Document:

DR - 12.31.2011 - Ex 10.8

EXHIBIT 10.8
Execution Copy
DIAMOND RESORTS OWNER TRUST 2011-1
TIMESHARE LOAN BACKED NOTES, SERIES 2011-1

	
						
	$
	64,510,000
	

	4
	%
	Timeshare Loan Backed Notes Series 2011-1

           

NOTE PURCHASE AGREEMENT

April 21, 2011

CREDIT SUISSE SECURITIES (USA) LLC
Eleven Madison Avenue, 4th Floor
New York, New York 10010-3629

Ladies and Gentlemen:

Section 1.Introductory.  Diamond Resorts Owner Trust 2011-1 (the “Issuer”), a Delaware statutory trust, proposes, subject to the terms and conditions stated herein, to sell to Credit Suisse Securities (USA) LLC (the “Initial Purchaser”) the Timeshare Loan Backed Notes, Series 2011-1 (the “Notes”) in the Initial Note Balance set forth in Exhibit A attached hereto.  The Notes are to be issued under an indenture, dated as of April 1, 2011 (the “Indenture”), by and among the Issuer, Diamond Resorts Financial Services, Inc., a Nevada corporation, as servicer (the “Servicer”) and Wells Fargo Bank, National Association, a national banking association, as indenture trustee (the “Indenture Trustee”).  The Securities Act of 1933, as amended, is herein referred to as the “Securities Act”.  Capitalized terms used herein but not otherwise defined shall have the meanings set forth in the Indenture.
Section 2.    Representations and Warranties of the Issuer and DRC.  Each of the Issuer and Diamond Resorts Corporation (“DRC”) jointly and severally represent and warrant to the Initial Purchaser, as of the Closing Date and on the date hereof, that:
(a)    A preliminary offering circular and an offering circular relating to the Notes to be offered by the Initial Purchaser have been prepared by the Issuer.  The preliminary offering circular, dated April 12, 2011 (the “Preliminary Offering Circular”), the final offering circular, dated April 21, 2011 that includes the offering price and other final terms of the Notes (the “Offering Circular”) and any General Use Issuer Free Writing Communication (each, as amended or supplemented by additional information) are collectively referred to as the “Offering Document”.  The Offering Document at a particular time means the Offering Document in the form actually amended or supplemented and issued at such time.
As of the date of this Agreement, the Offering Document and any Limited Use Issuer Free Writing Communication does not and as of the Closing Date will not include any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.  The preceding sentence does not apply to statements in or omissions from the Offering Document or 

any Limited Use Issuer Free Writing Communication based upon written information furnished to the Issuer or DRC by the Initial Purchaser specifically for use therein, it being understood and agreed that the only such information is that described as such in Section 7(b) hereof. 

“Free Writing Communication” means a written communication (as such term is defined in Rule 405 under the Securities Act) that constitutes an offer to sell or a solicitation of an offer to buy the Notes and is made by means other than the Preliminary Offering Circular or the Offering Circular. “Issuer Free Writing Communication” means a Free Writing Communication prepared by or on behalf of the Issuer or DRC or used or referred to by the Issuer or DRC, in the form retained in the records of the Issuer or DRC, provided, however, with respect to any cash flow models provided to investors by the Initial Purchaser, “Issuer Free Writing Communication” shall only refer to the collateral data and other statistical information to be used in such cash flow models.  “General Use Issuer Free Writing Communication” means any Issuer Free Writing Communication that is intended for general distribution to prospective investors, as evidenced by its being specified in Exhibit B to this Agreement. “Limited Use Issuer Free Writing Communication” means any Issuer Free Writing Communication that is not a General Use Issuer Free Writing Communication.

(b)    The Issuer is a statutory trust duly formed, validly existing and in good standing under the laws of the State of Delaware, with power and authority (corporate and other) to own its properties and conduct its business as described in the Offering Document and to execute, deliver and perform its obligations under each of the Transaction Documents and each other agreement or instrument completed thereby to which it is or will be a party; and the Issuer is duly qualified to do business as a foreign entity in good standing in all other jurisdictions in which its ownership or lease of property or the conduct of its business requires such qualification.  
(c)    DRC is a corporation duly formed, validly existing and in good standing under the laws of the State of Maryland, with power and authority (corporate and other) to own its properties and conduct its business as described in the Offering Document and to execute, deliver and perform its obligations under each of the Transaction Documents and each other agreement or instrument completed thereby to which it is or will be a party; and DRC is duly qualified to do business as a foreign corporation in good standing in all other jurisdictions in which its ownership or lease of property or the conduct of its business requires such qualification.  
(d)    Neither DRC nor any of its Affiliates is engaged in any business other than the acquisition, marketing, sale, development, management, rental and operation of timeshare resorts and other timeshare activities, the provision of financing for the purchase of timeshare properties and other leisure activities (exclusive of gaming) and activities directly related to or otherwise supporting any of the foregoing.
(e)    The Indenture has been duly authorized and on the Closing Date, the Indenture will have been duly executed and delivered, will conform to the description thereof contained in the Offering Document and will constitute a valid and legally binding obligation of the Issuer, enforceable in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equity principles.
(f)    The Notes have been duly authorized; and when the Notes are delivered and paid for pursuant to this Agreement on the Closing Date, such Notes will have been duly executed, 

authenticated, issued and delivered and will conform to the description thereof contained in the Offering Document; will constitute valid and legally binding obligations of the Issuer, enforceable against the Issuer in accordance with their terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equity principles; and will be entitled to the benefits of the Indenture.
(g)    No consent, approval, authorization, or order of, or filing with, any governmental agency or body or any court is required for the consummation of the transactions contemplated by the Transaction Documents and in connection with the issuance and sale of the Notes by the Issuer.
(h)    The execution, delivery and performance of each of the Transaction Documents and the issuance and sale of the Notes and compliance with the terms and provisions thereof will not result in a breach or violation of any of the terms and provisions of, constitute a default under or conflict with, (i) any statute, any rule, regulation or order of any governmental agency or body or any court, domestic or foreign, having jurisdiction over the Issuer, DRC, the Seller or the Transferors, or any of their properties, (ii) any agreement or instrument to which the Issuer, DRC, the Seller or the Transferors is a party or by which the Issuer, DRC, the Seller or the Transferors is bound or to which any of the properties of the Issuer, DRC, the Seller or the Transferors is subject, or (iii) the organizational documents of the Issuer, DRC, the Seller or the Transferors; and the Issuer has full power and authority to sell the Notes as contemplated by this Agreement.
(i)    This Agreement and each other Transaction Document to which the Issuer is a party have each been duly authorized, and when executed and delivered by the Issuer shall constitute a legal, valid and binding obligation of the Issuer enforceable against the Issuer in accordance with its terms.  This Agreement and the other Transaction Documents to which DRC is a party have each been duly authorized, and when executed and delivered by DRC shall constitute a legal, valid and binding obligation of DRC enforceable against DRC in accordance with its terms.
(j)    On the Closing Date, the Issuer shall have good and marketable title to all real properties and all other properties and assets owned by it, in each case free from liens, encumbrances and defects that would materially affect the value thereof or materially interfere with the use made or to be made thereof by it.
(k)    Each of the Issuer and DRC possesses all material certificates, authorities or permits issued by appropriate governmental agencies or bodies necessary to conduct the business now operated by it and has not received any notice of proceedings relating to the revocation or modification of any such certificate, authority or permit that, if determined adversely to the Issuer or DRC, would be likely individually or in the aggregate to produce a material adverse effect on the condition (financial or other), assets, business, properties or results of operations or prospects of the Issuer, whether or not in the ordinary course of business (“Material Adverse Effect”).
(l)    Except as disclosed in the Offering Document, there are no pending actions, suits or proceedings against or affecting DRC or the Issuer or any of their respective properties that, if determined adversely to the Issuer or DRC, would individually or in the aggregate have a Material Adverse Effect, or would materially and adversely affect the ability of the Issuer or DRC to perform its obligations under any of the Transaction Documents, or which are otherwise material in the context of the sale of the Notes; and no such actions, suits or proceedings are threatened or, to the Issuer’s 

