Exhibit 10.24


 


EXECUTION COUNTERPART


 


REDACTED


 


ENERGY MANAGEMENT AGREEMENT


 


Dated as of


 


August 17, 2004


 


By and Between


 


KGEN HOT SPRING LLC


 


As Owner


 


and


 


 


THE CINCINNATI GAS & ELECTRIC COMPANY


 


As Energy Manager


 

















 


TABLE OF CONTENTS


 


	
  ARTICLE I DEFINITIONS

  	
  1

  
	
   

  	
   

  	
   

  
	
  1.1

  	
  RULES OF INTERPRETATION

  	
  1

  
	
  1.2

  	
  DEFINED TERMS

  	
  2

  
	
   

  	
   

  	
   

  
	
  ARTICLE II APPOINTMENT OF ENERGY MANAGER AND TERM

  	
  10

  
	
   

  	
   

  
	
  2.1

  	
  APPOINTMENT

  	
  10

  
	
  2.2

  	
  TERM

  	
  10

  
	
  2.3

  	
  COMMODITY TRANSACTIONS AND RELATED AGREEMENTS

  	
  11

  
	
  2.4

  	
  RELATIONSHIP OF PARTIES

  	
  11

  
	
  2.5

  	
  NON-CIRCUMVENTION

  	
  12

  
	
   

  	
   

  	
   

  
	
  ARTICLE III OWNER’S RIGHTS AND RESPONSIBILITIES

  	
  13

  
	
   

  	
   

  	
   

  
	
  3.1

  	
  OWNER RIGHTS AND RESPONSIBILITIES

  	
  13

  
	
  3.2

  	
  OWNER’S REPRESENTATIVES

  	
  15

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV OBLIGATIONS OF ENERGY MANAGER/STANDARD OF PERFORMANCE

  	
  15

  
	
   

  	
   

  	
   

  
	
  4.1

  	
  SERVICES GENERALLY

  	
  15

  
	
  4.2

  	
  STANDARD OF PERFORMANCE OF OBLIGATIONS

  	
  15

  
	
  4.3

  	
  LIMITATION ON AUTHORITY OF ENERGY MANAGER

  	
  16

  
	
  4.4

  	
  AFFILIATES

  	
  16

  
	
   

  	
   

  	
   

  
	
  ARTICLE V SERVICES

  	
  17

  
	
   

  	
   

  	
   

  
	
  5.1

  	
  POWER MANAGEMENT SERVICES

  	
  17

  
	
  5.2

  	
  FUEL MANAGEMENT SERVICES

  	
  17

  
	
  5.3

  	
  RISK MANAGEMENT SERVICES

  	
  18

  
	
  5.4

  	
  ENHANCEMENT OF GENERATION MARGIN

  	
  18

  
	
  5.5

  	
  REPORTING REQUIREMENTS

  	
  18

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI FEES; SETTLEMENT

  	
  19

  
	
   

  	
   

  	
   

  
	
  6.1

  	
  MANAGEMENT FEES

  	
  19

  
	
  6.2

  	
  RESTART FEE

  	
  19

  
	
  6.3

  	
  FINANCIAL SETTLEMENT AND PAYMENT OF MANAGEMENT FEE

  	
  19

  
	
   

  	
   

  	
   

  
	
  ARTICLE VII TRANSACTION PROCEDURES

  	
  20

  
	
   

  	
   

  	
   

  
	
  7.1

  	
  BACK TO BACK CONTRACTS

  	
  20

  
	
  7.2

  	
  LONG TERM COMMODITY TRANSACTIONS

  	
  21

  
	
  7.3

  	
  SHORT TERM COMMODITY TRANSACTIONS

  	
  21

  
	
  7.4

  	
  DAY-AHEAD COMMODITY TRANSACTIONS

  	
  22

  
	
  7.5

  	
  OTHER TRANSACTIONS; ANCILLARY SERVICES

  	
  22

  
	
  7.6

  	
  RELATED AGREEMENTS

  	
  22

  
	
  7.7

  	
  RISK MANAGEMENT SERVICES

  	
  22

  
	
  7.8

  	
  DELEGATION

  	
  24

  
	
   

  	
   

  	
   

  
	
  ARTICLE VIII REPORTS, RECORDS AND AUDITS

  	
  24

  
	
   

  	
   

  	
   

  
	
  8.1

  	
  REPORTS

  	
  24

  
	
  8.2

  	
  BOOKS AND RECORDS

  	
  25

  
	
  8.3

  	
  AUDITS

  	
  25

  



 

















 


	
  ARTICLE IX FORCE MAJEURE

  	
  26

  
	
   

  	
   

  	
   

  
	
  9.1

  	
  PROCEDURE FOR CALLING FORCE MAJEURE

  	
  26

  
	
  9.2

  	
  PERFORMANCE SUSPENDED

  	
  27

  
	
  9.3

  	
  END OF FORCE MAJEURE EVENT

  	
  27

  
	
   

  	
   

  	
   

  
	
  ARTICLE X TERMINATION

  	
  27

  
	
   

  	
   

  	
   

  
	
  10.1

  	
  OWNER TERMINATION EVENTS

  	
  27

  
	
  10.2

  	
  ENERGY MANAGER TERMINATION EVENTS

  	
  28

  
	
  10.3

  	
  ADDITIONAL TERMINATION RIGHT

  	
  29

  
	
  10.4

  	
  TERMINATION PROCEDURE

  	
  29

  
	
  10.5

  	
  POST-TERMINATION TRANSACTION PROCEDURES

  	
  29

  
	
  10.6

  	
  SUCCESSOR TO ENERGY MANAGER

  	
  30

  
	
  10.7

  	
  COOPERATION FOLLOWING TERMINATION

  	
  30

  
	
   

  	
   

  	
   

  
	
  ARTICLE XI INDEMNIFICATION

  	
  31

  
	
   

  	
   

  	
   

  
	
  11.1

  	
  BY ENERGY MANAGER

  	
  31

  
	
  11.2

  	
  BY OWNER

  	
  31

  
	
  11.3

  	
  CONCURRENT NEGLIGENCE

  	
  32

  
	
  11.4

  	
  COOPERATION REGARDING CLAIMS

  	
  32

  
	
  11.5

  	
  DEFENSE OF THIRD-PARTY CLAIMS

  	
  32

  
	
   

  	
   

  	
   

  
	
  ARTICLE XII LIMITATION OF LIABILITY

  	
  33

  
	
   

  	
   

  	
   

  
	
  12.1

  	
  GENERAL LIMITATIONS OF LIABILITY

  	
  33

  
	
  12.2

  	
  LIMITATION OF OWNER’S LIABILITY

  	
  34

  
	
  12.3

  	
  LIMITATION OF ENERGY MANAGER’S LIABILITY

  	
  34

  
	
   

  	
   

  	
   

  
	
  ARTICLE XIII CONFIDENTIALITY

  	
  34

  
	
   

  	
   

  	
   

  
	
  13.1

  	
  NON-DISCLOSURE

  	
  34

  
	
  13.2

  	
  PERMITTED DISCLOSURE

  	
  34

  
	
   

  	
   

  	
   

  
	
  ARTICLE XIV REPRESENTATIONS AND WARRANTIES

  	
  35

  
	
   

  	
   

  	
   

  
	
  14.1

  	
  ENERGY MANAGER REPRESENTATIONS AND WARRANTIES

  	
  35

  
	
  14.2

  	
  OWNER REPRESENTATIONS AND WARRANTIES

  	
  36

  
	
   

  	
   

  	
   

  
	
  ARTICLE XV DISPUTE RESOLUTION

  	
  36

  
	
   

  	
   

  	
   

  
	
  15.1

  	
  DISPUTE RESOLUTION; ARBITRATION

  	
  36

  
	
   

  	
   

  	
   

  
	
  ARTICLE XVI FINANCIAL PERFORMANCE

  	
  37

  
	
   

  	
   

  	
   

  
	
  16.1

  	
  SECURITY BY OWNER

  	
  37

  
	
  16.2

  	
  SECURITY BY ENERGY MANAGER

  	
  38

  
	
   

  	
   

  	
   

  
	
  ARTICLE XVII MISCELLANEOUS

  	
  38

  
	
   

  	
   

  	
   

  
	
  17.1

  	
  SEVERABILITY

  	
  38

  
	
  17.2

  	
  ENTIRE AGREEMENT

  	
  38

  
	
  17.3

  	
  AMENDMENT

  	
  38

  
	
  17.4

  	
  ASSIGNMENT

  	
  38

  
	
  17.5

  	
  NOTICES

  	
  38

  
	
  17.6

  	
  ADDITIONAL DOCUMENTS AND ACTIONS

  	
  39

  
	
  17.7

  	
  WAIVER

  	
  40

  
	
  17.8

  	
  CAPTIONS

  	
  40

  
	
  17.9

  	
  SURVIVAL

  	
  40

  
	
  17.10

  	
  NO THIRD PARTY BENEFICIARY

  	
  40

  



 


ii

















 


	
  17.11

  	
  COUNTERPARTS

  	
  40

  
	
  17.12

  	
  GOVERNING LAW

  	
  40

  
	
  17.13

  	
  REGULATORY FILING

  	
  40

  



 


EXHIBITS


 


	
  Exhibit A

  	
  Master Power
  Purchase and Sale Agreement

  
	
  Exhibit B

  	
  Master Gas
  Purchase and Sale Agreement

  
	
  Exhibit C

  	
  Master ISDA
  Agreement

  
	
  Exhibit D

  	
  Collateral
  Annex

  
	
  Exhibit E

  	
  Operating
  and Dispatch Procedures

  
	
  Exhibit F

  	
  Credit
  Provisions

  
	
  Exhibit G

  	
  Lender
  Criteria

  



 


iii

















 


ENERGY MANAGEMENT AGREEMENT


 


This Energy
Management Agreement (this “Agreement”) dated as of the 17th day of August,
2004, is between KGen Hot Spring LLC, a Delaware limited liability company (the
“Owner”) and The Cincinnati Gas & Electric Company, an Ohio corporation
(the “Energy Manager”). Owner and Energy Manager may be referred to each
individually as a “Party” and collectively as the “Parties”. This Agreement
shall become effective on the Effective Date.


 


PRELIMINARY STATEMENT


 


WHEREAS, Owner owns and operates a combined cycle, natural gas-fired
electrical generating facility rated at approximately 620 megawatts located
approximately 55 miles southwest of Little Rock, Arkansas, consisting of 2
power trains, and interconnected to Entergy Corporation’s Etta substation (the “Facility”);
and


 


WHEREAS, Energy Manager is in the business of providing Power
Management Services, Fuel Management Services and Risk Management Transactions
(as defined below);


 


NOW, THEREFORE, in consideration of the mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the Parties hereto agree as follows:


 


ARTICLE I

DEFINITIONS


 


1.1           Rules of
Interpretation. All references herein to any agreement or other document of
any description shall be construed as of the particular time that such
agreement or other document may then have been executed, amended, varied,
supplemented or modified. References in the singular shall include references
in the plural and vice versa, and words denoting natural persons shall include
partnerships, firms, companies, corporations, joint ventures, trusts,
associations, organizations or other entities (whether or not having a separate
legal personality). References to a particular Article, Section, paragraph,
subparagraph, or Exhibit shall, unless specified otherwise, be a reference to
that Article, Section, paragraph, subparagraph or Exhibit in or to this
Agreement. The words “include” and “including” are to be construed to include
the phrase “not limited to”. Any reference in this Agreement to any Person
includes its permitted successors and assigns or to any Person succeeding to
its functions. All Exhibits are fully incorporated and part of this Agreement. To
the extent of any conflict between the provisions of the body of this Agreement
and the provisions of any of the Implementation Agreements or Related
Agreements, the provisions of the body of this Agreement shall apply; PROVIDED,
HOWEVER, that (i) silence in the provisions of the body of this Agreement as to
a matter covered in any of the Implementation Agreements or Related Agreements
shall not constitute a conflict, and (ii) silence in the provisions of the body
of this Agreement as to a matter covered in any of the Implementation
Agreements or Related Agreements shall mean that the provisions of the
applicable Implementation Agreements or Related Agreements shall control the
matter in question.


 

















 


1.2           Defined Terms.
As used in this Agreement, the following capitalized terms have the meanings
set forth below:


 


“AAA” has the meaning set forth in Section 15.1(b).


 


“Adverse Credit Change” means a change in Energy Manager’s
credit rating for long-term, senior unsecured indebtedness to less than BBB- by
Standard & Poor’s or less than Baa3 by Moody’s, or that Energy Manager
shall cease to have a rating by either Standard & Poor’s or Moody’s.


 


“Affected Party” has the meaning set forth in Section 9.1.


 


“Affiliate” means, with respect to any Person, any other Person
that, directly or indirectly, (i) controls or owns the first Person, (ii) is
controlled or owned by the first Person or (iii) is under common control or
ownership with the first Person, where “own” (including,
with correlative meanings, the terms “owned by” and “under common ownership
with”) means ownership of fifty percent (50%) or more of the equity interests
or rights to distributions on account of equity of the Person, and “control”  (including,
with correlative meanings, the terms “controlled by” and “under common control
with”) means the power to direct or cause the direction of the management or
policies of the Person, whether through the ownership of voting securities, by
contract or otherwise.


 


“Agreement” has the meaning assigned to such term in the first
paragraph of this Agreement.


