estimated cost to complete the uncompleted items on the Punchlist
for such Unit in lieu of requiring Contractor to complete such items.  Following
Contractor’s receipt of such Notice, Owner shall determine, which items on such
Punchlist have not been completed and Contractor shall prepare an estimate of
the cost to complete such items.  Owner shall then be permitted to deduct and
keep from the Retainage, or draw from the Letter of Credit, such amount in
satisfaction of Contractor’s obligation to complete such items.
 
14.2           Substantial Completion.  The following are conditions precedent
to Substantial Completion for each Unit:
 
(a)           the results of the applicable Acceptance Test of such Unit reflect
achievement of the Minimum Performance Criteria;
 
(b)           subject to Section 14.3, Contractor shall have paid all undisputed
Delay Liquidated Damages due pursuant to Section 15.1 (provided that all amounts
of disputed Delay Liquidated Damages that are ultimately determined to be due
and owing shall accrue interest from the date such amounts are determined to
have been owed);
 
(c)           Owner has received all Contractor Deliverables in accordance with
the Contractor Submittals Table, including all Required Manuals identified
therein for delivery prior to Substantial Completion;
 
(d)           pursuant to Section 3.19.1, training of Operating Personnel is
complete;
 
(e)           the Punchlist for such Unit shall be in final form or be deemed to
be in final form as provided in Section 14.1.1;
 
(f)           all Work related to such Unit other than record drawings and items
of Non-Critical Deficiency listed on the Punchlist shall have been completed
without any Errors or Omissions or Defects;
 
(g)           Contractor shall have licensed or granted, in accordance with this
Agreement, all Intellectual Property Rights necessary for such Unit to be
operated by Owner
 
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without violating any of Contractor’s, any Subcontractor’s or any third party’s
rights to such Intellectual Property Rights;
 
(h)           Contractor shall have delivered all applicable Conditional Waivers
and Releases Upon Milestone or Progress Payment from Contractor, and, as
applicable, Conditional Waivers and Releases Upon Milestone or Progress Payment,
Conditional Waivers and Releases Upon Final Payment and Unconditional Waivers
and Releases Upon Final Payment from each Major Subcontractor, or shall have
delivered security in lieu thereof, as required to be delivered pursuant to
Section 6.4; and
 
(i)           all operational spare parts used by Contractor prior to the
Substantial Completion Date that are to be replaced or reconditioned by
Contractor pursuant to Section 3.20.3 have been delivered or purchased for
delivery to Owner and all special tools have been turned over to Owner.
 
14.3           Notice of Substantial Completion.  When Contractor believes that
it has satisfied the provisions of Section 14.2 for a Unit, Contractor shall
deliver to Owner a Notice of Substantial Completion, including a certification
of all applicable Performance Test results.  The Substantial Completion Date for
such Unit shall be the day after the date on which the last of the conditions of
Section 14.2 was satisfied for such Unit or, in the sole discretion of Owner,
waived.  Owner shall, within five (5) days after receipt of a Notice of
Substantial Completion, issue an Owner’s Certificate of Substantial Completion
for such Unit dated to reflect the Substantial Completion Date for such Unit, or
if Owner rejects Contractor’s Notice of Substantial Completion, respond in
writing giving its reasons for such rejection and Contractor shall take the
appropriate corrective action.  If Owner fails to respond to a Notice of
Substantial Completion within such five (5) day period, Substantial Completion
shall be deemed to have occurred as of the date of Contractor’s Notice of
Substantial Completion.  Upon completion of such corrective action, Contractor
shall provide a new Notice of Substantial Completion for such Unit to Owner for
approval.  This process shall be repeated on an iterative basis until Owner
accepts the Notice of Substantial Completion for such Unit and issues an Owner’s
Certificate of Substantial Completion.  Notwithstanding the provisions of
Section 14.2(a), in order to properly determine the amount of Delay Liquidated
Damages due and owing (if any), and to arrange a wire transfer or other means of
payment, Contractor shall be deemed to have satisfied the provisions of
Section 14.2(a) with respect to the payment of undisputed Delay Liquidated
Damages due and owing if Contractor pays such amount to Owner by the date which
is five (5) days after the date on which the last of the conditions of
Section 14.2 was satisfied (other than clause (a) thereof) or, in the sole
discretion of Owner, waived.  Notwithstanding the foregoing, if Contractor does
not pay all such undisputed Delay Liquidated Damages by such date to Owner, then
Substantial Completion for such Unit shall not be deemed to have occurred
hereunder until the date on which Contractor shall have paid all such undisputed
amounts (which undisputed amounts shall include, for purposes of clarification,
Delay Liquidated Damages in the amounts required under Section 15.1 for the five
(5) day period noted above and for each day thereafter up to and including the
day on which Contractor actually makes such payment to Owner).
 
14.4           Final Completion.  Final Completion of a Unit shall be deemed to
have occurred only if all of the following have occurred:
 
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(a)           Substantial Completion of such Unit has been achieved;
 
(b)           intentionally omitted;
 
(c)           Owner has received copies of all Contractor Acquired Permits and
associated approvals required to be obtained by Contractor pursuant to
Section 3.9;
 
(d)           intentionally omitted;
 
(e)           Contractor shall have completed all items on the Punchlist for
such Unit unless Owner shall have relieved Contractor of its obligation to do so
under Section 14.1.3;
 
(f)           Contractor shall have completed all of the Work related to such
Unit;
 
(g)           Owner shall have received all Submittals, copies of final record
drawings, electronically prepared computer drawing file(s) as prepared by
Contractor on a software program acceptable to Owner as required by
Exhibit A-1–Section 01330, calculations, test data, performance data, Equipment
and Materials descriptions (other than the Owner Furnished Equipment), Required
Manuals, training aids (which, in the case of Unit 1, shall include the common
facilities to Units 1 and 2);
 
(h)           Contractor and each Subcontractor enrolled in the OCIP shall have
complied with the audit and closeout report requirements of the OCIP in
accordance with Section 21.1;
 
(i)           with regards to Final Completion of Unit 2, all Contractor’s and
Subcontractors’ personnel shall have left the Site, and all surplus materials,
waste materials, rubbish, and construction facilities other than those to which
Owner holds title shall have been removed from the Site as required by
Exhibit A-1–Section 01530, and any permanent facilities used by Contractor and
the Site shall have been restored to the same condition that such permanent
facilities and the Site were in on the Full Notice to Proceed Date, ordinary
wear and tear excepted.  All cleanup and disposal shall be conducted in
accordance with all Applicable Laws and Applicable Permits;
 
(j)           Contractor shall have assigned to Owner, or provided Owner, with
all warranties or guarantees with respect to such Unit that Contractor received
from Subcontractors to the extent Contractor is obligated to do so pursuant to
Article 17;
 
(k)           Contractor has delivered an Unconditional Waiver and Release Upon
Final Payment of Contractor and an Unconditional Waiver and Release Upon Final
Payment of Subcontractor from such Major Subcontractors, or the bonds, in
accordance with Section 6.9, with respect to such Unit, and has delivered such
other documents and certificates with respect to such Unit as Owner has
reasonably requested to ensure compliance with all Applicable Laws for which
Owner could be liable; and
 
(l)           Contractor shall have paid to Owner all Delay Liquidated Damages
and Performance Liquidated Damages (including any disputed amounts not
previously paid) due and owing pursuant to the terms of Sections 15.1 and 15.3
with respect to such Unit.
 
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14.5           Notice of Final Completion.  Contractor shall deliver to Owner a
Notice of Final Completion stating that Contractor believes it has satisfied the
provisions of Section 14.4 with respect to such Unit.  Within ten (10) business
days after receipt of the Notice of Final Completion, Owner shall issue an
Owner’s Certificate of Final Completion to Contractor evidencing that, to the
best of Owner’s knowledge, all of Contractor’s construction obligations under
this Agreement with respect to such Unit have been satisfied and Final
Completion of such Unit has been achieved, or if Owner rejects Contractor’s
Notice of Final Completion, respond in writing giving Owner’s reasons for such
rejection and Contractor shall promptly take the appropriate corrective
action.  Upon completion of such corrective action, Contractor shall resubmit a
Notice of Final Completion for such Unit to Owner for approval.  This process
shall be repeated until Owner accepts Contractor’s Notice of Final Completion
and issues an Owner’s Certificate of Final Completion.  Owner shall use
commercially reasonable efforts to advise Contractor within ten (10) business
days after Contractor has delivered a Notice of Final Completion why a Unit has
not achieved Final Completion, and if Owner has not responded to such Notice of
within twenty (20) business days after Contractor delivers such Notice of Final
Completion, Final Completion of such Unit shall be deemed to have occurred.  
 
14.6           Contractor’s Access After Substantial Completion and Final
Completion.  Following Substantial Completion of a Unit, Owner shall provide
Contractor with reasonable and timely access to such Unit to complete all items
on the Punchlist for such Unit and to satisfy the other requirements with
respect to that Unit for Final Completion.  The Parties expect that Contractor
shall accomplish any necessary modification, repairs or additional work with
minimal interference with commercial operation of the Project and that
reductions in and shut-downs of the Project’s operations will be required only
when necessary, taking into consideration the length of the proposed reduction
or shut-down, and Owner’s obligations and liabilities to customers or
others.  Notwithstanding the foregoing, should a reduction in or shut-down of
the Project’s operations be required to complete any items on the Punchlists,
then such reduction or shut-down shall be scheduled solely at the discretion of
Owner and Contractor shall complete such Work during such Owner scheduled
reduction or shut-down.  Contractor acknowledges that Owner may schedule such
reduction or shut-down at any time including off-peak hours, nights, weekends
and holidays.  
 
15.           LIQUIDATED DAMAGES
 
15.1           Liquidated Damages for Delay in the Substantial Completion
Dates.  Contractor understands that if the Substantial Completion Date for each
Unit does not occur on or before the Substantial Completion Guaranteed Date for
such Unit, Owner will suffer substantial damages, including the loss of
operating revenue, additional interest and financing charges on funds obtained
by Owner to finance the Work, reduction of return on Owner’s equity investment
in the Project, and other operating and construction costs and
charges.  Therefore, Contractor agrees that if Substantial Completion for a Unit
is not achieved by the Substantial Completion Guaranteed Date for such Unit,
Contractor shall pay liquidated damages (“Delay Liquidated Damages”) to Owner in
the amount of (a)  beginning on the thirty-first (31st) day of such delay, and
for each day (or portion thereof) of delay thereafter through the sixtieth
(60th) day of such
 
 
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delay, *** Dollars ($***) per day for each day (or portion thereof) of such
delay; (b) beginning on the sixty-first (61st) day of such delay and for each
day (or portion thereof) of delay thereafter through the ninetieth (90th) day of
such delay, *** ($***), per day for each day (or portion thereof) of such delay;
and (c) beginning on the ninety-first (91st) day of such delay and for each day
(or portion thereof) of delay thereafter, *** Dollars ($***), per day for each
day (or portion thereof) of such delay.  Any amount Contractor is obligated to
pay to Owner under this Section 15.1 shall be subject to the limitations set
forth in Section 31.2.2 and shall be due and payable ten (10) Business Days
after receipt of a Notice from Owner requesting such payment.  
 
15.2           Intentionally Omitted.
 
15.3           Liquidated Damages for Failure to Satisfy Net Unit Capacity and
Net Unit Heat Rate Guarantees.  Contractor understands that if the Units do not
each achieve the Net Unit Capacity Guarantee and the Net Unit Heat Rate
Guarantee, Owner will suffer substantial damages, including the loss of
operating revenue, reduction of return on Owner’s equity investment in the
Project, and other operating and construction costs and charges.  Therefore,
Contractor agrees that if a Unit does not achieve the Net Unit Capacity
Guarantee, as calculated in accordance with Exhibit I-2, Contractor shall pay
liquidated damages to Owner in the amount of *** Dollars ($***) per kilowatt for
each kilowatt by which such Unit fails to satisfy the Net Unit Capacity
Guarantee.  Contractor further agrees that if a Unit does not achieve the Net
Unit Heat Rate Guarantee, as calculated in accordance with Exhibit I-2,
Contractor shall pay liquidated damages to Owner in the amount of *** Dollars
($***) per Btu/kilowatt hour for each Btu/kilowatt hour by which such Unit
exceeds the Net Unit Heat Rate Guarantee.  Any amount Contractor is obligated to
pay to Owner under this Section 15.3 shall be subject to the limitations set
forth in Section 31.2.2 and shall be due and payable as determined in accordance
with Sections 15.4 and 15.5.
 
15.4           Actions During the Cure Period.
 
15.4.1                      If Minimum Performance Criteria are Satisfied.  If
based on the results from the most recent Performance Tests for a Unit, such
Unit shall have satisfied the Minimum Performance Criteria but not the Net Unit
Capacity Guarantee or the Net Unit Heat Rate Guarantee, and each Acceptance Test
for such Unit has been Successfully Run, Contractor, at its option, shall elect
to either:
 
(a)           pay Owner the Performance Liquidated Damages as determined
pursuant to Section 15.3 based on the results of the most recently completed
Performance Test of such Unit, in which case Owner shall calculate such amount
and deliver a Notice For Payment of Performance Liquidated Damages for such Unit
to Contractor, and after payment of such Performance Liquidated Damages,
Contractor shall have no further obligation to try to achieve the Net Unit
Capacity Guarantee and Net Unit Heat Rate Guarantee, as applicable, with respect
 
*** CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION.
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to such Unit; or
 
(b)           continue to attempt to satisfy the applicable Performance
Guarantees for such Unit, until the earlier of one hundred eighty (180) days
after the Substantial Completion Guaranteed Date for such Unit or until the
expiration of a previously implemented Remedial Plan and Contractor’s election
to pay Owner the Performance Liquidated Damages and achieve Substantial
Completion as provided in Section 15.4.1(a).
 
15.4.2                      Remedial Plans.  If Contractor elects to attempt to
satisfy the applicable Performance Guarantees as provided in Section 15.4.1(b),
Contractor shall submit a Remedial Plan for such Unit to Owner for review and
approval, such approval not to be unreasonably withheld.  Each Remedial Plan
shall, at a minimum, specify the corrective actions Contractor proposes to take,
the commencement date of such corrective action, the component or system that
will be tested after such corrective actions are implemented, and the tests that
will be performed on such component or system, including any Performance Tests,
and any required Outage Periods for such corrective actions and tests.  The
corrective actions described in the Remedial Plan that Contractor proposes to
undertake with respect to the Work must be designed and intended to cause the
Project to satisfy the applicable Performance Guarantees without negative
effects on Acceptance Tests results used to obtain Substantial Completion, must
have a reasonable probability of success, and may not involve a material risk of
damaging or diminishing the performance of any of the Work.  The projected
completion date for such corrective action must fall within the Cure Period.  If
in any dispute between Owner and Contractor regarding the approval of a proposed
Remedial Plan it is determined that Owner’s failure to approve a proposed
Remedial Plan was in violation of this Agreement, Contractor’s sole remedy for
such violation shall be an equitable extension of the Cure Period, and such
failure shall not otherwise be considered a breach of any covenant, condition,
representation or warranty of Owner, and shall not be construed as an Owner
Event of Default.
 
15.4.3                 Prosecution of Remedial Plan.  In the event Contractor
elects to attempt to achieve the Performance Guarantees and proceeds with a
Remedial Plan, Contractor shall:
 
(a)           promptly and diligently pursue completion of the Remedial Plan at
Contractor’s sole cost;
 
(b)           in performing the corrective actions described in the Remedial
Plan, neither cause the Project to be unable to meet the Minimum Performance
Criteria or satisfy the Emission Guarantees, nor cause the Project to be unable
to comply with Applicable Laws; and
 
(c)           make substantial and demonstrable progress toward completion of
the Remedial Plan in accordance with its terms.
 
15.4.4                      Additional Remedial Plans.  If Contractor is unable
to satisfy the applicable Performance Guarantees after completing the initial
Remedial Plan, Contractor may deliver a new Remedial Plan to Owner within ten
(10) days after completion of such initial Remedial Plan; provided that the Cure
Period has not or will not expire during the period covered by such new Remedial
Plan.
 
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15.4.5                      Election of Option.  Contractor shall exercise the
option provided in Section 15.4.1 by delivery of Notice to Owner not later than
ten (10) days after (i) the later of the Substantial Completion Guaranteed Date
for such Unit, or (ii) the expiration of a previously implemented Remedial Plan,
as applicable.  For the avoidance of doubt, Contractor may, notwithstanding
Contractor’s election of option (b) of Section 15.4.1 elect to pay the
Performance Liquidated Damages pursuant to option (a) of Section 15.4.1 after
the expiration of its previously implemented Remedial Plan if Contractor fails
to satisfy the applicable Performance Guarantees by such date; provided that the
Unit continues to meet the Minimum Performance Criteria.  
 
15.4.6                      Buy-Down Not Available.  For the avoidance of doubt,
if Contractor fails to achieve the Minimum Performance Criteria with respect to
the Net Unit Capacity and the Net Unit Heat Rate, Contractor shall not be
entitled to pay the Performance Liquidated Damages pursuant to option (a) of
Section 15.4.1 to achieve Substantial Completion of a Unit and must continue
seeking to satisfy the applicable Performance Guarantees and to achieve
Substantial Completion, and shall continue to pay Delay Liquidated Damages with
respect to such Unit under Section 15.1 until Contractor achieves Substantial
Completion of such Unit.
 
15.4.7                 Access During Cure Period.  Upon Substantial Completion
of a Unit, Owner shall assume care, custody and control of such Unit in
accordance with Section 14.6.  Notwithstanding the foregoing, during the Cure
Period and upon approval of a Remedial Plan, Owner shall provide Contractor with
reasonable access to such Unit Upon Owner’s approval of the Remedial Plan for a
Unit, Contractor shall be granted reasonable access to the Unit, subject to
Section 15.4.8, for purposes of achieving the Performance Guarantees and for the
period as set forth in the Remedial Plan, to:
 
(a)           perform corrective actions pursuant to the Remedial Plan; and
 
(b)           perform the applicable tests, including Performance Tests, as
provided in such Remedial Plan.
 
15.4.8                      Operations During Cure Period.  During the Cure
Period, Owner shall have the right to operate such Unit in its sole discretion,
including the right to maximize the economic benefits of such Unit.  Contractor
understands and accepts that the desire of Owner to maximize the economic
benefits of such Unit likely will significantly curtail Contractor’s freedom of
action during the Cure Period and Owner will likely not provide access to such
Unit to Contractor for any significant modifications during the peak season from
June 1 through September 30 of any year.  Any failure by Owner to provide
Contractor with reasonable access to such Unit during the Cure Period shall not
be considered a breach of any covenant, condition, representation or warranty of
Owner, and shall not be construed as an Owner Event of Default.  Contractor’s
only remedy for a failure by Owner to provide Contractor with reasonable access
to such Unit during the Cure Period shall be an equitable extension of the Cure
Period until such reasonable access is provided.
 
15.4.9                      Shut Downs During Cure Period.  Owner and Contractor
agree to cooperate in good faith in determining when and to what extent such
Unit will be taken out of service in order for Contractor to take corrective
actions or perform any tests required as part of
 
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Contractor’s proposed Remedial Plans during the Cure Period.  Owner and
Contractor agree to cooperate in good faith to minimize the periods of time
during the Cure Period when a Unit will be taken out of service or any material
limitations will be imposed on Owner’s operation of such Unit (each such period,
an “Outage Period”).  Contractor shall use its best efforts to conduct
corrective actions during periods when a Unit is undergoing scheduled
maintenance outages and Owner agrees to grant Contractor access to such Unit
during such scheduled maintenance outage to the extent Contractor’s corrective
actions do not unreasonably interfere with Owner’s scheduled
maintenance.  Unless Owner expressly agrees otherwise (which agreement may be
withheld in Owner’s sole discretion for any or no reason), no Outage Period
shall be scheduled during the months of June, July, August and
September.  Notwithstanding the foregoing, Contractor will have the right to at
least three (3) Outage Periods not to exceed twenty (20) days in the aggregate,
to be scheduled in consultation with Owner pursuant to this Section 15.4.9;
provided that any additional Outage Periods shall be subject to Owner’s approval
which may be withheld in Owner’s sole and absolute discretion for any or no
reason.  Each Outage Period will begin after a 24-hour cool down period (if
necessary for Contractor’s proposed corrective action) and will end when
Contractor restores the Unit to normal operational conditions and turns the Unit
over to Owner for operation.  Subject to Section 31.2.2, if the duration of an
Outage Period exceeds the duration agreed to by the Parties for such Outage
Period, Contractor shall pay Owner an amount equal to *** Dollars ($***) for
each day in excess of such agreed duration, not to exceed a maximum aggregate
amount of *** Dollars ($***); provided, that Contractor shall not pay any
amounts pursuant to the foregoing for the additional time that the Unit is out
of service beyond the agreed-upon Outage Period if Owner is engaged in a
scheduled maintenance outage and in any event would keep the Unit shut
down.  Accrued amounts of such payments shall be due and payable from time to
time within five (5) days after Owner provides a Notice to Contractor demanding
payment thereof.  If Owner instructs Contractor to cease performing a test of a
Unit or conducting corrective actions during an Outage Period or otherwise
during the remainder of the Cure Period (for reasons other than safety or other
concerns arising from Errors or Omissions or Defects), Contractor shall be
granted a day for day extension of the Cure Period.  
 