knowledge, contemplated.
(m)    The Issuer is not an open-end investment company, unit investment trust or face-amount certificate company that is or is required to be registered under Section 8 of the United States Investment Company Act of 1940, as amended (the “Investment Company Act”); and the Issuer is not and, after giving effect to the offering and sale of the Notes and the application of the proceeds thereof as described in the Offering Document, will not be an “investment company” as defined in the Investment Company Act (including an “excepted investment company”).
(n)    No securities of the same class (within the meaning of Rule 144A(d)(3) under the Securities Act) as the Notes are listed on any national securities exchange registered under Section 6 of the United States Securities Exchange Act of 1934, as amended (the “Exchange Act”).
(o)    The offer and sale of the Notes to the Initial Purchaser in the manner contemplated by this Agreement will be exempt from the registration requirements of the Securities Act by reason of Section 4(2) thereof and it is not necessary to qualify an indenture in respect of the Notes.  The Indenture is not required to be qualified under the Trust Indenture Act of 1939, as amended (the “Trust Indenture Act”).
(p)    The Issuer has not entered and will not enter into any contractual arrangement with respect to the distribution of the Notes except for this Agreement.
(q)    There is no “substantial U.S. market interest” as defined in Rule 902(j) of Regulation S in the Regulation S Notes (as defined below).
(r)    Upon execution and delivery of the Sale Agreement, the Issuer will have acquired all of the Seller’s right, title and interest in and to the Timeshare Loans free and clear of all Liens.
(s)    Upon the execution and delivery of the Sale Agreement, the Issuer will have the power and authority to pledge the Timeshare Loans to the Indenture Trustee on behalf of the Noteholders.
(t)    Each of the representations and warranties of the Issuer and DRC set forth in each of the Transaction Documents to which they are parties is true and correct in all material respects.
(u)    Any taxes, fees and other governmental charges in connection with the execution and delivery of the Transaction Documents or the execution, delivery and sale of the Notes have been or will be paid prior to the Closing Date.
(v)    Since the respective dates as of which information is given in the Offering Document (x) there has not been any change in or affecting the general affairs, business, management, financial condition, stockholders’ equity, results of operations or regulatory situation of DRC that would or might result in a Material Adverse Effect, (y) DRC has not entered into any transaction or agreement (whether or not in the ordinary course of business) material to DRC that, in either case, would reasonably be expected to materially adversely affect the interests of the holders of the Notes, otherwise than as set forth or contemplated in the Offering Document and (z) it is not in default under any agreement or instrument to which it is a party or by which it is bound which would individually 

or in the aggregate have a Material Adverse Effect.
(w)    Immediately after the consummation of the transactions to occur on the Closing Date, (i) the fair value of the assets of DRC, at a fair valuation, will exceed its debts and liabilities, subordinated, contingent or otherwise; (ii) the present fair saleable value of the property of DRC will be greater than the amount that will be required to pay the probable liability of its debts and other liabilities, subordinated, contingent or otherwise, as such debts and other liabilities become absolute and matured; (iii) DRC will be able to pay its debts and liabilities, subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured; and (iv) DRC will not have unreasonably small capital with which to conduct the business in which it is engaged as such business is now conducted and is proposed to be conducted following the Closing Date.
(x)    Each of DRC and its Affiliates owns or licenses or otherwise has the right to use all licenses, permits, trademarks, trademark applications, patents, patent applications, service marks, tradenames, copyrights, copyright applications, franchises, authorizations and other intellectual property rights that are necessary for the operation of its businesses, without infringement upon or conflict with the rights of any other Person with respect thereto, except for such infringements and conflicts which, individually or in the aggregate, are not reasonably likely to have a Material Adverse Effect
(y)    Each of DRC and the Issuer has complied with the representations, certifications and covenants made by each of them to the Rating Agency in connection with the engagement of the Rating Agency to issue and monitor a credit rating on the Notes, including any certification provided to the Rating Agency in connection with Rule 17g-5(a)(iii) of the Exchange Act (“Rule 17g-5”).  DRC and the Issuer are the parties responsible for compliance with Rule 17g-5 in connection with the issuance and monitoring of the credit ratings on the Notes.
Section 3.    Purchase, Sale and Delivery of Notes.
(a)    On the basis of the representations, warranties and agreements herein contained, but subject to the terms and conditions set forth herein, the Issuer agrees to sell to the Initial Purchaser and the Initial Purchaser agrees to purchase the Notes from the Issuer at the purchase price and the Initial Note Balance set forth in Exhibit A attached hereto. 
(b)    The Issuer will deliver against payment of the purchase price the Notes to be offered and sold by the Initial Purchaser in reliance on Regulation S (the “Regulation S Notes”) in the form of one or more temporary global notes in registered form without interest coupons (the “Regulation S Global Notes”) which will be deposited with the Indenture Trustee, in its capacity as custodian, for The Depository Trust Company (“DTC”) for the respective accounts of the DTC participants for Euroclear Bank S.A./N.V., as operator of the Euroclear System (“Euroclear”), and Clearstream Banking, société anonyme (“Clearstream”) and registered in the name of Cede & Co., as nominee for DTC.  The Issuer will deliver against payment of the purchase price the Notes to be purchased by the Initial Purchaser hereunder and to be offered and sold by the Initial Purchaser in reliance on Rule 144A under the Securities Act (the “144A Notes”) in the form of one permanent global security in definitive form without interest coupons (the “Rule 144A Global Notes”) deposited with the Indenture Trustee, in its capacity as custodian, for DTC and registered in the name of Cede & Co., as nominee for DTC.  The Regulation S Global Notes and the Rule 144A Global Notes shall be assigned separate CUSIP numbers.  The Rule 144A Global Notes shall include the legend regarding 

restrictions on transfer set forth under “TRANSFER RESTRICTIONS” in the Offering Circular.  Until the termination of the Restricted Period with respect to the offering of the Notes, interests in the Regulation S Global Notes may only be held by the DTC participants for Euroclear and Clearstream.  Interests in any permanent global notes will be held only in book-entry form through Euroclear, Clearstream or DTC, as the case may be, except in the limited circumstances permitted by the Indenture.
(c)    Payment for the Notes shall be made by the Initial Purchaser in Federal (same day) funds by wire transfer to an account at a bank acceptable to the Initial Purchaser and designated by the Issuer on April 27, 2011 (or, at such time not later than seven full Business Days thereafter as the Initial Purchaser and the Issuer determine, the “Closing Date”) against delivery to the Indenture Trustee, in its capacity as custodian, for DTC of (i) the Regulation S Global Notes representing all of the Regulation S Notes for the respective accounts of the DTC participants for Euroclear and Clearstream and (ii) the Rule 144A Global Notes representing all of the 144A Notes.  The Regulation S Global Notes and the Rule 144A Global Notes will be made available for inspection at the New York office of Kramer Levin Naftalis & Frankel LLP at least 24 hours prior to the Closing Date.
Section 4.    Representations of the Initial Purchaser; Resales.  
(a)    The Initial Purchaser represents and warrants that it is an “accredited investor” within the meaning of Regulation D under the Securities Act.
(b)    The Initial Purchaser acknowledges and agrees that the Notes have not been registered under the Securities Act and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons except in accordance with Regulation S or pursuant to an exemption from the registration requirements of the Securities Act.  The Initial Purchaser represents and agrees that it has offered and sold the Notes, and will offer and sell the Notes (i) as part of its distribution at any time and (ii) otherwise until 40 days after the later of the commencement of the offering and the Closing Date, only in accordance with Rule 903 or Rule 144A.  Accordingly, none of the Initial Purchaser or its affiliates, or any persons acting on its behalf, have engaged or will engage in any directed selling efforts (within the meaning of Regulation S) with respect to the Notes, and the Initial Purchaser, its affiliates and all persons acting on its behalf has complied and will comply with the offering restrictions requirement of Regulation S.  The Initial Purchaser severally agrees that at or prior to confirmation of sale of the Notes, other than a sale pursuant to Rule 144A, the Initial Purchaser will have sent to each distributor, dealer or person receiving a selling concession, fee or other remuneration that purchases the Notes from it during the Restricted Period a confirmation or notice to substantially the following effect:
“The Securities covered hereby have not been registered under the U.S. Securities Act of 1933 (the “Securities Act”) and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons (i) as part of their distribution at any time or (ii) otherwise until 40 days after the later of the date of the commencement of the offering and the closing date, except in either case in accordance with Regulation S (or Rule 144A if available) under the Securities Act. Terms used above have the meanings given to them by Regulation S.”