 


“Ancillary Services” means those services necessary to support
the transmission and distribution of Power from point of generation to point of
delivery while maintaining reliable operation of the transmission system,
including spinning reserves, non-spinning reserves, replacement reserves,
regulation, black-start capability, voltage regulation, regulated capacity or
capacity rights, and any other ancillary services.


 


“Applicable Law” means any federal, state or local laws
(including common law and criminal law), codes, statutes, directives,
ordinances, by-laws, regulations, rules, judgments, consent orders and
agreements with Governmental Authorities, proclamations or delegated or
subordinated legislation of any Governmental Authority that are applicable to
this Agreement, the Parties hereto or the Project.


 


“Availability Notice” has the meaning set forth in Section 2(b)
of Exhibit E.


 


“Back-to-Back Contract” has the meaning set forth in Section
7.1(a).


 


“Business Day” means any day on which Federal Reserve member
banks in New York City are open for business.


 


“Capacity” means the capability of the Facility to produce
Power, expressed in MW.


 


“Chairman” has the meaning set forth in Section 15.1(c).


 


2

















 


“Claims” has the meaning assigned to such term in Section
11.1(a).


 


“Cold Start” means the start-up of a Train immediately after a
continuous sixty-eight (68) hour period or more during which the Train has not
been generating electricity.


 


“Collateral
Annex” has the meaning set forth in Exhibit D.


 


“Confidential
Information” has the meaning set forth in Section 13.1.


 


“Control
Center” means the generation control center of the Transmission Provider,
the independent system operator or other Person, including, in Owner’s sole
discretion, Owner itself, responsible for providing control area services for
the Dispatch of the Facility.


 


“Costs”
means brokerage fees, commissions and other similar third party transaction
costs and expenses reasonably incurred by Energy Manager in entering into new
arrangements which replace terminated transactions.


 


“CPT”
means Central Prevailing Time.


 


“Daily Checkout” has the meaning set forth in Section 2(e) of
Exhibit E.


 


“Day-Ahead
Commodity Transactions” means any agreement between Energy Manager and
Owner for the purchase or sale of Fuel or Power with a term of one day or less
and with a forward start date of one day from the date of the transaction.


 


“Day-Ahead
Dispatch Request” has the meaning set forth in Section 2(c) of Exhibit E.


 


“Day-Ahead
Execution Strategies” means strategies for execution of any Day-Ahead
Commodity Transaction or associated Risk Management Policies and Strategies and
related agreements.


 


“Dispatch”
means a request that the Facility produce Power issued in accordance with the
criteria set forth in Exhibit E.


 


“Duke
Trading” means Duke Energy Trading and Marketing, L.L.C..


 


“Effective
Date” shall mean August 23, 2004.


 


“Energy Manager” has the meaning assigned to such term in the
first paragraph of this Agreement and shall include Energy Manager’s successors
and permitted assigns.


 


“Energy Manager Indemnified Party” means Energy Manager and its
Affiliates, and their respective members, shareholders, partners, principals,
officers, directors, employees, agents and representatives.


 


“Energy Management Plan” has the meaning set forth in Section
3.1(a).


 


3

















 


“Facility” has the meaning assigned to such term in the
Preliminary Statement to this Agreement.


 


“Facility Book” means all transactions, including the
Back-to-Back Contracts, executed by Energy Manager pursuant to Power Sales
Agreements, Fuel Supply Agreements, Related Agreements and transactions for
Risk Management Services in connection with the Services hereunder, indicating,
for each transaction, a date, number identifier, price, and volume.


 


“Force Majeure” means with respect to the Affected Party any
natural phenomena or other event or combination of events that the Affected
Party could not reasonably foresee, control or prevent, and the occurrence of
which the Affected Party has not caused or contributed to, which event(s)
materially impede the Affected Party from performing its obligations under this
Agreement.


 


PROVIDED THAT Force Majeure shall not include
(i) a failure of performance of any Third Party except to the extent that such
failure was caused by an event that would otherwise satisfy the definition of a
Force Majeure event as defined above or under the Implementation Agreements or
Related Agreements, (ii) lack of a market or unfavorable market conditions for
Fuel or Power, (iii) economic hardship, (iv) failure of a Party to timely apply
for, obtain or maintain Permits, or (v) the ability to sell Fuel or Power at a
higher or more favorable price.


 


“Fuel” means natural gas unless otherwise agreed upon between
Owner and Energy Manager.


 


“Fuel Costs” means the actual costs of Fuel, including (i)
commodity charges arising under the Master Gas Purchase and Sale Agreement,
(ii) capacity payments, storage costs, balancing costs, and penalty charges
arising under any Related Agreements, (iii) variable fuel transportation
(including losses and taxes) and (iv) any Third Party transaction costs
applicable to the procurement or transportation of Fuel to the Facility, all
net of any revenues from remarketed Fuel or transportation, and other financial
settlements.


 


“Fuel Management Services” has the meaning assigned to such term
in Section 5.2.


 


“Fuel Supply Agreement” means any agreement between Energy
Manager, and Cinergy Marketing & Trading, L.P., or other Third Party, for
the supply of Fuel to the Facility.


 


“Generation Margin” means with respect to any period of time,
the amount equal to (i) the Power Revenues attributable to Managed
Capacity for such period of time minus (ii) the sum of (A) the Fuel
Costs attributable to Managed Capacity, (B) the O&M Costs attributable
to Managed Capacity for such period of time and (C) fired hour LTSA expenses. Power
Revenues, Fuel Costs, and O&M Costs attributable to Managed Capacity from
transactions entered into during the Initial Term or Term Extension of this
Agreement, as the case may be, but which are realized after the Termination
Date shall be included in the Generation Margin as applicable.


 


“Generation Margin Reconciliation Statement” has the meaning set
forth in Section 6.3(a).


 


4

















 


“Good Industry Practice” means any of the practices, methods,
techniques and standards that, at the time of performance of Energy Manager’s
obligations under this Agreement, are commonly used by Persons performing
similar tasks or services for natural gas-fired power plants in the United
States, and which, in the exercise of reasonable judgment in light of the facts
known at the time the decision was made, could have been expected to accomplish
the desired result. Good Industry Practice is not intended to be limited to the
optimum practice to the exclusion of all others, but rather to be the practice
then generally accepted, having due regard for, among other things, system
reliability, operational limitations of the Facility, contractual obligations,
requirements of Governmental Authorities, operating rules or procedures of
transmission operators, reliability councils, or other existing market
conditions.


 


“Governmental Authority” means any federal, state, local or
municipal government, governmental department, commission, board, bureau,
agency or instrumentality, or any judicial, regulatory or administrative body,
having jurisdiction as to the matter in question.


 


“HE” means hour ending.


 


“Hot Start” means the start-up of a Train immediately after a
continuous eight (8) hour period or less during which the Train has not been
generating electricity.


 


“Implementation Agreements” means the Master Gas Purchase and
Sale Agreement, the Master Power Purchase and Sale Agreement and the Master
ISDA Agreement.


 


“Indemnified Party” has the meaning assigned to such term in
Section 11.4.


 


“Indemnifying Party” has the meaning assigned to such term in
Section 11.4.


 


“Initial Term” has the meaning assigned to such term in Section
2.2.


 


“Insolvency Event” means,
with respect to any Person, such Person (i) shall generally not pay its
debts as such debts become due, (ii) shall admit in writing its inability
to pay its debts generally, or (iii) shall make a general assignment for
the benefit of creditors.


 


“Interest Rate” means, for
the prime rate on corporate loans at large U.S. money center commercial banks
as set forth in the Wall Street Journal “Money Rates” table under the
heading “Prime Rate”, or any successor thereto, on the first date of
publication for the applicable calendar month; provided, however, that the Interest
Rate shall never exceed the maximum rate permitted by Applicable Law.


 


“Intra-Day
Dispatch Request” has the meaning set forth in Section 2(d) of Exhibit E.


 


“KGen LLC”
means KGen LLC, a Delaware limited liability company.


 


“Lender” means any Person providing Project Financing and any
successor or successor in interest thereof.


 


“Lender Criteria” means the Energy Management Criteria attached
as Exhibit G.


 


5

















 


“Liquidated Damages” means the “Liquidated Damages” set forth in
Section 10.3(a) and any liquidated damages payable by a Party under the
Implementation Agreements, or Related Agreements, if any.


 


“Long Term Bias” means the strategy for selling Power or
purchasing Fuel for a term greater than thirty-one (31) days.


 


“Long Term Commodity Transaction” means any agreement between
Energy Manager and Owner, including any tolling arrangement, for the purchase
and sale of Fuel or Power with (i) a term greater than thirty-one (31) days or
(ii) a forward start date greater than thirty-one (31) days from the execution
of the agreement.


 


“Long Term Execution Strategies” means strategies for execution
of any Long Term Commodity Transaction or associated Risk Management Policies
and Strategies and Related Agreements.


 


“Losses” means, with respect to Energy Manager, an amount equal
to the present economic loss to it, if any (exclusive of Costs), resulting from
the termination of a transaction, determined in a commercially reasonable
manner.


 


“Managed Capacity” means the net capacity of the Facility,
expressed in MW, excluding (i) any capacity committed under any tolling
arrangement between Owner and Energy Manager, and (ii) any portion of the
Facility’s capacity, Power or Ancillary Services sold by Owner to a Third Party
pursuant to Section 2.5(b).


 


“Master Gas Purchase and Sale Agreement” means the master gas
purchase and sale agreement in the form attached as Exhibit B.


 


“Master ISDA Agreement” means that certain ISDA Master Agreement
(Multi-Currency Cross Border) in the form published by the International Swap
& Derivatives Association in June 1993, dated of even date herewith,
entered into between Owner and Energy Manager in the form attached as Exhibit
C.


 


“Master Power Purchase and Sale Agreement” means the master power
purchase and sale agreement in the form attached as Exhibit A.


 


“MW” means megawatt.


 


“MWh” means megawatt-hour, or one million watt-hours of Power
per hour.


 


“MMBTU”
means one million British thermal units.


 


“Monthly
Management Fee” has the meaning set forth in Section 6.1.


 


“O&M Agreement” means that certain Operation and Maintenance
Agreement between Owner and the Operator, as the same may be amended,
supplemented or modified from time-to-time.


 


6

















 


“O&M Costs” have the meaning set forth in attachment 1 to
Exhibit E.


 


“Operating
and Dispatch Procedures” has the meaning set forth in Exhibit E.


 


“Operator” means Duke Energy North America, LLC until such time
as it is replaced by Cinergy Solutions, Inc., and, thereafter, Cinergy
Solutions, Inc. and its successors and permitted assigns designated to act as
the operator pursuant to the O&M Agreement.


 


“Other Transaction” means any transaction or arrangement, other
than a Short Term Commodity Transaction or a Long Term Commodity Transaction,
and Related Agreements thereto, which may include agreements and transactions
related to Risk Management Services or Ancillary Services.


 


“Other Transaction Execution Strategies” means strategies for
execution of any Other Transaction or associated Risk Management Policies and
Strategies, and related agreements.


 


“Owner” has the meaning assigned to such term in the first
paragraph of this Agreement and shall include Owner’s successors and permitted
assigns.


 


“Owner Indemnified Party” means Owner and its Affiliates and
their respective members, shareholders, partners, principals, officers,
directors, employees, agents and representatives.


 


“Owner’s Representative” means the representative designated by
Owner for execution of Owner’s commercial strategy for the Facility and to
exercise all of Owner’s rights and obligations hereunder.


 


“Party” has the meaning assigned to such term in the first
paragraph of this Agreement.


 


“Party Arbitrator” has the meaning set forth in Section 15.1(c).


 


“Performance Assurance” has the meaning set forth in the
Collateral Annex.


 


“Permits” means all consents, licenses, approvals,
registrations, permits or other authorizations granted by any Governmental
Authority required in respect of, or in relation to, the Project or the
Services.


 


“Person” means any individual, partnership, corporation,
association, business, trust, limited liability company, Governmental Authority
or other legal entity.


 


“Post-Transition PPAs” means the transactions between Owner and
Duke Trading referenced in (i) a confirmation dated August 5, 2004 among Owner,
KGen Hinds LLC and Duke Trading providing for the sale of up to 10 MW of
capacity and associated first call rights to related energy from either the
Facility or KGen Hinds LLC’s facility, (ii) a confirmation dated August 5, 2004
among Owner and Duke Trading providing for the sale of 100 MW of capacity and
associated first call rights to related energy from the Facility for the period
from August 1, 


 


7

















 


2004 through August 31, 2004
and 80 MW of capacity and associated first call rights to related energy from
the Facility for the period from September 1, 2004 through September 30, 2004
and (iii) a confirmation dated August 5, 2004 among Owner and Duke Trading
providing for the sale of 310 MW of capacity and associated first call rights
to related energy from the Facility for the delivery period specified therein.


 


“Power” means electric capacity as measured in MW, energy as
measured in MWh, and/or any other electric related products or services
available for sale from the Facility, including Ancillary Services.


 


“Power Management Services” has the meaning set forth in
Section 5.1.


 


“Power Purchaser” means any purchaser of Power pursuant to a
Power Sales Agreement.


 


“Power Revenues” means the actual revenues realized from any (i)
Power Sales Agreement, (ii) Other Transaction, (iii) any transaction for
Ancillary Services, and (iv) cash settlements of any financial products used in
connection with the Services, with all of the foregoing being net of (A) all
power transmission costs, fees, penalties and charges arising under the Related
Agreements, (B) any Third Party transaction costs applicable to the sale or
transmission of Power generated by the Facility, and (C) any revenues from
repurchased Power and remarketed Power or transmission, and other financial
settlements.