15.5           Extension of Cure Period.  Notwithstanding anything to the
contrary herein, in the event Contractor has been unable to meet the applicable
Performance Guarantees with respect to a Unit on or prior to the expiration of
the initial one hundred eight (180) day Cure Period for such Unit, Contractor
may submit to Owner for approval a revised Remedial Plan setting forth in
specificity and detail the corrective actions which Contractor proposes to
undertake to enable the Unit to achieve the applicable Performance Guarantees
during any extended Cure Period.  Upon Owner’s approval of such revised Remedial
Plan, not to be unreasonably withheld, the Cure Period for such Unit shall be
extended for the period of time set forth in the Remedial Plan, but in no event
for more than one hundred eighty (180) days; provided, however, that the Unit
continues to meet the Minimum Performance Criteria with respect to both Net Unit
Capacity and Net Unit Heat Rate; provided, further, that Contractor shall pay
the Performance Liquidated Damages due and owing to Owner pursuant to
Section 15.3 with respect to such Unit within ten (10) business days of Owner’s
approval of such revised Remedial Plan, such Performance Liquidated
Damages.  Notwithstanding anything to the contrary, in the event the Unit 1
Boiler Upgrade Supplier, Alstom Power Inc., is entitled to an extension of the
initial one hundred eighty
 
*** CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION.
 
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(180) day Cure Period pursuant to the terms of such Boiler Upgrade Supplier’s
Boiler Upgrade Contract, and Contractor and such Boiler Upgrade Supplier submit
a Remedial Plan requiring an extension that will exceed one hundred eighty (180)
days, Owner shall not unreasonably withhold approval of such Remedial Plan and,
provided Unit 1 continues to meet the Minimum Performance Criteria with respect
to both Net Unit Capacity and Net Unit Heat Rate and Contractor pays the
Performance Liquidated Damages as provided in the foregoing sentence, the Cure
Period for Unit 1 for such Boiler Upgrade Supplier only shall be extended for
the period of time set forth in the Remedial Plan, but in no event for more than
three hundred sixty (360) days.
 
15.6           Sole Remedy; Liquidated Damages Not a Penalty.  The amounts
payable under Sections 15.1 or 15.3, as limited by Article 31, and the other
remedies provided for in this Article 15 shall be the sole and exclusive
remedies of Owner for delays in Substantial Completion, and for failure of a
Unit to meet the Performance Guarantees (other than the Environmental Compliance
Guarantees) during the Acceptance Tests, except to the extent a delay in
Substantial Completion becomes a Contractor Event of Default pursuant to
Section 19.1(g).  The Parties agree that Owner’s actual damages, as applicable,
in the event of such delays or failures would be extremely difficult or
impracticable to determine and that Owner’s estimate of its costs and revenues
in the event of such delays or failures significantly exceed the amount of the
liquidated damages provided herein.  After negotiation, the Parties have agreed
that the Delay Liquidated Damages and the Performance Liquidated Damages do not
exceed the damages that Owner would incur as a result of such delays or failures
and are in the nature of liquidated damages, and not a penalty.  For the
avoidance of doubt, Contractor shall have an absolute obligation to cause each
Unit (subject to Sections 19.3, 31.1 and 31.2):  (a) to successfully achieve
Mechanical Completion; (b) to successfully achieve the Environmental Compliance
Guarantees; and (c) to achieve the Minimum Performance Criteria.
 
15.7           Enforceability.  The Parties explicitly agree and intend that the
provisions of this Article 15 shall be fully enforceable by any court exercising
jurisdiction over any dispute between the Parties arising under this
Agreement.  Each party hereby irrevocably waives any defenses available to it
under law or equity relating to the enforceability of the liquidated damages
provisions set forth in this Article 15.
 
15.8           True-Up.  The Parties acknowledge and agree that the Performance
Liquidated Damages, if any, paid upon the extension of the Cure Period for a
Unit pursuant to Section 15.5 will be based upon results of the most recent
Performance Tests, and that the results of the Performance Tests at the end of
the extended Cure Period may vary.  Upon completion of the final Performance
Tests of such Unit completed during any such extended Cure Period, the Parties
shall meet and review the results of such Performance Tests.  If the amounts
paid as Performance Liquidated Damages pursuant to Section 15.5 are less than
the amounts that Contractor should have paid based on the results of the final
Performance Tests of such Unit completed during such extended Cure Period,
Contractor shall pay to Owner such deficiency within ten (10) days after the
Parties agree on such results.  If the amounts paid as Performance Liquidated
Damages pursuant to Section 15.5 exceed the amounts that Contractor should have
paid based on the final Performance Test results of such Unit completed during
such extended Cure Period, Owner shall refund to Contractor such excess within
ten (10) days after the Parties agree on such results.
 
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16.           CHANGES IN THE WORK
 
16.1           Change In Work.  A Change In Work may result only from any of the
following:
 
(a)           Changes in the Work required by Owner in writing;
 
(b)           the addition to, modification of or deletion from the Work
(performed or yet to be performed) or the Project during the performance of the
Work;
 
(c)           the occurrence of an Excusable Event (as and only to the extent
permitted by Section 8.6.2);
 
(d)           the occurrence of an event of Force Majeure (as and only to the
extent permitted by Section 8.6.1);
 
(e)           Owner’s request to accelerate the Work;
 
(f)           an Owner Directive, in accordance with Section 16.7;
 
(g)           in the event Contractor fails to achieve the Substantial
Completion Guaranteed Date for a Unit due to a delay solely attributable to
failure of the pressure induction welds in Unit 1 or the pressure induction
welds in the economizer for the Unit 2 boiler;
 
(h)           in the event Roberts and Schafer is selected as the Subcontractor
for supply of the materials handling system, and fails to complete its scope of
work under its subcontract due to its insolvency or bankruptcy, and Contractor
fails to achieve the Substantial Completion Guaranteed Date for a Unit due to a
delay solely attributable to such Subcontractor’s failure to complete its scope
of work;
 
(i)           the determination by the Executive Labor Committee that the Craft
Labor Compensation must be increased in order for Contractor to attract or
retain sufficient qualified craft labor personnel to perform the on-Site Work as
necessary for Contractor to maintain the Project Schedule;
 
(j)           Owner requested delay in the Work or actions by third parties
providing services to the Project at the Site but that are outside the scope of
the Work and that impact Contractor’s performance of the Work; or
 
(k)           Events entitling Contractor to a change in the Work, Separated
Target Price, Separated Contract Price or the Substantial Completion Guaranteed
Dates as set forth in Sections 2.7.1, 3.5.7, 5.3.1, 9.2, 16.7, 21.1.2, 21.1.15,
22.1.2, 33.9.1, and Exhibit DD.
 
Contractor and Owner acknowledge and agree that as of the date hereof Contractor
is negotiating amendments and modifications to the STG Upgrade Contract with the
STG Upgrade Supplier.  Notwithstanding anything to the contrary herein,
Contractor acknowledges and agrees that Contractor shall not be entitled to a
Change In Work with respect to any such amendment or modification to the STG
Upgrade Contract; provided that Contractor may be entitled to a Change
 
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in Work to the extent such amendment or modification is made in connection with
resolution of an open item identified on Exhibit DD.
 
16.2           By Owner.  Owner shall have the right to make changes in the
Work, within the general scope thereof, whether such changes are modifications,
accelerations, alterations, additions, or deletions.  All such changes shall be
made in accordance with this Article 16, be documented in accordance with
Section 16.4 and shall be considered, for all purposes of this Agreement, as
part of the Work.  
 
16.3           Adjustment to Substantial Completion Guaranteed Dates and
Separated Contract Price Due to Certain Events.
 
16.3.1                      Adjustments to Substantial Completion Guaranteed
Dates.  If an Excusable Event occurs, the Project Schedule (and the Substantial
Completion Guaranteed Dates referenced therein) shall be extended as and to the
extent provided in Section 8.6.2 and as set forth in the Change In Work Form
accepted by Owner.  If an event of Force Majeure occurs, the Project Schedule
(and the Substantial Completion Guaranteed Dates referenced therein) shall be
extended as and to the extent provided in Section 8.6.1 and as set forth in a
Change In Work Form accepted by Owner.  If an event described in Section 16.1(g)
occurs, the Project Schedule (and the Substantial Completion Guaranteed Date
referenced therein for Unit 1 or Unit 2, as applicable) shall be equitably
extended as necessary for the repair of such welds and as set forth in a Change
In Work Form accepted by Owner; provided that Contractor uses all reasonable
efforts to mitigate the duration of any delay in achieving the Substantial
Completion Guaranteed Date.  If an event described in Section 16.1(h) occurs,
the Project Schedule (and the Substantial Completion Guaranteed Date referenced
therein for Unit 1 and Unit 2, as applicable) shall be equitably extended to the
extent necessary to complete such scope of work and as set forth in a Change In
Work Form accepted by Owner; provided that Contractor uses all reasonable
efforts to mitigate the duration of any delay in achieving the Substantial
Completion Guaranteed Date.
 
16.3.2                      Adjustments to Separated Target Price and Separated
Contract Price.  In the event of an Excusable Event, or the occurrence of an
event of Force Majeure that delays the Work for five (5) or more consecutive
days or of multiple events of Force Majeure that delays the Work for more than
fifteen (15) days in the aggregate, the Separated Target Price or the Separated
Contract Price, as applicable, shall be adjusted by the sum of:  (i) the
difference of the direct costs (without profit, overhead or contingency),
including third party costs, incurred by Contractor because of such Change In
Work; less any savings or costs not incurred because of such Change In Work;
plus (ii) an allowance for profit in accordance with Exhibit Y; provided that
Contractor shall be entitled to a Change In Work adjusting the Separated Target
Price or the Separated Contract Price, as applicable, only to the extent
Contractor can reasonably demonstrate that the Separated Target Price or the
Separated Contract Price, as applicable, is affected by such Excusable Event or
event of Force Majeure.  
 
16.3.3                      Adjustments to Separated Contract Price.  If an
event described in Section 16.1(i) occurs, the Separated Contract Price shall be
adjusted by an amount equal to the Craft Labor Compensation Escalation Amount
pursuant to a Change In Work reflecting such amount.  If Contractor’s
representatives on the Executive Labor Committee approve an increase in Craft
Labor Compensation, but the Executive Labor Committee does not unanimously
 
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approve such an increase, Contractor may submit a Change In Work to adjust the
Substantial Completion Guaranteed Dates for Unit 1 or Unit 2, as applicable, and
to adjust the Separated Contract Price.  If Contractor is entitled to submit a
Change In Work pursuant to the foregoing sentence, the Substantial Completion
Guaranteed Date for Unit 1 or Unit 2, as applicable, shall be equitably adjusted
pursuant to a Change In Work by the amount of time Contractor is actually and
demonstrably delayed in the performance of the Work due to the lack of
sufficient qualified craft labor personnel, and such Change In Work may also
adjust the Separated Contract Price to the extent Contractor can reasonably
demonstrate that Contractor will incur additional costs (but not including any
increases in Craft Labor Compensation) not included in the Separated Contract
Price as a direct result of such change in such Substantial Completion
Guaranteed Dates.
 
16.4           Preparation of Change In Work Form.  Upon the occurrence of any
of the events set forth in Section 16.1, Owner or Contractor, as applicable,
shall provide the other party with a Notice of the occurrence of such event,
subject to Section 8.2, and Contractor shall, as soon as practicable, prepare
and submit to Owner a preliminary written estimate relating to the proposed
Change In Work, including (i) any projected change in the cost of the
performance of the Work and any projected modification of the Separated Target
Price, or the Separated Contract Price, as applicable, occasioned by such Change
In Work, (ii) the effect such Change In Work could be expected to have on the
Project Schedule, the Milestone Items, the Substantial Completion Guaranteed
Dates or any other schedule or dates for performance by Contractor hereunder,
and (iii) the potential effect of such Change In Work on Contractor’s ability to
comply with any of its obligations hereunder, including Contractor’s warranties
and the Performance Guarantees.  If Owner elects to proceed with a more detailed
examination of such proposed Change In Work, within such period as shall be
agreed upon by the parties, Contractor shall submit to Owner a detailed estimate
relating to the contemplated Change on a written Change Order.  If Owner elects
to proceed with the proposed Change In Work, Owner and Contractor shall agree
upon a Change In Work Form, and the cost of preparation of Contractor’s detailed
estimate shall be included in such Change In Work.  If Owner elects not to
proceed with such proposed Change In Work, Owner agrees to reimburse Contractor
for Contractor’s reasonable expenses incurred in connection with the preparation
of the detailed estimate of such proposed Change In Work in accordance with the
rates and markups pursuant to Exhibit Y, and as part of the next Invoice Payment
on which such costs are included.  Contractor’s proposed change in the Contract
Price for such Change In Work shall propose a lump sum (with detailed estimates
and quotation backup).  Contractor’s estimate of the cost of any Change shall
include and identify all elements of cost and a total lump sum cost using the
following guidelines: labor to include category and estimated hours, travel and
other related expenses; materials to include category and quantity;
Subcontractor and Supplier work to be identified with quotation or other
estimate basis; and fee.
 
16.5           Execution of Change In Work Form.  If Contractor and Owner reach
agreement on the matters listed in the Change In Work Form submitted by
Contractor, Contractor shall execute such Change In Work Form in accordance with
Section 33.4, and Owner shall sign “Accepted by Owner” on such Change In Work
Form and execute such Change In Work Form (indicating any amendments necessary
to reflect the agreement of the Parties) in accordance with Section 33.4.  If
the Parties cannot reach agreement on the matters listed in the Change In Work
Form submitted pursuant to this Section 16.5, then such matter shall be referred
to dispute resolution under Article 32.  Notwithstanding anything to the
contrary in the foregoing, the Project Representative shall be authorized to
execute Change In Work Forms to the extent of the
 
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approval amount authorized in Owner’s delegation of authority for such Project
Representative; provided that Owner shall notify Contractor in writing prior to
the Full Notice to Proceed Date of the Project Representative’s approval
amount.  
 
16.6           No Obligation or Payment Without Executed Change In Work
Form.  CONTRACTOR SHALL NOT BE ENTITLED TO UNDERTAKE OR BE OBLIGATED TO
UNDERTAKE A CHANGE IN WORK UNTIL CONTRACTOR HAS RECEIVED A CHANGE IN WORK FORM
SUBMITTED BY CONTRACTOR AND ACCEPTED BY OWNER AND, EXCEPT AS SET FORTH IN
SECTION 16.7, OR IN THE EVENT IMMEDIATE ACTION IS REASONABLY REQUIRED TO ADDRESS
AN EMERGENCY WHICH ENDANGERS HUMAN HEALTH OR PROPERTY.  IN THE ABSENCE OF SUCH
EXECUTED CHANGE IN WORK FORM, IF CONTRACTOR UNDERTAKES ANY CHANGES IN THE WORK,
CONTRACTOR SHALL MAKE ANY SUCH CHANGES AT CONTRACTOR’S SOLE RISK AND EXPENSE AND
SHALL NOT BE ENTITLED TO ANY SCHEDULE MODIFICATION OR PAYMENT HEREUNDER FOR
UNDERTAKING SUCH CHANGES.  NOTHING IN THIS SECTION 16.6 SHALL BE DEEMED TO WAIVE
CONTRACTOR’S OR OWNER’S RIGHT TO AVAIL ITSELF OF THE DISPUTE RESOLUTION
PROCEDURES PURSUANT TO ARTICLE 32 WITH RESPECT TO DISPUTED CHANGE IN WORK FORMS.
 
16.7           Owner Directives.  If Contractor and Owner are unable to agree on
whether a Change In Work has occurred or on the matters described in a Change In
Work Form, whether such Change In Work Form was initiated by Contractor or by
Owner, Contractor shall perform the Work as Owner so directs in writing (an
“Owner Directive”) on a time-and-materials basis in accordance with the rates
set forth on the rates set forth on Exhibit Y, and the Parties shall mutually
agree on an equitable adjustment of the applicable Substantial Completion
Guaranteed Dates on account of such Change In Work.  Owner shall assign a
Pending Item Claim number to the Work in question and shall issue Contractor a
notice to proceed.  Contractor shall proceed to perform the work in question on
a time and material basis in accordance with the compensation schedule set forth
in Exhibit Y.  Using the Pending Item Claim number to identify the Work in
question, Contractor shall be entitled to submit a Contractor’s Invoice to Owner
for payment for the time and material costs, and subject to the provisions of
Article 6, Owner shall pay such invoiced amount until Contractor and Owner
resolve their dispute regarding such Owner Directive.  
 
16.8           Disputed Changes In Work.  Any disputes regarding a Change In
Work Form or whether a Change In Work has occurred or that are otherwise related
to a Change In Work shall be subject to the dispute resolution provisions of
Article 32.  
 
16.9           Changes in Work All Inclusive.  Contractor agrees that each
Change In Work Form executed pursuant to the provisions of this Article 16 shall
include all compensation to be provided to Contractor related to such Change In
Work within the agreed scope, qualifications and assumptions at the time of
execution of such Change In Work Form, including any changes in the Substantial
Completion Guaranteed Dates or the Separated Contract Price.
 
16.10                      No Suspension.  Notwithstanding any dispute between
Owner and Contractor regarding a proposed Change In Work, Owner Directive,
Contractor’s claim regarding the
 
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impact of a change upon the Separated Contract Price or whether a Change In Work
has in fact occurred, Contractor shall not suspend the Work unless directed by
Owner in writing in accordance with Section 20.4, and Owner shall continue to
make payments to Contractor based on the Schedule of Payment Values then in
effect, pending resolution of such dispute.  
 
16.11                      Change for Contractor’s Convenience.  Contractor
shall have the right to take any action at its own expense that is generally
consistent with this Agreement and that Contractor in good faith determines to
be reasonably necessary to meet the requirements of this Agreement.  In the
event such action involves substitution of Equipment or Materials as set forth
in this Agreement or the replacement of Subcontractors, or a deletion from, or
modification of the Work as described in this Agreement or any Contractor
Deliverable, Contractor shall obtain Owner’s written approval prior to
undertaking such action.  Contractor shall not be entitled to any adjustment to
the Separated Contract Price, any Substantial Completion Guaranteed Date, or any
other term or condition of this Agreement in respect of any action undertaken
pursuant to this Section 16.11.
 
17.           WARRANTIES CONCERNING THE WORK
 
17.1           Work Warranty.  Contractor warrants to Owner (the “Work
Warranty”) that all Work (other than engineering and design Work and Work
covered by the Materials Warranty), including Contractor’s (and its
Subcontractor’s) construction of the Project and the installation of the
Equipment and Materials:
 
(a)           shall be Industry Grade;
 
(b)           shall be free from Defects;
 
(c)           shall conform to all applicable requirements of this Agreement,
the Submittals approved or accepted by Owner, Applicable Laws and the Applicable
Permits; and
 
(d)           shall be generally fit for the purpose of generation of electric
power in accordance with and subject to the terms of this Agreement when
operated in accordance with prudent operating practices.
 
Contractor further warrants that the engineering and design Work shall be
completed without Errors and Omissions.
 
17.2           Materials Warranty.  Contractor further warrants that all
Equipment and Materials, including the Owner Furnished Equipment, furnished by
Contractor and any Subcontractors hereunder (the “Materials Warranty”):
 
(a)           shall be new (other than the Owner Furnished Equipment) and of
good quality when installed;
 
(b)           shall conform to the requirements of this Agreement, the
Submittals, all Applicable Laws and the Applicable Permits;
 
(c)           shall be free from any charge, lien, security interest or other
encumbrance;
 
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(d)           shall be free of Defects including Defects in materials,
fabrication or workmanship; and
 
(e)           shall be generally fit for the purpose of generation of electric
power in accordance with and subject to the terms of this Agreement when
operated in accordance with prudent operating practices.
 
If reasonably requested by Owner during the Warranty Period due to concerns that
any Work or Equipment and Materials may not satisfy the Work Warranty or the
Materials Warranty, Contractor shall promptly provide Owner with reasonable
evidence that such item(s) of the Work or Equipment and Materials do satisfy the
Work Warranty or Materials Warranty, as applicable.
 
17.3           Warranty Period.  Contractor shall have no liability under
Section 17.1 or 17.2 with respect to a Unit from and after the end of the twelve
(12) month period commencing on the Substantial Completion Date of such Unit
(the “Warranty Period”); provided, however, that the Warranty Period for any
Work, Equipment and Materials, item or part required to be re-performed,
repaired, corrected or replaced following discovery of an Error or Omission or
Defect during the original Warranty Period shall be extended from the time of
such re-performance, repair, correction or replacement for a period equal to the
original Warranty Period for such item or part; provided, further, in no event
shall the Warranty Period as extended for any Work, item or part extend for more
than twelve (12) months after the end of the initial Warranty Period for the
relevant Unit.  
 
17.4           Enforcement by Owner.  Commencing on the expiration of the
applicable Warranty Period, Owner shall be entitled to enforce all unexpired
representations, warranties, and guarantees with respect to the Project from
Subcontractors, and Contractor shall provide reasonable assistance to Owner, at
no additional cost, in enforcing such representations, warranties, and
guarantees, when and as reasonably requested by Owner.  In addition, prior to
the expiration of the applicable Warranty Period, Owner, at its option and upon
prior written Notice to Contractor, may enforce the particular warranty, the
Work Warranty or the Materials Warranty against any Subcontractor if:
 
(a)           a Contractor Event of Default exists and this Agreement has been
terminated in accordance with Article 19.
 
17.5           Exclusions.  The Work Warranty and Materials Warranty set forth
in Sections 17.1 and 17.2 shall not apply to:
 
(a)           Damage to or failure of any Equipment and Materials to the extent
such damage or failure is caused by:
 
(i)           a material failure by Owner or its representatives, agents or
contractors to operate and maintain such Equipment and Materials in accordance
with Industry Standards or in accordance with the recommendations set forth in
the Required Manuals but only if such failure occurs after Substantial
Completion of the relevant Unit;
 
(ii)           operation of such Equipment and Materials by Owner in excess of
or outside of the operating parameters or specifications for such Equipment and
Materials as set
 
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forth in the Required Manuals but only if such failure occurs after Substantial
Completion of the relevant Unit;
 
(iii)           the use of spare parts and normal consumables by Owner in the
repair or maintenance of such Equipment and Materials that are not materially in
accordance with specifications and recommendations set forth in the Required
Manuals but only if such failure occurs after Substantial Completion of the
relevant Unit; or
 
(iv)           an event of Force Majeure.
 