Terms used in this subsection (b) shall have the meanings given to them in Regulation S.

(c)    The Initial Purchaser agrees that it and each of its affiliates will not offer or sell the Notes in the United States by means of any form of general solicitation or general advertising within the meaning of Rule 502(c) under the Securities Act, including, but not limited to (i) any advertisement, article, notice or other communication published in any newspaper, magazine or similar media or broadcast over television or radio, or (ii) any seminar or meeting whose attendees have been invited by any general solicitation or general advertising.  The Initial Purchaser agrees, with respect to resales made in reliance on Rule 144A of any of the Notes, to deliver either with the confirmation of such resale or otherwise prior to settlement of such resale a notice to the effect that the resale of such Notes has been made in reliance upon the exemption from the registration requirements of the Securities Act provided by Rule 144A.
(d)    The Initial Purchaser represents and agrees that (i) it has only communicated or caused to be communicated and will only communicate or cause to be communicated any invitation or inducement to engage in investment activity (within the meaning of section 21 of the Financial Services and Markets Act 2000 (the “FSMA”)) received by it in connection with the issue or sale of any Notes in circumstances in which section 21(1) of the FSMA does not apply to the Issuer;  (ii) it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the Notes in, from or otherwise involving the United Kingdom; and (iii) in relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (each, a “Relevant Member State”), that with effect from and including the date on which the Prospectus Directive is implemented in that Member State (the “Relevant Implementation Date”) it has not made and will not make an offer of any Notes to the public in that Relevant Member State, other than: (A) to legal entities which are authorized or regulated to operate in the financial markets or, if not so authorized or regulated, whose corporate purpose is solely to invest in securities; (B) to any legal entity which has two or more of: (1) an average of at least 250 employees during the last financial year, (2) a total balance sheet of more than €43,000,000, and (3) an annual turnover of more than €50,000,000, all as shown in its last annual or consolidated accounts; (C) to fewer than 100 natural or legal persons (other than qualified investors defined in the Prospectus Directive); or (D) in any other circumstances falling within Article 3(2) of the Prospectus Directive; provided, that no such offer of Notes shall require the Issuer to publish a prospective pursuant to Article 3 of the Prospective Directive.
For the purposes of this provision, the expression “offer of Notes to the public” in relation to any Notes in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the Notes to be offered so as to enable an investor to decide to purchase or subscribe the Notes, as the same may be varied in that Member State by any measure implementing the Prospectus Directive in that Member State and the expression “Prospectus Directive” means Directive 2003/71/EC and includes any relevant implementing measure in each Relevant Member State.  
(e)    The Initial Purchaser represents and warrants that (i) it is not, and will not acquire the Notes or any interest therein on behalf or with the assets of, any “employee benefit plan” as defined in Section 3(3) of ERISA that is subject to Title I of ERISA or any other “plan” as defined in Section 4975(e)(1) of the Code that is subject to Section 4975 of the Code or any entity whose underlying assets include plan assets by reason of an employee benefit plan’s or plan’s investment in such entity, or any plan that is subject to any substantially similar provision of federal, state or local law (“Similar Law”), or (ii) no “prohibited transaction” under ERISA or Section 4975 of the Code or a violation of Similar Law that, in either case, is not covered by a statutory, regulatory or 

administrative exemption will occur in connection with the Initial Purchaser’s acquisition, holding or disposition of the Notes or any interest therein.  With respect to any Notes acquired by the Initial Purchaser on behalf or with assets of, any Plan, the Initial Purchaser further represents and warrants that it is not sponsored (within the meaning of Section 3(16)(B) of ERISA) by the Issuer, DRC, the Seller, the Servicer or the Indenture Trustee, or by an affiliate of any such person.
Section 5.    Certain Covenants of the Issuer and DRC.  The Issuer and DRC each agrees with the Initial Purchaser that:
(a)    The Issuer will advise the Initial Purchaser promptly of any proposal to amend or supplement the Offering Document and will not effect such amendment or supplementation without the Initial Purchaser’s consent.  If, at any time following delivery of any document comprising the Offering Document or any Limited Use Issuer Free Writing Communication and prior to the completion of the resale of the Notes by the Initial Purchaser, any event occurs as a result of which the such document as then amended or supplemented would include an untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, the Issuer promptly will notify the Initial Purchaser of such event and promptly will prepare, at its own expense, an amendment or supplement which will correct such statement or omission.  Neither the consent of the Initial Purchaser to, nor the Initial Purchaser’s delivery to offerees or investors of, any such amendment or supplement shall constitute a waiver of any of the conditions set forth in Section 6 hereof.
(b)    The Issuer will furnish to the Initial Purchaser copies of each document comprising a part of the Offering Document and each Limited Use Issuer Free Writing Communication, in each case as soon as available and in such quantities as the Initial Purchaser reasonably requests.  DRC will cause to be furnished to the Initial Purchaser, on the Closing Date, an Officer’s Certificate attaching a copy of each document comprising a part of the Offering Document, all amendments and supplements to such documents, and each Limited Use Issuer Free Writing Communication, and certifying that such attachments are true and correct copies of the same.  DRC will also cause to be furnished to the Initial Purchaser, on the Closing Date, the letters specified in Section 6(a) hereof.  At any time the Notes are Outstanding, the Issuer will promptly furnish or cause to be furnished to the Initial Purchaser and, upon request of holders and prospective purchasers of the Notes, to such holders and purchasers, copies of the information required to be delivered to holders and prospective purchasers of the Notes pursuant to Rule 144A(d)(4) under the Securities Act (or any successor provision thereto) in order to permit compliance with Rule 144A in connection with resales by such holders of the Notes.  The Issuer will pay the expenses of printing and distributing to the Initial Purchaser all such documents.
(c)    During the period of two years after the Closing Date, the Issuer will not, and will not permit any of its affiliates (as defined in Rule 144 under the Securities Act) to, resell any of the Notes that have been reacquired by any of them.
(d)    The Issuer shall use its best efforts to ensure that it will not be or become, an open-end investment company, unit investment trust or face-amount certificate company that is or is required to be registered under Section 8 of the Investment Company Act.
(e)    The Issuer will pay all expenses incidental to the performance of its obligations under the Transaction Documents including (i) all expenses in connection with the execution, issue, 

authentication, packaging and initial delivery of the Notes, the preparation of the Transaction Documents and the printing of the Offering Document and amendments and supplements thereto, and any other document relating to the issuance, offer, sale and delivery of the Notes; (ii) the cost of any advertising approved by the Issuer in its discretion in connection with the issue of the Notes; (iii) for any expenses (including fees and disbursements of counsel) incurred in connection with qualification of the Notes for sale under the laws of such jurisdictions in the United States and Canada as the Initial Purchaser designates and the printing of memoranda relating thereto; (iv) for any fees charged by investment rating agencies for the rating of the Notes, and (v) for expenses incurred in distributing the Offering Document (including any amendments and supplements thereto) to the Initial Purchaser.
(f)    In connection with the offering, until the Initial Purchaser shall have notified the Issuer of the completion of the resale of the Notes, neither the Issuer nor any of its affiliates has or will, either alone or with one or more other persons, bid for or purchase for any account in which it or any of its affiliates has a beneficial interest any Notes or attempt to induce any person to purchase any Notes; and neither it nor any of its affiliates will make bids or purchases for the purpose of creating actual, or apparent, active trading in, or of raising the price of, the Notes.
(g)    Each of DRC and the Issuer will comply with the representations, certifications and covenants made by it in the engagement letter with the Rating Agency, including any representation, certification or covenant provided by it to the Rating Agency in connection with Rule 17g-5, and will make accessible to any non-hired nationally recognized statistical rating organization all information provided by it to the Rating Agency in connection with the issuance and monitoring of the credit ratings on the Notes in accordance with Rule 17g-5.
Section 6.    Conditions of the Initial Purchaser’s Obligation.  The obligation of the Initial Purchaser to purchase and pay for the Notes on the Closing Date will be subject to the accuracy of the representations and warranties on the part of the Issuer and DRC herein, the accuracy of the statements of officers of the Issuer made pursuant to the provisions hereof, to the performance by the Issuer of its obligations hereunder and to the following additional conditions precedent:
(a)    The Initial Purchaser shall have received a letter or letters, dated as of the Offering Circular of BDO USA, LLP in form and substance satisfactory to the Initial Purchaser, confirming that they are certified independent public accountants and stating in effect that they have performed certain specified procedures, all of which have been agreed to by the Initial Purchaser, as a result of which they determined that certain information of an accounting, financial or statistical nature set forth in the Offering Document agrees with the accounting records of the Issuer and DRC, excluding any questions of legal interpretation. 
(b)    Subsequent to the execution and delivery of this Agreement, there shall not have occurred (i) a change in U.S. or international financial, political or economic conditions or currency exchange rates or exchange controls as would, in the judgment of the Initial Purchaser, be likely to prejudice materially the success of the proposed issue, sale or distribution of the Notes, whether in the primary market or in respect of dealings in the secondary market, or (ii) (A) any change, or any development or event involving a prospective change, in the condition (financial or other), business, properties or results of operations of the Issuer or DRC which, in the judgment of the Initial Purchaser, is material and adverse and makes it impractical or inadvisable to proceed with completion of the offering or the sale of and payment for the Notes; (B) any downgrading in the rating of any 