 


“Power Sales Agreement” means any agreement between Energy
Manager and a Third Party for the sale of Power, including any tolling
arrangement, that is entered into pursuant to this Agreement, which may include
transactions entered into by Energy Manager where the Facility is never
actually Dispatched.


 


“Power Transmission Agreement” means any agreement between Owner
and any Transmission Provider related to the delivery of Power from the
Facility.


 


“Project” means, collectively, the development, financing,
construction, ownership and operation and maintenance of the Facility and all
the ancillary equipment and rights related thereto.


 


“Project Financing” means lending money or extending credit
(including pursuant to any financing lease) (i) to Owner or KGen LLC for the
term or permanent financing of the Project; (ii) to Owner or KGen LLC for
working capital or other business of the Project (including maintenance,
repair, replacement or improvement of the Project); (iii) to Owner or KGen LLC
for any development financing, bridge financing, credit support, credit
enhancement or interest rate protection in connection with the Project; or (iv)
to a purchaser of the Project in connection with any financing transaction in
the form of a “sale-lease back” or synthetic lease involving the purchase of
the Project and related ownership rights from Owner, and a lease of the Project
by such purchaser as lessor and Owner as lessee.


 


“Project Fuel Transportation Agreements” means any fuel
transportation agreement that has been or may be entered into by Owner from
time to time where Energy Manager or its Affiliate serves as agent for Owner.


 


8

















 


“Related Agreements” means Power Transmission Agreements entered
in connection with this Agreement or Project Fuel Transportation Agreements.


 


“Risk Management Policies and Strategies” means strategies designed
to hedge or mitigate risk, including the magnitude and types of acceptable
risks, through risk management transactions.


 


“Risk Management Services” means entering into physical,
financial and derivative product purchases and sales either in bilateral,
over-the-counter or exchange-traded markets for the purpose of hedging or
mitigating price or delivery risks associated with Fuel or Power consisting of
a commodity purchase and sale, swap, cross commodity swap, commodity cap,
commodity floor, commodity collar, basis swap, basis option, commodity option
or any other similar price risk management product, including any combinations
of the foregoing products; PROVIDED HOWEVER, that in no event shall any such
risk management transactions be interpreted to include Short Term Commodity
Transactions or Long Term Commodity Transactions.


 


“Services” means the Power Management Services, Fuel Management
Services, Risk Management Services and any other services that Energy Manager
has agreed to provide hereunder.


 


“Settlement Date” has the meaning set forth in Section 6.3.


 


“Sequent” means Sequent Energy Management, L.P.


 


“Short Term Bias” means the strategy for marketing Power or
purchasing Fuel for terms of thirty-one (31) days or less.


 


“Short Term Commodity Transactions” means any agreement between
Energy Manager and Owner, including any tolling arrangement, for the purchase
or sale of Fuel or Power with (i) a term of thirty-one (31) days or less but
greater than one day, or (ii) with a term of thirty-one (31) days or less and
with a forward start date within thirty-one (31) days of the transaction date.


 


“Short Term Execution Strategies” means strategies for execution
of any Short Term Commodity Transaction or associated Risk Management Policies
and Strategies, and Related Agreements.


 


“Successor Energy Manager” has the meaning set forth in
Section 10.5.


 


“Term Extension” has the meaning set forth in Section 2.2
hereof.


 


“Termination Date” means the date for termination of this
Agreement specified in the Termination Notice.


 


“Termination Notice” has the meaning set forth in
Section 10.4.


 


9

















 


“Third Party” means with respect to Fuel Supply Agreements,
Power Transmission Agreements, Power Sales Agreements, Master ISDA Agreements,
or Project Fuel Transportation Agreements, any Person other than Owner or
Energy Manager, PROVIDED THAT for purposes of the foregoing, a Third Party may
be an Affiliate of Energy Manager or Energy Manager’s own trading book outside
of the Facility Book, as more fully described in Section 7.1(c). With respect
to any other provision of this Agreement, Third Party shall mean any Person
other than Owner or Energy Manager.


 


“Train”
refers to any one of the 2 power trains of the Facility.


 


“Transmission Provider” means any Person that provides
transmission or distribution services for the delivery of electric energy from
the Facility pursuant to any Power Transmission Agreement.


 


“Transporter” means any Person obligated to transport Fuel
pursuant to any Project Fuel Transportation Agreement.


 


“Warm Start” means the start-up of a Train immediately after a
continuous period of greater than eight (8) but less than sixty-eight (68)
hours during which the Train has not been generating electricity.


 


ARTICLE II

APPOINTMENT OF ENERGY MANAGER AND TERM


 


2.1           Appointment. Except
as otherwise provided under Section 2.5(b), Owner appoints Energy Manager to be
the sole and exclusive provider of Services to the Project. Energy Manager
accepts the appointment and agrees to provide the Services to Owner.


 


2.2           Term. The
term of this Agreement shall commence on the Effective Date and shall expire
three (3) years from the Effective Date (the “Initial Term”). This Agreement
may be extended for an additional one (1) year term upon mutual agreement of
the Parties (“Term Extension”). The Parties shall reach agreement upon a Term
Extension at least forty-five (45) days prior to the end of the Initial Term.


 


2.3           Commodity
Transactions and Related Agreements.


 


(a) In conducting Day-Ahead Commodity Transactions, Long Term Commodity
Transactions, Short Term Commodity Transactions or Other Transactions, Energy
Manager shall be the contracting party with all respective Third Party
suppliers and Power Purchasers, and under all Fuel Supply Agreements, Power
Sales Agreements, agreements for Risk Management Transactions and Other
Transactions, except as provided in Section 2.5(b) or unless otherwise agreed
by Owner and Energy Manager. All transactions between Owner and Energy Manager
with respect to Day-Ahead Commodity Transactions, Long Term Commodity
Transactions, Short Term Commodity Transactions, Risk Management Services or
Other Transactions shall be entered into pursuant to the applicable
Implementation Agreements and, upon such transaction being consummated pursuant
to those procedures or agreement, the terms and provisions contained in such
applicable Implementation Agreements shall govern the performance of the
parties thereunder.


 


10

















 


(b)           With respect to
Related Agreements, the following shall apply:


 


(i)            The Owner shall
remain a party to all Project Fuel Transportation Agreements to which it is a
party on the date hereof. The Parties intend that the Owner will be a party to
all other Project Fuel Transportation Agreements unless the applicable Fuel
Supply Agreement requires delivery to the Owner’s contracted pipelines or the
Facility, or Owner and Energy Manager determine otherwise. The Owner shall
designate the Energy Manager or its Affiliate as its agent with respect to all
Project Fuel Transportation Agreements to which the Owner is party.


 


(ii)           The Parties intend
that Power Sales Agreements between the Owner and the Energy Manager require
power to be delivered by the Owner to the Owner’s interconnection points. As
part of the Services, the Energy Manager will inform the Owner of opportunities
to enter into Power Transmission Agreements in connection with any Power Sales
Agreements. The Owner will be a party to any such Power Transmission Agreements
directly with the Third Party providers of transmission.


 


2.4           Relationship of
Parties.


 


(a) Except as provided in this Agreement, no Party shall be an agent,
partner, joint venturer, or legal representative of any other Party for any
purpose whatsoever, and no Party is authorized to assume or create any
obligation, liability, or responsibility, expressed or implied, on behalf of or
in the name of any other Party or to bind any other Party to any Third Party in
any manner whatsoever. The relationship of Owner with Energy Manager as set
forth in this Agreement is one of an independent contractor. Any provision of
this Agreement that appears to give Owner a measure of control over the details
of the Services shall be deemed to mean that Energy Manager shall follow the
provisions hereof in order to accomplish the desires of Owner, but Owner shall
look to Energy Manager for results only and shall have no right at any time to
direct or supervise Energy Manager’s servants or employees in the performance
of such work or as to the manner, means, and method in which the Services are
performed. No one employed by Energy Manager or its Affiliates shall be deemed
to be an employee, agent or servant of Owner. Except as expressly stated in
this Agreement, neither of the Parties shall have any separate obligations or
duties, including without limitation any fiduciary duties or other implied
duties. Owner hereby agrees that it is sophisticated and capable of assessing
the risks and merits of the Day-Ahead Commodity Transactions, Short Term
Commodity Transactions and Long Term Commodity Transactions entered into
pursuant to this Agreement and Implementation Agreements. Notwithstanding
Section 5.4, neither Energy Manager nor its Affiliates shall be responsible for
any business opportunities that may not be realized by Owner. Energy Manager
does not represent or warrant that it will be able to consummate any particular
Day-Ahead Commodity Transactions, Long Term Commodity Transaction, Short Term
Commodity Transaction, Other Agreement or, where applicable, Related
Transaction. Nothing in this Agreement shall be construed to make Energy
Manager a financial or investment advisor to Owner. Owner has consulted with
its own legal, tax, business, investment, financial and accounting advisors to
the extent that it has deemed necessary with regard to this Agreement and the
Implementation Agreements has a full understanding of the risks associated
therewith and is willing to assume those risks.


 


11

















 


(b) Energy Manager and its Affiliates are in the business of buying and
selling Power and Fuel products throughout the United States for their own
account or for the account of others, and nothing in this Agreement shall
prohibit Energy Manager and its Affiliates from doing so. Notwithstanding any
provision of this Agreement, Energy Manager and its Affiliates may engage in
whatever activities they choose, including, without limitation, trading or
selling Power and Fuel products even in the same geographic region as the
Facility. Owner shall have no claim against Energy Manager or its Affiliates in
and to the transactions described in this subsection (b).


 


(c) Energy Manager shall not be obligated to disclose the activities
under subparagraph (b) above to Owner and those activities shall not create any
liability on the part of Energy Manager or its Affiliates under this Agreement.


 


(d) Nothing in this Agreement shall prohibit Energy Manager from using
its own or its Affiliates’ assets to generate Power for Energy Manager’s own
use or for resale to Third Parties.


 


2.5           Non-Circumvention.


 


(a) During the term of this Agreement, Owner shall not enter into any
agreement with any Third Party with respect to the Services contemplated by
this Agreement or any alternative transaction which in either case would
preclude a transaction contemplated by this Agreement involving Owner and
Energy Manager; PROVIDED, HOWEVER, subject to the terms hereof, Owner may seek
transactions with Third Parties and bring them to the attention of Energy
Manager and Energy Manager shall have a right of first refusal as detailed in
Section 2.5(b) below. In addition, Owner may request that Energy Manager
execute such transactions with Third Parties and, subject to the approval of
Energy Manager (not to be unreasonably withheld) Energy Manager shall execute
such transactions with such Third Parties and enter into a Back-to-Back
Agreement with the Owner in respect of such transaction as further described in
Section 2.5(b).


 


(b) If Owner identifies any potential transaction, whether contemplated
by the Agreement or not, in accordance with the foregoing subsection (a) and
Energy Manager determines it does not wish to participate in such transaction
or withholds its approval of such transaction, as the case may be, then (i)
Owner may undertake the transaction for its own account, and (ii) the Capacity
associated therewith shall be excluded from Managed Capacity; PROVIDED that
other than for Day-Ahead Commodity Transactions Energy Manager shall have at
least three (3) Business Days from its receipt in writing of the proposed terms
of the transaction to make a determination. Failure of Energy Manager to
respond within the time allotted shall constitute its determination that it
does not wish to participate in or otherwise approve the proposed transaction. To
the extent that Owner undertakes a transaction under this subsection (b) and
the Capacity associated therewith is excluded from Managed Capacity, the Energy
Manager shall continue to perform the applicable Services in connection with
such excluded Capacity subject to the Parties developing in good faith mutually
agreeable terms and conditions for the management of the excluded Capacity. To
the extent that there are transactions then outstanding which are in respect of
such excluded Capacity, Energy Manager shall liquidate all such transactions,
subject to netting under Section 6.3, and the terms and 


 


12

















 


provisions (including credit
requirements, if any) of the applicable Implementation Agreements shall govern
the liquidation of such transactions, and Owner shall be liable for all Costs
and Losses as set forth in the Implementation Agreements.


 


(c)  The Energy Manager (i)
acknowledges that it is aware of the existence of and the terms and conditions
of the Post-Transition PPAs and (ii) confirms that the provision of Services
with respect to the Post-Transition PPAs are contemplated within the scope of
this Agreement for so long as such agreements remain in effect.  The
Parties agree that (i) Energy Manager shall have no obligation to procure or
provide Fuel with respect to the Post-Transition PPAs, (ii) the Services
provided by Energy Manager related to the Post-Transition PPAs are part of Managed
Capacity and (iii) notwithstanding anything in this Agreement to the contrary,
for the purpose of calculating the Generation Margin, the Fuel Costs will be
those charged by Duke Trading for providing Fuel in connection with the
Post-Transition PPAs.