(b)           Normal Operating Consumables or items that require replacement due
to normal wear and tear, normal erosion or corrosion, or casualty loss (other
than as a result of any failure of the Work Warranty or the Materials Warranty).
 
Notwithstanding the foregoing, during the period that Contractor has care,
custody and control of a Unit, any adverse stress or damage to the Equipment and
Materials caused by Operating Personnel while under the direction of Contractor
shall be the responsibility of Contractor, except to the extent such Operating
Personnels’ acts or omissions constitute gross negligence or willful misconduct.
 
Further, Contractor shall have no warranty obligation or liability for Defects
or deficiencies in the Work if Contractor reasonably demonstrates that the
Defect or deficiency is attributable to Contractor’s reliance upon or use of
design criteria, drawings or specifications provided by Owner expressly for use
in the performance of the Work.
 
17.6           Subcontractor Warranties.  Contractor shall obtain warranties for
all Work performed by each Subcontractor on terms at least as favorable as this
Article 17.  Notwithstanding the foregoing, Contractor shall obtain from the
Supplier supplying the emission reduction catalysts a warranty that the emission
reduction catalysts for the Project shall provide the emission reductions set
forth in Exhibit I-1 for a period ending forty-eight (48) months after the
Substantial Completion Date, and an affirmative obligation of the Suppliers of
the components of the emissions system to provide technical assistance and field
support in optimizing the performance of their respective components of the
emissions system, as Owner requests.  Contractor shall assign all unexpired
representations, warranties, guarantees, and obligations of all Subcontractors,
at the request and direction of Owner, to Owner or any Financing Entity upon
termination or expiration of this Agreement in accordance with its terms;
provided, however, that, notwithstanding such assignment, Contractor shall be
entitled to enforce each such representation, warranty, guarantee, and
obligation through the end of the Warranty Period.  In addition, Contractor
hereby assigns to Owner, effective as of the end of the Warranty Period, all
remaining representations, warranties, guarantees and obligations of all
Subcontractors (excluding performance or schedule guarantees for which
liquidated damages are provided as a remedy and for which the maximum amount of
liquidated damages have already been paid to Contractor).  Notwithstanding the
foregoing, Contractor shall not be obligated to assign any claims of Contractor
with respect to such subcontract or Subcontractor then existing.  Contractor
shall cause Owner to be an express third-party beneficiary of all such
representations, warranties, guarantees and obligations.  Contractor shall
deliver to Owner promptly following
 
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execution thereof duly executed copies of all subcontracts containing such
representations, warranties, guarantees, and obligations.  
 
17.7           Correction of Errors or Omissions and Defects.
 
17.7.1                      Notice of Warranty Claim.  Subject to
Section 17.7.5, Owner shall provide Notice to Contractor within a reasonable
period after discovery that any of the Work fails to satisfy the Work Warranty
or the Materials Warranty during the applicable Warranty Period.  Contractor
shall, at Contractor’s own cost and expense (including overtime, but excluding
insurance proceeds to the extent actually received) refinish, repair or replace,
at its option, such nonconforming or defective part of the Work, within its
original Scope of Work, including re-performing any necessary engineering and
purchasing relating to such Work, and shall pay the cost of removing any Error
or Omission or Defect and the cost of re-performing, repairing, replacing or
testing such subject Work, including any damage to the surrounding Work (subject
to the limitations provided in Section 22.2), as shall be necessary to cause the
Work and the Project to conform to the Work Warranty or Materials Warranty.  In
addition, subject to the limitations provided in Section 22.2, Contractor shall,
at its own cost and expense (including overtime, but excluding insurance
proceeds to the extent actually received), repair and replace any portion of the
Work that is damaged or destroyed because any of the Work shall fail to satisfy
the Work Warranty or the Materials Warranty during the applicable Warranty
Period, all in accordance with the Warranty Procedures.  Within five (5)
Business Days after receipt by Contractor of a Notice from Owner delivered
during the Warranty Period specifying a failure of any of the Work to satisfy
Contractor’s Work Warranty or the Materials Warranty and requesting Contractor
to correct the failure, Contractor and Owner shall mutually agree when and how
Contractor shall remedy such failure (the “Warranty Procedures”).  The timing of
and the Work to be completed with respect to any such remediation or repair
shall be subject to Owner’s approval.  No such remediation or repair shall be
considered complete until Owner shall have reviewed and approved such completed
remedial work.  Notwithstanding the foregoing and subject to Section 17.7.2.2,
if any of the Work shall fail to satisfy Contractor’s Work Warranty or the
Materials Warranty, and such failure endangers human health or property or
materially and adversely affects the operation of the Project, Contractor shall
correct the failure as soon as is reasonably practicable.
 
17.7.2                      Owner Performance.
 
17.7.2.1                      Upon Contractor’s Request.  Notwithstanding the
foregoing, Contractor may request Owner to perform all or any portion of
Contractor’s obligations with respect to any warranty claim.  Upon such request,
Owner may elect to perform such obligations in Owner’s sole discretion, and if
Owner elects not to perform such obligations, Contractor shall remain obligated
to and shall perform such obligations.  Contractor shall reimburse Owner for all
costs and expenses incurred by Owner (including costs of Owner’s personnel, but
excluding overhead, corporate burdens, profit, and the like) to perform
Contractor’s obligations with respect to such warranty claim within ten (10)
Business Days of receiving Owner’s request for payment of such costs.
 
17.7.2.2                      Failure of Contractor to Perform Warranty
Work.  If Contractor does not use its reasonable efforts to proceed to complete
the Work, or cause any relevant
 
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Subcontractor to proceed to complete the Work, required to satisfy any warranty
claim properly asserted under the terms of this Article 17 within the agreed
time, or if Contractor and Owner fail to reach such an agreement within such
five (5) day period set forth in Section 17.7.1, Owner shall, after giving
Contractor at least five (5) days prior Notice of Owner’s intent to perform the
remedy itself, have the right to perform the necessary remedy, or have third
parties perform the necessary remedy and Contractor shall bear the reasonable
costs thereof.  If Contractor (or the relevant Subcontractor) begins to perform
the Work to satisfy such warranty claim during such five (5) day period, Owner
shall not perform, or cause any third party to perform, such remedy.  In the
event any of the Work fails to satisfy the Work Warranty or the Materials
Warranty during the applicable Warranty Period and any such failure occurs under
circumstances in which there is an immediate need for repairs, Owner may perform
such warranty work for Contractor’s account; provided that Owner provides
reasonably prompt Notice to Contractor of such immediate need.
 
17.7.3                      Replaced Components Demonstrations.  If, during the
Warranty Period, Contractor changes, repairs or replaces any Equipment and
Materials (any such item changed, repaired or replaced, a “Component”),
Contractor and Owner shall mutually agree on how to demonstrate to Owner, taking
into consideration Owner’s reasonable requirements, that such Component meets
the intent of the Project design conditions.  
 
17.7.4                      Continual Failure of Component.  Should Contractor
fail to correct any Error or Omission or Defect in the Work during the Warranty
Period that results in a Component failing more than once to meet the Work
Warranty or the Material Warranty during the Warranty Period, Owner shall
provide Notice to Contractor of such failure, Contractor shall determine what
changes, repairs or replacements to the Component are necessary to correct the
Error or Omission or Defect or avoid further failures of such Component, and
shall make such necessary changes, repairs or replacements.  In each case,
during the Warranty Period Contractor shall repeat such process on an iterative
basis until the Error or Omission or Defect and the underlying cause thereof or
of the continuing failure is corrected.  
 
17.7.5                      Owner’s Warranty Option.  Owner and Contractor
acknowledge and agree that it may be impracticable or otherwise not in Owner’s
best interest to re-perform any Work or fix any defective Equipment and
Materials which fails to satisfy the Work Warranty or Materials Warranty
pursuant to the provisions of Section 17.7.1.  Such impracticability may be due
to, among other things, considerations concerning the length of time a Unit may
be shutdown in order to re-perform such nonconforming Work or risks to the other
portions of the Project as a result of such re-performance.  As a consequence
thereof, the Parties expressly agree that in lieu of re-performing any Work so
as to cause the Project to satisfy the Work Warranty and Materials Warranty,
Owner shall have the option (the “Warranty Payment Option”) (which option Owner
shall exercise (if at all) by Notice to Contractor within ten (10) days after
Owner initially Notifies Contractor of such non-conforming Work pursuant to the
first sentence of Section 17.7.1) to require Contractor to pay to Owner, in lieu
of re-performing such Work, an amount equal to the estimated cost to Contractor
to re-perform any necessary engineering and purchasing relating to such
non-conforming Work, plus the cost of removing any non-conforming Work and the
cost of re-performing, repairing or replacing such subject Work, including any
damage to the surrounding Work (subject to the limitations provided in
Section 22.2), all as would be necessary to cause the Work and or the applicable
Equipment and
 
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Materials to conform to the Work Warranty and Materials Warranty.  If Owner
exercises its Warranty Payment Option with respect to any non-conforming Work,
Contractor shall provide its estimated costs to Owner for approval within ten
(10) days of receipt of Notice from Owner that Owner has exercised the Warranty
Payment Option, and shall pay all such estimated costs, as approved by Owner, to
Owner within ten (10) Business Days after Notice of such demand from Owner.  If
Owner exercises its Warranty Payment Option with respect to any non-conforming
Work, and Contractor pays all such costs with respect to such non-conforming
Work, Contractor’s warranty obligations hereunder with respect to such
non-conforming Work shall be deemed satisfied.
 
17.8           Limitations On Warranties.  EXCEPT FOR THE EXPRESS WARRANTIES AND
REPRESENTATIONS SET FORTH IN ARTICLE 4, THIS ARTICLE 17 AND SECTION 25.4,
CONTRACTOR DOES NOT MAKE ANY OTHER EXPRESS WARRANTIES OR REPRESENTATIONS, OR ANY
IMPLIED WARRANTIES OR REPRESENTATIONS, OF ANY KIND, INCLUDING ANY IMPLIED
WARRANTY OF MERCHANTABILITY OR FITNESS FOR PURPOSE.  THE REMEDIES PROVIDED FOR
IN THIS ARTICLE 17 WITH RESPECT TO ANY WORK WHICH FAILS TO SATISFY THE WORK
WARRANTY OR THE MATERIALS WARRANTY DURING THE WARRANTY PERIOD, AND IF SUCH
FAILURE CONSTITUTES A CONTRACTOR EVENT OF DEFAULT, THE REMEDIES PROVIDED FOR IN
SECTIONS 19.2(B) AND 19.2(D) THROUGH 19.2(G), SHALL BE THE SOLE AND EXCLUSIVE
REMEDIES FOR OWNER AS A RESULT OF SUCH FAILURE.
 
18.           EQUIPMENT IMPORTATION; TITLE
 
18.1           Importation of Equipment and Materials.  Contractor, at its own
cost and expense, shall make all arrangements, including the processing of all
documentation, necessary to import into the United States Equipment and
Materials to be incorporated into the Project and any other equipment and other
items necessary to perform the Work and shall coordinate with the applicable
Governmental Authorities in achieving clearance of United States customs for all
such Equipment and Materials and other items and, to the extent available under
Applicable Laws of the United States but without limiting Contractor’s liability
for any and all import duties, taxes and levies as specified in Sections 5.7 and
5.8, achieving such importation duty- and tax-free.  In no event shall Owner be
responsible for any delays in customs clearance or any resulting delays in
performance of the Work.
 
18.2           Title.
 
18.2.1                      Condition.  To the extent Owner’s payments to
Contractor are made in accordance with this Agreement, Contractor warrants good
title, free and clear of all liens, claims, charges, security interests, and
encumbrances whatsoever, to all Equipment and Materials and other items
furnished by it or any of its Subcontractors that become part of the Project or
that are to be used for the operation, maintenance, or repair thereof; provided
that such warranty with respect to the Owner Furnished Equipment and the Leased
Equipment, if any, shall be limited to title being free and clear of all liens,
claims, charges, security interests and encumbrances, except for those
encumbrances which may be created by action of Owner associated with any
financing of the Project.
 
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18.2.2                      Transfer.  Title to all Equipment and Materials and
other items, other than the Owner Furnished Equipment and the Leased Equipment,
shall pass to Owner, and with respect to the Owner Furnished Equipment, shall be
retained by Owner, free and clear of all liens, claims, charges, security
interests, and encumbrances whatsoever, except for those encumbrances which may
be created by action of Owner associated with any financing of, upon delivery of
such Equipment and Materials or other items to the Project and payment by Owner
to Contractor therefor.
 
18.2.3                      Custody During Performance.  The transfer of title
shall in no way affect Owner’s rights as set forth in any other provision of
this Agreement.  Subject to Section 3.5.5, Contractor shall have care, custody,
and control of all Equipment and Materials, the Owner Furnished Equipment and
other items and exercise due care with respect thereto until the earlier of the
Substantial Completion Date and the termination of this Agreement.
 
18.3           Protection.  For the purpose of protecting Owner’s interest in
all Equipment and Materials, including the Owner Furnished Equipment, and other
items with respect to which title has passed to Owner pursuant to Section 18.2
but that remain in possession of Contractor or any Subcontractor, Contractor
shall take or cause to be taken all steps necessary under the laws of the
appropriate jurisdictions(s) (including obtaining bailee’s and warehousemen’s
waivers) to protect Owner’ title and to protect Owner against claims by other
parties with respect thereto.
 
18.4           Owner Possession.  On the Substantial Completion Date of each
Unit, Owner shall take complete possession and control and assume responsibility
for the daily operation and maintenance of such Unit.
 
19.           DEFAULT
 
19.1           Contractor Events of Default.  Contractor immediately shall be in
material default of its obligations pursuant to this Agreement upon the
occurrence of any one or more events of default set forth below (each, a
“Contractor Event of Default”):
 
(a)           Contractor becomes insolvent, generally does not pay its debts as
they become due, admits in writing its inability to pay its debts, or makes a
general assignment for the benefit of creditors, or Contractor commences any
case, proceeding or other action seeking reorganization or receivership, or
adopts an arrangement with creditors, under any bankruptcy, insolvency,
reorganization or similar law of the United States or any state thereof for the
relief of creditors or affecting the rights or remedies of creditors generally;
 
(b)           insolvency, receivership, reorganization, or bankruptcy or similar
proceedings are commenced against Contractor and such proceeding shall remain
undismissed or unstayed for a period of thirty (30) days;
 
(c)           any material representation or warranty made by Contractor herein
was false or misleading when made and Contractor fails to remedy such false or
misleading representation or warranty within thirty (30) days after Contractor
receives a Notice from Owner with respect thereto, except such thirty (30) day
limit shall be extended if: (i) curing such failure reasonably requires more
than thirty (30) days; (ii) Contractor commences such cure within such
thirty (30) day period and diligently prosecutes such cure; and (iii) such cure
is accomplished
 
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within seventy five (75) days after the earlier of the date on which Contractor
first knew of such misrepresentation or falsity or the date on which Contractor
receives a Notice from Owner with respect thereto;
 
(d)           Contractor assigns or transfers this Agreement or any right or
interest herein except in accordance with Article 27;
 
(e)           Contractor fails to maintain any insurance coverages required of
it in accordance with Article 21 and Contractor fails to remedy such breach
within five (5) days after the earlier of the date on which Contractor first
knew of such breach or the date on which Contractor first receives a Notice from
Owner with respect thereto;
 
(f)           Contractor fails to perform or observe in any respect any
provision of this Agreement providing for the payment of money to Owner or any
other material provision of this Agreement not otherwise addressed in this
Section 19.1, including Section 19.1(g), and such failure continues for ten (10)
days in the case of a payment obligation and thirty (30) days in the case of any
other obligation, except such thirty (30) day limit shall be extended if:
(i) curing such failure reasonably requires more than thirty (30) days,
(ii) Contractor commences such cure within such thirty (30) day period and
diligently prosecutes such cure, and (iii) such cure is accomplished within
seventy five (75) days after the earlier of the date on which Contractor first
knew of such failure to perform or the date on which Contractor receives a
Notice from Owner with respect thereto;
 
(g)           the Substantial Completion Date of a Unit has not occurred by the
three hundred sixty-fifth (365th) day after the Substantial Completion
Guaranteed Date for such Unit, as such date may be extended pursuant to the
provisions of this Agreement; or
 
(h)           except as a result of a Force Majeure event or during the pendency
of a suspension under Section 19.5 herein, Contractor abandons the Work;
 
19.2           Owner’s Rights and Remedies.  In the event of a Contractor Event
of Default Owner or its permitted assignees shall have the following rights and
remedies and may elect to pursue any or all of them, in addition to any other
rights and remedies under this Agreement that may be available to Owner or its
permitted assignees, and Contractor shall have the following obligations:
 
(a)           Owner, without prejudice to any of its other rights or remedies
under this Agreement, may terminate this Agreement by giving written Notice of
such termination to Contractor; provided that in the event of a Contractor Event
of Default pursuant to Section 19.1(a) or (b), Owner shall be deemed to have
given Notice of termination to Contractor immediately upon the occurrence of
such a Contractor Event of Default, and all amounts owing by Contractor to Owner
hereunder shall immediately become due and payable;
 
(b)           Owner may, without prejudice to any of its other rights or
remedies under this Agreement, proceed against any bond, guarantee, letter of
credit, or other security given by or for the benefit of Contractor for its
performance under this Agreement;
 
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(c)           in the event Owner terminates this Agreement in accordance with
the provisions hereof, Contractor shall withdraw from the Site, shall assign to
Owner (without recourse to Contractor) such of Contractor’s subcontracts as
Owner may request, and shall deliver and make available to Owner all
information, patents, and licenses of Contractor related to the Work reasonably
necessary to permit Owner to complete or cause the completion of the Work, and
in connection therewith Contractor authorizes Owner and its respective agents to
use such information in completing the Work, shall remove such materials,
equipment, tools, and instruments used by and any debris or waste materials
generated by Contractor in the performance of the Work as Owner may direct, and
Owner may take possession of any or all Contractor Deliverables and Site
facilities of Contractor related to the Work necessary for completion of the
Work (whether or not such Contractor Deliverables and Site facilities are
complete);
 
(d)           Owner shall have the right  to have the Work finished whether by
enforcing any security given by or for the benefit of Contractor for its
performance under this Agreement or otherwise;
 
(e)           Owner, without limiting Owner’s right to terminate this Agreement,
may seek equitable relief to cause Contractor to take action, or to refrain from
taking action pursuant to this Agreement;
 
(f)           Owner, without limiting Owner’s right to terminate this Agreement,
may pursue the dispute resolution procedures set forth in Article 32 to enforce
the provisions of this Agreement;
 
(g)           Owner may make such payments or perform such obligations as are
reasonably required to cure any Contractor Event of Default and offset the cost
of such payment or performance against payments otherwise due to Contractor
under this Agreement; and
 
(h)           in the event Owner terminates this Agreement, Owner may seek
damages as provided in Section 19.3, including proceeding against any bond,
guarantee, letter of credit, or other security given by or for the benefit of
Contractor for its performance under this Agreement.
 
19.3           Damages for Contractor Default.  In the event of a Contractor
Event of Default, Owner may terminate this Agreement by delivery of written
notice to Contractor, and, subject to Article 31, Contractor shall be liable to
Owner for  the actual costs of completing the Work, including compensation for
obtaining a replacement contractor or for obtaining additional professional
services  required as a consequence of Contractor’s Event of Default, in excess
of those costs that would have been payable to Contractor but for such
Contractor’s Event of Default (and, to the extent applicable, Contractor shall
remain liable for the satisfaction of all liabilities incurred prior to Owner’s
termination (including Contractor’s indemnification obligations hereunder and
payment of all Delay Liquidated Damages and Performance Liquidated
Damages)).  In addition, whether or not Owner terminates the Agreement, in the
event of a Contractor Event of Default, Owner shall be entitled to withhold
further payments to Contractor for the Work performed prior to termination of
this Agreement until Owner reasonably determines the liability of Contractor, if
any, under this Section 19.3, and in any event no later than the date a court of
competent jurisdiction finally determines Contractor’s
 
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liability hereunder.  Upon determination of the total cost of the Work, Owner
shall notify Contractor in writing of the amount, if any, that Contractor shall
pay Owner or Owner shall pay Contractor.  Contractor acknowledges that in the
event of such a termination, Owner may enter into a turnkey contract for the
completion of the Project with substantially similar or more favorable
performance guarantees, completion deadlines and liquidated damages as are
provided for in this Agreement, that such turnkey contract may require the
replacement contractor to perform all such work on an accelerated basis, and
that, as a result thereof, the cost to complete the Project may greatly exceed
the cost hereunder.  If it is determined for any reason that Contractor was not
in default or that Owner was not entitled to the remedy against Contractor
provided above, the termination will be deemed to be a termination for
convenience ab initio pursuant to Section 20.1 and Contractor’s sole and
exclusive remedies whether in tort, contract or otherwise against Owner shall be
the same as and shall be strictly limited to those afforded in Article 20 and
Section 33.18.  Nothing in this paragraph shall be deemed to modify the
provisions of Article 31, nor Contractor’s obligation (a) to successfully
achieve Mechanical Completion; (b) to successfully achieve the Environmental
Compliance Guarantees; (c) intentionally omitted; (d) intentionally omitted; and
(e) to achieve the Minimum Performance Criteria.
 