debt securities of the Issuer or DRC by any “nationally recognized statistical rating organization” (as defined for purposes of Rule 436(g) under the Securities Act), or any public announcement that any such organization has under surveillance or review its rating of any debt securities of the Issuer or DRC (other than an announcement with positive implications of a possible upgrading, and no implication of a possible downgrading, of such rating); (C) any suspension or limitation of trading in securities generally on the New York Stock Exchange or any setting of minimum prices for trading on such exchange, or any suspension of trading of any securities of the Issuer or DRC on any exchange or in the over-the-counter market; (D) any banking moratorium declared by U.S. Federal or New York authorities; (E) any material disruption of clearing or settlement services in the United States or (F) any outbreak or escalation of major hostilities in which the United States is involved, any declaration of war by Congress or any other substantial national or international calamity or emergency if, in the judgment of the Initial Purchaser, the effect of any such outbreak, escalation, declaration, calamity or emergency makes it impractical or inadvisable to proceed with completion of the offering or sale of and payment for the Notes.
(c)    The Notes shall have been duly authorized, executed, authenticated, delivered and issued, and each of the Transaction Documents shall have been duly authorized, executed and delivered by the respective parties thereto and shall be in full force and effect, and all conditions precedent contained in the Transaction Documents shall have been satisfied.
(d)    The Initial Purchaser shall have received from counsel to each party to the Transaction Documents (except as otherwise provided), written opinions dated the Closing Date and in form and substance satisfactory to the Initial Purchaser, covering such matters as the Initial Purchaser may reasonably request, including but not limited to the following:
(i)    Corporate Opinions.  An opinion in respect of each party to the Transaction Documents that such party has been duly formed, is existing and in good standing under the laws of its state of formation, with all requisite power and authority to own its properties and conduct its business; and such party is duly qualified to do business as a foreign entity in good standing in all other jurisdictions in which its ownership or lease of property or the conduct of its business requires such qualification, except where the failure to be so qualified, individually or in the aggregate, would not reasonably be expected to have a material adverse effect on the financial position of such party.
(ii)    Legal, Valid, Binding and Enforceable.  An opinion in respect of each party to the Transaction Documents that each Transaction Document to which it is a party has been duly authorized, executed and delivered and constitutes the valid and legally binding obligations of each party enforceable in accordance with their terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equity principles.
(iii)    Notes.  An opinion that the Notes have been duly authorized, executed, authenticated, issued and delivered and conform to the description thereof contained in the Offering Document; constitute valid and legally binding obligations of the Issuer enforceable in accordance with their terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights; and will be entitled to the benefits of the Indenture.

(iv)    No Consents Required.  An opinion in respect of each party to the Transaction Documents that in respect of such party, no consent, approval, authorization or order of, or filing with, any governmental agency or body or any court is required for the consummation of the transactions contemplated by the Transaction Documents.
(v)    Litigation.  An opinion in respect of each party to the Transaction Documents that in respect of such party, and other than as disclosed in the Offering Circular, there are no pending actions, suits or proceedings against or affecting such party, any of its subsidiaries or any of their respective properties that, if determined adversely to such party or any of its subsidiaries, would individually or in the aggregate have a Material Adverse Effect, or would materially and adversely affect the ability of such party to perform its obligations under the Transaction Documents; and no such actions, suits or proceedings are threatened or, to such counsel’s knowledge, contemplated.
(vi)    Non-Contravention.  An opinion in respect of each party to the Transaction Documents that in respect of such party the execution, delivery and performance of the Transaction Documents to which it is a party will not conflict with, contravene or result in a breach or violation of any of the terms and provisions of, or constitute a default under (A) the organizational documents of such party, (B) any statute, rule, regulation or order of any governmental agency or body or any court having jurisdiction over such party or any subsidiary of such party or any of their properties, or (C) any agreement or instrument to which such party or any such subsidiary is a party or by which such party or any such subsidiary is bound or to which any of the properties of such party or any such subsidiary is subject, or the organizational documents of such party or any such subsidiary.
(vii)    Securities Laws.  An opinion that it is not necessary in connection with (A) the offer, sale and delivery of Notes by the Issuer to the Initial Purchaser pursuant to this Agreement, or (B) the resales of the Notes by the Initial Purchaser in the manner contemplated by this Agreement, to register the Notes under the Securities Act or to qualify the Indenture under the Trust Indenture Act.
(viii)    Investment Company Act.  An opinion that the Issuer is not and, after giving effect to the offering and sale of the Notes and the application of the proceeds as described in the Offering Document, will not be an “investment company” as defined in the Investment Company Act, including an “excepted investment company”.
(ix)    Federal Income Tax.  An opinion from Katten Muchin Rosenman LLP that for U.S. federal income tax purposes (A) the Issuer will not be treated as an association, a publicly traded partnership or taxable mortgage pool taxable as a corporation; and (B) the Notes will be treated as indebtedness.
(x)    Bankruptcy.  An opinion or opinions, covering such bankruptcy matters as the Initial Purchaser may reasonably request.
(xi)    Security Interests.  An opinion to the effect that (A) in the event that the transfer of the Timeshare Loans from the Seller to the Issuer shall be considered a loan secured by the Timeshare Loans, upon execution of the Sale Agreement and upon possession of the Obligor Notes in the State of Minnesota and the filing of financing statements related 

thereto, the Issuer will have a perfected first priority security interest in the Obligor Notes and other assets which may be perfected by filing, and (B) upon execution of the Indenture and upon possession of the Obligor Notes in the State of  Minnesota and the filing of financing statements related thereto, the Indenture Trustee will have a perfected first priority security interest in the Obligor Notes and other assets which may be perfected by filing.
(xii)    Local Law.  An opinion with respect to each of the following jurisdictions: Hawaii, California, Arizona, Nevada, Virginia and Florida, to the effect that: (A) all timeshare associations for Resorts in such jurisdiction are duly organized, validly existing and in good standing under the laws of such jurisdiction, (B) the manner of offering for sale of and the sale of timeshare estates in such Resorts complies with the requirements of the applicable governmental authorities in such jurisdiction, (C) the form of purchase contract, obligor notes or mortgages (as applicable) are sufficient to create a valid and binding obligation of the purchaser enforceable against such purchaser in accordance with its terms, (D) the timeshare loans are assignable by the holder thereof, and (E) the form of assignment of mortgage is the proper form for recording in such jurisdiction.
(e)    The Initial Purchaser shall have received a letter from Kramer Levin Naftalis & Frankel LLP and Katten Muchin Rosenman LLP that such counsel has no reason to believe that the Offering Document, as of the date hereof and as of the Closing Date, contained any untrue statement of a material fact or omitted to state any material fact necessary to make the statements therein not misleading, it being understood that such counsel need express no opinion as to the financial statements or other financial data contained in the Offering Document.
(f)    The Initial Purchaser shall have received from each party to the Transaction Documents such information, certificates and documents as the Initial Purchaser may reasonably have requested and all proceedings in connection with the transactions contemplated by this Agreement and all documents incident hereto shall be in all material respects reasonably satisfactory in form and substance to the Initial Purchaser.
(g)    (i) The Notes shall have received a rating of “A (sf)” from S&P, and (ii) such rating shall not have been rescinded, and no public announcement shall have been made by (x) the Rating Agency that the rating of the Notes has been placed under review or (y) by a non-hired rating agency that it has issued an unsolicited lower rating on the Notes.
The Initial Purchaser may in its sole discretion waive compliance with any conditions to the obligations of the Initial Purchaser hereunder.

