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Exhibit 10.3  


 
 

ESCROW AGREEMENT    
    


        THIS ESCROW AGREEMENT, dated as of June 30, 2003 ("Escrow Agreement"), is by and between MSW  ENERGY
HOLDINGS LLC, a Delaware limited liability company ("Depositor"); DUKE CAPITAL CORPORATION, a
Delaware corporation ("Recipient"); and WACHOVIA BANK, NATIONAL ASSOCIATION, a national banking association, as Escrow Agent hereunder ("Escrow Agent"). 


BACKGROUND STATEMENT  


        A.    Depositor
and Recipient have entered into an Agreement (as amended, the "Underlying Agreement"), dated as of the date hereof, pursuant to which Depositor has agreed to
pay Recipient certain fees as consideration for Recipient's agreement to remain obligated on certain credit support obligations described in the Underlying Agreement. 


        B.    The
Underlying Agreement provides that, on each anniversary of the date hereof (each such date, a "Deposit Date"), Depositor shall deposit in a segregated escrow account,
to be held by Escrow Agent for the purpose of securing the fee payment obligations of Depositor contained in the Underlying Agreement, (i) the amount set forth for such Deposit Date on  Schedule A hereto (each, a "Required Amount"), plus (ii) the cumulative amount of interest
or other income earned on the Escrow Funds from the date hereof to but excluding the Deposit Date, minus (iii) any amount of Escrow Funds (as
hereinafter defined) on deposit with the Escrow Agent on the Deposit Date; provided, that the initial payment due on June 30, 2004 shall be made
prior to June 30, 2004 to the extent funds are available in the Duke Essex Payment Reserve Account. 


        C.    The
Underlying Agreement also provides that Depositor shall replenish the Escrow Funds upon certain disbursements of Escrow Funds as described herein. 



        D.    Escrow
Agent has agreed to accept, hold, and disburse the funds deposited with it and the earnings thereon in accordance with the terms of this Escrow Agreement. 


        E.    Depositor
and Recipient have each appointed the Representatives (as defined below) to represent them for all purposes in connection with the funds to be deposited with
Escrow Agent and this Escrow Agreement. 


        F.     In
order to establish the escrow of funds and to effect the provisions of the Underlying Agreement, the parties hereto have entered into this Escrow Agreement. 


STATEMENT OF AGREEMENT  


        NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto, for themselves, their successors and assigns, hereby agree as follows: 



        1.    Definitions.    The following terms shall have the following meanings when used herein: 



        "Affiliate"
shall mean an "affiliate" within the meaning of Rule 12b-2 of the Securities Exchange Act of 1934, as amended. 


        "Company
Support Agreement" means the Amended and Restated Company Support Agreement, dated as of December 1, 1997, between American Ref-Fuel Company of Essex County,
Recipient and Browning-Ferris Industries, Inc. and includes any substitute company support agreement entered into pursuant to the then applicable Company Support Agreement and any other
amendments, modifications and supplements thereto from time to time. 







 





        "DCC
Reimbursement Agreement" means the Reimbursement Agreement, dated as of April 30, 2001, between American Ref-Fuel Company LLC, American Ref-Fuel
Company of Essex County and Recipient, as amended, modified and supplemented from time to time. 


        "Deposit
Date" shall have the meaning set forth in the Background Statement hereto. 


        "Depositor
Representative" shall mean both the Highstar Representative and the MSW Acquisition Representative. 



        "Duke
Essex Payment Reserve Account" shall mean the MSW Energy Holdings LLC Duke Essex Payment Reserve Account (account number 14779106) with Wells Fargo Bank Minnesota, National
Association. 


        "Escrow
Funds" shall mean the funds deposited with Escrow Agent pursuant to this Agreement, together with any interest and other income thereon. 


        "Escrow
Period" shall mean the period commencing on the date hereof and ending upon the termination of this Escrow Agreement pursuant to Section 20
hereof.


        "Full
DCC Release" shall mean the satisfaction of the following conditions: (1)(A) the Company Support Agreement, including without limitation, any and all obligations and other
liabilities of Recipient, has terminated or (B) Recipient and its Affiliates have otherwise been fully and unconditionally released from the Company Support Agreement and any and all liability
with respect thereto in compliance with the letter agreement, dated as of November 3, 2000, between Recipient and Allied Waste Industries, Inc. and (ii) all fees and other amounts
then due and owing to Recipient under the Underlying Agreement and under the DCC Reimbursement Agreement have been paid in full. 



        "Highstar
Representative" shall mean Marc C. Baliotti or any other person designated in writing by Highstar Renewable Fuels LLC in its capacity as a member of Depositor and delivered to
Escrow Agent and Recipient Representative in accordance with the notice provisions of this Escrow Agreement, to act as its representative under this Escrow Agreement. 


        "Joint
Written Direction" shall mean a written direction, in substantially the form of Annex I attached hereto, executed by the
Representatives and directing Escrow Agent to disburse all or a portion of the Escrow Funds or to take or refrain from taking an action pursuant to this Escrow Agreement. 



        "Lease
Agreement" shall mean the Lease and Agreement, dated as of February 28, 1986, between the Port Authority of New York and New Jersey and American Ref-Fuel
Company of Essex County. 


        "MSW
Acquisition Representative" shall mean Daniel H. Clare or any other person designated in a writing by MSW Acquisition LLC in its capacity as a member of Depositor and delivered to
Escrow Agent and Recipient Representative in accordance with the notice provisions of this Escrow Agreement, to act as its representative under this Escrow Agreement. 


        "Recipient
Representative" shall mean S. L. Love or any other person designated in a writing signed by Recipient and delivered to Escrow Agent and the Depositor Representative in
accordance with the notice provisions of this Escrow Agreement, to act as its representative under this Escrow Agreement. 


        "Recipient
Written Direction" shall mean a written direction, in substantially the form of Annex II attached hereto, executed by
the Recipient Representative certifying that fees payable pursuant to Section 2.01 of the Underlying Agreement have not been paid when due 




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and
directing Escrow Agent to disburse all or a portion of the Escrow Funds to Recipient to satisfy the amount of fees certified by the Recipient Representative to be due and owing pursuant to
Section 2.01 of the Underlying Agreement. 


        "Representatives"
shall mean the Depositor Representative and the Recipient Representative. 


        "Required
Amount" shall have the meaning set forth in the Background Statement hereto. 