19.4           Owner Event of Default.  Owner shall be immediately in default of
its obligations pursuant to this Agreement upon the occurrence of any one or
more events of default below (each, an “Owner Event of Default”):
 
(a)           Owner becomes insolvent, generally does not pay its debts as they
become due, admits in writing its inability to pay its debts, or makes a general
assignment for the benefit of creditors, or commences any case, proceeding or
other action seeking reorganization or receivership, or adopts an arrangement
with creditors, under any bankruptcy, insolvency, reorganization or similar law
of the United States or any state thereof for the relief of creditors or
affecting the rights or remedies of creditors generally;
 
(b)           insolvency, receivership, reorganization, or bankruptcy or similar
proceedings are commenced against Owner and such proceeding shall remain
undismissed or unstayed for a period of thirty (30) days;
 
(c)           any material representation or warranty made by Owner herein was
false or misleading when made and Owner fails to remedy such false or misleading
representation or warranty within thirty (30) days after Owner receives a Notice
from Contractor with respect thereto, except such thirty (30) day limit shall be
extended if: (i) curing such failure reasonably requires more than thirty (30)
days, (ii) Owner commences such cure and diligently prosecutes such cure, and
(iii) such cure is accomplished within seventy five (75) days after the earlier
of the date on which Owner first knew of the misrepresentation or falsity or the
date on which Owner first receives a Notice from Contractor with respect
thereto;
 
(d)           Owner assigns or transfers this Agreement or any right or interest
herein, except in accordance with Article 26;
 
(e)           Owner fails to maintain any insurance coverages required of it in
accordance with Article 21 and Owner fails to remedy such breach within five (5)
days after the
 
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earlier of the date on which Owner first knew of such misrepresentation or
falsity or the date on which Owner first receives a Notice from Contractor with
respect thereto; or
 
(f)           Owner fails to perform or observe in any respect any provision of
this Agreement providing for the payment of money to Contractor or any other
material provision of this Agreement not otherwise addressed in this
Section 19.4, and such failure continues for ten (10) days in the case of a
payment obligation and thirty (30) days in the case of any other obligation,
except such thirty (30) day limit shall be extended if: (i) curing such failure
reasonably requires more than thirty (30) days; (ii) Owner commences such cure
within such thirty (30) day period and diligently prosecutes such cure; and
(iii) such cure is accomplished within seventy five (75) days, in each case
after the earlier of the date on which Owner first knew of such failure to
perform or the date on which Owner first receives a Notice from Owner with
respect thereto.
 
19.5           Contractor’s Remedies.  In the event of an Owner Event of Default
and subject to Article 31, Contractor shall only have the following rights:
 
(a)           to enforce the guarantee of the Owner’s parent provided pursuant
to Section 4.2.6 for the benefit of Contractor;
 
(b)           to suspend performance of the Work until Owner cures such Owner
Event of Default (in which event, Contractor shall be compensated in the manner
specified in Section 20.4.2);
 
(c)           to terminate this Agreement (in which event Contractor shall be
compensated in the manner described in Section 20.1 for termination by Owner for
convenience);
 
(d)           to seek equitable relief to enforce the provisions of this
Agreement; and
 
(e)           to pursue the dispute resolution procedures set forth in
Article 32 to enforce the provisions of this Agreement.
 
20.           TERMINATION FOR CONVENIENCE AND SUSPENSION
 
20.1           Termination for Convenience.  
 
20.1.1                      Owner’s Right to Terminate; Payment.  Owner may in
its sole discretion terminate the Work with or without cause at any time by
giving Notice of termination to Contractor, to be effective upon the receipt of
such Notice by Contractor or upon such other termination date specifically
identified by Owner therein.  If this Agreement is terminated pursuant to this
Section 20.1 after the Open Book Review has been concluded and the Separated
Contract Price has been agreed to by the Parties, as compensation for the Work
performed through the effective date of termination, subject to reductions as
set in this paragraph below, Owner shall pay to Contractor an amount equal to
the sum of (g) the reasonable cost of the Work properly performed in accordance
with this Agreement to the date of termination based on the Schedule of Payment
Values (and pro-rated if necessary); plus (h) Contractor’s reasonably incurred
out-of-pocket- costs of demobilization (as evidenced in writing) including
 
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demobilization and termination or cancellation or breakage costs of
Subcontractors if their agreements with Contractor are not assigned to and
assumed by Owner pursuant to Section 20.1.3; less (i) any amounts previously
paid to Contractor under this Agreement.  If such termination occurs prior to
the Completion of the Open Book Review and before the Separated Contract Price
has been agreed upon, Owner shall pay Contractor (x) the cost of the Work
properly performed in accordance with this Agreement to the date of termination
based on the rate schedule set forth in Exhibit Y, plus (y) Contractor’s
reasonably incurred out-of-pocket- costs of demobilization (as evidenced in
writing) including demobilization and termination or cancellation costs of
Subcontractors if their agreements with Contractor are not assigned to and
assumed by Owner pursuant to Section 20.1.3.  Owner shall make payments under
this Section 20.1 in accordance with Article 6.  Contractor shall not include
any cancellation fees of Contractor in the Schedule of Payment Values or the
estimated cancellation costs, and shall not be entitled to receive any
cancellation fees.  
 
20.1.2                      Limitation on Payment.  Except as provided in this
Section 20.1, Contractor shall not be entitled to any lost profit upon any
termination of this Agreement.
 
20.1.3                      Owner’s Right to Elect to Assume Obligations with
Subcontractors.  In addition, Owner shall have the right, at its sole option, to
assume and become liable for any written obligations and commitments that
Contractor may have in good faith undertaken with third-parties in connection
with the Work to be performed at the Site.  If Owner elects to assume any
obligation of Contractor as described in this Section 20.1.3, then (a) the
amount paid pursuant to Section 20.1.1 shall be reduced by the amount of such
obligations and commitments (unless they relate to termination or demobilization
costs or to payments due for work already completed for which Contractor remains
obligated to pay); (b) Contractor shall execute all assignments or other
documents and take all other reasonable steps requested by Owner which may be
required to vest in Owner all rights, set-offs, benefits and titles necessary to
such assumption by Owner; (c) Contractor’s satisfaction of its obligations under
this Section 20.1.3 shall be a condition precedent to Owner’s obligation to
comply with its obligations under this Section 20.1 (including its obligation to
make any payment to Contractor); and (d) Owner shall simultaneously agree to
indemnify Contractor against liabilities thereafter arising under the assumed
obligations or commitments.  
 
20.2           Contractor Conduct.  Upon receipt of written notice from Owner of
termination pursuant to Section 20.1, Contractor shall: (a) cease operations as
directed by Owner in the notice; (b) take action necessary, or that Owner may
direct, for the protection and preservation of the Work and the Project; and
(c) except for Work directed to be performed prior to the effective date of
termination stated in notice, or except as expressly requested by Owner in
writing, terminate all existing subcontracts and purchase orders and enter into
no further subcontracts or purchase orders with respect to the Work or the
Project.
 
20.3           Nature of Termination Payments.  The payments described in
Section 20.1 include payment for:  (a) all costs of Equipment and Materials,
temporary equipment, labor, transportation, engineering, design and other
services relating to Contractor’s performance of its obligations under this
Agreement and said Owner-requested Work (including any intellectual property
rights licensed under this Agreement, expressly or by implication) provided by
Contractor or such Subcontractors; (b) all national, state, regional and local
taxes, and other sales
 
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taxes imposed on Contractor or its Subcontractors or the Work; (c) all other
taxes, duties, levies, imposts, fees, or charges of any kind (whether in the
United States or elsewhere) arising out of Contractor’s or any Subcontractor’s
performance of the Work; and (d) any duties, levies, imposts, fees, charges, and
royalties imposed on Contractor or its Subcontractors with respect to any
Equipment and Materials, labor, or services provided under this Agreement.  The
taxes covered hereby include occupational, excise, unemployment, ownership,
value-added, gross receipts, and any and all other taxes and duties on any item
or service that is part of the Work, whether such tax is normally included in
the price of such item or service or is normally stated separately.  The
above-described payments shall not be increased with respect to any of the
foregoing or with respect to any withholdings in respect of any of the foregoing
items that Owner may be required to make.  
 
20.4           Suspension by Owner.  Owner may suspend performance of the Work
at any time by giving ten (10) days advance Notice thereof to Contractor.  Such
suspension shall continue for the period specified in the suspension
Notice.  The Separated Contract Price shall be adjusted as provided in
clause (b) of Section 20.4.2 to reflect any additional increased costs of
Contractor resulting from any such suspension, as demonstrated by Contractor to
Owner’s reasonable satisfaction.  No adjustment shall be made to the extent that
performance is suspended, delayed, or interrupted for any cause due to
Contractor’s negligence, willful misconduct, or noncompliance with the material
terms of this Agreement.  At any time after the effective date of the
suspension, Owner may require Contractor to resume performance of the Work on
seven (7) days prior Notice.
 
20.4.1                      Contractor’s Termination Right.  Subject to
Applicable Law, if, at the end of the suspension period specified pursuant to
Section 20.4, Owner has not requested a resumption of the Work or has not
notified Contractor of any extension of the suspension period (but in no event
beyond one hundred eighty (180) days in the aggregate for all such suspensions,
other than suspensions for any reason due to Contractor’s negligence, willful
misconduct or noncompliance with the material terms of this Agreement) at
Contractor’s option this Agreement shall be deemed terminated as of the
commencement date of the suspension period, and Owner shall promptly pay
Contractor for the Work performed pursuant to Section 20.1.  In the event the
Full Notice to Proceed has not been issued by December 31, 2007, Contractor may,
upon ten (10) days prior Notice to Owner, terminate this Agreement and Owner
shall pay Contractor for the Work performed pursuant to
Section 20.1.  Notwithstanding anything to the contrary herein, Contractor shall
not be entitled to terminate this Agreement regardless of the number of days a
Suspension for Cause (as defined in Section 20.6) may extend.
 
20.4.2                      Extension of Time and Compensation Rights.  In the
case of any suspension under this Section 20.4 or any suspension by Contractor
under Section 19.5, other than a Suspension for Cause (as defined below):
 
(a)           the applicable Substantial Completion Guaranteed Dates shall be
extended by a period no less than the suspension period, plus a reasonable
period for demobilization and remobilization, as mutually agreed upon by
Contractor and Owner;
 
(b)           Owner shall pay Contractor within thirty (30) days after receipt
of each Contractor’s invoice (which invoices shall be submitted on or about the
first (1st) and the
 
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fifteenth (15th) day of each month during the applicable suspension period) for
those costs incurred during the suspension period that are documented by
Contractor to the reasonable satisfaction of Owner, to the extent attributable
to the suspension, and that are:
 
(i)           for the purpose of safeguarding or storing the Work and the
Equipment and Materials at the point of fabrication, in transit, or at the Site;
 
(ii)           for personnel, Subcontractors, or rented Equipment and Materials,
the payments for which, with Owner’s prior written concurrence, are continued
during the suspension period;
 
(iii)           for reasonable costs of demobilization and remobilization of
Contractor and its Subcontractors, including suspension costs set forth in any
subcontract or purchase order; or
 
(iv)           for rescheduling the Work (including penalties or additional
payments to Subcontractors for the same); and
 
(c)           the Project Schedule, the Milestone Items and the Schedule of
Payment Values shall be adjusted to account for same, as mutually agreed upon by
Contractor and Owner.
 
20.5           Claims for Payment.  All claims by Contractor for compensation or
extension of time under Sections 20.1 and 20.4 must be made within
forty-five (45) days after the Work has been terminated or the suspension period
has ended, respectively.  Failure of Contractor to make such claim within said
period shall be deemed a waiver by Contractor of any such claims.
 
20.6           Suspension for Cause.  Notwithstanding the foregoing, neither the
Separated Contract Price nor any Substantial Completion Guaranteed Date shall be
adjusted for a Suspension for Cause.  Any suspension shall be a “Suspension for
Cause” if:
 
(i)           a Contractor Event of Default shall have occurred and is
continuing hereunder; or
 
(ii)           in the case of a suspension due to the occurrence of a Contractor
Event of Default identified in Section 19.1(b), Owner shall have given Notice of
such default to Contractor, at least five (5) days shall have elapsed since
delivery of such Notice and Contractor shall have failed to cure, or if such
default cannot reasonably be cured within such five (5) day period, commenced to
cure, such default within such five (5) days.
 
21.           INSURANCE
 
21.1           Owner Controlled Insurance Program.  
 
21.1.1                      OCIP Coverages.  Owner will implement, and shall
procure, pay for, and administer an “Owner Controlled Insurance Program” (the
“OCIP”) commencing on or before Contractor commences Work at the Site; provided
that with respect to the builders’ all risk coverage as set forth on
Exhibit N-2, Owner may, prior to the Full Notice to Proceed Date, provide
equivalent coverage in lieu of procuring such coverage under the OCIP.  The OCIP
 
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will provide workers compensation, employers liability, commercial general
liability, excess liability and builders’ risk coverage (including inland/marine
transit coverage).  The OCIP is intended to reduce the cost of completing the
Project and does not constitute any representation by Owner with respect to the
adequacy of the insurance to protect Contractor or the Subcontractors against
obligations imposed by law or by this Agreement or any other contract.  Except
as otherwise provided in this Agreement, neither the provision of the insurance
described in this Section 21.1 nor the extent of coverage or the limits of
liability under such insurance policies shall be construed to be a limitation on
the nature or extent of Contractor’s or the Subcontractors’ obligations or to
relieve Contractor or the Subcontractors of any such obligations.
 
21.1.2                      OCIP Costs.  Contractor has excluded from the
Separated Target Price and shall exclude from the Separated Contract Price and
any Change In Work Forms all charges for insurance costs which duplicate the
coverage provided under the OCIP.  Contractor shall include a provision in its
subcontracts requiring Subcontractors of all tiers that are eligible to
participate in the OCIP to exclude from their subcontract price and any Change
In Work Forms all charges for insurance coverages which duplicate the coverage
provided under the OCIP.  Notwithstanding anything to the contrary in the
foregoing, if Owner elects not to include an eligible Subcontractor in the OCIP,
a Change In Work Form may be submitted to adjust the Separated Target Price or
Separated Contract Price, as applicable, to account for such Subcontractor’s
insurance costs.  
 
21.1.3                      OCIP Deductibles.  Contractor shall, or shall cause
its Subcontractors to,  pay deductibles under the workers’ compensation and
employers’ liability OCIP policies, up to Two Hundred Fifty Thousand Dollars
($250,000) per occurrence and Two Hundred Fifty Thousand Dollars ($250,000)
annual aggregate.  Contractor shall, or shall cause its Subcontractors to, pay
deductibles under the commercial general liability OCIP policy, up to Two
Hundred Fifty Thousand Dollars ($250,000) per occurrence and Two Hundred Fifty
Thousand Dollars ($250,000) annual aggregate, when coverage is provided
thereunder for a loss for which Contractor is responsible under Section 23.1.  
 
21.1.4                      Participation.  The OCIP shall include coverage for
Owner, Contractor and the Subcontractors that are eligible to participate in the
OCIP, including Subcontractors providing temporary labor services, taking part
in or contributing to the actual Work at the Site who complete enrollment in the
OCIP and are accepted by Owner.  Coverage under the OCIP insurance policies
shall be limited to the Site and the Ancillary Sites, and as regards the
builders’ risk coverage shall extend to the Owner Furnished Equipment while
located at the Ancillary Sites, but  shall not, in any event, include any of
Contractor’s and any Subcontractor’s regularly established workplace, plant,
factory, office, shop, warehouse, yard or other property, even if utilized in
the fabrication of Equipment and Materials to be incorporated into the
Project.  Subcontractors that do not actually perform Work at the Site such as
Persons that provide security or janitorial services or that deliver Equipment
and Materials to the Site but do not otherwise engage in any of the Work at the
Site, shall not be eligible to participate in the OCIP.  Any Subcontractors that
are on the Site for a cumulative amount of time less than two weeks, and any
Subcontractors whose subcontract has a cumulative value of less than Twenty Five
Thousand Dollars ($25,000) shall not be eligible to participate in the OCIP
unless approved by Owner in writing.
 
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21.1.5                      Enrollment.  Participation in the OCIP by Contractor
and eligible Subcontractors is mandatory but not automatic.  Contractor shall,
and shall cause each of its Subcontractors, to complete enrollment procedures
with the OCIP Administrator.  The form of enrollment summary, including an
insurance cost worksheet, is attached hereto as Exhibit N-3.  Contractor shall
not allow any personnel of any eligible Subcontractor to perform any of the Work
on the Site until such Subcontractor has completed the enrollment process with
the OCIP Administrator.
 
21.1.6                      OCIP Administration.  Any questions concerning the
OCIP or the specifications outlined herein should be directed to (the “OCIP
Administrator”):
 
Becky Hubert
 
Willis Construction Practice
 
13355 Noel Road, Suite 1100
 
Dallas, Texas 75240-6643
 
Telephone: (972) 715-6239
 
Facsimile:  (972) 386-5561
 
Email:  becky.hubert@willis.com
 
Contractor will cooperate with, and will require all of its Subcontractors to
cooperate with, Owner and the OCIP Administrator with regards to the
administration and operation of the OCIP.  Contractor shall, and shall cause the
Subcontractors enrolled in the OCIP to:
 
(a)           comply with all rules and regulations of the applicable state
insurance bureau, board or department;
 
(b)           comply with Contractor’s approved safety program during the
performance of the Work;
 
(c)           provide Owner and the OCIP Administrator with such information as
requested regarding such Person’s contact, operations and insurance information
pursuant to Exhibit N-3; and
 
(d)           cooperate with any insurance company or the OCIP Administrator
with respect to requests for claim, payroll or other information reasonably
required in connection with the OCIP.
 
21.1.7                      Coverage.  Owner will procure and pay the premiums
for the OCIP insurance policies as set forth on Exhibit N-2.  Notwithstanding
anything to the contrary herein, Owner may, by Notice to Contractor, update and
revise Exhibit N-2 from time to time as Owner deems necessary or desirable to
reflect any change in Applicable Laws.  Any other modifications or revisions to
the OCIP coverages as set forth on Exhibit N-2 shall be subject to the
provisions of Section 21.1.14.
 
21.1.8                      OCIP Insurance Policies.  All insurance coverages
furnished by Owner pursuant to this Section 21.1 shall be written by insurance
companies approved to do business in the State of Texas with an A.M. Best rating
of no less than A X.  Owner shall provide Contractor
 
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and the applicable Subcontractors with appropriate certificates of insurance
evidencing the general liability and excess liability coverage provided under
the OCIP and, upon request, shall provide copies of such policies to Contractor
and the applicable Subcontractors, except for workers’ compensation and employer
liability policies, for which individual policies will be provided to Contractor
and each enrolled Subcontractor.  The terms and conditions of the OCIP insurance
policies shall be binding on Contractor and the enrolled Subcontractors.
 
21.1.9                      Commencement of Work.  Neither Contractor nor any
eligible Subcontractor shall commence any Work at the Site until it has
completed the OCIP enrollment requirements and has received the appropriate
certificates or policies of insurance.
 
21.1.10                      Non-Violation.  Contractor shall neither knowingly
violate nor knowingly permit to be violated, whether by the Subcontractors or
other Persons, any conditions of the OCIP policies and shall at all times use
reasonable efforts to satisfy the requirements of the insurance companies
issuing such policies.
 
21.1.11                      Payroll Reports.  Contractor shall, and shall cause
each Subcontractor enrolled in the OCIP to, keep and maintain accurate and
complete records of such Person’s payroll for operations in connection with the
Work and the Project, and to furnish a completed monthly payroll report in the
form of Form 5 – Payroll Reporting Form included in Exhibit N-3, to the OCIP
Administrator no later than the twentieth (20th) day of each month until the
month following the Final Completion Date of Unit 2.  Contractor shall attach a
copy of each such report submitted during the previous month to each
Contractor’s Invoice submitted for the next month.  Notwithstanding anything to
the contrary herein, Owner may withhold payment with respect to any Contractor’s
Invoice if Contractor or any of its Subcontractors fails to provide such monthly
payroll reports to the OCIP Administrator within thirty (30) days after the date
such report is due.  
 
21.1.12                      Audit Rights and Closeout Reports.  The OCIP
Administrator, at Owner’s request, may examine or audit the books and records of
Contractor and all eligible Subcontractors participating in the OCIP with
respect to Contractor’s and such Subcontractor’s payroll with regards to
workers’ compensation and experience modification factors.  At least thirty (30)
days prior to the estimated Final Completion Date of each Unit, Contractor shall
and shall cause each of the Subcontractors enrolled in the OCIP to furnish a
completed Notice of Anticipated Completion, the form of which is attached hereto
as Form-4 in Exhibit N-3, to the OCIP Administrator.  
 
21.1.13                      Dividends and Refunds.  All dividends, premium
refunds, return premiums, premium discounts, retentions, or credits payable or
available under any of the OCIP insurance policies shall belong to Owner, and
are hereby assigned to Owner.  Contractor, at the request of Owner, shall, and
shall cause its Subcontractors enrolled in the OCIP to, execute and deliver to
Owner any waiver, release, assignment, direction, or authorization which Owner
or any insurance company may require for such purpose.
 
21.1.14                      Safety and Accident Reporting.  Contractor shall,
and shall cause its Subcontractors to, follow and adhere to Contractor’s safety
program for the Site, and to report to Owner and the OCIP Administrator, on
forms to be provided, any accident at the Site and
 
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shall assist in every manner reasonable in the investigation of any
accident.  Upon request, Contractor shall cooperate with Owner and the insurance
company designated by Owner to handle any claim by securing and giving evidence
and obtaining the attendance of witnesses as required for any claim or suit.
 
21.1.15                      Modification and Termination.  While it is the
intent of Owner to keep the OCIP in force until the Final Completion Date of
Unit 2, Owner reserves the right to terminate the OCIP or to modify the OCIP or
any insurance policy provided thereunder, from time to time.  Owner shall
provide thirty (30) days prior Notice to Contractor and the Subcontractors
enrolled in the OCIP of any termination or material modification of any OCIP
policy.  If the OCIP or any insurance coverage provided thereunder is
terminated, Contractor shall, to the extent such coverage is commercially
available, immediately obtain replacement insurance coverage at the limits
provided under the OCIP.  If any revisions or modifications of this insurance
coverage under the OCIP reduces or materially adversely affects the scope of
insurance coverage provided thereunder, Owner and Contractor shall mutually
agree upon appropriate insurance coverage to be provided by Contractor and its
Subcontractors, and any increased costs for changes in insurance coverage
provided by Contractor or the Subcontractors shall be included in a Change In
Work Form in accordance with Article 16.  Replacement of the OCIP with
individual insurance policies by Contractor and such Subcontractors shall
constitute an Owner-initiated Change in Work and shall be reimbursable by Owner
upon submission of Change In Work Forms in accordance with the provisions of
Section 16.4.  Contractor shall, and shall cause each such Subcontractor, to
provide certificates of such replacement insurance to Owner prior to the
termination date of the OCIP.  
 