Section 7.    Indemnification and Contribution. 
(a)    Each of the Issuer and DRC jointly and severally agrees (i) to indemnify and hold harmless the Initial Purchaser, its partners, directors and officers and each person, if any, who controls the Initial Purchaser within the meaning of Section 15 of the Securities Act, against any losses, claims, damages or liabilities, joint or several, to which the Initial Purchaser may become subject, under the Securities Act or the Exchange Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon (A) any breach of any of the representations and warranties of the Issuer or DRC contained herein, or (B) any untrue statement or alleged untrue statement of any material fact contained in any document comprising a 

part of the Offering Document, any Limited Use Issuer Free Writing Communication or any amendment or supplement thereto, or any related preliminary offering circular, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, including any losses, claims, damages or liabilities arising out of or based upon the Issuer’s failure to perform its obligations under Section 5(a) hereof, and (ii) will reimburse the Initial Purchaser for any legal or other expenses reasonably incurred by the Initial Purchaser in connection with investigating or defending any such loss, claim, damage, liability or action as such expenses are incurred; provided, however, that neither the Issuer nor DRC will be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement in or omission or alleged omission from any of such documents in reliance upon and in conformity with written information furnished to the Issuer by the Initial Purchaser specifically for use therein, it being understood and agreed that the only such information consists of the information described as such in subsection (b) below; and provided, further, that neither the Issuer nor DRC will be liable in any such case to the extent that such misstatement or omission from an Offering Document or Limited Use Issuer Free Writing Communication was corrected by the Issuer or DRC reasonably prior to the initial time of sale and the Initial Purchaser did not deliver, prior to the initial time of sale, a copy of the Offering Document or Limited Use Issuer Free Writing Communication, as then revised, amended or supplemented, if either the Issuer or DRC furnished copies thereof reasonably prior to the initial time of sale to the Initial Purchaser in accordance with the terms of this Agreement.
(b)    The Initial Purchaser will indemnify and hold harmless the Issuer, its directors and officers, each person, if any, who controls the Issuer within the meaning of Section 15 of the Securities Act and DRC, against any losses, claims, damages or liabilities to which the Issuer may become subject, under the Securities Act or the Exchange Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any document comprising a part of the Offering Document, any Limited Use Issuer Free Writing Communication, or any amendment or supplement thereto, or any related preliminary offering circular, or arise out of or are based upon the omission or the alleged omission to state therein a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Issuer by the Initial Purchaser specifically for use therein, and will reimburse any legal or other expenses reasonably incurred by the Issuer in connection with investigating or defending any such loss, claim, damage, liability or action as such expenses are incurred, it being understood and agreed that the only such information furnished by the Initial Purchaser consists of the second, fifth and tenth paragraphs under the caption “PLAN OF DISTRIBUTION”; provided, however, that the Initial Purchaser shall not be liable for any losses, claims, damages or liabilities arising out of or based upon the Issuer’s failure to perform its obligations under Section 5(a) hereof.
(c)    Promptly after receipt by an indemnified party under this Section of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under subsection (a) or (b) above, notify the indemnifying party of the commencement thereof; but the omission so to notify the indemnifying party will not relieve it from any liability which it may have to any indemnified party otherwise than under subsection (a) or (b) above.  In case any such action is brought against any indemnified party and it notifies the 

indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel satisfactory to such indemnified party (who shall not, except with the consent of the indemnified party, be counsel to the indemnifying party), and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party will not be liable to such indemnified party under this Section for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation.  No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened action in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party unless such settlement includes an unconditional release of such indemnified party from all liability on any claims that are the subject matter of such action and does not include a statement as to or an admission of fault, culpability or failure to act by or on behalf of any indemnified party.
(d)    If the indemnification provided for in this Section is unavailable or insufficient to hold harmless an indemnified party under subsection (a) or (b) above, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of the losses, claims, damages or liabilities referred to in subsection (a) or (b) above (i) in such proportion as is appropriate to reflect the relative benefits received by the Issuer on the one hand and the Initial Purchaser on the other from the offering of the Notes or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Issuer on the one hand and the Initial Purchaser on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities as well as any other relevant equitable considerations.  The relative benefits received by the Issuer on the one hand and the Initial Purchaser on the other shall be deemed to be in the same proportion as the total net proceeds from the offering (before deducting expenses) received by the Issuer bear to the total discounts and commissions received by the Initial Purchaser from the Issuer under this Agreement.  The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Issuer or the Initial Purchaser and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such untrue statement or omission.  The amount paid by an indemnified party as a result of the losses, claims, damages or liabilities referred to in the first sentence of this subsection (d) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any action or claim which is the subject of this subsection (d).  Notwithstanding the provisions of this subsection (d), the Initial Purchaser shall not be required to contribute any amount in excess of the difference between the total price at which the Notes were resold by it and the total price of the Notes acquired by it.  
(e)    The obligations of the Issuer and DRC under this Section shall be in addition to any liability which the Issuer or DRC may otherwise have and shall extend, upon the same terms and conditions, to each person, if any, who controls the Initial Purchaser within the meaning of the Securities Act or the Exchange Act; and the obligations of the Initial Purchaser under this Section shall be in addition to any liability which the Initial Purchaser may otherwise have and shall extend, upon the same terms and conditions, to each person, if any, who controls the Issuer within the meaning of the Securities Act or the Exchange Act.
Section 8.    Default of Initial Purchaser.  If the Initial Purchaser defaults in its obligations 

to purchase Notes and the aggregate principal amount of the Notes with respect to which such default occurs exceeds 10% of the total principal amount of the Notes and arrangements satisfactory to the Issuer and DRC for the purchase of such Notes by any other persons are not made within 36 hours after such default, this Agreement will terminate without liability on the part of the Issuer or DRC, except as provided in Section 9 hereof.  Nothing herein shall relieve the Initial Purchaser from liability for any default hereunder. 
Section 9.    Survival of Certain Representations and Obligations.  The respective indemnities, agreements, representations, warranties and other statements of the Issuer and DRC or their respective officers and of the Initial Purchaser set forth in or made pursuant to this Agreement will remain in full force and effect, regardless of any investigation, or statement as to the results thereof, made by or on behalf of the Initial Purchaser, the Issuer and DRC or any of their respective representatives, officers or directors or any controlling person, and will survive delivery of and payment for the Notes.  If this Agreement is terminated pursuant to Section 8 hereof or if for any reason the purchase of the Notes by the Initial Purchaser is not consummated, the Issuer shall remain responsible for the expenses to be paid or reimbursed by it pursuant to Section 5 hereof and the respective obligations of the Issuer, DRC and the Initial Purchaser pursuant to Section 7 hereof shall remain in effect.  If the purchase of the Notes by the Initial Purchaser is not consummated for any reason other than solely because of the termination of this Agreement pursuant to Section 8 hereof or the occurrence of any event specified in clause (C), (D) or (E) of Section 6(b)(ii) hereof, the Issuer and DRC will reimburse the Initial Purchaser for all out-of-pocket expenses (including fees and disbursements of counsel) reasonably incurred by them in connection with the offering of the Notes.
Section 10.    Severability Clause.  Any part, provision, representation, or warranty of this Agreement which is prohibited or is held to be void or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof.
Section 11.    Notices.  All communications hereunder will be in writing and, (a) if sent to the Initial Purchaser will be mailed or delivered to the Initial Purchaser at Credit Suisse Securities (USA) LLC, One Madison Avenue, New York, NY 10010, Attention: General Counsel of the Americas; (b) if sent to the Issuer, will be mailed or delivered to it at c/o U.S. Bank Trust National Association 300 Delaware Avenue, 9th Floor, Wilmington, Delaware 19801, Attention: Corporate Trust Services; and (c) if sent to DRC will be mailed or delivered to it at 10600 West Charleston Blvd., Las Vegas, Nevada 89135, Attention: General Counsel, provided, however, that any notice to the Initial Purchaser pursuant to Section 7 hereof will be mailed or delivered to the Initial Purchaser.
Section 12.    Successors.  This Agreement will inure to the benefit of and be binding upon the parties hereto and their respective successors and the controlling persons referred to in Section 7 hereof, and no other person will have any right or obligation hereunder, except that holders of Notes shall be entitled to enforce the agreements for their benefit contained in the fourth sentence of Section 5(b) hereof against the Issuer as if such holders were parties thereto.
Section 13.    Applicable Law.  THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW OTHER THAN SECTIONS 5-1401 AND 5-1402 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK.  The Issuer and DRC hereby submit to the exclusive jurisdiction of the Federal and state courts in the Borough of Manhattan in The City of New York in any suit or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby.