 


ARTICLE III


OWNER’S RIGHTS
AND RESPONSIBILITIES


 


3.1           Owner
Rights and Responsibilities. Owner shall have the sole right and
responsibility to:


 


(a)           determine
and establish, in consultation with the Energy Manager, the energy management
strategy for Power, Fuel or Ancillary Services (generally, the “Energy
Management Plans”), and to approve or disapprove of any deviations from such
Energy Management Plans which may be presented by the Energy Manager from
time-to-time and Energy Manager shall report on compliance with the Energy
Management Plan;


 


(b)           determine
and establish, in consultation with the Energy Manager, a risk management
policy and program for the Facility (“Risk Management Policy”). The Risk
Management Policy shall, among other things, provide methodologies and
procedures for assessing risk on existing and proposed transactions,
establishing risk management strategies, generating risk management reports and
establishing appropriate mutually agreed to risk parameters and methodologies. The
Risk Management Policy shall set forth the internal and external approvals that
must be obtained prior to entering into transactions whose nominal value or
duration exceeds specified thresholds, or the effect of which would have
certain consequences under the Risk Management Policy. Transactions under this
Agreement shall be consistent with such risk management criteria and the Lender
Criteria.


 


(c)           Determine and
establish


 


(i)                                     Long Term Bias;


(ii)                                  Long Term Execution
Strategies;


(iii)                               Short Term Bias;


(iv)                              Short Term Execution
Strategies;


(v)                                 Day-Ahead Execution
Strategies, and


(vi)                              Other Transaction Execution
Strategies;


 


13





















 


PROVIDED that Owner shall communicate in
writing to Energy Manager the biases and strategies (A) no less frequently than
once per month and (B) in any event prior to the execution of any transactions
relating to such biases and at any time Owner determines to make any changes in
such biases and strategies;


 


PROVIDED FURTHER, that Energy Manager shall be
allowed to rely on the biases and strategies last communicated by Owner.


 


(d)           approve
or disapprove any deviations from the items listed in subparagraph (b) above
which may have been presented by the Energy Manager from time-to-time;


 


(e)           determine
and establish Risk Management Policies and Strategies related to any of the
foregoing, and to approve or disapprove any deviations from any of the
foregoing which may have been presented by the Energy Manager from
time-to-time;


 


(f)            approve
all Day-Ahead Commodity Transactions, Long Term Commodity Transactions, Short
Term Commodity Transactions and Other Transactions (except to the extent that
authority to enter into Day-Ahead Commodity Transaction, Short Term Commodity
Transaction and Other Transactions have been delegated to Energy Manager under
Section 7.8);


 


(g)           engage
in marketing of Ancillary Services solely in accordance with the limited
instances provided in Section 7.5;


 


(h)           determine
the amount of otherwise non-contracted Power available or to be made available
from the Facility at any given time;


 


(i)            determine
the amount of Fuel to be supplied to the Facility;


 


(j)            appoint
Energy Manager or its Affiliate as Owner’s agent for performance of the Project
Fuel Transportation Agreements;


 


(k)           timely
provide the Energy Manager with all information reasonably necessary and as
requested by Energy Manager to enable the Energy Manager to comply with the
nominating, scheduling, balancing and other requirements of any Supplier,
Transporter, Power Purchaser or Transmission Provider and to minimize
scheduling, balancing, overrun, and similar penalties and charges;


 


(l)            execute all agreements or other
documentation reasonably necessary for Energy Manager to perform the Services;
and


 


(m)          provide
an open line communication between Facility control room and Energy Manager.


 


3.2           Owner’s
Representatives. Owner shall designate in writing at least one Owner’s
Representative. Owner’s Representatives shall be authorized and empowered to
act for and on behalf of Owner as to all obligations of Owner hereunder. Owner
may change Owner’s Representatives from time-to-time with three (3) Business
Days prior written notice to Energy 


 


14





















 


Manager. Energy Manager shall
be entitled to rely upon, and Owner shall be bound by, the oral and written
communications, directions, requests and decisions made by Owner’s
Representatives with regard to this Agreement.


 


ARTICLE IV


OBLIGATIONS OF
ENERGY MANAGER/


STANDARD OF
PERFORMANCE


 


4.1           Services
Generally. In performing the Services during the term, Energy Manager
shall:


 


(a)           comply
with, and all Services shall conform to and comply with, the plans, policies,
strategies, approvals, and decisions of Owner, as described in Article III
above (except to the extent that Owner has elected to make a delegation of its
authority under Article III to Energy Manager under Section 7.8);


 


(b)           meet
with Owner as often as may be reasonably requested, but not less than monthly,
unless otherwise agreed by the Parties.


 


(c)           maintain
credit capacity so as not to suffer an Adverse Credit Change, and maintain
sufficient trading capabilities in terms of manpower, infrastructure, support
and credit in order to perform the Services.


 


(d)           subject
to Section 2.4, Energy Manager shall perform the Services to attempt to enhance
the profitability of the Facility within the operational limitations that are
set forth in Exhibit E.


 


4.2           Standard of Performance of
Obligations. Energy Manager shall perform the Services in a good, workmanlike
and commercially reasonable manner and in accordance with (i) Good Industry
Practice, (ii) instructions from Owner and Owner’s Representative, (iii) the
terms of this Agreement, the Energy Management Plan, the Risk Management Policy
and Lender Criteria, (iv) Applicable
Laws and permits; and (v) Good Industry Practices acting as if it were managing
the Facility for its own account. Energy Manager does not represent or
warrant that it will be able to arrange or consummate any particular
transaction or contract with any particular Third Parties. The Parties
acknowledge that speculative trading in connection with this Agreement shall be
prohibited and losses or gains incurred by the Energy Manager solely as a
result of Energy Manager’s speculative trading activities shall be borne by the
Energy Manager exclusively.


 


4.3           Limitation on
Authority of Energy Manager.


 


(a)           Except as may be
expressly authorized by this Agreement or in writing or on a recorded
telephonic line by Owner’s Representative from time-to-time, Energy Manager
shall not:


 


15

















 


(i)            pledge the credit of Owner in any
way in respect of any agreements entered into between Energy Manager and any
Third Party without the express prior written consent of Owner;


 


(ii)           knowingly violate any Applicable Law
with respect to the Facility or the Services provided hereunder that has a
material adverse effect on the Facility or the Services provided hereunder, or
knowingly violate any material Permits;


 


(iii)          sell or otherwise transfer any assets
of Owner, or cause any liens or encumbrances on the Facility or any other
assets of Owner, arising as a direct result of
the performance by Energy Manager of its obligations under this Agreement;


 


(iv)          make any representation or warranty
relating to Owner;


 


(v)           settle, compromise (including
agreeing to any penalty for any violation of any Applicable Law or Permit),
assign, pledge, transfer, release or consent to the compromise, assignment,
pledge, transfer or release of, any claim, suit, debt, demand or judgment
against or due by Owner, or submit any such claim, dispute or controversy to
arbitration or judicial process, or stipulate in respect thereof to a judgment,
or consent to do the same; or


 


(vi)          engage in any transaction on behalf of
Owner not permitted under this Agreement.


 


(b)           Owner shall have no
liability with respect to any transactions executed by Energy Manager in breach
of subparagraph (a) above, and Energy Manager shall indemnify and hold harmless
Owner from any Claims arising in connection with such transactions.


 


4.4           Affiliates.
Notwithstanding any provision of this Agreement to the contrary, Energy Manager
shall in all cases remain obligated for the performance of the Services and the
obligations under this Agreement regardless of whether such Services or
obligations are performed by its Affiliates.


 


ARTICLE V


SERVICES


 


5.1           Power
Management Services. Subject to Section 4.3 and all other limitations
provided by this Agreement, power management services of the Managed Capacity (“Power
Management Services”) to be provided by Energy Manager shall include:


 


(a)           negotiate
and execute forward hedging transactions in accordance with the approved Energy
Management Plan and Risk Management Policy;


 


(b)           develop
day-ahead base, incremental and decremental commitment offers consistent with
the rules and regulations of the applicable control area, negotiation and
execution of next day and short-term power transactions in accordance with
dispatch plan and existing obligations;


 


16

















 


(c)           develop
Third Party customer relationships, transaction structuring, analysis, and
contract negotiating with Third Parties for power sales;


 


(d)           negotiate,
execution and assist with scheduling of real-time power and ancillary services
transactions. Coordinate with gas management personnel. Coordinate with
applicable control area manager on re-dispatch. Manage ancillary services
transactions and reliability obligations. Use reasonable efforts to respond to
real-time forced outages. Assist Owner with intra-day dispatch enhancement
including power procurement at economics below decremental cost;


 


(e)           assist
Owner with coordination of dispatch decisions with the O&M provider to
determine the optimal hour-by-hour dispatch given short-term power and gas
prices, market liquidity, operating costs and risk/return trade-offs of various
energy products; provided, that Owner will have ultimate control over dispatch;


 


(f)            assist
the Owner in scheduling of power, procuring transmission and transmission
transactions, book-out management, and settlements with the applicable control
area;


 


(g)           development
of other Ancillary Service product bids and offers, as permitted by control
area business rules; and


 


(h)           assist
the Owner in the buying and selling of emission credits.


 


5.2           Fuel
Management Services. Subject to Section 4.3 and all other limitations
provided by this Agreement, fuel management services of the Managed Capacity (“Fuel
Management Services”) to be provided by Energy Manager or its Affiliate, as
applicable, shall include:


 


(a)                                  procurement of all Fuel for
the Facility;


 


(b)                                 negotiation and
administration of Related Agreements;


 


(c)           scheduling,
in accordance with the Operating and Dispatch Procedures, the delivery of Fuel
to the Facility;


 


(d)           coordination
of scheduling and balancing (including, without limitation daily and hourly)
with suppliers, transporters and storage providers of Fuel;


 


(e)           upon
mutual agreement, accepting appointment as Owner’s agent for performance of the
Project Fuel Transportation Agreements;


 


(f)            coordinate
delivery of Fuel with the O&M provider;


 


(g)           other
services as may be agreed to by the Parties from time-to-time; and


 


17





















 


(h)           present
information to the Owner regarding capacity release under the Project Fuel
Transportation Agreements to which the Owner is a party.


 


5.3           Risk
Management Services. Subject to Section 4.3 and all other limitations
provided by this Agreement, Risk Management Services to be provided by Energy
Manager shall include:


 


(a)           arranging
and administering Risk Management Services such as entering into heat rate call
option, swaps, cross commodity swaps, commodity caps, commodity floors,
commodity collars, basis swaps, basis option, or commodity options; and


 


(b)           other
services as may be agreed to by the Parties from time-to-time.


 


5.4           Enhancement
of Generation Margin. In performing the Services, except as may be
otherwise agreed to by Owner or otherwise limited herein, Energy Manager shall
make reasonable efforts to enhance Generation Margin based on prevailing market
conditions within the agreed upon risk management guidelines and Energy
Management Plan.


 


5.5           Reporting
Requirements. Subject to Article VIII below and Daily Checkout, weekly, or
at such other times as may be reasonably requested by Owner’s Representative or
whenever reasonably requested by Lenders, Energy Manager shall submit to Owner
summary reports of all transactions entered into between Owner and Energy Manager
in connection with the Services, including a daily report of mark-to-market
exposure and credit available for transactions.


 


ARTICLE VI


FEES; SETTLEMENT


 


6.1           Management Fees.
Commencing with the Effective Date, Energy Manager shall be entitled to a monthly
fee equal to the greater of (i) ***** (“Fixed Dollar Portion”) or (ii) ***** of
the monthly Generation Margin (the “Monthly Management Fee”). Payment of the
amounts specified in this Section 6.1 shall be made in accordance with Section
6.3 below.


 


6.2           Restart Fee. The
Monthly Management Fee shall not apply if the Facility is not in commercial
operations. Each time the Facility is brought back into commercial operations,
Owner shall pay Energy Manager a fee equal to ***** the Fixed Dollar Portion of
the Monthly Management Fee.


 


6.3           Financial
Settlement and Payment of Management Fee.


 


(a)           By the tenth
calendar day following the month in which the relevant Services were rendered,
Energy Manager shall render to Owner a statement (the “Generation Margin Reconciliation
Statement”), which may be based on reasonable estimates if actuals are not then
available, setting forth in total for the month in which the relevant Services
were 


 


_________


***
Certain information on this page has been omitted and filed separately with the
SEC. Confidential treatment has been requested with respect to the omitted
portions.


 


18

















 


rendered (i) the Fuel Costs,
(ii) the Power Revenues, (iii) the variable O&M Costs, (iv) the Generation
Margin, (v) the Monthly Management Fee, (vi) Liquidated Damages, if any, and
(vii) interest payments on cash, if any, under paragraph 6 of the Collateral
Annex. Energy Manager shall, in the Generation Margin Reconciliation Statement,
also calculate the net of all amounts due between Owner and Energy Manager
arising under the Implementation Agreements, Related Agreements and Other
Transactions. Energy Manager shall deliver the Generation Margin Reconciliation
Statement to Owner no later than the twenty-fifth (25th) day of each
month (the “Settlement Date”).


 


(b)           On the Settlement
Date, Energy Manager shall pay to Owner the net amounts owed to Owner,
withholding for itself the Monthly Management Fee. If the netting performed
pursuant to the foregoing results in a payment due Energy Manager, Owner shall
remit such payment to Energy Manager on the later of the Settlement Date or
four (4) Business Days of Owner’s receipt of the Generation Margin
Reconciliation Statement. To the extent that payment for any transaction is due
under the Implementation Agreements, or Related Agreements, as the case may be,
prior to the Settlement Date for any month, such amounts shall accrue interest,
to the benefit of the Party due such amounts, at the Interest Rate provided
herein. Upon the termination of this Agreement, to the extent that there are
transactions the terms of which extend past the Termination Date, the Parties
shall continue to net all amounts due between Owner and Energy Manager arising
under the Implementation Agreements, and Related Agreements, as the case may
be, and shall otherwise comply with this Section 6.3 until such time as those
transactions have been completed. To the extent that there is any netting by
Energy Manager under this Section 6.3 utilizing estimates because actuals were
not then available, Energy Manager shall actualize such estimates as soon as
reasonably practical and shall net them on the next Settlement Date following
actualization, and shall reflect that information in the Generation Margin
Reconciliation Statement for that particular Settlement Date.