        2.    Appointment of and Acceptance by Escrow Agent.    Depositor and Recipient hereby appoint
Escrow Agent to serve as escrow agent hereunder. Escrow Agent hereby accepts such appointment and, upon receipt by wire transfer of the Escrow Funds in accordance with  Section 3 below, agrees to
hold, invest and disburse the Escrow Funds in escrow in a separate account in accordance with this Escrow Agreement. 


        3.    Deposit of Escrow Funds.    


        (a)   On
June 30, 2004, or prior to June 30, 2004 to the extent funds are available in the Duke Essex Payment Reserve Account, Depositor will transfer a sum
equal to the Required Amount payable on
June 30, 2004 to Escrow Agent, by wire transfer of immediately available funds, to the following account: 



	Wachovia Bank, National Association

Charlotte, North Carolina

ABA # 053000219

ACCT# 5000000016439
	ATTN:	Corporate Trust Bond

Administration/Allison L. Poole Branch

Code 898
	Ref. Ref-Fuel/Duke Escrow A/C # 1072008439






        (b)   On
each Deposit Date commencing with June 30, 2005, Depositor will transfer a sum equal to (i) the Required Amount for such Deposit Date (as set forth on
Schedule A hereto), plus (ii), the cumulative amount of interest or other income earned on the Escrow Funds from the date hereof to but excluding such Deposit Date,  minus (iii) any amount of
Escrow Funds on deposit with the Escrow Agent on such Deposit Date, to the account set forth in  paragraph (a) above, 



        (c)   Within
three (3) business days of Depositor's receipt of notice from Recipient that a disbursement pursuant to a Recipient Written Direction has been made (and
identifying the amount of such disbursement), Depositor shall transfer a sum equal to such disbursement to the account set forth in paragraph (a)  above. Recipient shall notify the Escrow Agent of
the date that notice is given to the Depositor of a disbursement pursuant to a Recipient Written Direction. 


        (d)   At
least one (1) business day prior to making a transfer pursuant to this Section 3, Depositor shall notify
the Escrow Agent of the amount of Depositor's proposed transfer. Upon the reasonable request of the Escrow Agent, such notice shall be in writing. 


        (e)   Promptly
after confirmation that Depositor has made a transfer of funds to the account set forth in paragraph (a)  above, the Escrow Agent shall issue a statement to each of Depositor and Recipient
containing (i) the amount of such transfer, (ii) the amount of Escrow Funds on
deposit with the Escrow Agent following such transfer and (iii) the cumulative amount of interest or other income earned on the Escrow Funds from the date hereof to but excluding the date of
such transfer. 



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        4.    Disbursements of Escrow Funds.    


        (a)   Escrow
Agent shall disburse Escrow Funds, at any time and from time to time, in accordance with a Joint Written Direction or a Recipient Written Direction;  provided that Recipient shall notify Depositor in
writing five (5) days prior to furnishing a Recipient Written Direction to the Escrow Agent.
The Escrow Agent shall be entitled to rely upon certifications in a Recipient Written Direction that such notice has been given. After the expiration of any five (5) day notice period
established pursuant to this Section 4(a) (whether such expiration is certified pursuant to " the preceding sentence or otherwise), the Escrow Agent shall disburse funds in accordance with a
Recipient Written Direction. 


        (b)   All
disbursements of funds from the Escrow Funds shall be subject to the claims of Escrow Agent and the Indemnified Parties (as defined below) pursuant to  Sections 9 and 10 below. Attached hereto as
Schedule A is a schedule of each Required Amount for
the term of this Escrow Agreement, which amount varies according to whether there has been an extension or renewal of the Lease Agreement beyond the "Primary Term" thereof. Upon any such extension or
renewal of the Lease Agreement beyond the "Primary Term" thereof, each of Depositor and Recipient agree to provide joint written notice of such extension or renewal to the Escrow Agent, and upon
receipt of any such joint notice, the Escrow Agent shall accept the deposit of the Required Amount set forth in Column B "Required Amount (with Lease Extension or Renewal)" set forth on  Schedule A hereto. Until the Escrow Agent receives notice of such extension or renewal, the Escrow Agent shall be entitled to assume that the
"Primary Term" has not been extended and shall accept the deposit of the Required Amount set forth in Column A "Required Amount (without Lease Extension or Renewal)" set forth on  Schedule A hereto.



        (c)   Upon
the occurrence of the Full DCC Release, Recipient and Depositor shall execute a Joint Written Direction directing the Escrow Agent to disburse all Escrow Funds to
Depositor or its designee and this Escrow Agreement shall terminate in accordance with Section 20 hereof. 


        5.    Suspension of Performance; Disbursement Into Court.    If, at any time, there shall
exist any dispute between Depositor and Recipient with respect to the holding or disposition of any portion of the Escrow Funds or any other obligations of Escrow Agent hereunder, or if at any time
Escrow Agent is unable to determine, to Escrow Agent's sole satisfaction, the proper disposition of any portion of the Escrow Funds or Escrow Agent's proper actions with respect to its obligations
hereunder, or if the
Representatives have not within 30 days of the furnishing by Escrow Agent of a notice of resignation pursuant to Section 7, hereof,
appointed a successor Escrow Agent to act hereunder, then Escrow Agent may, in its sole discretion, take either or both of the following actions: 



        (a)   suspend
the performance of any of its obligations (including without limitation any disbursement obligations) under this Escrow Agreement until such dispute or
uncertainty shall be resolved to the sole satisfaction of Escrow Agent or until a successor Escrow Agent shall have been appointed (as the case may be); provided
however, that Escrow Agent shall continue to invest the Escrow Funds in accordance with Section 6 hereof; and/or 


        (b)   petition
(by means of an interpleader action or any other appropriate method) any court of competent jurisdiction in the Southern District of New York, for instructions
with respect to such dispute or uncertainty, and to the extent required by law, pay into such court, for holding and disposition in accordance with the instructions of such court, all funds held by it
in the Escrow Funds, after deduction and payment to Escrow Agent of all fees and expenses (including court costs and attorneys' fees) payable to, incurred by, or expected to be incurred by Escrow
Agent in connection with the performance of its duties and the exercise of its rights hereunder. 