Section 14.    Counterparts, Etc.  This Agreement supersedes all prior or contemporaneous agreements and understandings relating to the subject matter hereof between the Initial Purchaser, DRC and the Issuer.  Neither this Agreement nor any term hereof may be changed, waived, discharged or terminated except by a writing signed by the party against whom enforcement of such change, waiver, discharge or termination is sought.  This Agreement may be signed in any number of counterparts each of which shall be deemed an original, which taken together shall constitute one and the same instrument.  Delivery of an executed counterpart of this Agreement by facsimile or other electronic transmission (i.e., “pdf” or “tif”) shall be effective as delivery of a manually executed counterpart hereof and deemed an original.
Section 15.    No Petition.  During the term of this Agreement and for one year and one day after payment in full of the Notes, none of the parties hereto or any affiliate thereof will file any involuntary petition or otherwise institute any bankruptcy, reorganization, arrangement, insolvency or liquidation proceeding or other proceeding under any federal or state bankruptcy or similar law against the Issuer.
Section 16.    No Advisory or Fiduciary Responsibility.  Each of the Issuer and DRC acknowledges and agrees that: (a) the purchase and sale of the Notes pursuant to this Agreement, including the determination of the offering price of the Notes and any related discounts and commissions, is an arm’s-length commercial transaction among the Issuer, DRC and the Initial Purchaser and each of the Issuer and DRC is capable of evaluating and understanding and understands and accepts the terms, risks and conditions of the transactions contemplated by this Agreement; (b) in connection with the purchase and sale of the Notes, the Initial Purchaser is and has been acting solely as a principal and is not the agent or fiduciary of either of the Issuer or DRC, or their respective affiliates, stockholders, creditors or employees or any other party; (c) the Initial Purchaser has not assumed or will assume an advisory or fiduciary responsibility in favor of either of the Issuer or DRC with respect to any of the transactions contemplated hereby; (d) the Initial Purchaser and its affiliates may be engaged in a broad range of transactions that involve interests that differ from those of either of the Issuer or DRC and that the Initial Purchaser has no obligation to disclose any of such interests by virtue of any fiduciary or advisory relationship; (e) the Issuer and DRC shall each consult with its own advisors concerning the purchase and sale of the Notes and shall be responsible for making their own independent investigation and appraisal of the transaction contemplated hereby, and the Initial Purchaser shall not have any responsibility or liability to the Issuer or DRC with respect thereto and (f) each of the Issuer and DRC waive, to the fullest extent permitted by law, any claims it may have against the Initial Purchaser for breach of fiduciary duty or alleged breach of fiduciary duty.

This Agreement supersedes all prior agreements and understandings (whether written or oral) among the Issuer, DRC and the Initial Purchaser, or any of them, with respect to the subject matter hereof.

[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

If the foregoing is in accordance with your understanding of our agreement, please sign and return to the undersigned a counterpart hereof, whereupon this Note Purchase Agreement shall represent a binding agreement among the Issuer, DRC and the Initial Purchaser.
Very truly yours,

DIAMOND RESORTS OWNER TRUST 2011-1,                         AS ISSUER

		
	BY:
	DIAMOND RESORTS SELLER 2011-1, LLC, AS OWNER 

By:    /s/ David Palmer
Name:  David Palmer
Title:     President

DIAMOND RESORTS CORPORATION

By:    /s/ David Palmer
Name:     David Palmer
Title:     President
The foregoing Note Purchase Agreement is hereby confirmed and accepted
     as of the date first above written.

CREDIT SUISSE SECURITIES (USA) LLC

By:    /s/ Russell J. Burns
Name:  Russell J. Burns
Title:  Managing Director

EXHIBIT A

	
						
	Initial Purchaser
	Initial Note Balance
	Purchase Price (%)

	Credit Suisse Securities (USA) LLC
	$
	64,510,000
	

	99.309168
	%

EXHIBIT B
GENERAL USE ISSUER FREE WRITING COMMUNICATIONex_10-1.htm

Exhibit 10.1

	
 

	
Master Power

	
 

	
Purchase & Sale

	
 

	
Agreement

	
 

 

	

	

Version 2.1 (modified 4/25/00)

(c)COPYRIGHT 2000 by the Edison Electric Institute and National Energy Marketers Association

ALL RIGHTS RESERVED UNDER U.S. AND FOREIGN LAW, TREATIES AND CONVENTIONS

AUTOMATIC LICENSE - PERMISSION OF THE COPYRIGHT OWNERS IS GRANTED FOR REPRODUCTION BY DOWNLOADING FROM A COMPUTER AND PRINTING ELECTRONIC COPIES OF THE WORK. NO AUTHORIZED COPY MAY BE SOLD. THE INDUSTRY IS ENCOURAGED TO USE THIS MASTER POWER PURCHASE AND SALE AGREEMENT IN ITS TRANSACTIONS. ATTRIBUTION TO THE COPYRIGHT OWNERS IS REQUESTED.

 

  

MASTER POWER PURCHASE AND SALES AGREEMENT

TABLE OF CONTENTS

	
 

	
 

	
 

	
 

	
 

	
COVER SHEET

	
 

	
1

	
 

	
 

	
 

	
GENERAL TERMS AND CONDITIONS

	
 

	
6

	
 

	
 

	
 

	
ARTICLE ONE:

	
GENERAL DEFINITIONS

	
 

	
6

	
 

	
 

	
 

	
 

	
ARTICLE TWO:

	
TRANSACTION TERMS AND CONDITIONS

	
 

	
11

	
 

	
2.1

	
Transactions

	
 

	
11

	
 

	
2.2

	
Governing Terms

	
 

	
11

	
 

	
2.3

	
Confirmation

	
 

	
11

	
 

	
2.4

	
Additional Confirmation Terms

	
 

	
12

	
 

	
2.5

	
Recording

	
 

	
12

	
 

	
 

	
 

	
 

	
 

	
ARTICLE THREE:

	
OBLIGATIONS AND DELIVERIES

	
 

	
12

	
 

	
3.1

	
Seller's and Buyer's Obligations

	
 

	
12

	
 

	
3.2

	
Transmission and Scheduling

	
 

	
12

	
 

	
3.3

	
Force Majeure

	
 

	
13

	
 

	
 

	
 

	
 

	
 

	
ARTICLE FOUR:

	
REMEDIES FOR FAILURE TO DELIVER/RECEIVE

	
 

	
13

	
 

	
4.1

	
Seller Failure

	
 

	
13

	
 

	
4.2

	
Buyer Failure

	
 

	
13

	
 

	
 

	
 

	
 

	
 

	
ARTICLE FIVE:

	
EVENTS OF DEFAULT; REMEDIES

	
 

	
13

	
 

	
5.1

	
Events of Default

	
 

	
13

	
 

	
5.2

	
Declaration of an Early Termination Date and Calculation of Settlement Amounts

	
 

	
15

	
 

	
5.3

	
Net Out of Settlement Amounts

	
 

	
15

	
 

	
5.4

	
Notice of Payment of Termination Payment

	
 

	
15

	
 

	
5.5

	
Disputes With Respect to Termination Payment

	
 

	
15

	
 

	
5.6

	
Closeout Setoffs

	
 

	
16

	
 

	
5.7

	
Suspension of Performance

	
 

	
16

	
 

	
 

	
 

	
 

	
 

	
ARTICLE SIX:

