Exhibit 10.16


 


EXECUTION COUNTERPART


 


REDACTED


 


 


ENERGY MANAGEMENT AGREEMENT


 


Dated as of


 


August 17, 2004


 


By and Between


 


KGEN MURRAY I AND II 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

  	
  11

  
	
   

  	
   

  	
   

  
	
  2.1

  	
  APPOINTMENT

  	
  11

  
	
  2.2

  	
  TERM

  	
  11

  
	
  2.3

  	
  COMMODITY
  TRANSACTIONS AND RELATED AGREEMENTS

  	
  11

  
	
  2.4

  	
  RELATIONSHIP
  OF PARTIES

  	
  12

  
	
  2.5

  	
  NON-CIRCUMVENTION

  	
  12

  
	
   

  	
   

  	
   

  
	
  ARTICLE III OWNER’S RIGHTS AND
  RESPONSIBILITIES

  	
  12

  
	
   

  	
   

  	
   

  
	
  3.1

  	
  OWNER
  RIGHTS AND RESPONSIBILITIES

  	
  12

  
	
  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

  	
  17

  
	
   

  	
   

  	
   

  
	
  ARTICLE V SERVICES

  	
  17

  
	
   

  	
   

  	
   

  
	
  5.1

  	
  POWER
  MANAGEMENT SERVICES

  	
  17

  
	
  5.2

  	
  FUEL
  MANAGEMENT SERVICES

  	
  18

  
	
  5.3

  	
  RISK
  MANAGEMENT SERVICES

  	
  18

  
	
  5.4

  	
  ENHANCEMENT
  OF GENERATION MARGIN

  	
  18

  
	
  5.5

  	
  REPORTING
  REQUIREMENTS

  	
  18

  
	
  5.6

  	
  MURRAY
  I SERVICES

  	
  19

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI FEES; SETTLEMENT

  	
  19

  
	
   

  	
   

  	
   

  
	
  6.1

  	
  MANAGEMENT
  FEES

  	
  19

  
	
  6.2

  	
  RESTART
  FEE

  	
  19

  
	
  6.3

  	
  FINANCIAL
  SETTLEMENT AND PAYMENT OF MANAGEMENT FEE

  	
  20

  
	
   

  	
   

  	
   

  
	
  ARTICLE VII TRANSACTION PROCEDURES

  	
  21

  
	
   

  	
   

  	
   

  
	
  7.1

  	
  BACK
  TO BACK CONTRACTS

  	
  21

  
	
  7.2

  	
  LONG
  TERM COMMODITY TRANSACTIONS

  	
  22

  
	
  7.3

  	
  SHORT
  TERM COMMODITY TRANSACTIONS

  	
  22

  
	
  7.4

  	
  DAY-AHEAD
  COMMODITY TRANSACTIONS

  	
  22

  
	
  7.5

  	
  OTHER
  TRANSACTIONS; ANCILLARY SERVICES

  	
  22

  
	
  7.6

  	
  RELATED
  AGREEMENTS

  	
  23

  
	
  7.7

  	
  RISK
  MANAGEMENT SERVICES

  	
  23

  
	
  7.8

  	
  DELEGATION

  	
  24

  
	
   

  	
   

  	
   

  
	
  ARTICLE VIII REPORTS, RECORDS AND
  AUDITS

  	
  25

  
	
   

  	
   

  	
   

  
	
  8.1

  	
  REPORTS

  	
  25

  
	
  8.2

  	
  BOOKS
  AND RECORDS

  	
  26

  



 

















 


	
  8.3

  	
  AUDITS

  	
  26

  
	
   

  	
   

  	
   

  
	
  ARTICLE IX FORCE MAJEURE

  	
  27

  
	
   

  	
   

  	
   

  
	
  9.1

  	
  PROCEDURE
  FOR CALLING FORCE MAJEURE

  	
  27

  
	
  9.2

  	
  PERFORMANCE
  SUSPENDED

  	
  28

  
	
  9.3

  	
  END
  OF FORCE MAJEURE EVENT

  	
  28

  
	
   

  	
   

  	
   

  
	