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Escrow
Agent shall have no liability to Depositor, Recipient, their respective shareholders or any other person with respect to any such suspension of performance or disbursement into court in
accordance with this Section 5, specifically including any liability or claimed liability that may arise, or be alleged to have arisen, out of or
as a result of any delay in the disbursement of funds held in the Escrow Funds or any delay in or with respect to any other action required or requested of Escrow Agent. 


        6.    Investment of Funds.    Escrow Agent shall invest and reinvest the Escrow Funds as the
Depositor shall direct in writing (subject to applicable minimum investment requirements); provided, however, that no investment or reinvestment may be
made except in the following: 



        (a)   direct
obligations of the United States of America or obligations the principal of and the interest on which are unconditionally guaranteed by the United States of
America; 


        (b)   certificates
of deposit issued by any bank, bank and trust company, or national banking association (including Escrow Agent and its affiliates), which certificates of
deposit are insured by the Federal Deposit Insurance Corporation or a similar governmental agency; 


        (c)   repurchase
agreements with any bank, trust company, or national banking association (including Escrow Agent and its affiliates); or 


        (d)   any
money market fund substantially all of which is invested in the foregoing investment categories, including any money market fund managed by Escrow Agent and any of
its affiliates. 




If
Escrow Agent has not received written instructions at any time that an investment decision must be made, Escrow Agent shall invest the Escrow Funds, or such portion thereof as to which no written
instruction has been received, in investments described in clause (d) above. Each of the foregoing investments shall be made in the name of Escrow Agent. No investment shall be made in any
instrument or security that has a maturity of greater than six (6) months. Notwithstanding anything to the contrary contained herein, Escrow Agent may, without notice to the Depositor or
Recipient, sell or liquidate any of the foregoing investments at any time if the proceeds thereof are required for any release of funds permitted or required hereunder, and Escrow Agent shall not be
liable or responsible for any loss, cost or penalty resulting from any such sale or liquidation. With respect to any funds received by Escrow Agent for deposit into the Escrow Funds or any written
instructions received by Escrow Agent with respect to investment of any funds in the Escrow Funds after ten o'clock, a.m., Charlotte, North Carolina, time, Escrow Agent shall not be required to
invest such funds or to effect such investment instruction until the next day upon which banks in Charlotte, North Carolina are open for business. All taxable interest and other income earned on the
deposited Escrow Funds while they are invested by the Escrow Agent pursuant to this Section 6 shall be reported by the Depositor for income tax
purposes. The Escrow Agent will prepare and deliver to Depositor an Internal Revenue Service Form 1099 reflecting any taxable interest and other income earned on the Escrow Funds and reported
for income tax purposes for Depositor during each tax year. 


        7.    Resignation and Removal of Escrow Agent.    Escrow Agent may resign from the performance
of its duties hereunder at any time by giving ten (10) days' prior written notice to the Representatives or may be removed, with or without cause, by the Representatives, acting jointly by
furnishing a Joint Written Direction to Escrow Agent, at any time by the giving of ten (10) days' prior written notice to Escrow Agent. Such resignation or removal shall take effect upon the
appointment of a successor Escrow Agent as provided hereinbelow. Upon any such notice of resignation or removal, the Representatives jointly shall appoint a successor Escrow Agent hereunder, which
shall be a commercial bank, trust company or other financial institution with a combined capital and surplus in excess of $10,000,000. Upon the acceptance in writing of any 



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appointment
as Escrow Agent hereunder by a successor Escrow Agent, such successor Escrow Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the
departing Escrow Agent, and the departing Escrow Agent shall be discharged from its duties and obligations under this Escrow Agreement, but shall not be discharged from any liability for actions taken
as Escrow Agent hereunder prior to such succession; provided, however, that the benefits and protections afforded under  Sections 8 and 9 of this
Escrow Agreement shall survive such resignation or removal and remain in effect for the departing Escrow Agent. After
any departing Escrow Agent's resignation or removal, the provisions of this Escrow Agreement shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Escrow Agent
under this Escrow Agreement. The departing Escrow Agent shall transmit all records pertaining to the Escrow Funds and shall pay all funds held by it in the Escrow Funds to the successor Escrow Agent,
after making copies of such records as the departing Escrow Agent deems advisable and after deduction and payment to the departing Escrow Agent of all fees and expenses (including court costs and
attorneys' fees) payable to, incurred by, or expected to be incurred by the departing Escrow Agent in connection with the performance of its duties and the exercise of its rights hereunder, all to the
extent payable hereunder. 


        8.    Liability of Escrow Agent.    


        (a)   Escrow
Agent shall have no liability or obligation with respect to the Escrow Funds except for Escrow Agent's willful misconduct or gross negligence. Escrow Agent's sole
responsibility shall be for the safekeeping, investment, and disbursement of the Escrow Funds in accordance with the terms of this Escrow Agreement. Escrow Agent shall have no implied duties or
obligations and shall not be charged with knowledge or notice of any fact or circumstance not specifically set forth herein. Escrow Agent may rely upon any instrument, not only as to its due
execution, validity and effectiveness, but also as to the truth and accuracy of any information contained therein, which Escrow Agent shall in good faith believe to be genuine, to have been signed or
presented by the person or parties purporting to sign the same and to conform to the provisions of this Escrow Agreement. In no event shall Escrow Agent be liable for incidental, indirect, special,
consequential or punitive damages. Escrow Agent shall not be obligated to take any legal action or commence any proceeding in connection with the Escrow Funds, any account in which Escrow Funds are
deposited, this Escrow Agreement or the Underlying Agreement, or to appear in, prosecute or defend any such legal action or proceeding. Escrow Agent may consult legal counsel selected by it in the
event of any dispute or question as to the construction of any of the provisions hereof or of any other agreement or of its duties hereunder, or relating to any dispute involving any party hereto, and
shall incur no liability and shall be fully indemnified from any liability whatsoever in acting in accordance with the opinion or instruction of such counsel. Depositor
and Recipient, jointly and severally, shall promptly pay, upon demand, the reasonable fees and expenses of any such counsel. 