 


(c)           Owner shall, by the
Settlement Date following its receipt of a Generation Margin Reconciliation
Statement, notify Energy Manager of any dispute therewith, PROVIDED that Energy
Manager shall have provided the Generation Margin Reconciliation Statement at
least ten (10) days prior to the Settlement Date. In the event that Energy
Manager shall have not provided the Generation Margin Reconciliation Statement
at least ten (10) days prior to the Settlement Date, then Owner shall have a
number of additional days corresponding to the number of days by which the
Generation Margin Reconciliation Statement was late in which to dispute the
Generation Margin Reconciliation Statement. Except to the extent that
discrepancies may be uncovered under Article VIII and thereafter give rise to a
dispute, failure of Owner to timely dispute the Generation Margin
Reconciliation Statement shall be deemed acceptance by Owner thereof.


 


(d)           If Owner timely
disputes the Generation Margin Reconciliation Statement as provided in
subparagraph (c) above, the Parties shall attempt in good faith to resolve the
dispute within thirty (30) days thereof. In the event of failure to resolve the
dispute within thirty (30) days, then either Party may submit the dispute for
resolution under Article XV. The foregoing notwithstanding, all sums in a
Generation Margin Reconciliation Statement not in dispute shall be timely
netted and remitted in accordance with Section 6.3 above.


 


19

















 


ARTICLE VII


TRANSACTION
PROCEDURES


 


7.1           Back
to Back Contracts 


 


(a)           Owner
and Energy Manager shall enter into contracts, separate from this Agreement, (“Back-to-Back
Contract”) pursuant to which Owner will purchase and/or sell Power or Fuel to
the Energy Manager which Energy Manager will, in turn, utilize to meet its
obligations under Power Sales Agreements and/or Fuel Supply Agreements.


 


(b)           The
Back-to-Back contracts for Fuel and/or Power will be executed and the
confirmations with respect to transactions governed thereby shall mirror the
confirmations with respect to the Power Sales Agreement and the Fuel Supply
Agreement (i.e., price, product, quantity, delivery specifications shall be the
same; provided, however, unless the Parties otherwise agree in
the Implementation Agreements confirmations for Day-Ahead Commodity
Transactions shall be done by recorded phone line).


 


(c)           Owner agrees that
Energy Manager may purchase Power from the Facility for its own use and at its
own risk and without an associated Power Sales Agreement with a third party
entered into at the same time as Energy Manager’s purchase from Owner. In the
event Energy Manager purchases Power from the Facility for its own use, the
Energy Manager shall purchase the Power at a price to be agreed with the Owner.
Upon request by Owner, Energy Manager shall verify the market price by
receiving, if available, up to three (3) market quotes from market participants
in the power industry.


 


(d)           For
any Day-Ahead Commodity Transaction, Long Term Commodity Transaction or Short
Term Commodity Transaction, the contract price shall be equal to either (i) the
applicable Third Party contract price specified in the related Power Sales
Agreement, Fuel Supply Agreement or Related Agreement between Energy Manager
and a Third Party, or (ii) where Energy Manager is supporting such transaction
with its own Power portfolio, then the contract price agreed to between Owner
and Energy Manager under the applicable Implementation Agreements. Upon request
by Owner, Energy Manager shall verify the market price by receiving, if
available, up to three (3) market quotes from market participants in the power
industry. The quantity, term and other special conditions for a specific
commodity transaction shall be as mutually agreed to by Owner and Energy
Manager as provided in this Article VII.


 


(e)           Until
such time the Owner has satisfied the obligations set forth in Section 16.1,
Energy Manager shall only engage in Day-Ahead Commodity Transactions, unit
contingent transactions and non-firm Power sales. Until the obligations set
forth in Section 16.1 are satisfied, Energy Manager may, in its sole
discretion, determine whether it will enter into transactions other than the
foregoing. If Energy Manager so determines, it shall obtain the approval of
Owner.


 


(f)            Energy
Manager shall establish a separate “Facility Book” for Owner in Energy Manager’s
trading system.


 


20





















 


7.2           Long
Term Commodity Transactions. Subject to Section 4.3(a) and all other
limitations provided by this Agreement,


 


(a)           Energy
Manager shall communicate to Owner any Long Term Execution Strategies and how
the Facility can be managed in the marketplace to meet this strategy. Energy
Manager shall promptly present each potential Long Term Commodity Transaction
to Owner for review, endorsement and recommendation to Owner. Owner and Energy
Manager shall agree on the terms of the Long Term Commodity Transaction and
Owner shall approve all Long Term Commodity Transactions. Upon receipt of Owner’s
approval of a Long Term Commodity Transaction, which shall be in accordance
with the applicable Implementation Agreements and Exhibit E, and upon Energy
Manager’s receipt of any credit support required for the Long Term Commodity
Transactions, in an amount and form determined by Energy Manager in accordance
with the terms of the Collateral Annex, Energy Manager and Owner shall be
deemed to have agreed to the Long Term Commodity Transaction.


 


(b)           Without
limiting Section 2.5(b), Owner shall retain the right to participate with
Energy Manager in any negotiations of any agreements which are the basis of any
Long Term Commodity Transactions.


 


7.3           Short
Term Commodity Transactions. Except where Owner has made a delegation to
Energy Manager under Section 7.8, Energy Manager shall promptly present each
potential Short Term Commodity Transaction to Owner for approval. Owner and
Energy Manager shall thereafter confirm such transaction in accordance with
Exhibit E and the Implementation Agreements.


 


7.4           Day-Ahead
Commodity Transactions. Except where Owner has made a delegation to Energy
Manager under Section 7.8, Energy Manager shall promptly present each potential
Day-Ahead Commodity Transaction to Owner for approval. Owner and Energy Manager
shall thereafter confirm such transaction in accordance with Exhibit E and the
Implementation Agreements.


 


7.5           Other
Transactions; Ancillary Services.


 


(a)           Energy
Manager shall promptly present each potential Other Transaction to Owner for
review, endorsement and recommendation to Owner. Upon receipt of Owner’s
approval, Energy Manager shall finalize and execute the Other Transaction in
the form approved by Owner.


 


(b)           Owner
shall retain the right to participate with Energy Manager in any negotiations
of Other Transactions.


 


(c)           Anything
herein to the contrary notwithstanding, Energy Manager shall have the sole
right to market Ancillary Services, EXCEPT to the extent that there are
Ancillary Services which, due to its status as a power generator, are solely
within the province of Owner to sell and such right cannot be delegated to
Energy Manager.


 


21

















 


7.6           Related
Agreements. In connection with Section 2.3(b):


 


(a)           Energy
Manager shall promptly present any potential Related Agreement to Owner for
review, endorsement and recommendation to Owner. Upon receipt of Owner’s
approval, Energy Manager or its Affiliate, shall finalize and execute the
Related Agreements in the form agreed to by the Parties.


 


(b)           Owner
shall retain the right to participate with Energy Manager in any negotiations
of Related Agreements.


 


(c)           Owner
shall be obligated to reimburse Energy Manager for all costs and charges paid
by Energy Manager to Third Parties in accordance with this Agreement in
connection with Related Agreements undertaken for Owner’s benefit hereunder
(which include the monthly transportation and/or transmission charges actually
paid by Energy Manager, if any, pursuant to relevant arrangements with a
Transporter or Transmission Provider). Such costs and charges shall be netted
as provided in Section 6.3 and shall include, but not be limited to, all rates,
fees, cash-outs, penalties, forfeitures, taxes, and fuel or power retainage
charges, attributable to Fuel transportation or Power transmission transactions
administered and/or undertaken in accordance with this Agreement for Owner’s
benefit, unless incurred through the gross negligence or willful misconduct of
the Energy Manager.


 


7.7           Risk
Management Services. Subject to Section 4.3 and all other limitations
provided by this Agreement,


 


(a)           Obligations
of Energy Manager and Owner. During the term of this Agreement, at the
request of Owner or Owner’s Representative, Energy Manager shall provide
proposals to Owner for various Risk Management Services to address specific
financial risks identified by Owner with respect to the activities of the
Facility. In the event Owner should decide to purchase any Risk Management
Services to manage any of the financial risks to Owner with respect to the
activities of the Facility, Owner agrees to enter into a financial derivative
transaction for such Risk Management Services with Energy Manager upon mutually
satisfactory terms under the Master ISDA Agreement. Any financial derivative
transaction entered into between Energy Manager and Owner under the Master ISDA
Agreement will be governed solely by the terms of the Master ISDA Agreement. Any
such financial derivative transaction will be on an arms-length basis and
nothing relating to Energy Manager’s services under this Agreement shall be
construed as creating a fiduciary or other advisory relationship between Energy
Manager and Owner in respect of any such financial derivative transaction. Energy
Manager shall deliver to Owner a confirmation of each such financial derivative
transaction and Owner shall execute and return such confirmation to Energy
Manager, all in accordance with the terms of the Master ISDA Agreement.


 


(b)           Assumption
of Risk. For purposes of this Section 7.7, Owner acknowledges that (i)
Energy Manager is not acting as a fiduciary or financial or investment advisor
for Owner; (ii) Owner has consulted with its own legal, regulatory, tax,
business, investment, financial, and accounting advisors to the extent it has
deemed necessary, and it has made its own investment, hedging, and trading
decisions based upon its own judgment and upon 


 


22

















 


any advice from such advisors
as it has deemed necessary; and (iii) Owner is entering into this Agreement,
the Master ISDA Agreement and each financial derivative transaction relating to
Risk Management Services, with a full understanding of all of the risks thereof
(economic and otherwise), and Owner is capable of assuming and willing to
assume (financially and otherwise) those risks.


 


(c)           Limitation of
Liability. For purposes of this Section 7.7 only, Energy Manager shall have
no responsibility for the accuracy, completeness or reasonableness of any
information, projections, valuations or models that may be provided by Energy
Manager in connection with the Risk Management Services, provided that Energy
Manager shall be responsible for providing such information with a good faith
belief as to its accuracy. Owner acknowledges that any information,
projections, valuations or models provided by Energy Manager pursuant to this
Agreement are solely an estimate based on information available to Energy
Manager at such time. The providing of such information shall not constitute,
and shall not be construed by Owner to constitute, a guarantee of any future
facts or expected results, or that such information represents the best market
alternatives under any circumstances or that any particular results may
actually be achieved by the following of any suggestions by Energy Manager. In
no event shall Energy Manager be required pursuant to the terms of this
Agreement and/or the Master ISDA Agreement to perform any act in violation of
the Commodities Exchange Act of 1936, as amended. TO THE EXTENT ANYTHING DELIVERED BY ENERGY MANAGER PURSUANT TO THIS
AGREEMENT OR THE MASTER ISDA AGREEMENT IS CONSTRUED TO BE GOODS SUBJECT TO
ARTICLE 2 OF THE UNIFORM COMMERCIAL CODE OF THE STATE OF NEW YORK, ENERGY
MANAGER MAKES NO REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, AS TO THE
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR OTHERWISE, WITH RESPECT TO
ANY SUCH GOODS FURNISHED TO OWNER UNDER THIS AGREEMENT OR THE MASTER ISDA
AGREEMENT OR IN CONNECTION WITH ANY TRANSACTION ENTERED INTO PURSUANT TO THIS
AGREEMENT OR THE MASTER ISDA AGREEMENT.


 


7.8           Delegation.
The provisions of Sections 7.3, 7.4, 7.5, 7.6 and 7.7 above notwithstanding,
but subject to Section 4.3 and all other limitations provided by this
Agreement, Owner shall communicate the Day-Ahead Execution Strategies, Short
Term Execution Strategies, Other Transaction Execution Strategies and Risk
Management Policies and Strategies to Energy Manager and may delegate from
time-to-time its authority to Energy Manager to execute the Short Term Execution
Strategies, Other Transaction Execution Strategies and Risk Management Policies
and Strategies in the marketplace and their associated transactions, without
prior approval by Owner, subject to such restrictions and reporting
requirements as may be directed by Owner’s Representative in connection
therewith. Any transaction executed by Energy Manager in accordance with the
delegation referred to in this Section 7.8 shall be automatically entered into
between Energy Manager and Owner pursuant to a Back-to-Back Agreement.


 


23





















 


ARTICLE VIII

REPORTS, RECORDS AND AUDITS


 


8.1           Reports. Energy
Manager shall provide Owner with such reports, if requested by Owner, as are
prescribed by Applicable Law or any Permit. In addition, Energy Manager shall
submit the following information to Owner:


 


(a)           Energy Manager shall
develop daily trading and marketing reports as required to keep the Owner
informed of daily positions and credit utilization, as mutually agreed upon by
the Owner and the Energy Manager. Monthly and quarterly reports will also be
produced in a form mutually agreed upon by the Owner and the Energy Manager. A
form of report is attached hereto as Exhibit G. Such reports shall provide
summaries in a form and in such detail as may be reasonably satisfactory to
Owner’s Representative including, information on any penalties or fines arising
during the period, information relating to sources of gas transportation and
pricing for such transportation and, to the extent Energy Manager is utilizing
Owner’s pipeline capacity, information requested to provide transparency in
fuel optimization off of the Owner’s fixed pipeline capacity. Energy Manager
shall provide reasonable cooperation in establishment of appropriate links and
data access between the systems of Owner and Energy Manager to facilitate
reporting and communication to the extent practicable. In addition to the
foregoing, upon the request of Owner Energy Manager shall provide Owner with
intraday reports with respect to information Energy Manager has available.