21.1.16                      Duplication; Cancellation.  Contractor shall not,
and shall cause its Subcontractors that are eligible to participate in the OCIP
not to, duplicate coverages afforded under the OCIP with Contractor’s, or
Subcontractor’s, as applicable, own insurance, unless such Subcontractor is not
accepted for enrollment in the OCIP.  Contractor shall not, and shall cause its
Subcontractor not to, attempt to exercise any right to cancel any of its OCIP
insurance policies without the express written consent of Owner, and any
attempted cancellation of an OCIP insurance policy by Contractor or any
Subcontractor without said express written consent shall be null and void.  
 
21.1.17                      Work After Termination of OCIP Coverage.  In the
event insurance coverage under the OCIP has terminated with respect to
Contractor or any enrolled Subcontractor, and Contractor or such Subcontractor
performs any further Work on the Site, or performs any warranty work on the Site
after termination of such coverage, Contractor and such Subcontractor shall
provide its own insurance coverage with respect to any such Work or warranty
work and may not rely on insurance coverage provided under the OCIP.
 
21.2           Contractor’s Additional Insurance.  
 
21.2.1                      Insurance Policies.  Contractor shall purchase from
and maintain, from a company or companies lawfully authorized to do business in
Texas, such additional insurance coverage as set forth on Exhibit N-1.  All
insurance coverage furnished by Contractor pursuant to this Section 21.1.17 (or
by Subcontractors pursuant to Section 21.2.3) shall be written by insurance
companies with an A.M. Best rating of no less than A X.  
 
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21.2.2                      Effectiveness.  All insurance required under this
Section 21.2 shall be in effect no later than thirty (30) days after the date of
execution of this Agreement.  The insurance required by this Section 21.2 shall
be written for the limits of liability specified in this Agreement or required
by law, whichever coverage is greater.  Coverage shall be maintained without
interruption from date of commencement of the Work until the end of Contractor’s
Warranty Period or the Final Completion Date of Unit 2, whichever is later,
subject to the requirements for extended products and completed operations
liability set forth in Exhibit N-1.
 
21.2.3                      General Requirements.  The insurance policies
required to be obtained by Contractor as set forth on Exhibit N-1 shall be
obtained on a Project-specific basis (except such workers’ compensation or
employers’ liability policy), shall list Owner, and upon request of Owner, the
Financing Entities, if any, Owner’s Engineer and any of Owner’s other
consultants or contractors as an additional insured.  Notwithstanding anything
herein to the contrary, the additional insured status of Owner, the Financing
Entities, Owner’s Engineer, and any of Owner’s other consultants or contractors,
and any other additional insured party, shall be limited to the Project-specific
insurance policies providing the coverage as set forth on Exhibit N-1 and shall
not extend to any other policy or policies that Contractor may carry.  Any
workers’ compensation or employers’ liability policy shall name Owner and its
Affiliates or associated companies as “Alternate Employer” with a waiver of
subrogation.  The policies shall contain a provision that coverage will not be
terminated, canceled or not renewed without at least thirty (30) days’ prior
Notice given to Owner and the Financing Entities, if applicable.  Certificates
of insurance showing required coverage to be in force shall be provided to Owner
and filed with the OCIP Administrator prior to commencement of the Work.  Copies
of all Project-specific policies provided as set forth on Exhibit N-1 and any
subsequent endorsements shall be furnished promptly to Owner upon Owner’s
reasonable request.  Any Project-specific insurance policy as set forth on
Exhibit N-1 provided by Contractor shall be in form and content acceptable to
Owner.  Contractor shall give Owner, and the Financing Entities, if applicable,
thirty (30) days’ Notice of cancellation, non-renewal, or any endorsements
restricting or reducing coverage.  Copies of all policies provided as set forth
on Exhibit N-1 or other coverage documents, including Declaration pages and
applications for coverage, shall be provided to any additional insured upon
request.  If any of the foregoing insurance coverage is required to remain in
force after Final Completion of Unit 1 or Unit 2, an additional certificate
evidencing continuation of such coverage shall be submitted with the application
for Final Payment and upon renewal of such insurance coverage during the
duration of the required period.
 
21.3           Subcontractors’ Insurance.  Contractor shall cause any and all
eligible Subcontractors and Suppliers to participate in the OCIP, and shall
cause all of the Subcontractors and Suppliers to obtain the insurance coverage
as set forth in Exhibit N-1.  All policies obtained by Subcontractors and
Suppliers shall satisfy the requirements of Section 21.2 and shall provide
releases and waivers of all rights of subrogation and recovery as set forth in
Section 21.4.  Contractor may waive the foregoing insurance coverage requirement
with respect to any Subcontractor that does not perform any of the Work on the
Site and does not otherwise physically come onto the Site.  Notwithstanding
anything to the contrary herein or in Exhibit N-1, Contractor and Owner
acknowledge and agree that (i) the Suppliers that are party to the STG Upgrade
Contract and the Boiler Upgrade Contracts will provide insurance coverage in the
amounts and of the type as set forth in such subcontracts, (ii) if the STG
Upgrade Supplier agrees to amend the insurance provisions of the STG Upgrade
Contract as requested by Owner
 
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and Contractor, the STG Upgrade Supplier will not be required to and will not
participate in the OCIP, (iii) Contractor may reduce the insurance coverage
required to be maintained under this Section 21.3 by any eligible Subcontractor
with subcontract values of less than Fifteen Million Dollars ($15,000,000) as
set forth on Exhibit N-1, and (iv) Contractor may also excuse Subcontractors
with subcontract values of less than Twenty Five Thousand Dollars ($25,000) from
excluding the Site and the Ancillary Sites under such Subcontractors’ insurance
policies.
 
21.4           Subrogation Waivers.  The OCIP policies and any other insurance
policies provided by Owner shall provided for a waiver of all rights of
subrogation against, as applicable, Contractor, the Subcontractors, Owner’s
Engineer and the Financing Entities, if any, and their assigns, subsidiaries,
Affiliates, directors, officers, employees, agents, and of any right of the
insurers to any set-off or counterclaim or any other deduction, whether by
attachment or otherwise, in respect of any liability of any such Person insured
under any such policy, except that Owner shall not and does not waive its rights
of subrogation as against any Suppliers with respect to the builders’ risk
policy except with respect to losses arising out of a Supplier’s activities at
the Site.  All policies otherwise supplied by Contractor pursuant to this
Agreement or with respect to the Work, including any insurance policies covering
owned, leased or borrowed equipment, shall provide for a waiver of all rights of
subrogation against, as applicable, Owner, Owner’s Engineer and the Financing
Entities, if any, and their assigns, subsidiaries, Affiliates, directors,
officers, employees, agents, and of any right of the insurers to any set-off or
counterclaim or any other deduction, whether by attachment or otherwise, in
respect of any liability of any such Person insured under any such policy.
 
21.5           Insurance Coverages.  All amounts of insurance coverage specified
in Exhibits N-1 and N-2 are required minimums.  Contractor and its
Subcontractors shall each be solely responsible for determining the appropriate
amount of insurance, if any, that Contractor or such Subcontractor desires or
determines is appropriate that is in excess of or in addition to the insurance
coverage set forth on Exhibit N-1 at such Contractor’s or Subcontractor’s sole
cost and expense.  The required minimum amounts of insurance shall not operate
as limits on recoveries available under this Agreement.
 
21.6           Failure to Maintain Insurance.  If at any time the insurance
required to be provided hereunder by Contractor or any Subcontractor shall be
reduced or cease to be maintained, then (without limiting the rights of Owner in
respect of any default that arises as a result of such failure) Owner may at its
option maintain the insurance required hereby upon written notice to Contractor
and ten (10) days opportunity to cure.  In such event, Owner may withhold the
cost of such replacement insurance from any payments to Contractor otherwise due
to Contractor hereunder.
 
21.7           Claims Compensation.  Contractor shall be responsible for
preparing all claim loss data, claim forms, proof of loss statements, and
coordinating with the various underwriters and the appointed loss adjusters with
respect to all claims to be made under the OCIP, all without increase to the
Separated Contract Price.  Owner shall cooperate with Contractor in preparing
all such claims.  To the extent that Contractor is unable to recover under the
builders’ risk policy its costs incurred pursuant to this Section 21.7 in
connection with the builders’ risk policy, Owner shall reimburse Contractor for
such costs in accordance with Exhibit Y.
 
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22.           RISK OF LOSS OR DAMAGE
 
22.1           Contractor Assumption of Risk.  Until the Substantial Completion
Date of each Unit, Contractor shall have care, custody and control of such
Unit.  
 
22.1.1                      Risk of Loss.  Until the Substantial Completion Date
of each Unit, subject to the provisions of this Article 22, Contractor assumes
risk of loss for, and full responsibility for the cost of replacing or repairing
any damage to, such Unit or any of the Work related to such Unit (including any
Owner Furnished Equipment or Owner Provided Facilities and Services) and all
Equipment and Materials and maintenance equipment (including temporary
materials, equipment and supplies) which are purchased by Contractor or Owner
for permanent installation in or for use during construction of the Project
regardless of whether Owner has title thereto under this Agreement.  
 
22.1.2                      Repair or Replacement.  Until the Substantial
Completion Date of each Unit, if any portion of such Unit or the Work related to
such Unit (including any Owner Furnished Equipment or Owner Provided Facilities
and Services) is lost or damaged, Contractor shall replace or repair any such
loss or damage and complete the Work in accordance with this
Agreement.  Notwithstanding the foregoing, if there is any loss or damage to
such Unit or any portion of the Work (including any Owner Furnished Equipment or
Owner Provided Facilities and Services) in Contractor’s care, custody and
control, Contractor shall not be obligated to replace or repair any such loss or
damage if the cost of such replacement and repair is more than the amount of
Contractor’s responsibility for any amount pursuant to Section 22.1.3, unless
Contractor has received reasonable assurances from Owner that Contractor will
receive from Owner any insurance proceeds paid under such insurance policies or
will otherwise be paid such amounts necessary to complete such repair or
replacement pursuant to a Change In Work.  
 
22.1.3                      Payment Amounts.  Subject to Section 22.1.2,
Contractor’s liability for any loss or damage to any Unit or otherwise to the
Project (including any Owner Furnished Equipment or Owner Provided Facilities
and Services), shall, to the extent any loss or damage to any Unit or otherwise
to the Project is caused by the negligence of Contractor or any Subcontractor,
be the payment of the amount of such loss or damage, not to exceed Two Hundred
Fifty Thousand Dollars ($250,000) per occurrence and not to exceed Two Hundred
Fifty Thousand Dollars ($250,000) in any year; provided that in any year in
which a Unit is being hot tested, such liability shall, to the extent any loss
or damage to any Unit or otherwise to the Project is caused by the negligence of
Contractor or any Subcontractor, be the payment of the amount of such loss or
damage not to exceed Five Hundred Thousand Dollars ($500,000) per hot testing
occurrence and Two Hundred Fifty Thousand Dollars ($250,000) per occurrence for
other occurrences, and not to exceed Five Hundred Thousand Dollars ($500,000) in
such year; provided, further, that in any such year in which a Unit is being
hot-tested, the aggregate of all deductibles paid during such year shall not
exceed Five Hundred Thousand Dollars ($500,000) per Unit.  Notwithstanding
anything to the contrary herein, Owner shall be responsible for payment of
deductible amounts due under the builders’ risk coverage in the event of the
occurrence of an event of Force Majeure that causes loss or damage to the
Project covered by the builders’ risk policy.  
 
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22.2           Risk of Loss After Substantial Completion.  Subject to
Contractor’s obligations hereunder to satisfy the Performance Guarantees and
pursuant to Articles 15, 17 and 23, Owner shall bear the risk of loss for, and
full responsibility for, the cost of replacing or repairing any damage to a Unit
or the Project from and after Substantial Completion.  Notwithstanding the
foregoing, if any portion of a Unit or the Project is lost or damaged after
Substantial Completion due to any negligent act or omission of Contractor, any
Affiliate of Contractor or any Subcontractor, or anyone directly or indirectly
employed by any of them, Contractor’s liability for replacing or repairing such
loss or damage shall be limited in amount to the amount of such loss or damage,
not to exceed $250,000 per occurrence and $250,000 in any given year, regardless
of whether or not Owner carries insurance coverage for such loss or damage.  In
any event, the care, custody, and control of each Unit shall pass to Owner no
later than the Substantial Completion Date of such Unit.  From and after the
Substantial Completion Date of such Unit, Owner shall assume all risks of
physical loss or damage thereto, subject to Contractor’s obligation to pay the
costs of losses or damage to the Unit to the extent caused by any negligent act
or omission of Contractor or any of its Subcontractors, not to exceed $250,000
per occurrence and $250,000 in any given year.  
 
23.           INDEMNIFICATION
 
23.1           By Contractor.  Contractor shall defend, indemnify, and hold
harmless Owner, the Financing Entities, if any, and any Person acting for or on
behalf of Owner, and its respective employees, agents, partners, Affiliates,
shareholders, directors, officers, and permitted assigns (each an “Owner
Indemnitee”), from and against the following:
 
(a)           all Losses arising from third-party claims for property damage or
bodily injury or death to the extent caused by any negligent, willful, reckless,
or otherwise tortious act or omission (including strict liability) during the
performance of the Work or from performing or failing to perform any of its
obligations under this Agreement, or any curative action under any warranty
following performance of the Work, of Contractor, any Subcontractor or any of
their respective Affiliates, or anyone directly or indirectly employed by any of
them, or anyone for whose acts such Person may be liable; provided that
Contractor’s obligations hereunder with respect to claims of damage to property
owned by Owner shall be limited to amounts due under Sections 21.1.3 and 22.1.3,
if and to the extent applicable, and claims of damage to property owned by any
of Owner’s Affiliates shall be limited to Five Hundred Thousand Dollars
($500,000) per occurrence if such damage occurs to such property located at the
Site or Five Million Dollars ($5,000,000) per occurrence if such damage occurs
to such property at locations other than the Site; provided, further, that
during the period from the Final Completion Date of Unit 2 until the end of the
Warranty Period, Contractor’s obligations hereunder with respect to claims of
damage to property owned by any of Owner’s Affiliates shall be limited to Two
Hundred Fifty Thousand Dollars ($250,000) per occurrence and in the annual
aggregate if such damage occurs to such property located at the Site or at
locations other than the Site; provided, further, that Contractor’s obligations
hereunder with respect to Losses arising from third party claims for property
damage or bodily injury or death to the extent caused by Alstom Power Inc.,
shall include only such Losses to the extent caused by Alstom Power Inc. that
arise before the date that is sixty months after such Subcontractor achieves
final completion of the Unit 1 boiler under the terms of the relevant Boiler
Upgrade Contract;
 
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(b)           all Losses that directly arise out of or result from
 
(i)           all claims for payment of compensation for Work performed
hereunder, whether or not reduced to a lien or mechanics lien, filed by
Contractor or any Subcontractors, or other persons performing any portion of the
Work, including reasonable attorneys’ fees and expenses incurred by any Owner
Indemnitee in discharging any Contractor Lien, except to the extent of an
Owner’s Event of Default with respect to its payment obligations hereunder; and
 
(ii)           employers’ liability or workers’ compensation claims filed by any
employees or agents of Contractor or any of its Subcontractors;
 
(c)           all Losses arising from third-party claims, including claims by
Subcontractors, including claims for property damage or bodily injury or death
that directly or indirectly arise out of or result from the failure of
Contractor or any of its Subcontractors to comply with the terms and conditions
of Applicable Laws during their performance of the Work or the conditions or
provisions of the Contractor Acquired Permits; provided that Contractor’s
obligations hereunder with respect to claims of damage to property owned by
Owner shall be limited to amounts due under Sections 21.1.3 and 22.1.3, if and
to the extent applicable, and claims of damage to property owned by any of
Owner’s Affiliates shall be limited to Five Hundred Thousand Dollars ($500,000)
per occurrence if such damage occurs to such property located at the Site or
Five Million Dollars ($5,000,000) per occurrence if such damage occurs to such
property at locations other than the Site; provided, further, that during the
period from the Final Completion Date of Unit 2 until the end of the Warranty
Period, Contractor’s obligations hereunder with respect to claims of damage to
property owned by any of Owner’s Affiliates shall be limited to Two Hundred
Fifty Thousand Dollars ($250,000) per occurrence and in the annual aggregate if
such damage occurs to such property located at the Site or at locations other
than the Site;
 
(d)           all fines, penalties, or assessments issued by any Governmental
Authority prior to the Substantial Completion Date that directly arise out of or
result from the failure of a Unit or the Project, as designed, constructed and
completed by Contractor or any Subcontractor, to be capable of operating in
compliance with all Applicable Laws or the conditions or provisions of all
Applicable Permits;
 
(e)           any and all fines, penalties, or assessments issued by any
Governmental Authority that Owner may incur as a result of executing any
applications at Contractor’s request;
 
(f)           all Losses arising from claims by any Governmental Authority that
directly or indirectly arise out of or result from the failure of Contractor to
pay, as and when due, all taxes, duties, levies, assessments, tariffs, imposts,
fees or charges of any kind (together with any and all interest, penalties,
additions to tax and additional amounts imposed with respect thereto) imposed by
any Governmental Authority for which Contractor is obligated to pay pursuant to
the terms of this Agreement;
 
(g)           all Losses arising from claims by any Governmental Authority
claiming taxes based on gross receipts or on income of Contractor, any of its
Subcontractors, or any of
 
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their respective agents or employees with respect to any payment for the Work
made to or earned by Contractor, any of its Subcontractors, or any of their
respective agents or employees under this Agreement;
 
(h)           all Losses, including claims for property damage or bodily injury
or death, whether or not involving damage to the Project or the Site or any
Ancillary Site, that arise out of or result from the use of Hazardous Materials,
whether lawful or unlawful, brought onto the Site or any Ancillary Site by
Contractor or any Subcontractor.  Such use of or contamination by Hazardous
Materials include:
 
(i)           the storage, transportation, processing or disposal of such
Hazardous Materials; and
 
(ii)           any environmental condition caused by such Hazardous Materials;
and
 
(i)           all Losses incurred in connection with the Agency Subcontracts
related to matters in which Contractor acted outside the scope of its agency
pursuant to Section 3.23, including failure to make payments to such Suppliers
(provided Owner has paid Contractor).
 
23.2           By Owner.  Owner shall defend, indemnify, and hold harmless
Contractor, its Subcontractors and any Person acting for or on behalf of
Contractor and their respective employees, agents, partners, Affiliates,
shareholders, directors, officers, and assigns (each an “Contractor Indemnitee”)
from and against the following:
 
(a)           all Losses arising from third-party claims for property damage
or  bodily injury or death to the extent caused by any negligent, reckless, or
otherwise tortious act or omission (including strict liability) during the
performance of Owner’s obligations under this Agreement, of Owner or any of
Owner’s Affiliates, or anyone directly or indirectly employed by any of them
(but not including Operating Personnel prior to Substantial Completion), or
anyone for whose acts such Person may be liable (but not including Operating
Personnel prior to Substantial Completion);
 
(b)           all Losses arising from claims by any Governmental Authority that
directly or indirectly arise out of or result from the failure of Owner to pay,
as and when due, all taxes, duties, levies, assessments, tariffs, imposts, fees
or charges of any kind (together with any and all interest, penalties, additions
to tax and additional amounts imposed with respect thereto) imposed by any
Governmental Authority for which Owner is obligated to pay pursuant to the terms
of this Agreement;
 
(c)           all Losses, including claims for property damage or bodily injury
or death that directly or indirectly arise out of or result from:
 
(i)           the presence or existence of Hazardous Materials (including
pre-existing contamination) at the Site or any Ancillary Site (A) brought onto
or generated at the Site or such Ancillary Site on or before the date of the
Original Agreement; (B) brought onto or generated at the Site by Owner or such
Ancillary Site (other than Hazardous Materials that were brought onto the Site
or the Ancillary Sites or delivered to Contractor or any Subcontractor to be
 
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handled by the same in the course of performing the Work); or (C) which migrated
onto the Site from another location (other than such Hazardous Materials that
were previously in the care, custody or control of Contractor or any
Subcontractor), except to the extent the remediation of any such Hazardous
Materials is part of the Work; or
 
(ii)           the unlawful release or spill by Owner or its Affiliates after
the Substantial Completion Date of Hazardous Materials otherwise brought onto
the Site by Contractor or any Subcontractor in accordance with the terms of this
Agreement and all Applicable Laws;
 
(d)           All Losses incurred in connection with damage to property other
than the Project owned by or in the possession of any of the Owner Indemnitees,
in excess of the deductible under any such Owner Indemnitees’ applicable
insurance policy not to exceed Five Million Dollars ($5,000,000), whether or not
caused by the acts, omissions, fault or negligence of Contractor or its
Subcontractors; and
 
(e)           Until assignment and assumption of such Agency Subcontracts, Owner
shall indemnify Contractor and the Contractor Indemnitees against all Losses
incurred in connection with the Agency Subcontracts related to the period prior
to the date on which Contractor assumed such agreements, including Losses
arising out of claims by the Suppliers under the Agency Subcontracts for payment
and cancellation costs, except to the extent such claims or Losses related to
matters in which Contractor acted outside the scope of its agency pursuant to
Section 3.23, including Contractor’s failure to pay such Suppliers after
receiving payment therefor from Owner.
 