        (b)   The
Escrow Agent is authorized, in its sole discretion, to comply with orders issued or process entered by any court with respect to the Escrow Funds, without
determination by the Escrow Agent of such court's jurisdiction in the matter. If any portion of the Escrow Funds is at any time attached, garnished or levied upon under any court order, or in case the
payment, assignment, transfer, conveyance or delivery of any such property shall be stayed or enjoined by any court order, or in case any order, judgment or decree shall be made or entered by any
court affecting such property or any part thereof, then and in any such event, the Escrow Agent is authorized, in its sole discretion, to rely upon and comply with any such order, writ, judgment or
decree which it is advised by legal counsel selected by it is binding upon it without the need for appeal or other action; and if the Escrow Agent complies with any such order, writ, judgment or
decree, it shall not be liable to any of the parties hereto or to any other person or entity by reason 



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of
such compliance even though such order, writ, judgment or decree may be subsequently reversed, modified, annulled, set aside or vacated. 



        9.    Indemnification of Escrow Agent.    From and at all times after the date of this Escrow
Agreement, Depositor and Recipient, jointly and severally, shall, to the fullest extent permitted by law and to the extent provided herein, indemnify and hold harmless Escrow Agent and each director,
officer, employee, attorney, agent and affiliate of Escrow Agent (collectively, the "Indemnified Parties") against any and all actions, claims (whether or not valid), losses, damages, liabilities,
costs and expenses of any kind or nature whatsoever (including without limitation reasonable attorneys' fees, costs and expenses) incurred by or asserted against any of the Indemnified Parties from
and after the date hereof, whether direct, indirect or consequential, as a result of or arising from or in any way relating to any claim, demand, suit, action or proceeding (including any inquiry or
investigation) by any person, including without limitation Depositor or Recipient, whether threatened or initiated, asserting a claim for any legal or equitable remedy against any person under any
statute or regulation, including, but not limited to, any federal or state securities laws, or under any common law or equitable cause or otherwise, arising from or in connection with the negotiation,
preparation, execution, performance or failure of performance of this Escrow Agreement or any transactions contemplated herein, whether or not any such Indemnified Party is a party to any such action,
proceeding, suit or the target of any such inquiry or investigation; provided, however, that no Indemnified Party shall have the right to be indemnified hereunder for any liability finally determined
by a court of competent jurisdiction, subject to no further appeal, to have resulted solely from the gross negligence or willful misconduct of such Indemnified Party. If any such action or claim shall
be brought or asserted against any Indemnified Party, such Indemnified Party shall promptly notify Depositor and Recipient in writing, and Depositor and Recipient shall assume the defense thereof,
including the employment of counsel and the payment of all expenses. Such Indemnified Party shall, in its sole discretion, have the right to employ separate counsel (who may be selected by such
Indemnified Party in its sole discretion) in any such action and to participate in the defense thereof, and the fees and expenses of such counsel shall be paid by such Indemnified Party, except that
Depositor and/or Recipient shall be required to pay such fees and expenses if (a) Depositor and/or Recipient agree to pay such fees and expenses, or (b) Depositor and/or Recipient shall
fail to assume the defense of such action or proceeding or shall fail, in the sole discretion of such Indemnified Party, to employ counsel satisfactory to the Indemnified Party in any such action or
proceeding, (c) Depositor or Recipient is the plaintiff in any such action or proceeding or (d) the named or potential parties to any such action or proceeding (including any potentially
impleaded parties) include both Indemnified Party and Recipient and/or Depositor, and Indemnified Party shall have been advised by counsel that there may be one or more legal defenses available to it
which are different from or additional to those available to Recipient or Depositor. Depositor and Recipient shall be jointly and severally liable to pay fees and expenses of counsel pursuant to the
preceding sentence, except that any obligation to pay under clause (a) shall apply only to the party so agreeing. All such fees and expenses payable by Recipient and/or Depositor pursuant to
the foregoing sentence shall be paid from time to time as incurred, both in advance of and after the final disposition of such action or claim. All of the foregoing losses, damages, costs and expenses
of the Indemnified Parties shall be payable by Depositor and Recipient, jointly and severally, to the extent of the Escrow Funds upon demand by such Indemnified Party. Upon exhaustion of the Escrow
Funds, the indemnification obligations of Depositor and Recipient hereunder shall be borne solely by Depositor, and not jointly and severally. The obligations of Depositor and Recipient under this  Section 9
shall survive any termination of this Escrow Agreement, and the resignation or removal of Escrow Agent shall be independent of any
obligation of the Escrow Agent. 



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        The
parties agree that neither the payment by Depositor or Recipient of any claim by Escrow Agent for indemnification hereunder nor the disbursement of any amounts to Escrow Agent from
the Escrow
Funds in respect of a claim by Escrow Agent for indemnification shall impair, limit, modify, or affect, as between Depositor and Recipient, the respective rights and obligations of Depositor, on the
one hand, and Recipient, on the other hand, under the Underlying Agreement. 



        10.    Fees and Expenses of Escrow Agent.    Depositor shall compensate Escrow Agent for its
services hereunder in accordance with Schedule B attached hereto and, in addition, shall reimburse Escrow Agent for all of its reasonable
out-of-pocket expenses, including attorneys' fees, travel expenses, telephone and facsimile transmission costs, postage (including express mail and overnight delivery charges),
copying charges and the like. All of the compensation and reimbursement obligations set forth in this Section 10 shall be payable by Depositor
upon demand by Escrow Agent. The obligations of Depositor under this Section 10 shall survive any termination of this Escrow Agreement and the
resignation or removal of Escrow Agent. 


        Escrow
Agent is authorized to, and may, disburse to itself from the Escrow Funds, from time to time, the amount of any compensation and reimbursement of
out-of-pocket expenses due and payable hereunder (including any amount to which Escrow Agent or any Indemnified Party is entitled to seek indemnification pursuant to  Section 9 hereof.) Escrow Agent
shall notify the Representatives of any disbursement from the Escrow Funds to itself or any Indemnified Party in
respect of any compensation or reimbursement hereunder and shall furnish to the Representatives copies of all related invoices and other statements. Recipient and Depositor hereby grant to Escrow
Agent and the Indemnified Parties a security interest in and lien upon the Escrow Funds and all funds therein to secure all obligations hereunder to Escrow Agent and the Indemnified Parties, and
Escrow Agent and Indemnified Parties shall have the right to offset the amount of any compensation or reimbursement due any of them hereunder (including any claim for indemnification pursuant to  Section 9 hereof) against the Escrow Funds. If for any reason funds in the Escrow Funds are insufficient to cover such compensation and
reimbursement, Depositor shall promptly pay such amounts to Escrow Agent or any Indemnified Party upon receipt of an itemized invoice. 