  ARTICLE X TERMINATION

  	
  28

  
	
   

  	
   

  	
   

  
	
  10.1

  	
  OWNER
  TERMINATION EVENTS

  	
  28

  
	
  10.2

  	
  ENERGY
  MANAGER TERMINATION EVENTS

  	
  29

  
	
  10.3

  	
  ADDITIONAL
  TERMINATION RIGHT

  	
  29

  
	
  10.4

  	
  TERMINATION
  PROCEDURE

  	
  30

  
	
  10.5

  	
  POST-TERMINATION
  TRANSACTION PROCEDURES

  	
  30

  
	
  10.6

  	
  SUCCESSOR
  TO ENERGY MANAGER

  	
  31

  
	
  10.7

  	
  COOPERATION
  FOLLOWING TERMINATION

  	
  31

  
	
   

  	
   

  	
   

  
	
  ARTICLE XI INDEMNIFICATION

  	
  31

  
	
   

  	
   

  	
   

  
	
  11.1

  	
  BY
  ENERGY MANAGER

  	
  31

  
	
  11.2

  	
  BY
  OWNER

  	
  32

  
	
  11.3

  	
  CONCURRENT
  NEGLIGENCE

  	
  32

  
	
  11.4

  	
  COOPERATION
  REGARDING CLAIMS

  	
  32

  
	
  11.5

  	
  DEFENSE
  OF THIRD-PARTY CLAIMS

  	
  33

  
	
   

  	
   

  	
   

  
	
  ARTICLE XII LIMITATION OF LIABILITY

  	
  34

  
	
   

  	
   

  	
   

  
	
  12.1

  	
  GENERAL
  LIMITATIONS OF LIABILITY

  	
  34

  
	
  12.2

  	
  LIMITATION
  OF OWNER’S LIABILITY

  	
  34

  
	
  12.3

  	
  LIMITATION
  OF ENERGY MANAGER’S LIABILITY

  	
  34

  
	
   

  	
   

  	
   

  
	
  ARTICLE XIII CONFIDENTIALITY

  	
  34

  
	
   

  	
   

  	
   

  
	
  13.1

  	
  NON-DISCLOSURE

  	
  34

  
	
  13.2

  	
  PERMITTED
  DISCLOSURE

  	
  35

  
	
   

  	
   

  	
   

  
	
  ARTICLE XIV REPRESENTATIONS AND
  WARRANTIES

  	
  35

  
	
   

  	
   

  	
   

  
	
  14.1

  	
  ENERGY
  MANAGER REPRESENTATIONS AND WARRANTIES

  	
  35

  
	
  14.2

  	
  OWNER
  REPRESENTATIONS AND WARRANTIES

  	
  36

  
	
   

  	
   

  	
   

  
	
  ARTICLE XV DISPUTE RESOLUTION

  	
  36

  
	
   

  	
   

  	
   

  
	
  15.1

  	
  DISPUTE
  RESOLUTION; ARBITRATION

  	
  36

  
	
   

  	
   

  	
   

  
	
  ARTICLE XVI FINANCIAL PERFORMANCE

  	
  37

  
	
   

  	
   

  	
   

  
	
  16.1

  	
  SECURITY
  BY OWNER

  	
  37

  
	
  16.2

  	
  SECURITY
  BY ENERGY MANAGER

  	
  37

  
	
   

  	
   

  	
   

  
	
  ARTICLE XVII MISCELLANEOUS

  	
  37

  
	
   

  	
   

  	
   

  
	
  17.1

  	
  SEVERABILITY

  	
  38

  
	
  17.2

  	
  ENTIRE
  AGREEMENT

  	
  38

  
	
  17.3

  	
  AMENDMENT

  	
  38

  
	
  17.4

  	
  ASSIGNMENT

  	
  38

  
	
  17.5

  	
  NOTICES

  	
  38

  
	
  17.6

  	
  ADDITIONAL
  DOCUMENTS AND ACTIONS

  	
  39

  
	
  17.7

  	
  WAIVER

  	
  39

  
	
  17.8

  	
  CAPTIONS

  	
  39

  
	