	
PAYMENT AND NETTING

	
 

	
16

	
 

	
6.1

	
Billing Period

	
 

	
16

	
 

	
6.2

	
Timeliness of Payment

	
 

	
17

	
 

	
6.3

	
Disputes and Adjustments of Invoices

	
 

	
17

	
 

	
6.4

	
Netting of Payments

	
 

	
17

	
 

	
6.5

	
Payment Obligation Absent Netting

	
 

	
17

	
 

	
6.6

	
Security

	
 

	
18

	
 

	
6.7

	
Payment for Options

	
 

	
18

	
 

	
6.8

	
Transaction Netting

	
 

	
18

i

 

  

	
 

	
 

	
 

	
 

	
 

	
ARTICLE SEVEN:

	
LIMITATIONS

	
 

	
18

	
 

	
7.1

	
Limitation of Remedies, Liability and Damages

	
 

	
18

	
 

	
 

	
 

	
 

	
 

	
ARTICLE EIGHT:

	
CREDIT AND COLLATERAL REQUIREMENTS

	
 

	
19

	
 

	
8.1

	
Party A Credit Protection

	
 

	
19

	
 

	
8.2

	
Party B Credit Protection

	
 

	
21

	
 

	
8.3

	
Grant of Security Interest/Remedies

	
 

	
22

	
 

	
 

	
 

	
 

	
 

	
ARTICLE NINE:

	
GOVERNMENTAL CHARGES

	
 

	
23

	
 

	
9.1

	
Cooperation

	
 

	
23

	
 

	
9.2

	
Governmental Charges

	
 

	
23

	
 

	
 

	
 

	
 

	
 

	
ARTICLE TEN:

	
MISCELLANEOUS

	
 

	
23

	
 

	
10.1

	
Term of Master Agreement

	
 

	
23

	
 

	
10.2

	
Representations and Warranties

	
 

	
23

	
 

	
10.3

	
Title and Risk of Loss

	
 

	
25

	
 

	
10.4

	
Indemnity

	
 

	
25

	
 

	
10.5

	
Assignment

	
 

	
25

	
 

	
10.6

	
Governing Law

	
 

	
25

	
 

	
10.7

	
Notices

	
 

	
26

	
 

	
10.8

	
General

	
 

	
26

	
 

	
10.9

	
Audit

	
 

	
26

	
 

	
10.10

	
Forward Contract

	
 

	
27

	
 

	
10.11

	
Confidentiality

	
 

	
27

	
 

	
 

	
 

	
 

	
 

	
SCHEDULE M: GOVERNMENTAL ENTITY OR PUBLIC POWER SYSTEMS

	
 

	
28

	
 

	
 

	
 

	
SCHEDULE P: PRODUCTS AND RELATED DEFINITIONS

	
 

	
32

	
 

	
 

	
 

	
EXHIBIT A: CONFIRMATION LETTER

	
 

	
39

ii

 

  

MASTER POWER PURCHASE AND SALE AGREEMENT

COVER SHEET

This Master Power Purchase and Sale Agreement ("Master Agreement" ) is made as of the following date: _________________ ("Effective Date"). The Master Agreement, together with the exhibits, schedules and any written supplements hereto, the Party A Tariff, if any, the Party B Tariff, if any, any designated collateral, credit support or margin agreement or similar arrangement between the Parties and all Transactions (including any confirmations accepted in accordance with Section 2.3 hereto) shall be referred to as the "Agreement." The Parties to this Master Agreement are the following:

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Name ("_________________" or "Party A")

	
 

	
Name ("Counterparty" or "Party B")

	
 

	
 

	
 

	
All Notices:

	
 

	
 

	
All Notices:

	
 

	
 

	
 

	
 

	
 

	
 

	
Street:

	
 

	
 

	
Street:

	
 

	
 

	
 

	
 

	
 

	
 

	
City: 

	
 

	
Zip:

	
 

	
 

	
City: 

	
 

	
Zip:

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Attn: Contract Administration

	
 

	
Attn: Contract Administration

	
Phone:

	
 

	
 

	
Phone:

	
 

	
Facsimile:

	
 

	
 

	
Facsimile:

	
 

	
Duns:

	
 

	
 

	
Duns:

	
 

	
Federal Tax ID Number:

	
 

	
 

	
Federal Tax ID Number:

	
 

	
 

	
 

	
 

	
 

	
Invoices:

	
 

	
 

	
Invoices:

	
 

	
Attn:

	
 

	
 

	
Attn:

	
 

	
Phone:

	
 

	
 

	
Phone:

	
 

	
Facsimile:

	
 

	
 

	
Facsimile:

	
 

	
 

	
 

	
 

	
 

	
 

	
Scheduling:

	
 

	
 

	
Scheduling:

	
 

	
Attn:

	
 

	
 

	
Attn:

	
 

	
Phone:

	
 

	
 

	
Phone:

	
 

	
Facsimile:

	
 

	
 

	
Facsimile:

	
 

	
 

	
 

	
 

	
 

	
 

	
Payments:

	
 

	
 

	
Payments:

	
 

	
Attn:

	
 

	
 

	
Attn:

	
 

	
Phone:

	
 

	
 

	
Phone:

	
 

	
Facsimile:

	
 

	
 

	
Facsimile:

	
 

	
 

	
 

	
 

	
 

	
 

	
Wire Transfer:

	
 

	
Wire Transfer:

	
BNK:

	
 

	
 

	
BNK:

	
 

	
ABA:

	
 

	
 

	
ABA:

	
 

	
ACCT:

	
 

	
 

	
ACCT:

	
 

	
 

	
 

	
 

	
 

	
 

	
Credit and Collections:

	
 

	
Credit and Collections:

	
Attn:

	
 

	
 

	
Attn:

	
 

	
Phone:

	
 

	
 

	
Phone:

	
 

	
Facsimile:

	
 

	
 

	
Facsimile:

	
 

	
 

	
 

	
 

	
 

	
 

	
With additional Notices of an Event of Default or Potential Event of Default to:

	
 

	
With additional Notices of an Event of Default or Potential Event of Default to:

	
Attn:

	
 

	
 

	
Attn:

	
 

	
Phone:

	
 

	
 

	
Phone:

	
 

	
Facsimile:

	
 

	
 

	
Facsimile:

	
 

1

 

  

The Parties hereby agree that the General Terms and Conditions are incorporated herein, and to the following provisions as provided for in the General Terms and Conditions:

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Party A Tariff

	
 

	
 

	
Tariff

	
 

	
 

	
Dated

	
 

	
 

	
Docket Number

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Party B Tariff

	
 

	
 

	
Tariff

	
 

	
 

	
Dated

	
 

	
 

	
Docket Number

	
 

 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Article Two

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Transaction Terms and Conditions

	
o Optional provision in Section 2.4. If not checked, inapplicable.

	
 

	
 

	
 

	
 

	
 

	
 

	
Article Four

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Remedies for Failure 

to Deliver or Receive

	
o Accelerated Payment of Damages. If not checked, inapplicable.

	
 

	
 

	
 

	
 

	
Article Five

	
o Cross Default for Party A:

	
 

	
 

	
Events of Default; Remedies

	
o Party A:__________________

	
Cross Default Amount $ ________

	
 

	
 

	
 

	
 

	
o Other Entity: _____________

	
Cross Default Amount $ ________

	
 

	
 

	
 

	
 

	
o Cross Default for Party B: ________

	
 

	
 

	
 

	
o Party B: _________________

	
Cross Default Amount $ ________

	
 

	
 

	
 

	
 

	
o Other Entity: ______________

	
Cross Default Amount $ ________

	
 

	
 

	
 

	
 

	
5.6 Closeout Setoff

	
 

	
 

	
 

	
 

	
o

	
Option A (Applicable if no other selection is made.)