 


(b)           Owner’s
Representative may from time-to-time specify changes to be made to the format
or timing of any report required to be submitted to Owner hereunder, and Energy
Manager shall use commercially reasonable efforts in complying with any such
request. The relevant agreed upon revised format shall be adopted by Energy
Manager with effect from the date of the specified revision and shall apply to
the first period to which such report or plan relates commencing after receipt
of Owner’s notice specifying such changes.


 


(c)           If Owner is required
by any Applicable Law, any Permit or any Project agreement or Project Financing
to produce any projection, report or other document relating to the provision
of the Services, Energy Manager shall make commercially reasonable efforts to
provide such information at the request of Owner, provided that Energy Manager
shall be reimbursed for any costs reasonably incurred in connection with this
clause.


 


(d)           If Energy Manager is
required by any Applicable Law or Permit to produce any projection, report or
any other document, it shall prepare such report timely and shall submit the
same to Owner with sufficient time that Owner may comment thereon.


 


(e)           Anything herein to
the contrary notwithstanding, upon obtaining knowledge thereof, the Parties
shall submit prompt written notice to the other of:


 


(i)            any litigation or material claims,
disputes or actions, threatened or filed, concerning the Services;


 


(ii)           any refusal or threatened refusal to
grant, renew or extend, or any action pending or threatened that might affect,
the granting, renewal or extension of any Permit relating to the Services;


 


(iii)          any dispute with any Governmental
Authority relating to the Services;


 


24

















 


(iv)          all penalties or notices of violation
issued by any Governmental Authority relating to the Services;


 


(v)           any material violation of any
Applicable Law or Permits, in either case, relating to the Services; and


 


(vi)          any other event or circumstance that
could materially affect the performance of the Services.


 


8.2           Books and Records.
Energy Manager shall maintain in accordance with Good Industry Practice
complete, accurate and up-to-date supporting records which are pertinent to the
performance of Energy Manager’s obligations hereunder, and records of all
expenses and costs incurred under this Agreement as such pertain to the
Facility, and payment thereof. Energy Manager shall ensure that such supporting
books and records are segregated and distinguishable from its own books and
records. Energy Manager shall retain all such books and records for a minimum
of four (4) years or, if longer, the relevant period required by Applicable
Law.


 


8.3           Audits.
Notwithstanding any provision in the Implementation Agreements to the contrary:


 


(a)           Owner
shall maintain meter records and other records needed to reflect all Power
generated by or available from the Facility and all meter records reflecting
Fuel delivered to the Facility pursuant to this Agreement for a period of at
least two (2) years from the date of such records. From time-to-time, but not
more frequently than once per quarter during the Initial Term and any Term
Extension, either Party, or the Lenders at any time, may designate any
qualified Person to carry out audit tasks of a financial, technical or other
nature in relation to the Facility and the Services, including transactions
under the Implementation Agreements to discuss the affairs, finances and
accounts of the other Party which relate to this Agreement and are relevant to
the Facility or Services, with the other Party’s officers and staff at such
time as may reasonably be requested. All contracts, books, records, documents
and vouchers relating to the Services and the Facility, including transactions
under the Implementation Agreements shall at such times be open to the
inspection of any such Person, who may make such copies thereof or extracts
therefrom as such Person may deem appropriate. Any such copies or extracts
shall be considered confidential and shall be used for the sole purpose of
supporting the findings of the audit. Notwithstanding the foregoing, Owner,
Owner Representatives and the Lenders shall be given access only to the
Facility Book and records of the Facility.


 


(b)           Either
Party shall be entitled to conduct an audit of all matters pertaining to the
Services or the Facility, including transactions under the Implementation
Agreements together with any supporting documentation, for a period of two (2)
years from and after the Termination Date. Notwithstanding the foregoing,
Owner, Owner Representatives and the Lenders shall be given access only to the
Facility Book and records of the Facility. If, pursuant to such audit, either
Party determines that an amount paid was inaccurate, or that a Party did not
receive all sums due it, such Party may submit a claim to the other Party
indicating the amount and explaining why it does not consider the amount paid
to have been accurate or why further sums may be due. Any amounts determined to
be due either Party shall be paid, together with interest thereon from the date
of such payment until the date of repayment at the Interest Rate, 


 


25

















 


within thirty (30) days of determination,
unless Disputed by either Party. In the event of a Dispute under this Section
8.3, senior management of Owner and Energy Manager shall attempt to resolve the
Dispute. If senior management of the Parties are unable, within ten (10)
Business Days of undertaking consideration of the Dispute, to resolve it to
their mutual satisfaction, then either Party may seek resolution of the Dispute
under Article XV.


 


(c)           Each
Party shall be responsible for all of its expenses incurred in conducting and
complying with an audit.


 


ARTICLE IX

FORCE MAJEURE


 


9.1           Procedure for
Calling Force Majeure. If one Party wishes to claim relief from the
performance of its obligations arising under this Agreement on account of any
event or circumstance of Force Majeure (hereinafter, the “Affected Party”),
then the Affected Party shall give written notice to the other Party of such
event or circumstance as soon as reasonably practicable after becoming aware of
such event or circumstance. Any Force Majeure event arising in connection with
a Long Term Commodity Transaction, Day-Ahead Commodity Transaction or Short
Term Commodity Transaction shall be handled in accordance with the Force
Majeure provision contained in the applicable Implementation Agreements and not
the provisions of this Section 9.1. Each notice of a Force Majeure event served
by an Affected Party to the other Party shall specify the event or circumstance
of Force Majeure in respect of which the Affected Party is claiming relief and
the steps being taken to mitigate and overcome the effects of such event or
circumstances. Noncompliance by the Affected Party with the procedure specified
herein shall relieve the other Party from accepting the Affected Party’s claim
until notice is so provided. The Affected Party shall, by reason of any event
or circumstance of Force Majeure in respect of which it has claimed relief
under this Section 9.1:


 


(a)           use its commercially
reasonable efforts to mitigate the effects of such Force Majeure and to remedy
any inability to perform its obligations hereunder due to such events as
promptly as reasonably practicable; provided that:


 


(i)            the Affected Party shall not be
obliged to take any steps that would not be in accordance with Good Industry
Practice or Applicable Laws or that would be beyond its reasonable control; and


 


(ii)           the Affected Party shall not be
required to settle any strikes or other labor disputes on terms that are
adverse to the Affected Party and not commercially reasonable.


 


(b)           furnish periodic
reports to the other Party regarding the progress in overcoming the adverse
effects of such event of Force Majeure and setting forth its best, good faith
estimate concerning when it will be able to resume the performance of its
obligations under this Agreement; and


 


(c)           resume the
performance of its obligations under this Agreement as soon as is reasonably
practicable after the events of Force Majeure are remedied or cease to exist.


 


26

















 


9.2           Performance
Suspended. During the continuance of any Force Majeure, the obligations of
an Affected Party under this Agreement, other than any obligation of either
Party to pay money when due under the terms of this Agreement (including,
without limitation, under Article VI), shall be suspended to the extent such
condition results in the Affected Party’s inability to perform its obligations.


 


9.3           End of Force
Majeure Event. When the Affected Party is able, or would have been able if
it had complied with its obligations under Section 9.1 and Section 9.2,
to resume the performance of all of its obligations under this Agreement
affected by the occurrence of an event or circumstance of Force Majeure, then
the period of Force Majeure relating to such event or circumstance shall be
deemed to have ended.


 


ARTICLE X

TERMINATION


 


10.1         Owner Termination
Events. Owner may terminate this Agreement if any of the following events
occur:  (i) a payment default arising
under this Agreement, any Implementation Agreements, or Related Agreements in
respect of an undisputed payment obligation by Energy Manager that is not cured
within (3) Business Days after Energy Manager has received written notice by
Owner of such default, (ii) a voluntary dissolution, bankruptcy, winding-up,
liquidation or similar event in respect of Energy Manager is commenced by
Energy Manager; (iii) an involuntary dissolution, bankruptcy, winding-up or
liquidation in respect of Energy Manager is instituted against Energy Manager
and is not stayed, dismissed or terminated within thirty (30) days after
commencement; (iv) an Insolvency Event occurs in respect of Energy Manager; (v)
Energy Manager has failed to perform any of its material obligations (other
than a payment default covered by (i) above) under this Agreement, any
Implementation Agreement, or Related Agreements, or otherwise is in material
breach of this Agreement, any Implementation Agreement, Related Agreements, and
such failure or breach has continued unremedied (A) for a period of five (5)
Business Days following notice from Owner demanding cure of such failure or
breach or (B) if such cure cannot be reasonably accomplished within such five
(5) Business Day period, within such longer period of time required for cure,
but in any case not in excess of thirty (30) days following notice from Owner
demanding cure of such failure of breach (or such shorter period of time of
time as may be necessary to avoid the imposition of governmental or regulatory
penalties or the loss of a Permit), provided that such Energy Manager has
commenced such cure within the five (5) Business Day period and diligently
pursues such cure; (vi) Energy Manager breaches a material representation or
warranty in this Agreement and such breach is not cured within five (5)
Business Days following notice from Owner demanding a cure; or (vii) Energy
Manager suffers an Adverse Credit Change, and such Adverse Credit Change is not
cured in accordance with the Collateral Annex.


 


10.2         Energy Manager
Termination Events. Energy Manager may terminate this Agreement if any of
the following events occur:  (i) a
payment default arising under this Agreement, any Implementation Agreements, or
Related Agreements in respect of an undisputed payment obligation by Owner that
is not cured within three (3) Business Days, after Owner has received written
notice by Energy Manager of such default; (ii) a voluntary dissolution,
bankruptcy, winding up or liquidation in respect of Owner is commenced by
Owner; (iii) an involuntary dissolution, bankruptcy, winding-up or liquidation
in respect of Owner is instituted 


 


27

















 


against Owner, that is not
stayed, dismissed or terminated within thirty (30) days after commencement;
(iv) an Insolvency Event occurs in respect of Owner; (v) Owner has failed to
perform any of its material obligations (other than a payment default covered
by (i) above) under this Agreement, any Implementation Agreement, or Related
Agreements, or otherwise is in material breach of this Agreement, any
Implementation Agreement, or Related Agreements, and such failure or breach has
continued unremedied (A) for a period of five (5) Business Days following
notice from Energy Manager demanding cure of such failure or breach or (B) if
such cure cannot be reasonably accomplished within such five (5) Business Day
period, within such longer period of time required for cure, but in any case
not in excess of thirty (30) days following notice from by Energy Manager
demanding cure of such failure or breach (or such shorter period of time of
time as may be necessary to avoid the imposition of governmental or regulatory
penalties or the loss of a Permit), provided that Owner has commenced such cure
within the five (5) Business Day period and diligently pursues such cure; (vi)
Owner breaches a material representation or warranty and such breach is not
cured within five (5) Business Days following notice by Energy Manager
demanding a cure; or (vii) Owner shall have failed to provide Energy Manager
with Performance Assurance pursuant to the Collateral Annex and this Agreement.


 


10.3         Additional
Termination Right.


 


(a)           Owner shall have the
right, for any reason or no reason, to terminate this Agreement at any time
upon ***** written notice to Energy Manager. Such termination shall be without
liability except for (i) Owner’s obligation to compensate Energy Manager for
the Services performed up to the date of termination and (ii) any amounts owed
by Owner under the Implementation Agreements. Any such termination shall not
relieve Energy Manager of any of its obligations pursuant to Section 10.6 and
Owner shall have the right to liquidate all transactions under the
Implementation Agreements in accordance with Section 10.5.


 


(b)           Energy Manager shall
have the right, for any reason or no reason, to terminate this Agreement at any
time upon ***** written notice to Owner. Such termination shall be without
liability except for (i) Energy Manager’s obligation to compensate Owner for
amounts up to the date of termination and (ii) any amounts owed by Energy
Manager under the Implementation Agreements. Any such termination shall not
relieve Energy Manager of any of its obligations pursuant to Section 10.6 and
Owner shall have the right to liquidate all transactions under the
Implementation Agreements in accordance with Section 10.5.


 


(c)           Owner may terminate
this Agreement upon ***** written notice if (i) Energy Manager defaults under
any other energy management agreement that Energy Manager has with an Affiliate
of Owner or (ii) Energy Manager’s Affiliate defaults under any O&M
Agreements between Energy Manager’s Affiliate and Owner’s Affiliate.


 


(d)           Energy Manager may
terminate this Agreement upon ***** written notice if (i) Owner’s Affiliate
defaults under any energy management agreement between Owner’s Affiliate and
Energy Manager or (ii) Owner or Owners Affiliate defaults under any O&M
Agreement between Owner or Owner’s Affiliate and Energy Manager’s Affiliate.


 


_________


***
Certain information on this page has been omitted and filed separately with the
SEC. Confidential treatment has been requested with respect to the omitted
portions.