  17.9

  	
  SURVIVAL

  	
  40

  



 


ii

















 


	
  17.10

  	
  NO
  THIRD PARTY BENEFICIARY

  	
  40

  
	
  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 Murray I and II 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) a combined cycle, natural
gas-fired electrical generating facility rated at approximately 620 megawatts consisting
of 2 power trains located approximately 30 miles southeast of Chattanooga,
Tennessee that interconnects with Georgia Power Company’s Conasauga substation
and (b) a combined cycle, natural gas-fired electrical generating facility
rated at approximately 620 megawatts consisting of 2 power trains located
approximately 30 miles southeast of Chattanooga, Tennessee that interconnects
with Dalton Utilities’ Loopers Farm substation; 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.


 


2

















 


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


 


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


 


“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, with respect to each
Facility, 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 such Facility.


 


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


 


“CPT” means Central Prevailing Time.


 


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


 


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


 


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


 


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


 


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


 


“Effective Date” shall mean August 23, 2004.


 


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


 


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).


 


“Facility” means Murray I or Murray II (which may be referred to
herein collectively as “the Facility”).


 


“Facility Book” means, with respect to each Facility, all
transactions with respect to such Facility, 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, with respect to each Facility, 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
such 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, with respect to each Facility,
any agreement between Energy Manager, and Cinergy Marketing & Trading,
L.P., or other Third Party, for the supply of Fuel to such Facility.


 


“Generation Margin” means with respect to any period of time and
each Facility, 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 


 


4

















 


Costs attributable to Managed Capacity for such period of time and (C) fired
hour LTSA expenses, in each case with respect to such Facility. 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.


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


5

















 


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


 


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


 


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


 


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


 


“MW” means megawatt.


 


6

















 


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


 


“MMBTU” means one million British
thermal units.


 


“Murray I” means Unit I at the Murray Power Generation Facility,
owned by Owner and located in Murray County, Georgia.


 


“Murray I Fixed Dollar Portion” has the meaning set forth in Section 6.1.


 


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


 


“Murray II” means Unit II at the Murray Power Generation
Facility, owned by Owner and located in Murray County, Georgia.


 


“Murray II Fixed Dollar Portion” has the meaning set forth in Section 6.1.


 


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


 


“Murray PPA” means the Contract for the Purchase of Firm
Capacity and Energy between Georgia Power Company and the Owner, dated June 3,
2002.


 


“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 Murray Operating,  LLC
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.


 


7

















 


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


 


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


 


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


 


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


 


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


 


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


 


“Pre-PPA Murray I Monthly Management Fee” has the meaning set
forth in Section 6.1.


 


“Post-PPA Murray I Monthly Management Fee” has the meaning set
forth in Section 6.1.


 


“Power” means, with respect to each Facility, electric capacity
as measured in MW, energy as measured in MWh, and/or any other electric related
products or services available for sale from such 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, with respect to each Facility, 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 such Facility, and (C) any revenues from repurchased Power
and remarketed Power or transmission, and other financial settlements.


 


“Power Sales Agreement” means, with respect to each Facility,
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
such Facility is never actually Dispatched.


 


8

















 


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


 


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


 


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


 


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


 


“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 (i) with respect to Murray I, from the
Effective Date until May 31, 2005 and with respect to Murray II from the
Effective Date through the term of this Agreement, the Power Management
Services, Fuel Management Services, Risk Management Services and any other
services that Energy Manager has agreed to provide hereunder and (ii) with
respect to Murray I, from May 31, 2005 through the term of this Agreement,
the services described in Section 5.6.


 


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


 


9

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


“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 Murray I or
any one of the 2 power trains of Murray II, as the context may require.


 


“Transmission Provider” means, with respect to each
Facility, any Person that provides transmission or distribution services for
the delivery of electric energy from such 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.


 


10

















 


ARTICLE II

APPOINTMENT OF ENERGY MANAGER AND TERM


 


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


 


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


 


2.3                                 Commodity
Transactions and Related Agreements.


 


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


 


(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.


 


11

















 


2.4                                 Relationship
of Parties.


 


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


 


(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.