        11.    Representations and Warranties.    


        (a)   Depositor
makes the following representations and warranties to Escrow Agent: 



        (i)    Depositor
is a limited liability company duly organized, validly existing, and in good standing under the laws of the State of Delaware, and has full power and authority
to execute and deliver this Escrow Agreement and to perform its obligations hereunder; 



        (ii)   This
Escrow Agreement has been duly approved by all necessary corporate action of Depositor, including any necessary shareholder or member approval, has been executed
by duly authorized officers of Depositor, and constitutes a valid and binding agreement of Depositor, enforceable in accordance with its terms; 


        (iii)  The
execution, delivery, and performance by Depositor of this Escrow Agreement is in accordance with the Underlying Agreement and will not violate, conflict with, or
cause a default under the certificate of formation or limited liability company agreement of Depositor, any applicable law or regulation, any court order or administrative ruling or decree to which
Depositor is a party or any of its property is subject, or any agreement, contract, indenture, or other binding arrangement, including without limitation the Underlying Agreement, to which Depositor
is a party or any of its property is subject; 


        (iv)  Marc
C. Baliotti and Daniel H. Clare have been duly appointed to act as Depositor Representative hereunder and jointly (and not severally) have full power and authority
to execute, deliver, and perform this Escrow Agreement, jointly to execute and deliver any Joint 




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Written
Direction, jointly to amend, modify or waive any provision of this Agreement and jointly to take any and all other actions as the Depositor Representative under this Agreement, all without
further consent or direction from, or notice to, Depositor or any other party; and 


        (v)   No
party other than the parties hereto have, or shall have, any lien, claim or security interest in the Escrow Funds or any part thereof. No financing statement under
the Uniform Commercial Code is on file in any jurisdiction claiming a security interest in or describing (whether specifically or generally) the Escrow Funds or any part thereof, other than a
financing statement in favor of Recipient. 




        (b)   Recipient
makes the following representations and warranties to Escrow Agent: 



        (i)    Recipient
is a corporation duly organized, validly existing, and in good standing under the laws of the State of Delaware, and has full power and authority to execute
and deliver this Escrow Agreement and to perform its obligations hereunder; 


        (ii)   This
Escrow Agreement has been duly approved by all necessary corporate action of Recipient, including any necessary shareholder approval, has been executed by duly
authorized officers of Recipient, and constitutes a valid and binding agreement of Recipient, enforceable in accordance with its terms; 


        (iii)  The
execution, delivery, and performance by Recipient of this Escrow Agreement is in accordance with the Underlying Agreement and will not violate, conflict with, or
cause a default under the articles of incorporation or bylaws of Recipient, any applicable law or regulation, any court order or administrative ruling or decree to which Recipient is a party or any of
its property is subject, or any
agreement, contract, indenture, or other binding arrangement, including without limitation the Underlying Agreement, to which Recipient is a party or any of its property is subject; 


        (iv)  S.
L. Love has been duly appointed to act as a Recipient Representative hereunder and has full power and authority to execute, deliver, and perform this Escrow
Agreement, to execute and deliver any Joint Written Direction or Recipient Written Direction, to amend, modify or waive any provision of this Agreement and to take any and all other actions as the
Recipient Representative under this Agreement, all without further consent or direction from, or notice to, Recipient or any other party; and 



        (v)   No
party other than the parties hereto have, or shall have, any lien, claim or security interest in the Escrow Funds or any part thereof. No financing statement under
the Uniform Commercial Code is on file in any jurisdiction claiming a security interest in or describing (whether specifically or generally) the Escrow Funds or any part thereof, other than a
financing statement in favor of Recipient. 




        (c)   Escrow
Agent makes the following representations and warranties to Depositor and Recipient: 



        (i)    Escrow
Agent is a national banking association duly organized, validly existing and in good standing and has full power and authority to execute and deliver this Escrow
Agreement and to perform its obligations hereunder; and 


        (ii)   This
Escrow Agreement has been duly approved by all necessary corporate action of Escrow Agent, has been executed by duly authorized officers of Escrow Agent, and
constitutes a valid and binding agreement of Escrow Agent, enforceable in accordance with its terms. 




        12.    Consent to Jurisdiction and Venue.    In the event that any party hereto commences a
lawsuit or other proceeding relating to or arising from this Agreement, the parties hereto agree 



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that
the United States District Court for the Southern District of New York shall have non-exclusive jurisdiction over any such proceeding. Such court shall be proper venue for any such
lawsuit or judicial proceeding and the parties hereto waive any objection to such venue. The parties hereto consent to and agree to submit to the jurisdiction of such court specified herein and agree
to accept service or process to vest personal jurisdiction over them in such court. 


        13.    Notice.    All notices and other communications hereunder shall be in writing and shall
be deemed to have been validly served, given or delivered five (5) days after deposit in the United States mails, by
certified mail with return receipt requested and postage prepaid, when delivered personally, one (1) day after delivery to any overnight courier, or when transmitted by facsimile transmission
facilities, and addressed to the party to be notified as follows: 



        If
to Depositor, at: 




c/o
Highstar Renewable Fuels LLC

175 Water Street

New York, New York 10038

Attention: Christopher H. Lee and Marc C. Baliotti

Telephone No. (212) 458-2338

Facsimile No. (212) 458-2222 



c/o
DLJ Merchant Banking III, Inc.

Eleven Madison Avenue, 16th Floor

New York, New York 10010

Attention: Ari Benacerraf and Daniel H. Clare

Telephone No. (212) 538-2255

Facsimile No. (646) 935-7190 





        With
a copy to: 




Bingham
McCutchen LLP

150 Federal Street

Boston, Massachusetts 02110

Attention: Vincent M. Sacchetti

Telephone No. (617) 951-8563

Facsimile No. (617) 951-8736 


Weil,
Gotshal & Manges LLP

767 Fifth Avenue

New York, New York 10153-0119

Attention: David Blittner

Telephone No. (212) 310-8329

Facsimile No. (212) 310-8007 





        If to Recipient, at: 




Duke
Capital Corporation

Mail Code PB03G

422 South Church Street, 5th Floor

Charlotte, North Carolina 28201 - 1244

United States of America

Attention: Director, Corporate Treasury

Telephone No. (704) 382-3239

Facsimile No. (704) 382-9497 






10





 







        With
a copy to: 




Robinson,
Bradshaw & Hinson, P.A.