23.3           Patent Infringement and Other Indemnification Rights.  Contractor
shall defend, indemnify, and hold harmless the Owner Indemnitees against all
Losses arising from any Intellectual Property Claim.  If Owner provides Notice
to Contractor of the receipt of any such claim, Contractor shall, in addition,
at its own expense settle or defend any such Intellectual Property Claim and pay
all damages and costs awarded in it against Owner and either; (a) procure for
Owner, or reimburse Owner for procuring, the right to continue using the
infringing service, Equipment and Materials, or other Work, as the case may be;
(b) modify the infringing service, Equipment and Materials, or other Work, as
the case may be, so that the same becomes non-infringing; or (c) replace the
infringing service, Equipment and Materials, or other Work, as the case may be,
with noninfringing service, Equipment and Materials, or other Work, as the case
may be.  If Owner is enjoined from completing the Project or any part thereof,
or from the use, operation, or enjoyment of the Project or any part thereof, as
a result of such claim or legal action or any litigation based thereon,
Contractor shall promptly use its best efforts to have such injunction removed
and to take one or more of the actions under the preceding clauses (a), (b) or
(c), provided, that in no case shall Contractor take any action which materially
adversely affects Owner’s continued use and enjoyment of the applicable service,
Equipment and Materials, or other Work, as the case may be, without the prior
written consent of Owner.  Owner’s acceptance of the Contractor Deliverables or
supplied Materials and Equipment shall not be construed to relieve Contractor of
any obligation hereunder.
 
23.4           Use of Electronic Data Files.  Any electronic data files
furnished to Owner pursuant to this Agreement are provided only for the
convenience of Owner.  Owner recognizes
 
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that the electronic data files may not be adequate or appropriate for Owner’s
needs.  In the case of any discrepancies between the Submittals represented by
electronic data files and the plotted hardcopy of such files bearing the seal of
Contractor’s registered professional engineer, the sealed hardcopy shall
govern.  Contractor assumes no responsibility for the accuracy or completeness
of the electronic data files and any use or reuse of such electronic data for
any purpose shall be at Owner’s sole risk.  Furthermore, in consideration for
the use of the electronic data, Owner agrees, to the fullest extent permitted by
law, to defend, indemnify and hold Contractor harmless from any and all claims,
damages, losses, costs, and expenses, including reasonable attorneys’ fees and
court costs (including the costs of any appeals) arising out of or resulting
from Owner’s use, reuse, of such electronic data regardless of whether such
claims, damages, losses, costs, and expenses are caused in whole or in part by
Contractor.
 
23.5           Claim Notice.  An Indemnitee shall provide Notice to the
indemnifying party, within ten (10) days after receiving written notice of the
commencement of any legal action or of any claims or threatened claims against
such Indemnitee in respect of which indemnification may be sought pursuant to
the foregoing provisions of this Article 23 or any other provision of this
Agreement providing for an indemnity (such notice, a “Claim Notice”).  The
Indemnitee’s failure to give, or tardiness in giving, such Claim Notice will
reduce the liability of the Indemnifying Party only by the amount of damages
proven to be attributable and prejudicial to such failure or tardiness, but
shall not otherwise relieve the indemnifying party from any liability that it
may have under this Agreement.  In case any such claim or legal action shall be
made or brought against an Indemnitee and such Indemnitee shall Notify (by
sending a Claim Notice) the indemnifying party thereof, and the Indemnitee may
by such Claim Notice require the indemnifying party to assume and control the
defense of the claim that is the subject of such Claim Notice, in which case the
indemnifying party may select counsel after consultation with the Indemnitee,
and the indemnifying party shall pay all expenses of the conduct of such
defense.  The Indemnitee shall have the right to employ separate counsel in any
such proceeding and to participate in (but not control) the defense of such
claim, but the fees and expenses of such counsel shall be borne by the
Indemnitee unless the indemnifying party shall agree otherwise; provided,
however, if the named parties to any such proceeding (including any impleaded
parties) include both the Indemnitee and the indemnifying party, the
indemnifying party requires that the same counsel represent both the Indemnitee
and the indemnifying party, and representation of both parties by the same
counsel would be inappropriate due to actual or potential differing interests
between them, then the Indemnitee shall have the right to retain its own counsel
at the cost and expense of the Indemnifying Party.  If the indemnifying party
shall have failed to assume or diligently prosecute the defense of any claim in
accordance with the provisions of this Section 23.5, then the Indemnitee shall
have the absolute right to control the defense of such claim and the fees and
expenses of such defense, including reasonable attorneys’ fees of the
Indemnitee’s counsel and any reasonable amount determined to be owed by
Indemnitee pursuant to such claim, shall be borne by the indemnifying party,
provided that the indemnifying party shall be entitled, at its expense, to
participate in (but not control) such defense.  Subject to all of the foregoing
provisions of this Section 23.5, (a) the indemnifying party shall control the
settlement of all claims, in coordination with any insurer as required under the
applicable insurance policies set forth in Exhibit N-1 or Exhibit N-2, as
applicable, as to which it has assumed the defense; provided, however, that
(i) such settlement  shall include a dismissal with prejudice of the claim and
an explicit and unconditional release from the party bringing such claim or
other proceedings of all Indemnitees; and (ii) the indemnifying party shall
 
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not conclude any settlement without the prior approval of the Indemnitee, which
approval shall not be unreasonably withheld; and (b) except as provided in the
preceding sentence concerning the indemnifying party’s failure to assume or to
diligently prosecute the defense of any claim, no Indemnitee seeking
reimbursement pursuant to the foregoing indemnity shall, without the prior
written consent of the indemnifying party, settle, compromise, consent to the
entry of any judgment in or otherwise seek to terminate any action, claim, suit,
investigation or proceeding for which indemnity is afforded hereunder unless
such Indemnitee reasonably believes that the matter in question involves
potential criminal liability against such Indemnitee.  The Indemnitee shall
provide reasonable assistance to the indemnifying party when the indemnifying
party so requests, at the indemnifying party’s expense, in connection with such
legal action or claim, including executing any powers-of-attorney or other
documents required by the indemnifying party with regard to the defense or
indemnity obligations.
 
23.6           Survival of Indemnity Obligations.  The indemnities set forth in
this Article 23 shall survive completion of the Work or the earlier termination
of this Agreement for a period expiring five (5) years following the Final
Completion Date or said termination, whichever first occurs.  All Claim Notices
must be delivered, if at all, to the applicable Party prior to the expiration of
such five (5) year period.  If any Claim Notice is made within such five (5)
year period, then the indemnifying period  with respect to all claims identified
in such Claim Notice (and the indemnity obligation of the Parties hereunder with
respect to such claim) shall extend through the final, non-appealable resolution
of such claims.  For purposes of clarification hereunder, without limiting the
other rights granted hereunder to either Party, a Party may enforce the
indemnity provisions hereunder pursuant to the provisions of Article 32 without
having to declare an Owner Event of Default or a Contractor Event of Default, as
applicable.  
 
24.           TREATMENT OF CONFIDENTIAL INFORMATION
 
24.1           Confidential Information.  Any Confidential Information is
disclosed in confidence, and the transferee shall restrict its use of such
information solely to uses related to the Project or performance of this
Agreement and shall not use the Confidential Information in any way detrimental
to the transferor or its stockholders, including, without limitation, to gain a
competitive advantage with the businesses of the transferor.  The transferee
shall not publish or otherwise disclose any Confidential Information received to
others without the prior written approval of the transferor, including the fact
that the Confidential Information has been made available to the transferee,
that it has entered into this Agreement, or any of the terms, conditions, or
other facts with respect to this Agreement.  Contractor shall disclose only such
Confidential Information to those of its Subcontractors (of all tiers) and its
and their Affiliates as is necessary to carry out the purposes of this
Agreement.  Contractor shall require each of its Subcontractors and their
Affiliates to abide by the terms and conditions relating to Confidential
Information contained herein.  Contractor shall inform its Subcontractors and
Affiliates of the confidential nature of the Confidential Information and shall
indemnify Owner for any acts or omissions by Contractor or its Subcontractors or
their Affiliates with respect to the Confidential Information provided by
Owner.  Nothing herein shall limit: (a) the right of Owner to provide any
information regarding Contractor, any Subcontractor, this Agreement, or the Work
to its legal, technical and other officers, its then existing or prospective
successors or assigns or any Financing Entity (or advisors retained on their
behalf) or its successors and assigns; (b) the right of either Party to supply
such information to any Governmental Authority as may be required by
 
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Applicable Law or any securities exchange; or (c) the right of Owner to
reproduce and use as many copies of any Submittals or other documents provided
to Owner as Owner in its sole discretion considers useful or necessary for the
furtherance of the Work, operation and maintenance of the Project, or otherwise
related to the Project, regardless of any notices, legends, or disclaimers on
such Submittals or other documents.  No right or license is granted to
Contractor or any third-party respecting the use of such Confidential
Information by virtue of this Agreement, except to the extent required for
Contractor’s performance of its obligations hereunder.  Contractor shall deliver
all Owner’s Confidential Information, including all copies thereof, to Owner
upon request.  The transferee’s obligations regarding Confidential Information
shall extend to all derivatives or references to such Confidential Information
that are incorporated in any documentation prepared by the transferee in
connection with the Work.
 
24.2           Applicable Law Disclosures.  In the event that a transferee is
requested or required (by oral questions, interrogatories, requests for
information or documents in legal proceedings, or by the Securities and Exchange
Commission, subpoena, civil investigative demand or other similar process) to
disclose any Confidential Information, the transferee shall provide the
transferor with prompt written notice of any such request or requirement so that
the transferor may seek a protective order or other appropriate remedy and/or
waive compliance with the provisions of this Agreement.  If, in the absence of a
protective order or other remedy or the receipt of a waiver by the transferor,
the transferee is nonetheless legally compelled to make any such disclosure of
Confidential Information or else stand liable for contempt, the transferee may,
without liability hereunder, disclose to such Person only that portion of the
Confidential Information that on the advice of counsel is legally required to be
disclosed, provided that the transferee uses its reasonable efforts to assist
the transferor in obtaining an appropriate protective order or other reliable
assurance that confidential treatment will be accorded the Confidential
Information.  
 
24.3           Ownership of Confidential Information.  All Confidential
Information obtained, developed or created by or for Contractor exclusively for
the Project, including the drawings and specifications and any copies of
Confidential Information, is the exclusive property of Owner whether delivered
to Owner or not; provided, however, that Contractor may also use such
Confidential Information for internal purposes.  No right or license is granted
to Contractor or any third-party respecting the use of such Confidential
Information by virtue of this Agreement, except to the extent required for
Contractor’s performance of its obligations hereunder.  Contractor shall deliver
all Owner’s Confidential Information, including all copies thereof, to Owner
upon request; provided, however, that Contractor may keep one copy for archival
purposes only, which copy shall remain subject to the obligations of this
Article 24.
 
24.4           Remedies.  Contractor and Owner each recognize and acknowledge
the competitive and confidential nature of the Confidential Information and each
agrees that irreparable damage may result to the other Party if Confidential
Information of such other Party is disclosed to any third party except as herein
permitted or is used for any purpose other than the purposes of this
Agreement.  The Parties agree that money damages may not be a sufficient remedy
for any breach of this Article 24.  Accordingly, the Parties agree that a Party
whose Confidential Information is disclosed to a third party in breach of this
Article 24 shall be entitled to an injunction or injunctions (without the
posting of any bond and without proof of actual damages) to prevent breaches or
threatened breaches of this Article 24, and to specific
 
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performance of this Article 24, and that neither the other Party nor its
Affiliates will oppose the granting of such relief.  Such remedies shall not be
deemed to be the exclusive remedies for a breach of this Article 24, but shall
be in addition to all other remedies available at law or equity.
 
24.5           Exclusions.  For purposes of determining liability under this
Article 24, Confidential Information shall not include:  (i) information that is
publicly available through no fault of the receiving Party; or (ii) acquired by
the receiving Party from a source having no direct or indirect obligation of
confidentiality to the disclosing Party regarding such information; provided
that Contractor nonetheless continues to treat such information as Confidential
Information pursuant to this Article 24.  
 
25.           INVENTIONS AND LICENSES
 
25.1           Invention, License.  Any idea, invention, work of authorship,
drawing, design, formula, algorithm, utility, tool, pattern, compilation,
program, device, method, technique, process, improvement, development or
discovery (collectively, “Invention”), whether or not patentable, or
copyrightable, or entitled to legal protection as a trade secret or otherwise,
that Contractor may conceive, make, develop, create, reduce to practice, or work
on, in whole or in part, in the course of performing the Work shall be owned and
retained by Contractor.  Contractor hereby grants to Owner an irrevocable,
nonexclusive royalty-free license (which license is freely assignable (a) to any
Financing Entity or any assignee of such Financing Entity; and (b) to any party
to which the Project is sold or otherwise transferred) to use all Inventions,
other proprietary rights and specialized knowledge of Contractor which, in each
case, form a part of the Work for Owner’s use to the extent reasonably necessary
for the operation, maintenance, repair, or alteration of the Project or any
subsystem or components thereof in connection with the Project or to the extent
such Inventions are related to any specific design concepts developed primarily
for the Project, for the operation, maintenance, repair, or alteration of any
other project developed by Owner or any Affiliate of Owner or of any subsystem
or component thereof, with Owner’s or its Affiliate’s exercise of such license
to be at Owner’s and its Affiliate’s sole risk and expense and subject to the
rights of third-parties.  Contractor shall, prior to directing any Subcontractor
to produce any design or engineering work in connection with the Project, obtain
a valid written license of any such inventions, specialized knowledge or other
proprietary property from such Subcontractor in terms substantially similar to
those that obligate Contractor to Owner as expressed in this
Section 25.1.  Without diminishing the rights granted in the previous sentence,
Contractor also acknowledges and agrees that it shall not be deemed a breach of
the license granted in this Section 25.1 for any Affiliate of Owner wholly-owned
by Owner’s direct or indirect corporate parent to utilize as reference material
any such Invention, proprietary right or specialized knowledge.  Contractor
shall promptly notify Owner of any such Invention or discovery.  All Contractor
Deliverables and computer software prepared by Contractor pursuant to this
Agreement are instruments of service in respect to the Project.  They are not
intended or represented to be suitable for reuse by Owner or others on
extensions of the Project or on any other project.  Any reuse without prior
written verification or adaptation by Contractor for the specific purpose
intended will be at Owner’s sole risk and without liability or legal exposure to
Contractor.  Owner shall defend, indemnify, and hold harmless Contractor against
all Losses arising out of or resulting from such reuse.  Contractor shall, at
Owner’s expense and request, execute or cause the execution of any documentation
reasonably requested by Owner in order to
 
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effectuate the foregoing.  Except as specifically stated herein, no other
license in such patents and proprietary information is granted pursuant to this
Agreement.
 
25.2           Contractor Deliverables.  Subject to Section 25.1, the Contractor
Deliverables accumulated or developed by Contractor or its employees, to the
extent Owner may determine, shall become the property of Owner without any
further consideration to be provided therefore, when prepared or in process,
whether or not delivered by Contractor.  Contractor shall deliver the Contractor
Deliverables to Owner upon its request upon any termination of this Agreement,
or completion of the Work.
 
25.3           Software Licenses.  To the extent Contractor purchases any
software which software is necessary or otherwise desirable for the continued
operation of the Project after Substantial Completion, Contractor shall register
Owner as the licensee of such software with the applicable Supplier.
 
25.4           Warranty.  Contractor expressly warrants that there has been, and
covenants that there will be, no violation, misappropriation or infringement of
any trade secret, patent, trademark, copyright, or other third-party property
right (including any violation of a third-party license) in any way connected
with or arising out of performing the work specified in this Agreement.
 
25.5           Subcontractors.  Notwithstanding anything to the contrary in the
foregoing, Contractor and Owner acknowledge and agree that, despite Contractor’s
commercially reasonable efforts to satisfy the requirements of Section 25.1 with
respect to obtaining licenses of intellectual property from certain
Subcontractors, certain of the subcontracts include provisions that licenses of
intellectual property provided by the applicable Subcontractor are granted with
respect to use on or in connection with the Project and not in connection with
any other project of Owner, and that Owner’s ability to use such intellectual
property in altering the Project or any other project of Owner may be restricted
or prohibited.  Contractor shall provide Owner a list of subcontracts with such
restrictions or limitations.
 
26.           ASSIGNMENT BY OWNER
 
26.1           Assignment.  
 
26.1.1                      Assignment to Financing Entities.  Owner may,
without Contractor’s prior consent but upon five (5) days prior Notice to
Contractor, make a collateral assignment of all or part of its right, title, and
interest in this Agreement to any Financing Entity.  Any such Financing Entity
may further sub-assign all or any portion of Owner’s rights and obligations
hereunder to Owner or any Affiliate of Owner in connection with any financing or
refinancing related to the development, construction, operation and maintenance
of the Project.  Contractor acknowledges that the Financing Parties may under
certain circumstances assume the interests and rights of Owner under the
Contract Documents, and that the Financing Parties may under certain
circumstances foreclose upon and sell, or cause Owner to sell or lease the
Project and cause any new lessee or purchaser of the Project to assume all of
the interests, rights and obligations of Owner arising under the Contract
Documents.  In such event, Contractor hereby agrees to the assignment by Owner
and the Financing Parties of the Contract Documents and its
 
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rights herein to such purchaser or lessee.  Contractor agrees that, upon receipt
of written notice of such permitted assignment, it shall deliver all documents,
data, Notices, and other communications required to be delivered to Owner
hereunder to Owner and to the Financing Entities or to any other permitted
assignee at such address as such Persons shall designate to Contractor in
writing.  
 
26.1.2                      Assignment to an Affiliate of Owner.  Owner may,
without Contractor’s prior consent but upon five (5) days prior Notice to
Contractor, assign all or part of Owner’s right, title, obligations and interest
in this Agreement to any Affiliate of Owner (for purposes of this Section 26.1.2
only, the reference to “twenty percent (20%)” in the last sentence of the
definition of Affiliate shall be replaced with “fifty percent (50%)”) if
performance security for such Affiliate’s obligations is provided in accordance
with any of subsections (a), (b), (c) or (d) in this Section 26.1.2
below.  Owner’s Notice shall provide reasonable supporting documentation and
financial calculations reasonably demonstrating that the relevant conditions set
forth in either subsection (a), (b), (c) or (d) of this Section 26.1.2 are
satisfied.  
 
(a)           Such Affiliate has a Tangible Net Worth of at least Two Hundred
Million Dollars ($200,000,000) (the “Minimum Tangible Net Worth”) and a credit
rating equal to or greater than the Threshold Rating; provided, however, if such
Affiliate’s Tangible Net Worth declines by more than thirty percent (30%) of the
Minimum Tangible Net Worth or its credit rating falls below the Threshold
Rating, such Affiliate shall provide, or cause to be provided, either: (i) a
letter of credit, bond or other form of security from a financial institution
reasonably acceptable to Contractor, securing its obligations under this
Agreement in an amount equal to the Guaranteed Amount; or (ii) a guaranty from
an entity having an equivalent or higher credit rating than the Threshold
Rating, guaranteeing such Affiliate’s obligations under this Agreement in an
amount equal to the Guaranteed Amount.
 
(b)           Such Affiliate has written commitments from lenders or equity
investors (where the lead lender or investor has an equivalent or higher credit
rating than the Threshold Rating) to provide financing for the Project in an
amount equal to no less than the portion of the Separated Contract Price then
remaining to be paid, and all conditions precedent to such commitments (except
such assignment) have been met to close financing and fund the Project.
 
(c)           Such Affiliate causes to be provided a letter of credit in support
of its obligations under this Agreement from a bank that has senior unsecured
debt rated at least A- by Standard & Poors or A3 by Moody’s (or an equivalent
rating from a similar rating agency), and such letter of credit: (i) names
Contractor as the stated beneficiary, and (ii) has a stated amount at least
equal to the sum of the Guaranteed Amount.
 
(d)           If (i) the Owner’s Parent Guaranty remains in effect, or
(ii) Owner provides a guarantee of such Affiliate’s obligations under this
Agreement from an entity having an equivalent or higher credit rating than the
Threshold Rating, in form and substance reasonably acceptable to Contractor as
set forth in Exhibit Z-2, and in an amount equal to the Guaranteed Amount.  In
the event that the guarantee provided by Owner pursuant to this
Section 26.1.2(d) lapses or terminates, such Affiliate shall provide, within
twenty (20) days of Notice of such lapse or termination from Contractor, a
substitute guarantee in form and substance reasonably acceptable to Contractor
as set forth in Exhibit Z-2 of assignee’s obligations under this
 
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Agreement in an amount equal to the Guaranteed Amount from an entity having an
equivalent or higher credit rating than the Threshold Rating.
 
Upon the assignment of Owner’s rights and obligations hereunder to any Affiliate
pursuant to subsections (a), (b), (c) or (d) of this Section 26.1.2, and such
Affiliate’s assumption in writing of such rights and obligations, (1) Owner
shall be deemed released from and shall have no further rights, obligations,
responsibilities or liabilities under this Agreement, (2) in the case of
subsections (a), (b), (c) and (d)(ii) of this Section 26.1.2, Owner’s Parent
Guaranty shall be released in its entirety, and (3) Owner shall remain
responsible for all liabilities relating to matters occurring prior to such
assignment, except to the extent such Affiliate agrees in writing to be
responsible for such liabilities.
 