 


12

















 


2.5                                 Non-Circumvention.


 


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


 


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


 


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 


 


13

















 


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


 


(c)                                  Determine
and establish


 


(i)                                     Long Term Bias;


(ii)                                  Long Term Execution
Strategies;


(iii)                               Short Term Bias;


(iv)                              Short Term Execution
Strategies;


(v)                                 Day-Ahead Execution
Strategies, and


(vi)                              Other Transaction
Execution Strategies;


 


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;


 


14

















 


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


 


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


 


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


 


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


 


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


 


(m)                               provide
an open line communication between the 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.


 


15

















 


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


 


4.2                                 Standard
of Performance of Obligations. Energy Manager shall perform the Services in
a good, workmanlike and commercially reasonable manner and in accordance with (i) Good
Industry Practice, (ii) instructions from Owner and Owner’s
Representative, (iii) the terms of this Agreement, the Energy Management
Plan, the Risk Management Policy and Lender Criteria, (iv) Applicable Laws
and permits; and (v) Good Industry Practices acting as if it were managing
each 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 either Facility or the Services provided
hereunder that has a material adverse effect on either 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 either
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.


 


16

















 


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


 


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


 


ARTICLE V


SERVICES


 


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


 


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


 


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


 


(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.


 


17

















 


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 each Facility;


 


(b)                                 negotiation and
administration of Related Agreements;


 


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

















 


5.6                                 Murray
I Services. Notwithstanding any provision of this Agreement to the
contrary, from May 31, 2005 through the term of this Agreement, for Murray
I the Services shall include only the following: (i) coordinate scheduling
activities with the O&M provider to assist the Owner in meeting its
obligations under the Murray PPA, (ii) providing information to the Owner
regarding the optimization of Murray I in light of the Murray PPA and any Fuel
Supply Agreements applicable to Murray I, (iii) provide billing functions,
reporting relating to the operation of Murray I and other administrative and
back-office functions and (iv) assisting the Owner in transactions for
Power from Alternative Resources (as defined in the Murray PPA) in connection
with the Owner’s obligations under the Murray PPA.


 


ARTICLE VI


FEES; SETTLEMENT


 


6.1                                 Management
Fees. Commencing with the Effective Date, Energy Manager shall be entitled
to a monthly fee equal to:


 


(a)                                  with
respect to Services to be provided in respect of Murray I:


 


(i)                                     for each month
prior to June 2005, the greater of (A) ***** (“Murray I Fixed Dollar
Portion”) or (ii) ***** of the monthly Generation Margin for Murray I (the
“Pre-PPA Murray I Monthly Management Fee”); and


 


(ii)                                  for each month commencing
with June 2005, ***** for Murray I (the “Post-PPA Murray I Monthly
Management Fee” and, together with the Pre-PPA Murray I Monthly Management Fee,
the “Murray I Monthly Management Fee”); and


 


(b)                                 with
respect to Services to be provided in respect of Murray II, the greater of (i) *****  (“Murray II Fixed Dollar Portion”) or (ii) *****
of the monthly Generation Margin for Murray II (the “Murray II 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 Murray I Monthly Management Fee shall not apply if Murray I is not
in commercial operations. Each time Murray I is brought back into commercial
operations, Owner shall pay Energy Manager a fee equal to ***** either (a) the
Murray I Fixed Dollar Portion of the Murray I Monthly Management Fee or (b) the
Post-PPA Murray I Monthly Management Fee based upon the date on which Murray I
is brought back into commercial operations. The Murray II Monthly Management
Fee shall not apply if Murray II is not in commercial operations. Each time
Murray II is brought back into commercial operations, Owner shall pay Energy
Manager a fee equal to ***** the Murray II Fixed Dollar Portion of the Murray
II Monthly Management Fee.


