Exhibit 10.20


 


EXECUTION COUNTERPART


 


REDACTED


 


ENERGY MANAGEMENT AGREEMENT


 


Dated as of


 


August 17, 2004


 


By and Between


 


KGEN HINDS 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

  	
  16

  
	
  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

  	
  21

  
	
  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

  	
  28

  
	
  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

  	
  30

  
	
   

  	
   

  	
   

  
	
  11.1

  	
  BY ENERGY MANAGER

  	
  30

  
	
  11.2

  	
  BY OWNER

  	
  31

  
	
  11.3

  	
  CONCURRENT NEGLIGENCE

  	
  31

  
	
  11.4

  	
  COOPERATION REGARDING CLAIMS

  	
  31

  
	
  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

  	
  33

  
	
  12.3

  	
  LIMITATION OF ENERGY MANAGER’S LIABILITY

  	
  33

  
	
   

  	
   

  	
   

  
	
  ARTICLE XIII CONFIDENTIALITY

  	
  34

  
	
   

  	
   

  	
   

  
	
  13.1

  	
  NON-DISCLOSURE

  	
  34

  
	
  13.2

  	
  PERMITTED DISCLOSURE

  	
  34

  
	
   

  	
   

  	
   

  
	
  ARTICLE XIV REPRESENTATIONS AND WARRANTIES

  	
  34

  
	
   

  	
   

  	
   

  
	
  14.1

  	
  ENERGY MANAGER REPRESENTATIONS AND WARRANTIES

  	
  34

  
	
  14.2

  	
  OWNER REPRESENTATIONS AND WARRANTIES

  	
  35

  
	
   

  	
   

  	
   

  
	
  ARTICLE XV DISPUTE RESOLUTION

  	
  35

  
	
   

  	
   

  	
   

  
	
  15.1

  	
  DISPUTE RESOLUTION; ARBITRATION

  	
  35

  
	
   

  	
   

  	
   

  
	
  ARTICLE XVI FINANCIAL PERFORMANCE

  	
  36

  
	
   

  	
   

  	
   

  
	
  16.1

  	
  SECURITY BY OWNER

  	
  36

  
	
  16.2

  	
  SECURITY BY ENERGY MANAGER

  	
  37

  
	
   

  	
   

  	
   

  
	
  ARTICLE XVII MISCELLANEOUS

  	
  38

  
	
   

  	
   

  	
   

  
	
  17.1

  	
  SEVERABILITY

  	
  38

  
	
  17.2

  	
  ENTIRE AGREEMENT

  	
  38

  
	
  17.3

  	
  AMENDMENT

  	
  38

  
	
  17.4

  	
  ASSIGNMENT

  	
  38

  
	
  17.5

  	
  NOTICES

  	
  39

  
	
  17.6

  	
  ADDITIONAL DOCUMENTS AND ACTIONS

  	
  40

  
	
  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 Hinds 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
520 megawatts located within the city limits of Jackson, Mississippi,
consisting of 2 power trains, and interconnected to Entergy Corporation’s
Lakeover 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.


 


“Depositary” has the meaning set forth in Section 16.3.


 


“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.


 


“EM Receivable Amount” has the meaning
set forth in Section 16.3.


 


“EM’s Payment Account” has the meaning
set forth in Section 16.3.


 


“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.


 


3

















 


“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).


 


“ESI” has the meaning set forth in Section 16.3.


 


“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


 


4

















 


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).


 


“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.


 


“Hinds PPA” means (a) the Master
Purchase and Sale Agreement and Cover Sheet dated January 31, 2003 between
Owner (as assignee of Duke Trading) and Entergy Services, Inc., (b) the
Master Power Purchase and Sale Agreement Confirmation dated June 30, 2003
between Owner (as assignee of Duke Trading) and Entergy Services, Inc. and
(c) Amendment to Confirmation and to the Additional Provisions to Master
Power Purchase and Sale Agreement Confirmation dated February 10, 2004
between Owner (as assignee of Duke Trading) and Entergy Services, Inc.


 


“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.


 


5

















 


“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.


 


“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.


 


6

















 


“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.


 


“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.


 


7

















 


“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 Hot Spring 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 Hot Spring
LLC’s facility and (ii) a confirmation dated August 5, 2004 among
Owner and Duke Trading providing for the sale of 230 MW of capacity and
associated first call rights to related energy from the Facility.


 


“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.


 


“PPA Receipts Account” has the meaning
set forth in Section 16.3.


 


8

















 


“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.


 


“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


 


9

















 


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.


 


“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


 


10

















 


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.


 


(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


 


11

















 


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.


 


(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


 


12

















 


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 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


 


13

















 


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;


 


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;


 


14

















 


(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 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.


 


15

















 


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:


 


(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


 


16

















 


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;


 


(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;


 


17

















 


(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


 


(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.


 


18

















 


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 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.


 


 






*** 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.


 


19














 


(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.


 


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


 


20

















 


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.


 


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


 


21

















 


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.


 


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


 


22

















 


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
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


 


23

















 


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.


 


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.