101 North Tryon Street, Suite 1900

Charlotte, North Carolina 28246

Attention: Matthew S. Churchill

Telephone No. (704) 377-8388

Facsimile No. (704) 373-3988, 





        If
to the Escrow Agent, at: 




Wachovia
Bank, National Association, as Escrow Agent

401 S. Tryon Street, 12th Floor

Charlotte, NC 28288-1179

Attn: Corporate Trust Bond Administration

Telephone No. (704) 374-6914

Facsimile No. (704) 383-7316 






or
to such other address as each party may designate for itself by like notice. 


        14.    Amendment or Waiver.    This Escrow Agreement may be changed, waived, discharged or
terminated only by a writing signed by the Depositor, the Recipient and Escrow Agent. No delay or omission by any party in exercising any right with respect hereto shall operate as a waiver. A waiver
on any one occasion shall not be construed as a bar to, or waiver of, any right or remedy on any future occasion. 


        15.    Severability.    To the extent any provision of this Escrow Agreement is prohibited by
or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions
of this Escrow Agreement. 


        16.    Governing Law.    This Escrow Agreement shall be construed and interpreted in
accordance with the internal laws of the State of New York without giving effect to the conflict of laws principles thereof; provided, that, to the
extent applicable, the provisions of the Uniform Commercial Code as in effect in the State of North Carolina shall apply with respect to the provisions of Sections 22 - 26
hereof. 


        17.    Entire Agreement.    This Escrow Agreement constitutes the entire agreement between the
parties relating to the holding, investment and disbursement of the Escrow Funds and sets forth in their entirety the obligations and duties of Escrow Agent with respect to the Escrow Funds. 


        18.    Binding Effect.    All of the terms of this Escrow Agreement, as amended from time to
time, shall be binding upon, inure to the benefit of and be enforceable by the respective heirs, successors and assigns of Depositor, Recipient and Escrow Agent. 


        19.    Execution in Counterparts.    This Escrow Agreement and any Joint Written Direction may
be executed in two or more counterparts, which when so executed shall constitute one and the same agreement or direction. 


        20.    Termination.    Upon the first to occur of (i) the disbursement of all amounts
in the Escrow Funds pursuant to Joint Written Directions or Recipient Written Directions and receipt of written notice from Depositor and Recipient that Depositor has no further obligations under this
Escrow Agreement pursuant to the Underlying Agreement or (ii) the disbursement of all amounts in the Escrow Funds into court pursuant to Section 5  hereof and receipt of written notice from
Depositor and Recipient that Depositor has no further obligations under this Escrow Agreement pursuant to the Underlying Agreement,
this Escrow Agreement shall terminate and Escrow Agent 



11





 




shall
have no further obligation or liability whatsoever with respect to this Escrow Agreement or the Escrow Funds. 


        21.    Dealings.    The Escrow Agent and any stockholder, director, officer or employee of the
Escrow Agent may buy, sell, and deal in any of the securities of the Depositor or Recipient and become pecuniarily interested in any transaction in which the Depositor or Recipient may be interested,
and contract and lend money to the Depositor or, Recipient and otherwise act as fully and freely as though it were not
Escrow Agent under this Agreement. Nothing herein shall preclude the Escrow Agent from acting in any other capacity for the Depositor or Recipient or for any other entity. 


        22.    Security.    


        (a)   Depositor
hereby pledges, assigns and delivers to the Recipient, and grants to the Recipient, a lien upon and security interest in, all of Depositor's right, title and
interest in and to the following to secure the full and prompt payment, at any time and from time to time as and when due, of any amounts due to Recipient under the Underlying Agreement: 



        (i)    the
escrow account created pursuant to Section 3, hereof, 


        (ii)   the
Escrow Funds; and 


        (iii)  any
and all proceeds (as defined in the Uniform Commercial Code as in effect in the State of North Carolina) of or from any and all of the foregoing. 




        The
foregoing liens and security interest are subject to the liens and security interests in favor of the Escrow Agreement granted under Section 10 of the Agreement. 


        (b)   Each
of Depositor, Recipient and the Escrow Agent agree to execute customary security documents to effect the security interest described herein. Depositor hereby
irrevocably authorizes Recipient at any time and from time to time to file in any filing office in any Uniform Commercial Code jurisdiction any initial financing statements and amendments thereto that
(a) indicate the collateral as described in this Section 22 or words of similar effect, or as being of equal or lesser scope or in greater
detail, and (b) contain any other information required by part 5 of Article 9 of the Uniform Commercial Code of the jurisdiction of the filing office for the sufficiency or filing
office acceptance of any financing statement or amendment, including whether Depositor is an organization, the type of organization and any organization identification number issued to Depositor.
Depositor agrees to furnish any such information to Recipient promptly upon request. 


        23.    The Account.    


        (a)   The
Escrow Agent hereby represents and warrants to Depositor and Recipient that (i) the escrow account described in Section 3  (the "Account") has been established, (ii) the Account statements
to be provided from time to time will contain a complete and accurate statement of the Escrow Funds
maintained in the Account and (iii) there are no claims to or interests in the Account arising by, through or from the Escrow Agent (other than those expressly permitted hereby) and, to the
best of Escrow Agent's knowledge, there is no other claim to or interest in the Account except for (i) the claims and interest of Depositor and Recipient in the Account and (ii) the
claims of Escrow Agent and the Indemnified Parties pursuant to Sections 9 and 10 of the Escrow Agreement. 


        (b)   Depositor
hereby represents and warrants to Recipient that, to the extent valid and legally binding "security entitlements", as defined in Article 8 of the UCC,
have been created with respect to the financial assets to be carried in the Account, they have been pledged to Recipient pursuant to this Escrow Agreement. Each party hereto agrees that the Account
constitutes a "securities account" and that all property from time to time credited to the Account will be 



12





 




treated
as "financial assets" and, with respect to such property, the Escrow Agent is the "securities intermediary" and Depositor is an "entitlement holder," each within the meaning of the UCC. For
purposes of perfecting the security interest of Recipient in any property (other than security entitlements of Depositor) at any time now or hereafter held in or credited to the Account, Escrow Agent
hereby acknowledges that it holds and will hold such property as collateral for the benefit of Recipient, subject to the terms and conditions of this Agreement. All property delivered to Escrow Agent
and directed by Depositor to be included in the Account pursuant to the terms of the Escrow Agreement shall be promptly credited to the Account. All parties agree that the Account and all property
held by the Escrow Agent in the Account, including without limitation cash or credit balances, will be treated as investment property under Article 9 of the UCC and financial assets under
Article 8 of the UCC. 