 


28

















 


10.4         Termination
Procedure. A notice of termination given pursuant to this Article X (a “Termination
Notice”) shall specify in reasonable detail, if applicable, the circumstances
giving rise to the Termination Notice and, as appropriate to the circumstances,
of the termination, shall specify whether transactions are to be terminated or
continue to term, all in accordance with Section 10.5. Except to the extent
otherwise provided herein, this Agreement shall terminate on the date specified
in the Termination Notice, which date shall not be earlier than the date upon
which the applicable Party is entitled to effect such termination as provided
above. Subject to the limitations provided in this Agreement, upon any
termination pursuant to Section 10.1, 10.2, 10.3(c) or 10.3(d), the Parties
shall have all rights and remedies available at law or in equity.


 


10.5         Post-Termination
Transaction Procedures.


 


(a) Upon a termination of this Agreement
pursuant to Article X, the non-defaulting Party in the event of a termination
under Sections 10.1, 10.2, 10.3(c) or 10.3(d) or the Owner in the event of a
termination under Section 10.3(a) or (b), shall have the right to (i) elect to
have all transactions, if any, still outstanding under the Implementation
Agreements and attributable to the Managed Capacity at the time of termination
of this Agreement continue in effect for the remaining term of such
transactions, and the terms and provisions (including credit requirements)
contained in the applicable Implementation Agreements shall govern such
transactions for the remaining term of such transactions or (ii) elect to
liquidate all such transactions,  and the terms and provisions
(including credit requirements, if any) contained in the applicable
Implementation Agreements shall govern the liquidation of such transactions;
PROVIDED that in the event that the non-defaulting Party or Owner, as the case
may be, elects to have the transactions continue in effect under subsection (i)
above, then Energy Manger shall be entitled to the Monthly Management Fee for
the remaining term of such transactions; PROVIDED FURTHER that during the time
of such transactions post-termination, Energy Manager shall not undertake or
put on any new positions for the Facility.


 


(b)           All
transactions that are liquidated under either subparagraph (i) or (ii) above
and in accordance with the terms of the Implementation Agreements shall be
reconciled and netted in accordance with Section 6.3. In the event, other
energy management agreements between Energy Manager and Owner’s Affiliates are
also terminated at the same time as this Agreement, then such amounts due under
this Agreement and the other energy management agreements shall be netted into
a single payment to be made by Energy Manager or Owner, as applicable.


 


10.6         Successor to
Energy Manager. Upon provision or receipt of a Termination Notice, as the
case may be:


 


(a)           Energy Manager shall
use all commercially reasonable efforts to facilitate the transfer of duties to
any person appointed by Owner to provide Services in connection with the
operation of the Facility (the “Successor Energy Manager”) so as not to disrupt
the normal operation of the Facility, including but not limited to continuing
to provide Services pursuant to the terms of this Agreement upon Owner’s
request for up to thirty (30) days after the date on which termination of this
Agreement becomes effective and shall thereafter provide all relevant
information, data and records relating thereto to the Successor Energy Manager
and its 


 


29

















 


representatives and accede to
all reasonable requests made by such persons in connection with preparing for
taking over the duties and obligations of Energy Manager.


 


(b)           Promptly after
termination, Energy Manager shall deliver to (and shall, with effect from
termination, hold in trust for and to the order of) Owner or (if so required by
Owner by written notice) to the Successor Energy Manager all property in its
possession or under its control owned by Owner or leased or licensed to Owner.


 


10.7         Cooperation
Following Termination. Energy Manager shall, upon termination of this
Agreement, cooperate with Owner and the Successor Energy Manager and comply
with all reasonable requests thereof, including the execution of documents and
other actions; provided, however, that in the event of a termination pursuant
to Sections 10.2 or 10.3(a), (b) or (c), Owner shall bear any reasonable costs
incurred by Energy Manager relating thereto.


 


ARTICLE XI

INDEMNIFICATION


 


11.1         By Energy Manager.


 


(a)           Energy Manager shall
indemnify, defend and hold harmless Owner Indemnified Parties from and against
any and all suits, actions, liabilities, legal proceedings, claims, demands,
losses, costs and expenses of whatsoever kind or character, including
reasonable attorneys’ fees and expenses (collectively, “Claims”) in respect of
personal injury to, or death of, Third Parties and in respect of loss of, or
damage to, any Third Party property to the extent that the same arises out of
or results from (i) any failure of Energy Manager to perform its obligations
under this Agreement, (ii) any negligent or tortious acts or omissions by
Energy Manager or its subcontractors or their respective agents or employees,
or (iii) any willful misconduct or breach of Applicable Law on the part of
Energy Manager or its subcontractors or their respective agents or employees in
the performance of their express obligations arising under this Agreement.


 


(b)           Subject to the
provisions of Article XII and without limiting the provisions of Section
11.1(a), Energy Manager shall also indemnify, defend and hold harmless Owner
Indemnified Parties from and against any and all regulatory penalties or fines,
and reasonable expenses (including attorneys’ fees and expenses whether at the
trial or appellate level) to the extent arising from Energy Manager’s violation
of any Applicable Law.


 


11.2         By Owner.


 


(a)           Owner shall
indemnify, defend and hold harmless the Energy Manager Indemnified Parties from
and against any and all Claims in respect of personal injury to, or death of,
Third Parties and in respect of loss of, or damage to, any Third Party property
to the extent the same arises out of or results from (i) any failure of Owner
to perform its obligations under this Agreement, (ii) any negligent or tortious
acts or omissions by Owner, its subcontractors (other than Energy Manager or
its subcontractors or their respective agents or employees) or their respective
agents or employees, (iii) any willful misconduct or breach of Applicable Law
on the part of Owner, its subcontractors (other than Energy Manager or its
subcontractors or their 


 


30

















 


respective agents or employees)
or their respective agents or employees, or (iv) the operation of the Facility.


 


(b)           Subject to the
provisions of Article XII and without limiting the provisions of
Section 11.2(a), Owner shall also indemnify, defend and hold harmless the
Energy Manager Indemnified Parties from and against any and all regulatory
penalties or fines, and reasonable expenses (including attorneys’ fees and
expenses whether at the trial or appellate level) arising from Owner’s
violation of any Applicable Law.


 


11.3         Concurrent
Negligence. NOTWITHSTANDING SECTIONS 11.1 AND 11.2
ABOVE, WHEN ANY OBLIGATION FOR INDEMNIFICATION RESULTS FROM JOINT OR CONCURRENT
NEGLIGENCE, GROSS NEGLIGENCE, WILLFUL MISCONDUCT, OR BAD FAITH OF BOTH OWNER
AND ENERGY MANAGER, SUCH PARTIES’ DUTY OF INDEMNIFICATION SHALL BE IN
PROPORTION TO EACH SUCH PARTY’S ALLOCABLE SHARE OF JOINT OR CONCURRENT
NEGLIGENCE, GROSS NEGLIGENCE, WILLFUL MISCONDUCT, OR BAD FAITH.


 


11.4         Cooperation
Regarding Claims. If any Party hereto shall receive notice or have
knowledge of any claim that may result in a claim for indemnification by such
Party or any other Owner or Energy Manager Indemnified Party, as applicable
(the “Indemnified Party”) against the other Party (the “Indemnifying Party”)
pursuant to this Agreement, such Indemnified Party shall, as promptly as
possible, give the Indemnifying Party notice of such claim, including a
reasonably detailed description of the facts and circumstances relating to such
claim, and a complete copy of all notices, pleadings and other papers related
thereto, and in reasonable detail the basis for its potential claim for
indemnification with respect thereto; provided, that failure promptly to give
such notice or to provide such information and documents shall not relieve the
Indemnifying Party from the obligation hereunder to respond to or to defend the
Indemnified Party failing to give such notice against such claim, unless the
failure to provide such notice would give rise to additional liability on the
part of the Indemnifying Party, in which case the Indemnifying Party shall not
be liable for such additional liability.


 


11.5         Defense of
Third-Party Claims.


 


(a)           The Indemnifying
Party shall be entitled, at its option, and expense and with counsel of its
selection, to assume and control the defense of any third-party claim, action,
suit or proceeding that is subject to any indemnity provided in this Agreement
by such Indemnifying Party, subject to the prior approval of the Indemnified
Party, which shall not unreasonably be withheld; provided that the Indemnifying
Party gives prompt notice of its intention to do so to the Indemnified Party
and reimburses the Indemnified Party for the reasonable costs and expenses
incurred by the Indemnified Party prior to the assumption by the Indemnifying
Party of such defense.


 


(b)           Notwithstanding the
provisions of this Section 11.5, unless and until the Indemnifying Party
acknowledges in writing its obligation to indemnify the Indemnified Party and
assumes control of the defense of a claim, suit, action or proceeding in
accordance with Section 11.5(a), the Indemnified Party shall have the
right, but not the obligation, to contest, defend and litigate, with counsel of
its own selection, any claim, action, suit or proceeding by 


 


31

















 


any third party alleged or
asserted against the Indemnified Party in respect of, resulting from, related
to or arising out of any matter for which it is entitled to be indemnified
hereunder, and the reasonable costs and expenses thereof shall be subject to
the indemnification obligations of the Indemnifying Party hereunder.


 


(c)           Indemnifying Party
shall not be entitled to settle or compromise any such claim, suit, action or
proceeding without the prior written consent of the Indemnified Party; provided
that after agreeing in writing to indemnify the Indemnified Party, the
Indemnifying Party may settle or compromise any claim without the approval of
the Indemnified Party so long as such claim is solely for monetary damages that
are paid in full by the Indemnifying Party and so long as the Indemnified Party
is fully released from liability by the claimant. So long as the Indemnifying
Party is fulfilling its obligations pursuant to this Article XI, the
Indemnified Party shall not be entitled to settle any such claim, suit, action
or proceeding without the prior written consent of the Indemnifying Party,
which consent shall not be unreasonably withheld, conditioned or delayed.


 


(d)           Following the
acknowledgment of the indemnification and the assumption of the defense by the
Indemnifying Party, the Indemnified Party shall have the right to employ its
own counsel and such counsel may participate in such action, but the fees and
expenses of such counsel shall be at the expense of the Indemnified Party, when
and as occurred, unless (i) the employment of counsel by the Indemnified Party
has been authorized in writing by the Indemnifying Party and the Indemnifying
Party has agreed to pay such fees and expenses, (ii) the Indemnified Party
shall have reasonably concluded, upon advice of counsel, that there would be a
conflict of interest between the Indemnifying Party and the Indemnified Party
in the conduct of the defense of such action, or (iii) the Indemnifying Party
shall not in fact have employed independent counsel reasonably satisfactory to
the Indemnified Party to assume the defense of such action and shall have been
so notified by the Indemnified Party.


 


ARTICLE XII

LIMITATION OF LIABILITY


 


12.1         General
Limitations of Liability. NOTWITHSTANDING ANY PROVISION HEREIN TO THE
CONTRARY, NEITHER PARTY NOR ANY OF THEIR RESPECTIVE SHAREHOLDERS, PARTNERS,
PRINCIPALS, AFFILIATES, OFFICERS, DIRECTORS, AGENTS, OR EMPLOYEES SHALL BE
LIABLE HEREUNDER FOR CONSEQUENTIAL OR INDIRECT LOSS OR DAMAGE, INCLUDING LOSS
OF PROFIT OR ANTICIPATED REVENUES, COST OF CAPITAL, LOSS OF GOODWILL, INCREASED
OPERATING COSTS OR ANY OTHER SPECIAL OR INCIDENTAL DAMAGES, OR PUNITIVE OR
EXEMPLARY DAMAGES; provided, however, nothing in this Section 12.1 shall limit
either Party’s obligations in respect of the indemnification provisions set
forth in Sections 11.1(a) or 11.2(a) hereof. The Parties further agree that the
waivers and disclaimers of liability, indemnities, releases from liability, and
limitations on liability expressed herein shall survive termination or
expiration of this Agreement, and shall apply at all times, whether in
contract, equity, tort or otherwise, REGARDLESS OF THE FAULT, NEGLIGENCE (IN
WHOLE OR IN PART), STRICT LIABILITY, BREACH OF CONTRACT OR BREACH OF WARRANTY
OF THE PARTY INDEMNIFIED, RELEASED OR WHOSE LIABILITIES ARE LIMITED, AND SHALL
EXTEND TO THE SHAREHOLDERS, PARTNERS, PRINCIPALS, 


 


32

















 


AFFILIATES, DIRECTORS, OFFICERS
AND EMPLOYEES, AGENTS AND RELATED OR AFFILIATED ENTITIES OF SUCH PARTY, AND
THEIR SHAREHOLDERS, PARTNERS, PRINCIPALS, AFFILIATES, DIRECTORS, OFFICERS AND
EMPLOYEES.


 


12.2         Limitation of
Owner’s Liability. Notwithstanding anything to the contrary herein, there
shall be absolutely no personal liability or recourse for the payment of any
amounts due hereunder, or the performance of any obligations hereunder against
any employee, shareholder, partner, officer or director, whether past, present
or future, of Owner.


 


12.3         Limitation of Energy Manager’s Liability. Any information, projections, valuations or
models provided by Energy Manager pursuant to this Agreement shall be based on
information available to Energy Manager at such time. The providing of such
information shall not constitute a guarantee by Energy Manager of any future
facts or expected results, or that such information represents the best market
alternatives under any circumstances or that any particular results may
actually be achieved by the following of any suggestions by Energy Manager. Notwithstanding
anything to the contrary herein, there shall be absolutely no personal
liability or recourse for the payment of any amounts due hereunder, or the
performance of any obligations hereunder against any employee, shareholder,
partner, officer or director, whether past, present or future, of Energy
Manager.