26.1.3                      Assignment to Other Persons.  In addition, Owner may
assign all or part of its right, title, obligations and interest in this
Agreement to any other Person with the prior written approval of Contractor,
which approval shall not be unreasonably withheld or delayed.  As a condition to
any such assignment, Contractor in its sole discretion may require that the
prospective assignee provide performance security for such assignee’s
obligations hereunder as follows.  Owner shall provide Contractor with a written
request for approval, together with reasonable supporting documentation and
financial calculations reasonably demonstrating that, if Owner proposes to
assign all or any part of its right, title, obligations and interest in this
Agreement to an assignee pursuant to subsections (a), (b), (c) or (d) of this
Section 26.1.3, the relevant conditions are satisfied.  If the required
conditions of any one of subsection (a), (b), (c) or (d) of this Section 26.1.3
are satisfied, Contractor shall not be entitled to withhold its approval of such
assignment on the basis of insufficient payment and performance security.
 
(a)           If any proposed assignee has a Tangible Net Worth (calculated in
accordance with generally accepted accounting principles) of at least the
Minimum Tangible Net Worth and a credit rating equal to or greater than the
Threshold Rating, Contractor may not require any performance security for
Owner’s obligations from such prospective assignee upon such Person’s assumption
of this Agreement; provided, however, if such assignee’s Tangible Net Worth
declines by more than thirty percent (30%) of the Minimum Tangible Net Worth or
its credit rating falls below the Threshold Rating, such assignee shall provide,
or cause to be provided, either:  (i) a letter of credit, bond or other form of
security from a financial institution reasonably acceptable to Contractor,
securing assignee’s obligations under this Agreement in an amount equal to the
Guaranteed Amount, or (ii) a guaranty from an entity having an equivalent or
higher credit rating than the Threshold Rating, guaranteeing assignee’s
obligations under this Agreement in an amount equal to the Guaranteed Amount.
 
(b)           If any proposed assignee has written commitments from lenders or
equity investors (where the lead lender or investor has an equivalent or higher
credit rating than the Threshold Rating) to provide financing for the Project in
an amount equal to no less than the portion of the Separated Contract Price then
remaining to be paid, and all conditions precedent to such commitments (except
such assignment) have been met to close financing and fund the Project,
Contractor may not require any performance security for Owner’s obligations from
such prospective assignee upon such Person’s assumption of this Agreement.
 
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(c)           If any proposed assignee causes to be provided a letter of credit
in support of such assignee’s obligations under this Agreement from a bank that
has senior unsecured debt rated at least A- by Standard & Poors or A3 by Moody’s
(or an equivalent rating from a similar rating agency), and such letter of
credit: (i) names Contractor as the stated beneficiary, and (ii) has a stated
amount at least equal to the sum of the Guaranteed Amount, Contractor may not
require further performance security from any prospective assignee.
 
(d)           If (iii) the Owner’s Parent Guaranty remains in effect, or
(iv) Owner provides a guarantee of such assignee’s obligations under this
Agreement from an entity having an equivalent or higher credit rating than the
Threshold Rating, in form and substance reasonably acceptable to Contractor as
set forth in Exhibit Z-2, and in an amount equal to the Guaranteed Amount,
Contractor may not require any performance security for Owner’s obligations from
such prospective assignee upon such Person’s assumption of this Agreement.  In
the event that the guarantee provided by Owner pursuant to this
Section 26.1.3(d) lapses or terminates, assignee shall provide, within twenty
(20) days of Notice of such lapse or termination from Contractor, a substitute
guarantee in form and substance reasonably acceptable to Contractor as set forth
in Exhibit Z-2 of assignee’s obligations under this Agreement in an amount equal
to the Guaranteed Amount from an entity having an equivalent or higher credit
rating than the Threshold Rating.
 
Upon the assignment of Owner’s rights and obligations as approved by Contractor
under the first paragraph of this Section 26.1.3, and such permitted assignee’s
assumption in writing in of such rights and obligations, (1) Owner shall be
deemed released from and shall have no further rights, obligations,
responsibilities or liabilities under this Agreement, (2) in the case of
subsection (a), (b), (c) and (d)(ii) of this Section 26.1.3, Owner’s Parent
Guaranty shall be released in its entirety, and (3) Owner shall remain
responsible for all liabilities relating to matters occurring prior to such
assignment, except to the extent such permitted assignee agrees in writing to be
responsible for such liabilities.
 
26.1.4                      Assignment in Violation.  Any attempted assignment
or delegation in violation of this Section 26.1 shall be null and void and shall
be ineffective to relieve Owner of its obligations hereunder.
 
26.1.5                      Owner Indemnitee to Include Successors and
Assigns.  Upon any assignment by Owner hereunder, the definition of “Owner
Indemnitee” shall be deemed modified to include the assignor and permitted
assignee under such assignment and each of their respective employees, agents,
partners, Affiliates, shareholders, directors, officers, successors and
assigns.  
 
26.2           Transfer of Work; Third-Party Beneficiaries.  Owner may, upon
reasonable advance written notice to Contractor not to be less than five (5)
Business days, assign, convey or transfer all or part of its right, title, and
interest in the Work to any Affiliate of Owner (whether or not such Affiliate
provides consideration to Owner for such assignment, conveyance or
transfer).  Each such Affiliate-assignee shall be deemed to be a third-party
beneficiary of the following provisions of this Agreement:  Article 17, but only
to the extent any portion of the Work is assigned, conveyed or transferred to
such Affiliate assignee, Article 23, but only to the extent any portion of the
Work is assigned, conveyed or transferred to such Affiliate-assignee,
 
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and Article 29.  Owner shall have the right to enforce any provisions of this
Agreement with respect to any Work assigned, conveyed or transferred to an
Affiliate (including any warranties, indemnities or rights to receive liquidated
damages with respect to such Work) and such assignment, conveyance or transfer
shall not affect Owner’s rights hereunder with respect to any Work.
 
27.           ASSIGNMENT BY CONTRACTOR
 
Contractor understands that this Agreement is personal to
Contractor.  Contractor shall have no right, power, or authority to assign or
delegate this Agreement or any portion thereof, either voluntarily or
involuntarily, or by operation of law.  Absent Owner’s prior written approval,
Contractor’s attempted assignment or delegation of any of its Work hereunder
shall be null and void and shall be ineffective to relieve Contractor of its
responsibility for the Work assigned or delegated.  Nothing herein shall be
deemed to limit the right of Contractor to subcontract out portions of this Work
to others in accordance with the other terms and conditions of this Agreement.
 
28.           HAZARDOUS MATERIALS
 
28.1           Use by Contractor.  Contractor shall not and shall not permit any
of its Subcontractors, directly or indirectly to, permit the manufacture,
storage, transmission or presence of any Hazardous Materials on the Site, and
shall not and shall not permit any of its Subcontractors to release, discharge
or otherwise dispose of any Hazardous Materials on the Site, in each case except
in accordance with Applicable Laws.  
 
28.2           Remediation by Contractor.  Without limiting what may constitute
a “Change In Law” hereunder, Contractor shall conduct and complete all
investigations, studies, sampling, testing and remediation of the Site in
connection with the potential release, discharge or presence of Hazardous
Materials brought onto or generated at the Site by Contractor or any
Subcontractor or any third-party (other than Owner, except to the extent that
such Hazardous Materials were brought onto or generated at the Site and
delivered to Contractor or any Subcontractor to be handled by the same in the
course of performing the Work) to the extent required under any Applicable
Laws.  Contractor shall promptly comply with all lawful orders and directives of
all Governmental Authorities regarding Applicable Laws relating to the use,
transportation, storage, handling, presence, or release by Contractor, any
Subcontractor or any Person acting on its or their behalf or under its or their
control of any Hazardous Materials brought onto or generated at the Site by
Contractor or any Subcontractor, except to the extent any such orders or
directives are being contested in good faith by appropriate proceedings in
connection with the Work.  
 
28.3           Notice of Hazardous Materials.  If Contractor discovers,
encounters or is notified of the existence of any contaminated materials or
Hazardous Materials at the Site:
 
(a)           Contractor shall promptly notify Owner thereof and restrict access
to the area containing such contaminated materials or Hazardous Materials;
 
(b)           if Contractor or any Subcontractor has brought such Hazardous
Materials onto the Site or generated such Hazardous Materials, Contractor shall
promptly remove such Hazardous Materials from the Site and remediate the Site in
accordance with all Applicable
 
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Laws and Applicable Permits (including Contractor’s EPA Hazardous Material
Disposal Permit) and at Contractor’s sole cost and expense; and
 
(c)           if Contractor or any Subcontractor has brought such Hazardous
Materials onto the Site or generated such Hazardous Materials, Contractor shall
not be entitled to any extension of time or additional compensation hereunder
for any delay or costs incurred by Contractor as a result of the existence of
such Hazardous Materials.
 
28.4           Suspension and Mitigation.  Contractor shall suspend the Work if
required by Owner in accordance with Section 20.4.  Contractor shall use
reasonable efforts consistent with the requirements of Applicable Law or the
health and safety of persons or property to mitigate the effects of such
suspension and the amount of Work so suspended.
 
28.5           Pre-Existing Contamination.  Owner shall advise Contractor of any
known material “pre-existing contamination.”  For purposes of this section,
“pre-existing contamination” means any Hazardous Materials present at the Site
or Ancillary Site that were not brought to the Site or Ancillary Site by
Contractor or its Subcontractors.  Upon notice from Contractor, Owner shall, at
Owner’s sole expense and risk, determine the appropriate action to be taken with
respect to such pre-existing contamination, including, as Owner determines is
necessary, arranging for the handling, storage, transportation, treatment or
delivery for disposal of such pre-existing contamination.  In the event
Contractor executes or completes (with the concurrence of the Owner’s
Representative) any required governmental forms relating to regulated
activities, including any storage, treatment, transportation, handling or
disposal of Hazardous Materials, Contractor shall be acting as, and be deemed to
have acted as, Owner’s agent.
 
28.6           Handling Pre-Existing Contamination as part of the
Work.  Notwithstanding anything to the contrary herein, in the event that
Contractor agrees to remediate or otherwise handle any pre-existing
contamination as part of the Work, such remediation or handling shall be
performed by specialty Subcontractors, Sections 28.4 or 28.5 shall not apply,
and Contractor shall be responsible for such pre-existing contamination as
though such materials were brought onto the Site or generated by Contractor or a
Subcontractor; provided that Contractor’s liabilities arising out of such
pre-existing contamination shall not exceed the liability assumed by such
specialty Subcontractor under the terms and conditions of its subcontract with
Contractor for such Work.  Notwithstanding anything to the contrary herein,
Owner shall have the right to review and approve any such subcontract before
Contractor enters into such subcontract, such approval not to be unreasonably
delayed.  
 
29.           NON-PAYMENT CLAIMS
 
To the extent payment by Owner has been made in accordance with
Article 6:  (a) Contractor shall not directly or indirectly create, incur,
assume or suffer to be created by it or any Subcontractor, employee, laborer,
materialman or other supplier of goods or services any right of retention,
mortgage, pledge, assessment, security interest, lease, advance claim, levy,
claim, lien, charge or encumbrance on the Work, the Site, the Project or any
part thereof or interest therein (each a “Contractor Lien”); (b) Contractor
shall keep the Site, the Work, the Equipment and Materials, including the Owner
Furnished Equipment, the Leased Equipment
 
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and all Subcontractor equipment and materials free of Contractor Liens; and
(c) Contractor shall promptly pay or discharge, and discharge of record, any
such Contractor Lien or other charges which, if unpaid, might be or become a
Contractor Lien.  Contractor shall notify Owner as soon as practicable of the
assertion of any Contractor Lien.  If any Owner Indemnitee becomes aware of any
Contractor Lien, such Owner Indemnitee may so notify Contractor in writing, and
Contractor, to the extent payment by Owner has been made in accordance with
Article 6, shall then:  (x) satisfy and obtain the release of such Contractor
Lien; or (y) defend Owner Indemnitees against any such Contractor Lien, provide
assurances of payment as described in the last sentence of this Article 29 and
obtain the release of such Contractor Lien.  If Contractor does not promptly,
and in any event within fifteen (15) days after such Notice, satisfy such
Contractor Lien, give such Owner Indemnitee reasons in writing that are
satisfactory to such Owner Indemnitee for not causing the release of such
Contractor Lien, or contest such Contractor Lien in accordance with the
provisions of the last sentence of this Article 29, then any Owner Indemnitee
shall have the right, at its option, after written notification to Contractor,
and subject to Applicable Law, to cause the release of, pay, or settle such
Contractor Lien, and Owner at its sole option may:  (1) require Contractor to
pay, within five (5) days after request by Owner; (2) draw on the Letter of
Credit; or (3) withhold, in addition to the Retainage, other amounts due or to
become due to Contractor (in which case Owner shall, if it is not the applicable
Owner Indemnitee, pay such amounts directly to Owner Indemnitee causing the
release, payment, or settlement of such liens or claims), all costs and expenses
incurred by Owner Indemnitee in causing the release of, paying, or settling such
Contractor Lien, including administrative costs, attorneys’ fees, and other
expenses.  Contractor shall have the right to contest any such Contractor Lien,
provided it first provides to Owner a bond or other assurances of payment
reasonably satisfactory to Owner in the amount of such Contractor Lien and in
form and substance reasonably satisfactory to Owner.
 
30.           NOTICES AND COMMUNICATIONS
 
30.1           Requirements.  Any Notice pursuant to the terms and conditions of
this Agreement shall be in writing and:  (a) delivered personally; (b) sent by
certified mail, return receipt requested; (c) sent by a recognized overnight
mail or courier service, with delivery receipt requested; or (d) sent by
confirmed facsimile transmission or electronic mail, with telephonic
confirmation, to the following addresses:
 
 
If to Contractor:
 
Fluor Enterprises, Inc.
100 Fluor Daniel Drive
Greenville, SC  29607
Attention:  Clinton W. Smith, Project Director
Facsimile:  (864) 567-1300
E-mail:  Clinton.Smith@fluor.com
     
With a copy to:
 
James J. Kenney
Assistant General Counsel
One Fluor Daniel Drive
Sugar Land, TX  77478
Facsimile:  (281) 263-4093

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If to Owner:
 
Oak Grove Management Company LLC
1601 Bryan Street
Dallas, Texas  75201
Attention:  Von Thompson
Facsimile:  (214) 812-6860
E-mail:  Von.Thompson@txu.com
     
With a copy to the
Project Representative:
 
Oak Grove Management Company LLC
1601 Bryan Street
Dallas, Texas  75201
Attention:  Von Thompson
Facsimile:  (214) 812-6860
E-mail:  Von.Thompson@txu.com
     
With a copy to:
 
Oak Grove Management Company LLC
1601 Bryan Street
Dallas, Texas  75201
Attention:  General Counsel
Facsimile:  (214) 812 6032
     

    30.2           Effective Time.  Notices shall be effective when received by
the other Party.
 
30.3           Representatives.  Any technical or other communications
pertaining to the Work shall be with the Parties’ designated
representative.  Each Party shall notify the other in writing of the name of
such representatives.  The Project Director and the Project Representative each
shall have knowledge of the Work and be available at all reasonable times for
consultation.  Each Party’s representative shall be authorized on behalf of such
Party to administer this Agreement, agree upon procedures for coordinating the
efforts of the Parties, and, when appropriate, to furnish information to or
receive information from the other Party in matters concerning the Work.
 
31.           LIMITATIONS OF LIABILITY AND REMEDIES
 
31.1           Limitations on Damages.  Except for liquidated damages as
expressly set forth in this Agreement, or to the extent damages claimed by
third-parties (other than Owner or Contractor Indemnitees) for which Contractor
or Owner has a duty to indemnify hereunder as expressly provided in Article 23
are shown to be consequential in nature, notwithstanding anything else in this
Agreement to the contrary, no Party (nor that Party’s subcontractors) shall be
liable to any other Party hereto for any loss of profits, loss of revenue, or
loss of use of Equipment and Materials or the Project, downtime costs, increased
expense of operation or maintenance of the Equipment and Materials or the
Project, loss of opportunity or goodwill, cost of purchased or replacement
power, equipment or systems, cost of capital, claims of customers for such
damages, any governmental fines, penalties or sanctions imposed (except as
otherwise expressly provided in Article 23) or any loss, damage or other
liability otherwise equivalent to or in the nature of any indirect, incidental,
consequential, exemplary, or special damages arising from performing or a
failure to perform any obligation under this Agreement, whether such liability
arises in contract, tort (including negligence or strict liability), or
otherwise.
 
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31.2           Limitations on Contractor’s Liability.
 
31.2.1                      Maximum Liability Amount.  Prior to Substantial
Completion of a Unit, Contractor’s and its Subcontractors’ liability for claims
by Owner arising out of or relating to the performance or non-performance of
obligations or the Work with respect to such Unit shall in no event be greater
in the aggregate than an amount equal to *** percent (***%) of the Separated
Contract Price related to such Unit; provided that Contractor’s liability for
the Owner Furnished Equipment included in a Unit, howsoever arising, including
the impacts on Contractor of any failures or deficiencies in the performance and
warranties of, or delays, to the extent attributable in any way to the Owner
Furnished Equipment, liquidated damages related thereto, and any failure or
default by the Upgrade Suppliers to perform with respect to such Unit in
accordance with the terms of the Upgrade Contracts to the extent such failure or
default adversely affects the Contractor, shall not exceed *** Dollars ($***)
per Unit.  Following the Substantial Completion Date of a Unit, Contractor’s and
its Subcontractor’s liability, howsoever caused, for claims by Owner arising out
of or relating to the performance or non-performance of obligations or the Work,
including claims for payment of Performance Liquidated Damages and Delay
Liquidated Damages, with respect to such Unit shall in no event be greater than
an amount equal to *** percent (***%) of the portion of the Separated Contract
Price related to such Unit; provided that Contractor’s liability for the Owner
Furnished Equipment included in a Unit, howsoever arising, including the impacts
on Contractor of any failures or deficiencies in the performance and warranties
of, or delays, to the extent attributable in any way to the Owner Furnished
Equipment, liquidated damages related thereto, and any failure or default by the
Upgrade Suppliers to perform with respect to such Unit in accordance with the
terms of the Upgrade Contracts to the extent such failure or default adversely
affects the Contractor, shall not exceed *** Dollars ($***) per
Unit.  Notwithstanding anything to the contrary in the foregoing, nothing
contained in this Section 31.2.1 shall be construed to limit Contractor’s
liability (a) with respect to any of its indemnity obligations under Article 23,
or (b) with respect to any willful misconduct or fraud on the part of
Contractor’s senior supervisory personnel at the Project Director level or
above.  
 
31.2.2                      Maximum Liquidated Damages.  In no event shall
Contractor’s aggregate liability (a) under Section 15.1 for Delay Liquidated
Damages exceed *** percent (***%) of the portion of the Separated Contract Price
applicable to the Unit to which such Delay Liquidated Damages relate; (b) under
Section 15.3 for Performance Liquidated Damages exceed *** percent (***%) of the
portion of the Separated Contract Price applicable to the Unit to which such
Performance Liquidated Damages relate; and (c) in the aggregate under
Sections 15.1 and 15.3 exceed *** percent (***%) in the aggregate of the portion
of the Separated Contract Price applicable to the Unit to which such liquidated
damages relate.  Notwithstanding any of the foregoing provisions of this
Section 31.2.2, the limitations of this Section 31.2.2 shall not limit Owner’s
remedies for any other breach of this Agreement other than a failure of a Unit
to achieve Substantial Completion on or before the Substantial Completion
Guaranteed Date for such Unit or the failure of a Unit to satisfy the
Performance Guarantees.  
 
*** CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION.
 
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31.2.3                      Calculation of Liability.  Notwithstanding anything
herein to the contrary, for purposes of determining whether the maximum
liability amounts provided in Section 31.2.1 have been exceeded, the following
items shall be excluded from the calculation of any such maximum liability
amount: (a) amounts expended to achieve Mechanical Completion, the Environmental
Compliance Guarantees and the Minimum Performance Criteria (except, in each
case, with respect to the Owner Furnished Equipment for which all amounts
expended shall be included in the calculation of such maximum liability
amounts); (b) insurance proceeds from the OCIP policies or the Project-specific
insurance policies obtained by Contractor pursuant to Article 21 (not including
any proceeds from any other insurance coverage of Contractor); and (c) amounts
paid by Contractor to or on behalf of Owner in respect of any damages or
third-party claims (other than Owner Indemnitees and Contractor Indemnitees)
arising out of the willful misconduct or fraud of Contractor’s senior
supervisory personnel at the Project Director level or above.  For the purposes
of this Section 31.2, the Separated Contract Price shall be allocated fifty
percent (50%) to Unit 1 and fifty percent (50%) to Unit 2.
 
31.3           Specific Performance.  In addition to any other rights and
remedies of Owner hereunder, as a specific performance obligation, Contractor
guarantees that the Project shall as a condition to Substantial Completion,
Successfully Run the Emissions Tests and achieve the Environmental Compliance
Guarantees.  Contractor acknowledges that Contractor’s failure to Successfully
Run the Emissions Tests and achieve the Environmental Compliance Guarantees
would cause Owner irreparable harm for which money damages would not constitute
an adequate remedy, and therefore Contractor stipulates that specific
performance is an appropriate remedy should Contractor breach such obligation.
 
31.4           Limitation on Owner’s Liability.  In no event shall Owner’s
liability pursuant to this Agreement, whether arising in contract warranty, or
otherwise, be greater in the aggregate than the Separated Contract Price and any
other amounts for which Owner is expressly obligated to pay Contractor pursuant
hereto, less amounts previously paid by Owner; provided, however that nothing
contained in this Section 31.4 or in any other provision of this Agreement shall
be construed to limit Owner’s liability for:  (a) its indemnity obligations
pursuant to Article 23; or (b) with respect to any willful misconduct or fraud
on the part of Owner’s senior supervisory personnel for the Project at an
equivalent level to Project Director and above.  Contractor’s sole recourse for
any damages or liabilities due to Contractor by Owner pursuant to this Agreement
shall be limited to the assets of Owner and to the parent guarantee provided by
Owner hereunder without recourse individually or collectively to the assets of
the members or the Affiliates of Owner, the Financing Entities or their
respective officers, directors, employees or agents of Owner, its members or
their Affiliates.
 