 


24

















 


(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;


 


(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


 


25

















 


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, 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


 


26

















 


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.


 


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


 


27

















 


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 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


 


 






*** 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

















 


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.


 


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


 


 






*** 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.


 


29

















 


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
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


 


30

















 


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
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


 


31

















 


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 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


 


32

















 


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, 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.


 


33

















 


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 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


 


34

















 


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.


 


(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.


 


35

















 


(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 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.


 


36

















 


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


 


16.3                           Hinds PPA Security.


 


(a)                                  The Energy Manager (i) acknowledges that it is aware of the
existence of and the terms and conditions of the Hinds PPA and (ii) confirms
that the provision of Services with respect to the Hinds PPA is contemplated
within the scope of this Agreement for so long as such agreement remains in
effect.  Energy Manager shall procure and deliver Fuel as
necessary for Owner to meet its obligations under the Hinds PPA.  The
Parties agree that the Services provided by Energy Manager related to the Hinds
PPA are part of Managed Capacity. Notwithstanding the forgoing, the parties
agree that Energy Manager’s obligations and standards to perform the Services
as they relate to the Hinds PPA are set forth in this Agreement only and
Energy Manager shall not be held to any standard of performance that is set
forth in the Hinds PPA.


 


(b)                                 Notwithstanding
anything in this Agreement, the Collateral Annex, the Master Gas Purchase and
Sale Agreement or any other agreement to the contrary, as the sole security for
Owner’s obligation to pay Energy Manager for Fuel delivered to Owner to be
utilized by Owner to meet Owner’s obligations under the Hinds PPA, Owner (and
KGen if applicable) hereby grants to Energy Manager a first priority lien on
and security interest in energy payment receivables from Entergy Services, Inc.
(or its successor under the Hinds PPA, “ESI”)) under the Hinds PPA.  The amount secured by such security interest
and lien shall equal, on any date, the aggregate amount due to Energy Manager
under the Master Gas Purchase and Sale Agreement with respect to Fuel
deliveries utilized by Owner to serve its obligations in respect of the Hinds
PPA, whether invoiced or not (such amount, the “EM Receivable Amount”).  In addition, KGen hereby guarantees payment
of the EM Receivable Amount.  KGen and
Owner shall promptly execute all security agreements, guarantees, intercreditor
agreements, subordination agreements, funds transfer agent agreements,
collateral agent agreements, financing statements, filings and other documents
deemed necessary by Energy Manager from time to time to perfect and evidence
such security interest and lien and to give full effect to the provisions of
this Section 16.3, all in form and substance reasonably acceptable to
Energy Manager and providing for the express provisions required under Section 6.05
of the Depositary Agreement.


 


(c)                                  In addition to the
foregoing, Owner agrees to cause, or have others cause, ESI to remit all
payments due to Owner to a segregated account (the “PPA Receipts Account”)
at The Bank of New York or such other financial institution reasonably
acceptable to Energy Manager (“Depositary”).  No changes or modifications to the payment
procedures regarding payments in the preceding sentence will be made without
Energy Manager’s prior written consent (which is not to be unreasonably
withheld or delayed).  Each month after
energy payments are received from ESI, KGen shall cause the Depositary to
transfer amounts from the PPA Receipts Account by wire transfer in an amount
equal to the invoiced amounts constituting a portion of the EM Receivables
Amount for such month into an account designated by Energy Manager (the “EM’s
Payment Account”) in accordance with Section 3.01(a) and Section 3.04
of that certain Depositary Agreement dated as of August 5, 2004 by and
among KGen and its


 


37

















 


subsidiaries, the Depositary and other parties
named therein.  Owner or KGen shall cause
the Depositary and Credit Suisse First Boston, acting through its Cayman
Islands Branch, as Collateral Agent for the Secured Parties thereunder to agree
that no changes may be made to Section 3.01(a) and Section 3.04
of the Depositary Agreement with respect to such payment procedures without
Energy Manager’s prior written consent (which is not to be unreasonably
withheld or delayed).  Owner agrees and
acknowledges that it has no legal or equitable right or claim to the amounts in
the EM’s Payment Account, except to the extent the amounts deposited therein
are in excess of the then total amount due to Energy Manager in respect of the
EM Receivable Amount.  All fees and
charges of the Depositary and associated with the PPA Receipts Account shall be
the responsibility of Owner.


 


(d)                                 In the event that
ESI does not make timely payment to Owner under the Hinds PPA, Owner shall
utilize its reasonable efforts to immediately enforce the payment and all other
applicable provisions of the Hinds PPA; provided, however, that Owner’s
inability or failure to collect any sums due from ESI shall in no event excuse
Owner from its payment obligations to Energy Manager or restrict Owner’s right
to dispute such amounts.


 


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 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.


 


38

















 


(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:


 


*****


*****


*****


*****


*****


 


If to Owner:


 


*****


*****


*****


*****


*****


*****


 


 






*** 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.


 


39

















 


*****


*****


 


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).


 


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.


 


40

















 


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


 


	
   

  	
  KGEN HINDS 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