 


ARTICLE
XIII

CONFIDENTIALITY


 


13.1         Non-Disclosure.
Each Party agrees to hold in confidence any information imparted to it by the
other Party which pertains to Owner’s or Energy Manager’s business activity in
any manner, and which is not the subject of general public knowledge,
including, without limitation, this Agreement and its Exhibits, proprietary
processes, technical information and know-how, information concerning Owner’s
or Energy Manager’s management policies, economic policies, financial and other
data (“Confidential Information”). Confidential Information shall not
include:  (i) information in the public
domain, or (ii) information obtained by a Party from a third Person not under
an obligation of non-disclosure to Owner or Energy Manager. This obligation
shall continue to remain in full force and effect during the Initial Term or
Term Extension of this Agreement, as the case may be, and for two (2) years after
the date of termination or expiration of this Agreement.


 


13.2         Permitted
Disclosure. Either Party shall have the right to disclose Confidential
Information to (i) any Governmental Authority (in each case, to the extent
legally required by any such entity), (ii) its advisors, auditors, legal
counsel and insurers, (iii) Energy Manager shall be entitled to disclose
Confidential Information to its Affiliate, Cinergy Marketing & Trading, LP
solely in connection with providing the Services, (iv) Lenders, potential
Lenders, investors, potential investors and other members of the public in
connection with the financing of the development, construction and operation of
the Project, including in connection with the listing of any shares, stocks,
securities, bonds or any other similar financial instrument, but in each case
only to the extent required in connection with obtaining and maintaining such
financing and provided that any such Person receiving any Confidential
Information agrees to maintain the confidentiality of such Confidential
Information in accordance with the terms hereof and the 


 


33

















 


disclosing Party shall remain
liable for any breach of confidentiality by any such Person, and (v) bona fide
potential purchasers of an interest in Owner or the Facility; provided,
however, such bona fide potential purchasers must sign a written
confidentiality agreement agreeing to maintain the confidentiality of the
Confidential Information consistent with the terms hereof. Lenders shall be
entitled to disclose Confidential Information to any Governmental Authority (in
each case, to the extent legally required by any such entity and provided that
reasonable efforts are undertaken to receive confidential treatment by any such
entity) and to their advisors, auditors, insurers and supervisory bodies,
provided that such advisors, auditors, insurers and supervisory bodies agree to
maintain the confidentiality of such Confidential Information in accordance
with the terms hereof and the disclosing Party shall remain liable for any
breach of confidentiality by any such Person.


 


ARTICLE XIV

REPRESENTATIONS AND WARRANTIES


 


14.1         Energy Manager
Representations and Warranties. Energy Manager represents and warrants to
Owner as of the Effective Date that:


 


(a)           Organization and
Good Standing. Energy Manager is a corporation duly organized, validly
existing and in good standing under the laws of the State of Ohio.


 


(b)           Enforceability.
This Agreement constitutes the legal, valid and binding obligation of Energy
Manager, except as enforceability may be limited by (i) applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
the rights of creditors generally, and (ii) general principles of equity.


 


(c)           Due Authorization.
The execution, delivery and performance of this Agreement by Energy Manager has
been duly authorized by all requisite action and will not conflict with any
provisions of any Applicable Law, or any material agreement or instrument to
which it is a party or by which it, its property or assets may be bound or
affected, and specifically that Energy Manager’s performance under this
Agreement, and the terms of any transactions entered into hereunder, are not
subject to the jurisdiction of any state utility or public service commissions.


 


(d)           Permits.
Energy Manager has obtained and shall maintain during the Initial Term or Term
Extension of this Agreement, as the case may be, all Permits required for the
Services.


 


14.2         Owner
Representations and Warranties. Owner represents and warrants to Energy
Manager as of the Effective Date that:


 


(a)           Organization and
Good Standing. Owner is a limited liability company duly organized, validly
existing and in good standing under the laws of the State of Delaware.


 


(b)           Enforceability.
This Agreement constitutes the legal, valid and binding obligation of Owner,
except as enforceability may be limited by (i) applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the rights of
creditors generally and (ii) general principles of equity.


 


34

















 


(c)           Due Authorization.
The execution, delivery and performance of this Agreement by Owner has been
duly authorized by all requisite action and will not conflict with any
provisions of any Applicable Law, or any agreement or instrument to which it is
a party or by which it, its property or assets may be bound or affected.


 


(d)           Permits. Owner
has obtained or shall have obtained all Permits required to operate or conduct
Owner’s business as contemplated herein.


 


ARTICLE XV

DISPUTE RESOLUTION


 


15.1         Dispute
Resolution; Arbitration.


 


(a)           In the event dispute
arises, it shall first be referred to senior management of each company. If
senior management cannot resolve the dispute within 10 Business Days then the
parties shall follow the terms of subsection (b).


 


(b)           Any dispute not
otherwise resolved hereunder may be submitted for arbitration hereunder by
either Party delivering to the other a notice demanding arbitration of the
dispute in accordance with the commercial arbitration rules of the American
Arbitration Association (“AAA”) then in effect.


 


(c)           Each Party shall,
within thirty (30) days of delivery of the notice demanding arbitration, select
an arbitrator (each, a “Party Arbitrator”). The Party Arbitrators shall select,
within ten (10) days, a third neutral arbitrator, who shall serve as the
Chairman (“Chairman”) of the arbitration panel. In the absence of agreement
between the Party Arbitrators on selection of the third arbitrator, the third
arbitrator shall be selected by the AAA.


 


(d)           No arbitrator may
have a direct or indirect interest in either Party or the subject of the
arbitration, PROVIDED HOWEVER that each Party may communicate ex parte with
their respective Party Arbitrator, but not the Chairman of the arbitration
panel.


 


(e)           The place of the
arbitration shall be at a location as mutually agreed to by the Parties at a
site chosen by the arbitration panel or, in the absence of agreement among the
panel, by the Chairman.


 


(f)            The arbitration
panel shall determine the rules of procedure or, in the absence of agreement
among the panel, the Federal Rules of Civil Procedure shall govern the
procedure for discovery as well as presentation of the evidence. In any event,
the arbitration panel or, in the absence of agreement among the panel, the
Chairman shall have the right to impose reasonable restrictions on the taking
of discovery, including limitations on the number of and length of depositions
of witnesses.


 


(g)           The arbitration
panel shall begin hearing evidence within ninety (90) days of selection of the
Chairman, unless extended for a reasonable period upon agreement among the
arbitration panel, or in the absence of agreement among the panel, by the
Chairman. The arbitration panel shall render its decision in writing within
thirty (30) days of the close of 


 


35

















 


evidence. Judgment upon the
award rendered by the arbitration panel may be entered by any court having
jurisdiction.


 


(h)           During the course of
the arbitration, each Party shall pay its own expenses, but the arbitration
panel, in its final award, may award costs and expenses, including reasonable
attorneys’ fees, to the prevailing party if the panel determines that such an
award is appropriate, PROVIDED HOWEVER that the arbitration panel shall in no
way exceed in its award the limits, if any, on damages afforded by New York law
or the provisions of this Agreement, particularly Article XII.


 


(i)            The Parties shall continue
performance of their obligations under this Agreement during the course of any
dispute hereunder except for a dispute in which a Party is seeking to terminate
the Agreement.


 


ARTICLE XVI

FINANCIAL PERFORMANCE


 


16.1         Security by Owner. During the Initial Term of this
Agreement, and any Term Extension, if applicable, Owner shall provide and
maintain with the Energy Manager the security in accordance with Exhibit F and
in an amount specified as the Performance Assurance for Party B in the
Collateral Annex. The foregoing notwithstanding, Owner shall post such
additional security as may be required from time-to-time under the Collateral
Annex.


 


16.2         Security by Energy Manager. Energy Manager’s
obligation to post collateral to Owner shall be governed by the Collateral
Annex.


 


ARTICLE XVII

MISCELLANEOUS


 


17.1         Severability. The
invalidity, in whole or in part, of any of the foregoing Sections or provisions
of this Agreement will not affect the validity of the remainder of such
Sections or provisions.


 


17.2         Entire Agreement.
This Agreement, which hereby expressly incorporates the Implementation
Agreements and the transactions entered into pursuant to the Implementation
Agreements and makes them part of this Agreement, contains the complete
agreement between Owner and Energy Manager with respect to the provision of
Services as contained herein and supersedes all other agreements, whether
written or oral, with respect to the matters contained therein.


 


17.3         Amendment. No
modification, amendment, or other change will be binding on any Party unless
consented to in writing by both Parties.


 


17.4         Assignment.


 


(a)           General. No
assignment or transfer of this Agreement by a Party or such Party’s rights or
obligations hereunder shall be effective without the written approval of the
other Party; provided that (i) Owner may assign its rights without obtaining
the consent of Energy 


 


36

















 


Manager in connection with a
Project Financing and (ii) Energy Manager may assign its rights and obligations
hereunder to an Affiliate with equal or greater creditworthiness without
obtaining the approval of Owner; provided, however, that no assignment of this
Agreement by either Party shall relieve the assignor of any obligation, duty or
liability hereunder except to the extent such Party is expressly released in
writing from any such obligation, duty or liability by the other Party.


 


(b)           Assignment as
Security. Notwithstanding the provisions of Section 17.4(a) above, for the
purpose of a Project Financing, Owner may assign to, or otherwise create a
security interest in favor of, Lenders or their designee, or any other Person
providing Project Financing, in Owner’s rights and interests in, under or
pursuant to this Agreement and the revenues deriving from any of the rights or
assets of Owner hereunder. Energy Manager further agrees to reasonably
cooperate with Owner and the parties providing Project Financing by entering
into consent agreements with the Lenders.


 


17.5         Notices. All
notices required or provided for in this Agreement shall be in writing and
shall be delivered by hand or sent by registered or certified mail, return
receipt requested, or facsimile transmission as follows:


 


If to Energy Manager:


 


*****


*****


*****


*****


*****


*****


 


With a copy to:


 


*****


*****


*****


*****


*****


*****


 


And to:


 


*****


*****


*****


*****


*****


 


_________


***
Certain information on this page has been omitted and filed separately with the
SEC. Confidential treatment has been requested with respect to the omitted portions.


 


37

















 


If to Owner:


 


*****


*****


*****


*****


*****


*****


*****


*****


 


17.6         Additional
Documents and Actions. Each Party agrees to execute and deliver to the
other such additional documents, and take such additional actions, as may be
reasonably required by the other to effect the interest of this Agreement.


 


17.7         Waiver. Failure
by either Party to exercise any of its rights under this Agreement shall not
constitute a waiver of such rights. Neither Party shall be deemed to have
waived any right resulting from any failure to perform by the other unless it
has made such waiver specifically in writing.


 


17.8         Captions. The
captions contained in this Agreement are for convenience and reference only and
in no way define, describe, extend or limit the scope or intent of this
Agreement or the intent of any provision contained herein. The headings are
inserted for convenience and are to be ignored for the purposes of construction.
The Schedules to this Agreement form part of this Agreement and will be of full
force and effect as though they were expressly set forth in the body of this
Agreement.


 


17.9         Survival. Notwithstanding
any provisions herein to the contrary, the obligations set forth in Sections
6.3, 10.5, 10.6 and 10.7 and Articles XI, XII, XIII, XV and XVII shall survive
the expiration or termination of this Agreement for a period of twenty-four
(24) months therefrom.


 


17.10       No Third Party
Beneficiary. This Agreement is for the sole and exclusive benefit of the
Parties hereto and shall not create a contractual relationship with, or cause
of action in favor of, any Third Party.


 


17.11       Counterparts. This
Agreement may be executed in one or more counterparts each of which shall be
deemed an original and all of which shall be deemed one and the same Agreement.


 


17.12       Governing Law. THIS
AGREEMENT SHALL BE INTERPRETED AND CONSTRUED ACCORDING TO THE LAWS OF THE STATE
OF NEW YORK, EXCLUSIVE OF ITS CONFLICTS OF LAWS PRINCIPLES (OTHER THAN SECTIONS
5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAWS).


 


_________


***
Certain information on this page has been omitted and filed separately with the
SEC. Confidential treatment has been requested with respect to the omitted
portions.


 


38

















 


17.13       Regulatory Filing.
Energy Manager may send a letter to FERC outlining the relationship between
Energy Manager and Owner and any other regulatory filing that may be required
by FERC or may be required in the reasonable opinion of Energy Manager’s
counsel. Owner agrees to cooperate with Energy Manager in any such filing. Energy
Manager shall provide a copy of such letter and such other regulatory filing,
if any, to the Owner and an opportunity for it to review and comment on such
letter prior to its submission to FERC.


 


39

















 


IN WITNESS
WHEREOF, the Parties have executed this Agreement as of this 17th day of
August, 2004


 


	
   

  	
  KGEN HOT SPRING LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ GERALD
  K. LINDNER

  	
   

  
	
   

  	
  Name:

  	
  Gerald K.
  Lindner

  	
   

  
	
   

  	
  Title:

  	
  CEO

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  THE CINCINNATI GAS & ELECTRIC COMPANY

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ JACK
  FARLEY

  	
   

  
	
   

  	
  Name:

  	
  Jack Farley

  	
   

  
	
   

  	
  Title:

  	
  Vice
  President-Executing Agent