31.5           Releases, Indemnities and Limitations.  The releases,
indemnities, waivers, subrogation, assumptions of and limitations on liabilities
and limitations on remedies expressed in this Agreement, subject to the terms
hereof, shall apply even in the event of fault, negligence, or strict liability
of the Party released or indemnified, or whose liability is limited or assumed
or against whom right of subrogation are waived and shall extend to such Party’s
subcontractors, and in each case to such Party’s and its subcontractors’
Affiliates, officers, directors, employees, licensees, agents or partners.  If
Owner is not the sole owner or operator of the Site or the Ancillary Sites,
Owner shall obtain from such other owners or operators the same releases from
and limitations on liabilities for Contractor’s benefit that are afforded to
Contractor under this
 
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Agreement.  The Parties acknowledge and agree that this Agreement satisfies the
Express Negligence Rule.  
 
31.6           Representations and Remedies.  Each Party makes no
representations, covenants, warranties, or guarantees, express or implied, other
than those expressly set forth herein and in the Exhibits hereto.  
 
31.7           Limitation on Remedies.  It is the intent of Owner and Contractor
that the provisions of this Agreement state all of the rights and remedies of
the Parties with respect to this Agreement, and are the sole or exclusive (or
words of similar import) rights or remedies for the failure to satisfy the
applicable obligation arising hereunder.  The Parties’ rights, liabilities,
responsibilities and remedies as stated herein with respect to this Agreement
and the Work shall be the sole and exclusive remedies of the Parties for failure
to satisfy such obligations, notwithstanding any right or remedy otherwise
available at law or in equity.  For purposes of clarity, the foregoing shall not
be construed to limit a Party’s right to exercise its dispute resolution rights
under Article 32 at any time during the term of this Agreement. 
 
32.           DISPUTES
 
32.1           Negotiations.  Subject to Section 32.2, any disputes arising
under this Agreement shall first be referred to Owner’s Project Representative
and the Project Director.  Any dispute that cannot be resolved between Owner’s
Project Representative and the Project Director within fourteen (14) days, or in
the case of payment disputes five (5) days, after receipt by each thereof of
Notice of such dispute (specifically referencing this Section 32.1) shall be
referred, by Notice setting forth, in reasonable detail, the basis of the
dispute and signed by Owner’s Project Representative and the Project Director,
to the executive officers of the Parties designated by them as their designated
representatives (which shall not be Owner’s Project Representative or the
Project Director) for resolution.  If the Parties, negotiating in good faith,
fail to reach an agreement within a reasonable period of time, not exceeding
twenty (20) days or, in the case of payment disputes, ten (10) days after such
referral, then either Owner or Contractor may, if the dispute is in regards to
an issue subject to Section 32.2, notify the other of its desire to engage an
Independent Expert in accordance with Section 32.2, or may bring a suit, claim
or cause of action in any state or federal court of law to protect its rights
and interest hereunder in accordance with the terms of Section 33.2 hereof.  
 
32.2           Disputed Invoice Payments and Changes In Work.  In the case of a
dispute with respect to technical engineering, procurement or construction
issues regarding whether a Change In Work has occurred or Contractor has
achieved a payment milestone satisfying such condition to an Invoice Payment,
that is not resolved by the management negotiation procedure described in
Section 32.1, upon determining to select an Independent Expert to resolve such
dispute, the Party electing to utilize the Independent Expert shall notify the
other Party in writing, nominating five (5) Independent Experts for the other
Party’s review.  The other Party shall promptly, and in any event within ten
(10) days notify the nominating Party whether any of the nominated experts are
acceptable, and if not, shall nominate five (5) Independent Experts for the
original nominating Party’s consideration.  If the Parties are unable to agree
upon an Independent Expert within thirty (30) days, either Party may bring a
suit, claim or cause of action in any state or federal court of law.  Any
decision or award made by the Independent Expert shall be limited
 
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in scope to the direct issue regarding the disputed Change In Work or Milestone
Payment and shall be binding on both Parties.  
 
32.3           Work to Continue.  Unless otherwise agreed in writing, Contractor
shall diligently carry on the Work during the pendency of any disputes so long
as all undisputed amounts payable to Contractor hereunder have been paid.  
 
33.           MISCELLANEOUS
 
33.1           Severability.  The invalidity or unenforceability of any portion
or provision of this Agreement shall in no way affect the validity or
enforceability of any other portion or provision hereof.  Any invalid or
unenforceable portion or provision shall be deemed severed from this Agreement
and the balance of this Agreement shall be construed and enforced as if this
Agreement did not contain such invalid or unenforceable portion or
provision.  If any such provision of this Agreement is so declared invalid, the
Parties shall promptly negotiate in good faith new provisions to eliminate such
invalidity and to restore this Agreement as near as possible to its original
intent and effect.
 
33.2           Governing Law; Consent to Jurisdiction and Venue.  This Agreement
shall be governed by the internal laws of the State of Texas, excluding its
conflict of laws provisions.  EXCEPT AS OTHERWISE PROVIDED IN THIS AGREEMENT,
AND TO THE EXTENT PERMITTED BY LAW, THE PARTIES HERETO AGREE THAT ALL ACTIONS OR
PROCEEDINGS ARISING IN CONNECTION WITH THIS AGREEMENT, SHALL BE TRIED AND
LITIGATED ONLY IN THE STATE AND FEDERAL COURTS LOCATED IN THE COUNTY OF DALLAS,
STATE OF TEXAS.  THE PARTIES, TO THE EXTENT THEY MAY LEGALLY DO SO, WAIVE ANY
RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUMNONCONVENIENS OR TO OBJECT TO
VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION
AND STIPULATE THAT THE STATE AND FEDERAL COURTS LOCATED IN THE COUNTY OF DALLAS,
STATE OF TEXAS SHALL HAVE INPERSONAM JURISDICTION AND VENUE OVER SUCH PARTY FOR
THE PURPOSE OF LITIGATING ANY SUCH DISPUTE, CONTROVERSY, OR PROCEEDING ARISING
OUT OF RELATED TO THIS AGREEMENT.  THE PARTIES ACKNOWLEDGE AND AGREE THE TERMS
AND CONDITIONS OF THIS AGREEMENT HAVE BEEN FREELY, FAIRLY AND THOROUGHLY
NEGOTIATED.  FURTHER, THE PARTIES ACKNOWLEDGE AND AGREE SUCH TERMS AND
CONDITIONS, INCLUDING THOSE RELATING TO WAIVERS, ALLOCATIONS OF, RELEASES FROM,
INDEMNITIES AGAINST AND LIMITATIONS OF LIABILITY, WHICH MAY REQUIRE CONSPICUOUS
IDENTIFICATION, HAVE NOT BEEN SO IDENTIFIED BY MUTUAL AGREEMENT AND THE PARTIES
HAVE ACTUAL KNOWLEDGE OF THE INTENT AND EFFECT OF SUCH TERMS AND CONDITIONS.  
 
33.3           Survival of Termination.  The provisions of this Agreement which
by their nature are intended to survive the termination, cancellation,
completion or expiration of this Agreement including any express limitations of
or releases from liability shall continue as a valid and enforceable obligation
of the Party notwithstanding any such termination, cancellation, completion or
expiration.
 
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33.4           No Oral Modification.  No oral or written amendment or
modification of this Agreement (including a Change In Work Form accepted under
Article 16) by any officer, agent, or employee of Contractor or Owner, either
before or after execution of this Agreement, shall be of any force or effect
unless such amendment or modification is in writing and is signed by a duly
authorized representative of the Party to be bound thereby.
 
33.5           No Waiver.  A Party’s waiver of any breach or failure to enforce
any of the terms, covenants, conditions, or other provisions of this Agreement
at any time shall not in any way affect, limit, modify, or waive that Party’s
right thereafter to enforce or compel strict compliance with every term,
covenant, condition, or other provision hereof, any course of dealing or custom
of the trade notwithstanding.  All waivers must be in writing and signed on
behalf of Owner and Contractor in accordance with Section 33.4.  Contractor and
Owner each represents and warrants to its knowledge that as of the date hereof
the other Party isnot in breach or default of its obligations under this
Agreement, and that Contractor and Owner, respectively, has no known unresolved
claims against the other Party, nor has reason to make any claim not heretofore
asserted and delivered by official Notice based on facts known as of this
date.  
 
33.6           Review and Approval.  Notwithstanding Owner’s or the Financing
Entities’, if any, review or Owner’s approval of any items submitted to Owner or
the Financing Entities for review or approval, neither Owner nor the Financing
Entities, if any, or any of their representatives or agents reviewing such
items, including the Owner’s Engineer, shall have any liability for, under or in
connection with the items such Person reviews or approves and Contractor shall
remain responsible for the quality and performance of the Work.  Neither Owner’s
nor the Financing Entities’ review or approval of any items, including the
Submittals, shall constitute a waiver of any claim or right that Owner may then
or thereafter have against Contractor.  Unless otherwise expressly provided
herein, Owner shall not unreasonably delay its review of any item submitted by
Contractor for review or approval.  Any inspection comment, review or approval
of any Contractor Deliverable shall be performed in Owner’s sole
discretion.  The review or approval by Owner of any Subcontractor shall not
constitute any approval of the Work undertaken by any such Person, cause Owner
to have any responsibility for the actions, the Work, or payment of such Person
or to be deemed to be in an employer-employee relationship with any such
Subcontractor, or in any way relieve Contractor of its responsibilities and
obligations under this Agreement.
 
33.7           Time.  Subject to the terms and conditions of this Agreement,
including the express provisions providing for adjustment of the Substantial
Completion Guaranteed Dates and the provisions limiting Contractor’s liability
for its failure to achieve Substantial Completion by the Substantial Completion
Guaranteed Date, Contractor acknowledges that timely achievement of Substantial
Completion by the Substantial Completion Guaranteed Date is essential to Owner,
and therefore TIME IS OF THE ESSENCE with respect to meeting the Substantial
Completion Guaranteed Date; provided that Owner’s sole and exclusive remedies
for delays in performance of the Work shall be as set forth in Sections 15.1,
15.6 and 19.1(g). 
 
33.8           Third Party Beneficiaries.  The provisions of this Agreement are
intended for the sole benefit of Owner and Contractor and there are no
third-party beneficiaries hereof, except the Financing Entities where expressly
provided and assignees as contemplated by the terms of Article 26.  
 
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33.9           Financing Matters.
 
33.9.1                      Contractor Cooperation.  Contractor understands that
Owner may obtain financing for the Project consisting of:  (a) one or more
construction or permanent loans, to be secured by all or a portion of the
Project and Owner’s rights under this Agreement; (b) lease financing pursuant to
which Owner may assign this Agreement to one or more Financing Entities that may
then collaterally assign this Agreement to other Financing Entities or
sub-assign all or any portion of Owner’s rights and obligations hereunder to
Owner or an Affiliate of Owner; or (c) a combination thereof.  In connection
therewith, Contractor shall:  (x) execute any assignments, amendments and
modifications hereto reasonably requested by the Financing Entities; provided
that any such amendments or modifications to this Agreement are of a nature
customarily obtained by financing parties for projects similar to the Project
and do not alter the timeframes stated herein if altering such timeframes would
adversely impact performance of the Work, or materially affect the obligations,
benefits, risk or liability of Contractor arising out of the Agreement or the
Separated Contract Price or proposed bonuses; (y) promptly execute or consent to
other documents to the extent reasonably required by the Financing Entities,
which consents may, among other things, include provisions whereby Contractor
agrees to:  (i) provide such Financing Entities reasonable notice of and
opportunity to cure Owner’s defaults hereunder; (ii) allow such Financing
Entities (as security for Owner’s financing) to be assigned all of Owner’s
rights hereunder and in such assets in the event of an Owner’s Event of Default;
provided, however, that Owner shall keep Contractor currently informed of such
assignment or reassignment; (iii) provide for other customary investor or lender
protection provisions that are not in violation of Applicable Law; and
(iv) provide copies of any Certificate of Substantial Completion, Notice of
Non-Critical Deficiencies, or any other certificates, Notices and any documents
and plans submitted to Owner for review or approval hereunder, to the Financing
Entities and their designated agents or representatives; and (z) deliver
customary legal opinions of counsel to Contractor in accordance with
Section 33.16.  Without limiting the foregoing, Contractor shall enter into such
arrangements as Owner or the Financing Entities may reasonably request to ensure
the continued availability of the Contractor’s Equipment and Materials at the
Site and the right to use such Equipment and Materials (whether by Contractor,
Owner, or Owner’s nominees) in the prosecution of the Work as contemplated by
this Agreement until the Work is completed, including the granting of security
interests in such Equipment and Materials and shall keep such Equipment and
Materials free and clear of any liens or encumbrances that could materially
affect Contractor’s, Owner’s, or Owner’s nominee’s rights with respect to such
Equipment and Materials, except for those encumbrances which may be created by
action of Owner associated with any financing of the Project.  Contractor shall
respond promptly to requests for information regarding the qualifications,
experience, past performance and financial condition of Contractor and other
matters pertaining to Contractor’s obligations hereunder.  Notwithstanding the
foregoing, under no circumstances shall Contractor be obligated to enter into
any amendment and modification of this Agreement, or any other agreement with
Owner or the Financing Entities, that materially (i) reduces Contractor’s rights
as set forth in this Agreement; (ii) increases Contractor’s cost or risk to
perform the Work, or (iii) reallocates to Contractor any risks or obligations
that are allocated to Owner under this Agreement.
 
33.9.2                      Documents Requested by Financing
Entities.  Contractor shall provide such data, reports, certifications and other
documents, up to a maximum of five (5) copies each, or assistance related to the
Work or this Agreement as may be reasonably requested by the
 
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Financing Entities with respect to the financing of the Project; provided,
however, that the provision of this information shall not in any manner modify
Contractor’s rights or obligations under any other provision of this Agreement.
 
33.10                      Other Assistance.  Contractor shall to the extent
reasonably requested by Owner, assist Owner in dealing with Governmental
Authorities and Financing Entities in any and all matters relating to the Work
(including any interconnection facilities).
 
33.11                      Further Assurances.  Owner and Contractor will each
use its reasonable  efforts to implement the provisions of this Agreement, and
for such purpose each, at the reasonable request of the other, will, without
further consideration, promptly execute and deliver or cause to be executed and
delivered to the other such assistance, or assignments, consents or other
instruments in addition to those required by this Agreement, in form and
substance satisfactory to the other, as the other may reasonably deem necessary
or desirable to implement any provision of this Agreement.
 
33.12                      Record Retention.  Contractor agrees to retain for a
period of five (5) years from the Final Completion Date all records relating to
its performance of the Work or Contractor’s warranty obligations herein, and to
use commercially reasonable efforts to cause its Subcontractors engaged in
connection with the Work or the performance by Contractor of its warranty
obligations herein to retain for the same period all their records relating to
the Work.
 
33.13                      Binding on Successors, Etc.  Subject to Articles 26
and 27, this Agreement shall be binding on the Parties hereto and on their
respective successors, heirs and assigns.
 
33.14                      Merger of Prior Contracts.  This Agreement supersedes
any other agreement, including the Pre-Authorization, the Original Agreement and
the Amendment, whether written or oral, that may have been made or entered into
between Owner and Contractor or by any office or officer of such Party relating
to the Project or the Work; provided that any Changes In Work executed in
accordance with the provisions of the Original Agreement and the Amendment after
February 5, 2007 shall be deemed to be Changes In Work to this Agreement and
shall remain in effect.  This Agreement, including the Exhibits hereto and any
Changes In Work executed in accordance with the provisions of the Original
Agreement and the Amendment after February 5, 2007, shall constitute the entire
agreement between the Parties with respect to the Project, and there are no
other agreements or commitments with respect to the Project except as set forth
herein and therein.
 
33.15                      Counterparts.  This Agreement may be executed in any
number of counterparts, and any Party hereto may execute any such counterpart,
each of which when executed and delivered shall be deemed to be an original and
all of which counterparts taken together shall constitute but one and the same
instrument. This Agreement shall become effective when each Party hereto shall
have received a counterpart by facsimile or electronic mail hereof signed by the
other Parties hereto. The Parties agree that the delivery of this Agreement may
be effected by means of an exchange of facsimile signatures with original copies
to follow by mail or courier service.
 
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33.16                      Opinions of Contractor’s Counsel.  At the request of
any Financing Entity in connection with any financing, Contractor shall deliver
to Owner and any such Financing Entity, an opinion of counsel to Contractor that
is reasonably acceptable to Owner and any such Financing Entity, opining as to
the matters set forth in Sections 4.1.1, 4.1.3, 4.1.4 and 4.1.6.
 
33.17                      Set-Off.  Either Party may at any time, but shall be
under no obligation to, set off any and all sums due from the other Party
against sums due to such Party hereunder.
 
33.18                      Attorneys’ Fees.  In the event any action by legal
proceeding shall be instituted between Owner and Contractor in connection with
this Agreement, the Party prevailing in such action shall be entitled to recover
from the other Party all of its reasonable costs and expenses incurred in
connection with such action by legal proceeding, including reasonable attorneys’
fees.
 
33.19                      Announcements; Publications.  Contractor shall
coordinate with Owner with respect to, and provide advance copies to Owner for
review of, the text of any proposed announcement or publication concerning the
Work prior to the dissemination thereof to the public or to any Person.  If
Owner delivers written notice to Contractor rejecting any such proposed
announcement or publication within five (5) Business Days after receiving such
advance copies, Contractor shall not make such public announcement or
publication.
 
33.20                      Independent Contractor.  Contractor is an independent
contractor, and nothing contained herein shall be construed as constituting any
relationship with Owner other than that of owner and independent contractor,
except as expressly provided in this Agreement pursuant to which Owner appoints
Contractor as Owner’s agent with respect to certain equipment purchase
agreements or purchase orders, or as creating any relationship whatsoever
between Owner and Contractor’s employees.  Neither Contractor nor any of its
employees is or shall be deemed to be an employee of Owner.  
 
33.21                      Non-Solicitation.  Neither party shall, during the
period ending on the earlier of Substantial Completion of the second Unit or the
expiration or termination of this Agreement, and for a period of ninety (90)
days thereafter, directly or indirectly for itself or on behalf of, or in
conjunction with, any of its Affiliates, solicit, hire or employ an employee of
the other with whom that Party has had substantial contact during the term of
this Agreement; provided that hiring any such Person who responds to a general
advertisement not directly aimed at such other Party’s employees shall not be a
violation of this Section 33.21.
 
33.22                      Audit.  With respect to any Change In Work which
adjusts the Separated Contract Price by compensating Contractor on a
reimbursable cost or time and materials basis, or with respect to Work performed
by Contractor on a reimbursable cost or time and materials basis pursuant to an
Owner’s Directive, Contractor shall maintain, in accordance with generally
accepted accounting principles consistently applied, records and books of
account.  Owner, Owner’s Engineer, the OCIP Administrator, the Financing
Entities, if any, and their authorized representatives shall be entitled to
inspect and audit such records and books of account during normal business hours
and upon reasonable advance notice during the course of the Work and for a
period of one (1) year after Final Completion of the second Unit (or for such
longer period of time as may be required pursuant to Section 5.9); provided
that, the purpose of any such audit
 
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shall be only for verification of such costs, and Contractor shall not be
required to keep records of or provide access to those of its costs covered by
the fee, allowances, fixed rates, unit prices, lump sum amounts, or of costs
which are expressed in terms of percentages of other costs; providedfurther that
Owner shall be permitted access and Contractor shall retain records and books of
account for such longer period, not to exceed six (6) months, as may be required
for Owner to complete an audit begun and which Owner has made reasonable efforts
to complete during the initial period ending one (1) year after the Final
Completion Date of the second Unit.  Contractor shall retain all such records
and books of account for a period of one (1) year after the Final Completion
Date of the second Unit.  Contractor shall cause all of its direct (i.e., first
tier) Subcontractors, and shall use commercially reasonable efforts to cause its
other Subcontractors, engaged in connection with the Work or the performance by
Contractor of its warranty obligations herein to retain for the same period all
their records relating to the Work subject to the same limitations set forth in
this Section 33.22.  Notwithstanding the foregoing, Owner acknowledges that
Alstom Power Inc. may only retain such records and provide access for such
audits for a period of two (2) years after the Final Completion Date of
Unit 1.  Audit data shall not be released by the auditor to parties other than
Contractor, Owner, Owner’s Engineer, the OCIP Administrator, the Financing
Entities, if any, and their respective directors, officers, employees, and
agents in connection with any such audit.  Without limiting the foregoing, Owner
and Contractor acknowledge and agree that certain of the Agency Subcontracts
provide that the respective Subcontractors will limit access to their books and
records for audit or other purposes to approved third parties.  In any case
where Contractor is instructed to proceed to comply with a Change In Work prior
to the agreement of the change to the Separated Contract Price under Article 16,
Contractor shall keep contemporary records of the cost of complying with the
Change In Work and of time expended thereon.  Such records shall be open to
inspection by Owner at all reasonable times until the expiration of the audit
period set forth in this Section 33.22.  If, as a result of any audit conducted
pursuant to this Section 33.22, the results of such audit indicate that
Contractor received more or less than the amount to which it was entitled under
this Agreement, either Owner shall pay the additional amount owed to Contractor
or Contractor shall refund any overpayment to Owner, as applicable, in either
case within ten (10) days of a written request therefor.  Owner shall be
responsible for all costs and expenses of such audit.
 
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IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed
as of the date and the year first above written.
 
OWNER:
 
OAK GROVE MANAGEMENT COMPANY LLC,
a Delaware limited liability company
 
 
By:
     /s/ Michael P. Childers
Name:            Michael P. Childers
Its:                 President and Chief Executive
     
CONTRACTOR:
 
FLUOR ENTERPRISES, INC.,
a California corporation
 
 
By:
     /s/ David E. Constable
Name:            David E. Constable
Its:                 Group President