 


 






*** 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

















 


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 for each Facility
for transactions prior to May 31, 2005 and for Murray II only after such
date (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 Murray I Monthly Management Fee or Murray II
Monthly Management Fee, as applicable, (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 Murray I Monthly Management Fee or Murray II
Monthly Management Fee, as applicable. If the netting performed pursuant to the
foregoing results in a payment due Energy Manager, Owner shall remit such
payment to Energy Manager on the later of the Settlement Date or four (4) Business
Days of Owner’s receipt of the Generation Margin Reconciliation Statement. To
the extent that payment for any transaction is due under the Implementation
Agreements, or Related Agreements, as the case may be, prior to the Settlement
Date for any month, such amounts shall accrue interest, to the benefit of the
Party due such amounts, at the Interest Rate provided herein. Upon the
termination of this Agreement, to the extent that there are transactions the
terms of which extend past the Termination Date, the Parties shall continue to
net all amounts due between Owner and Energy Manager arising under the
Implementation Agreements, and Related Agreements, as the case may be, and
shall otherwise comply with this Section 6.3 until such time as those
transactions have been completed. To the extent that there is any netting by
Energy Manager under this Section 6.3 utilizing estimates because actuals
were not then available, Energy Manager shall actualize such estimates as soon
as reasonably practical and shall net them on the next Settlement Date
following actualization, and shall reflect that information in the Generation
Margin Reconciliation Statement for that particular Settlement Date.


 


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


 


20

















 


(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 either 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 either Facility for its
own use, the Energy Manager shall purchase the Power at a price to be agreed
with the Owner. Upon request by Owner, Energy Manager shall verify the market
price by receiving, if available, up to three (3) market quotes from
market participants in the power industry.


 


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


 


(e)                                  Until
such time the Owner has satisfied the obligations set forth in Section 16.1,
Energy Manager shall only engage in Day-Ahead Commodity Transactions, unit
contingent transactions and non-firm Power sales. Until the obligations set
forth in Section 16.1 are 


 


21

















 


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


 


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


 


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


 


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


 


7.5                                 Other
Transactions; Ancillary Services.


 


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


 


22

















 


(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 identified by Owner with respect to the activities of each
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 each 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 


 


23

















 


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 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 


 


24

















 


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.


 


(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.


 


25














 


(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 each Facility and all meter records reflecting
Fuel delivered to each Facility pursuant to this Agreement for a period of at
least two (2) years from the date of such records. From time-to-time, but
not more frequently than once per quarter during the Initial Term and any Term
Extension, either Party, or the Lenders at any time, may designate any qualified
Person to carry out audit tasks of a financial, technical or other nature in
relation to each 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 each 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 each 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 


 


26

















 


Representatives and the Lenders shall be given access only to the
Facility Book and records of each Facility.


 


(b)                                 Either
Party shall be entitled to conduct an audit of all matters pertaining to the
Services or either 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 each 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 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:


 


27

















 


(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 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 


 


28

















 


(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 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 


 


 






*** 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

















 


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 be entitled to the Murray I Monthly Management Fee or
Murray II Monthly Management Fee, as applicable, 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 either 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 


 


 






*** 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.


 


30

















 


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 each Facility (the “Successor Energy Manager”)
so as not to disrupt the normal operation of such 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 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.


 


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(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 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.


 


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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 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.


 


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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.


 


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 


 


34

















 


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


 


ARTICLE XIV

REPRESENTATIONS AND WARRANTIES


 


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


 


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


 


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


 


(c)                                  Due
Authorization. The execution, delivery and performance of this Agreement by
Energy Manager has been duly authorized by all requisite action and will not 


 


35

















 


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.


 


(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.


 


36

















 


(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.


 


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


 


37

















 


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.


 


(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:


 


*****


*****


*****


*****


*****


*****






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


 


38

















 


With a copy to:


 


*****


*****


*****


*****


*****


*****


 


And to:


 


*****


*****


*****


*****


*****


 


If to Owner:


 


*****


*****


*****


*****


*****


*****


 


*****


*****


 


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


 


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


 


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


 






*** 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

















 


17.9                           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 MURRAY I AND II LLC

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ GERALD K. LINDNER

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Gerald K. Linder

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  CEO

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  THE CINCINNATI GAS & ELECTRIC
  COMPANY

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ JACK FARLEY

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Jack Farley

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Vice President-Executing Agent