        24.    Control.    Escrow Agent will comply with all Recipient Written Directions it receives
directing it to transfer or redeem any property in the Account or other directions concerning the Account to the extent directed by Recipient and without further consent from Depositor or any other
person. In the event Escrow Agent desires to engage other parties to perform any of its duties in conjunction with the Account which would require additional actions to continue Recipient's perfected
security interest in the Account and all the property in the Account, then prior to engaging such party, Escrow Agent shall obtain such agreements and provide such assurances as are reasonably
required by Recipient to preserve its perfected security interest in the Account and all the property in the Account. 


        25.    Depositor's Rights in Account.    If Escrow Agent receives a written notice from
Recipient (a "Notice of Exclusive Control") that Recipient exercises exclusive control over the Account, Depositor's rights under Section 6 shall be exercised by Recipient. Until Escrow Agent
receives a Notice of Exclusive Control, Depositor shall continue to have the rights contemplated by Section 6 of the Escrow Agreement. 


        26.    Priority of the Recipient's Security Interest.    


        (a)   Except
as provided in Sections 9 and 10, the Escrow Agent subordinates in favor of the Recipient any security
interest, lien or right of setoff it may have, now or in the future, against the Account and all property from time to time in the Account. 


        (b)   The
Depositor will be solely responsible for any filings necessary to perfect its security interest in the assets pledged pursuant to  Section 22.


        27.    Identifying Information,.    Depositor and Recipient acknowledge that a portion of the
identifying information set forth on Schedule C is being requested by the Escrow Agent in connection with the USA Patriot Act,
Pub.L.107-56 (the "Act"), and Depositor and Recipient agree to provide any additional information requested by the Escrow Agent in connection with the Act or any similar legislation or
regulation to which Escrow Agent is subject, in a timely manner. The Depositor and the Recipient each represent that all identifying information set forth on Schedule C,  including without
limitation, its Taxpayer Identification Number assigned by the Internal Revenue Service or any other taxing authority, is true and complete on the date hereof
and will be true and complete at the time of any disbursement of the Escrow Funds. 



13





 





        IN WITNESS WHEREOF, the parties hereto have caused this Escrow Agreement to be executed under seal as of the date first above written. 



	

 	
 	
MSW ENERGY HOLDINGS LLC
	

 	
 	

By:	

/s/  MICHAEL J. MILLER      
 Name:  Michael J. Miller

Title:    CEO
	

 	
 	
DUKE CAPITAL CORPORATION
	

 	
 	

By:	

/s/  DAVID L. HAUSER      
 Name:  David L. Hauser

Title:    Vice President & Treasurer
	

 	
 	
WACHOVIA BANK, NATIONAL ASSOCIATION, as Escrow Agent
	

 	
 	

By:	

/s/  ALLISON LANCASTER-POOLE      
 Name:  Allison Lancaster-Poole

Title:    Assistant Vice Presdient




14





 
 

SCHEDULE A    
    
    Required Amount    
    



	Deposit Date
 
	 	Column A Required Amount

(without Lease Extension or Renewal)
	 	Column B Required Amount

(with Lease Extension or Renewal)

	June 30, 2004 - June 30, 2009	 	$	5,000,000	 	$	15,000,000
	June 30, 2010	 	$	6,000,000	 	$	16,000,000
	June 30, 2011 and all Deposit Dates thereafter	 	$	7,000,000	 	$	17,000,000










 
 

SCHEDULE B    
    
    Fees Payable to Escrow Agent    
    
    WACHOVIA BANK, NATIONAL ASSOCIATION    
    
    Escrow Agent Services for    
    
    Duke Capital Corporation
  and
  MSW
Energy Holdings LLC    
    


Schedule of Fees  



	Acceptance Fee:	 	$500, in Advance
	

Annual Administration Fee:	
 	

$1,500, in Advance
	

Money Market Investment Sweep:	
 	

10 Basis Points (0.10%)
	

Transaction Expenses:	
 	

 
	 	Per Wire Transfer or Check:	 	$35 Wire and $25 Check
	 	Per Security Purchase/Sale:	 	$25 (excluding Money Market)
	

Legal Fees and Expenses:	
 	

$500






        The
Acceptance Fee and the initial Annual Administration Fee are payable at the closing of this transaction. Thereafter, the Trustee Administration Fees and any expenses will be billed
on the anniversary date of the closing. The Annual Administration Fees will not be pro-rated. 


        If
Required Amount, as defined in the Escrow Agreement, ever falls below $5,000,000, then Wachovia reserves the right to revise its fees. 


        The
above-mentioned Fees are basic charges and do not include out-of-pocket expenses, which will be billed in addition to the regular charges as required.
Out-of-pocket expenses shall include, but are not limited to: telephone tolls, stationery, travel and postage expenses. 


        Charges
for performing extraordinary or other services not contemplated at the time of the execution of the transaction or not specifically covered elsewhere in this schedule will be
determined by appraisal in amounts commensurate with the service to be provided. Counsel fees, if ever retained as a result of default or other extraordinary occurrence on behalf of Wachovia will be
billed at cost. 


        Services
not included in this Fee Schedule, but deemed necessary or desirable by you, may be subject to additional charges based on a mutually agreed upon fee schedule. 


        Our
proposal is subject in all aspects to Wachovia's review and acceptance of the final financing documents, which set forth our duties and responsibilities. 







ANNEX I  


 
  FORM OF
  JOINT WRITTEN DIRECTION
  TO
  WACHOVIA BANK, NATIONAL ASSOCIATION    
    


Wachovia
Bank, National Association,

        as Escrow Agent

401 S. Tryon Street, 12th Floor

Charlotte, NC 28288-1179

Attention: Corporate Trust Bond Administration 



To
Whom It May Concern: 


        This
Joint Written Direction is given pursuant to the Escrow Agreement, dated as of June    , 2003, by and between MSW Energy Holdings LLC, Duke Capital Corporation and
Wachovia Bank, National Association, as Escrow Agent (the "Escrow Agreement"). Capitalized terms used but not defined herein shall have the meanings given to them in the Escrow Agreement. 


        The
Escrow Agent is hereby directed as follows: 



	1.
	
[                                         
       ].




	2.
	
[                                         
       ].







        This
the            day of                  , 20    . 



	 	 	DEPOSITOR REPRESENTATIVE:

Highstar Representative
	    	 	 	 
	

 	
 	


	 	 	Name:	 
	 	 	 	

	

 	
 	

MSW Acquisition Representative
	    	 	 	 
	 	 	

	 	 	Name:	 
	 	 	 	

	

 	
 	
RECIPIENT REPRESENTATIVE
	    	 	 	 
	

 	
 	


	 	 	Name:	 
	 	 	 	








ANNEX II  


 
  FORM OF
  RECIPIENT WRITTEN DIRECTION
  TO
  WACHOVIA BANK, NATIONAL ASSOCIATION    
    


Wachovia
Bank, National Association,

        as Escrow Agent

401 S. Tryon Street, 12th Floor

Charlotte, NC 28288-1179

Attention: Corporate Trust Bond Administration 


To
Whom It May Concern: 


        This
Recipient Written Direction is given pursuant to the Escrow Agreement, dated as of June    , 2003, by and between MSW Energy Holdings LLC, Duke Capital Corporation and
Wachovia Bank, National Association, as Escrow Agent (the "Escrow Agreement"). Capitalized terms used but not defined herein shall have the meanings given to them in the Escrow Agreement. 


        The
undersigned Recipient Representative hereby certifies to the Escrow Agent that fees in the amount of
$                        payable pursuant to Section 2.01 of the Underlying
Agreement have not been paid when due. The Undersigned Recipient Representative further certifies that five (5) days prior notice has been give to the Depositor stating that this Recipient
Written Direction is being furnished to the Escrow Agent. 


        Pursuant
to Section 4(a) of the Escrow Agreement, the Escrow Agent is directed to disburse to the Recipient the sum of
[                        ] Dollars
($[                        ]), such amount representing the amount of fees due and owing pursuant to Section 2.01 of the
Underlying Agreement. The Escrow Agent is directed to
disburse such amount by wire transfer to [Name of                  Account], Account Number
[                        ] Wachovia Bank, National Association,
Charlotte, North Carolina, ABA Number [                        ]. The costs of such wire transfer shall be deducted from the sum
to be disbursed in this paragraph. 



        This
the            day of                  , 20    . 



	 	 	RECIPIENT REPRESENTATIVE
	    	 	 	 
	

 	
 	


	 	 	Name:	 
	 	 	 	










 
 

SCHEDULE C    
    


	1.
	Taxpayer Identification Numbers.



Depositor:    #14-1873119 


Recipient:    #
1-51-0252142 



	2.
	Investment Instructions



Until
it receives alternative investment instructions, the Escrow Agent will invest the Escrow Funds in Evergreen Institutional Money Market Fund #495, Institutional Class. The minimum fee for
sweeping funds into or out of the fund selected is an annualized amount of 10/100 of 1% (10 basis points) and is deducted from the interest posted to the account. 



	3.
	Representatives.



The
following persons are hereby designated and appointed as Depositor Representative under the Escrow Agreement: 



	Highstar Representative:	 	 
	

Marc C. Baliotti
 Name	
 	

    
 Specimen signature
	    	 	 
	

MSW Acquisition Representative:	
 	

 
	

Daniel H. Clare
 Name	
 	

    
 Specimen signature






The
following person is hereby designated and appointed as Recipient Representative under the Escrow Agreement: 



	S.L. Love
 Name	 	    
 Specimen signature





	4.
	Representative Information.    The following information should be provided to Escrow Agent separately by each Representative
and any future Representative:



	1.
	Date
of Birth



	2.
	Address



	3.
	Mailing
Address, if different



	4.
	Social
Security Number 












	5.
	Notice Addresses.






	If to Depositor, at:	 	c/o Highstar Renewable Fuels LLC

175 Water Street

New York, New York 10038

Attention: Christopher H. Lee and Marc C. Baliotti

Telephone No. (212) 458-2338

Facsimile No. (212) 458-2222
	

 	
 	

c/o DLJ Merchant Banking III, Inc.

Eleven Madison Avenue, 16th Floor

New York, New York 10010

Attention: Ari Benacerraf and Daniel H. Clare

Telephone No. (212) 538-2255

Facsimile No. (646) 935-7190
	

With a copy to:	
 	

Bingham McCutchen LLP

150 Federal Street

Boston, Massachusetts 02110

Attention: Vincent M. Sacchetti

Telephone No. (617) 951-8563

Facsimile No. (617) 951-8736
	

 	
 	

Weil, Gotshal & Manges LLP

767 Fifth Avenue

New York, New York 10153-0119

Attention: David Blittner

Telephone No. (212) 310-8329

Facsimile No. (212) 310-8007
	

If to Recipient, at:	
 	

Duke Capital Corporation

Mail Code PB03G

422 South Church Street, 5th Floor

Charlotte, North Carolina 28201 - 1244

United States of America

Attention: Director, Corporate Treasury

Telephone No. (704) 382-3239

Facsimile No. (704) 382-9497
	

With a copy to:	
 	

Robinson, Bradshaw & Hinson, P.A.

101 North Tryon Street, Suite 1900

Charlotte, North Carolina 28246

Attention: Matthew S. Churchill

Telephone No. (704) 377-8388

Facsimile No. (704) 373-3988,
	

If to the Escrow Agent, at:	
 	

Wachovia Bank, National Association, as Escrow Agent

401 S. Tryon Street, 12th Floor

Charlotte, NC 28288-1179

Attn: Corporate Trust Bond Administration

Telephone No. (704) 374-6914

Facsimile No. (704) 383-7316












QuickLinks


ESCROW AGREEMENT

SCHEDULE A Required Amount


SCHEDULE B Fees Payable to Escrow Agent WACHOVIA BANK, NATIONAL ASSOCIATION Escrow Agent Services for Duke Capital Corporation and MSW Energy Holdings LLC


FORM OF JOINT WRITTEN DIRECTION TO WACHOVIA BANK, NATIONAL ASSOCIATION

FORM OF RECIPIENT WRITTEN DIRECTION TO WACHOVIA BANK, NATIONAL ASSOCIATION



SCHEDULE C