	
 

	
 

	
 

	
 

	
 

	
 

	
o

	
Option B - Affiliates shall have the meaning set forth in the Agreement unless otherwise specified as follows: ___________________________________

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
o

	
Option C (No Setoff)

	
 

	
 

	
 

	
 

	
 

	
 

	
Article 8

	
8.1 Party A Credit Protection:

	
 

	
 

	
Credit and Collateral Requirements

	
 

	
(a) Financial Information:

	
 

	
 

	
 

	
 

	
 

	
o

	
     Option A

	
 

	
 

	
 

	
 

	
 

	
 

	
o

	
     Option B Specify: ____________

	
 

	
 

	
 

	
 

	
 

	
 

	
o

	
     Option C Specify: ____________

	
 

	
 

	
 

	
 

	
 

	
 

	
(b) Credit Assurances:

	
 

	
 

	
 

	
 

	
 

	
o

	
     Not Applicable

	
 

	
 

	
 

	
 

	
 

	
 

	
o

	
     Applicable

	
 

	
 

	
(c) Collateral Threshold:

	
 

	
 

	
 

	
 

	
 

	
o

	
     Not Applicable

	
 

	
 

	
 

	
 

	
 

	
 

	
o

	
     Applicable

	 	 	 	 	 

2

 

  

	
 

	
 

	
 

	
 

	
 

	
If applicable, complete the following:

	
 

	
 

	
 

	
 

	
 

	
Party B Collateral Threshold: $__________; provided, however, that Party B's Collateral Threshold shall be zero if an Event of Default or Potential Event of Default with respect to Party B has occurred and is continuing.

	
 

	
 

	
 

	
 

	
 

	
Party B Independent Amount: $ _______________

	
 

	
 

	
 

	
 

	
 

	
Party B Rounding Amount: $ _______________

	
 

	
 

	
 

	
 

	
 

	
(d) Downgrade Event:

	
 

	
 

	
 

	
 

	
 

	
o

	
Not Applicable

	
 

	
 

	
 

	
 

	
 

	
 

	
o

	
Applicable

	
 

	
 

	
 

	
 

	
 

	
 

	
If applicable, complete the following:

	
 

	
 

	
 

	
 

	
 

	
o

	
It shall be a Downgrade Event for Party B if Party B's Credit Rating falls below __________ from S&P or __________ from Moody's or if Party B is not rated by either S&P or Moody's 

	
 

	
 

	
 

	
 

	
 

	
 

	
o

	
Other: ____________________________________

	
 

	
 

	
 

	
Specify: ____________________________________

	
 

	
 

	
 

	
 

	
 

	
 

	
(e) Guarantor for Party B: _____________________________

	
 

	
 

	
 

	
 

	
 

	
 

	
Guarantee Amount:

	
 

	
 

	
 

	
 

	
 

	
 

	
8.2 Party B Credit Protection:

	
 

	
 

	
 

	
 

	
 

	
(a) Financial Information:

	
 

	
 

	
o

	
Option A

	
 

	
 

	
o

	
Option B Specify: ___________________

	
 

	
 

	
o

	
Option C Specify: ___________________

	
 

	
 

	
 

	
 

	
 

	
 

	
(b) Credit Assurances:

	
 

	
 

	
o

	
Not Applicable

	
 

	
 

	
o

	
Applicable

	
 

	
 

	
 

	
 

	
 

	
 

	
(c) Collateral Threshold:

	
 

	
 

	
o

	
Not Applicable

	
 

	
 

	
o

	
Applicable

	
 

	
 

	
If applicable, complete the following:

	
 

	
 

	
 

	
 

	
 

	
Party A Collateral Threshold: $__________; provided, however, that Party A's Collateral Threshold shall be zero if an Event of Default or Potential Event of Default with respect to Party A has occurred and is continuing.

	
 

	
 

	
 

	
 

	
 

	
Party A Independent Amount: $ _________________

	
 

	
 

	
 

	
 

	
 

	
Party A Rounding Amount: $ _________________

3

 

  

 

	
 

	
 

	
 

	
 

	
 

	
(d) Downgrade Event:

	
 

	
 

	
 

	
 

	
 

	
o

	
Not Applicable

	
 

	
 

	
o

	
Applicable

	
 

	
 

	
 

	
 

	
 

	
 

	
If applicable, complete the following:

	
 

	
 

	
 

	
 

	
 

	
o

	
It shall be a Downgrade Event for Party A if Party A's Credit Rating falls below __________ from S&P or __________ from Moody's or if Party A is not rated by either S&P or Moody's

	
 

	
 

	
 

	
 

	
 

	
 

	
o

	
Other:

	
 

	
 

	
 

	
Specify: ____________________________________________

	
 

	
 

	
 

	
 

	
 

	
 

	
(e) Guarantor for Party A: _____________________________________

	
 

	
 

	
 

	
 

	
 

	
 

	
Guarantee Amount: __________________________________

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Article 10

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Confidentiality

	
 

	
o Confidentiality Applicable

	
If not checked, inapplicable.

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Schedule M

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
o Party A is a Governmental Entity or Public Power System

	
 

	
 

	
o Party B is a Governmental Entity or Public Power System

	
 

	
 

	
o Add Section 3.6. If not checked, inapplicable

	
 

	
 

	
o Add Section 8.6. If not checked, inapplicable

	
 

	
 

	
 

	
Other Changes

	
 

	
Specify, if any: ___________________________________

	 	 	 	 	 

4

 

  

IN WITNESS WHEREOF, the Parties have caused this Master Agreement to be duly executed as of the date first above written.

	
 

	
 

	
 

	
Party A Name

	
 

	
Party B Name

	
 

	
 

	
 

	
By:

	
 

	
 

	
By:

	
 

	
 

	
 

	
 

	
 

	
 

	
Name:

	
 

	
 

	
Name:

	
 

	
 

	
 

	
 

	
 

	
 

	
Title:

	
 

	
 

	
Title:

	
 

DISCLAIMER: This Master Power Purchase and Sale Agreement was prepared by a committee of representatives of Edison Electric Institute ("EEI") and National Energy Marketers Association ("NEM") member companies to facilitate orderly trading in and development of wholesale power markets. Neither EEI nor NEM nor any member company nor any of their agents, representatives or attorneys shall be responsible for its use, or any damages resulting therefrom. By providing this Agreement EEI and NEM do not offer legal advice and all users are urged to consult their own legal counsel to ensure that their commercial objectives will be achieved and their legal interests are adequately protected.

5

 

  

GENERAL TERMS AND CONDITIONS

ARTICLE ONE: GENERAL DEFINITIONS

          1.1 "Affiliate" means, with respect to any person, any other person (other than an individual) that, directly or indirectly, through one or more intermediaries, controls, or is controlled by, or is under common control with, such person. For this purpose, "control" means the direct or indirect ownership of fifty percent (50%) or more of the outstanding capital stock or other equity interests having ordinary voting power.

          1.2 "Agreement" has the meaning set forth in the Cover Sheet. 

          1.3 "Bankrupt" means with respect to any entity, such entity (i) files a petition or otherwise commences, authorizes or acquiesces in the commencement of a proceeding or cause of action under any bankruptcy, insolvency, reorganization or similar law, or has any such petition filed or commenced against it, (ii) makes an assignment or any general arrangement for the benefit of creditors, (iii) otherwise becomes bankrupt or insolvent (however evidenced), (iv) has a liquidator, administrator, receiver, trustee, conservator or similar official appointed with respect to it or any substantial portion of its property or assets, or (v) is generally unable to pay its debts as they fall due.

          1.4 "Business Day" means any day except a Saturday, Sunday, or a Federal Reserve Bank holiday. A Business Day shall open at 8:00 a.m. and close at 5:00 p.m. local time for the relevant Party's principal place of business. The relevant Party, in each instance unless otherwise specified, shall be the Party from whom the notice, payment or delivery is being sent and by whom the notice or payment or delivery is to be received.

          1.5 "Buyer" means the Party to a Transaction that is obligated to purchase and receive, or cause to be received, the Product, as specified in the Transaction. 

          1.6 "Call Option" means an Option entitling, but not obligating, the Option Buyer to purchase and receive the Product from the Option Seller at a price equal to the Strike Price for the Delivery Period for which the Option may be exercised, all as specified in the Transaction. Upon proper exercise of the Option by the Option Buyer, the Option Seller will be obligated to sell and deliver the Product for the Delivery Period for which the Option has been exercised.

          1.7 "Claiming Party" has the meaning set forth in Section 3.3.

          1.8 "Claims" means all third party claims or actions, threatened or filed and, whether groundless, false, fraudulent or otherwise, that directly or indirectly relate to the subject matter of an indemnity, and the resulting losses, damages, expenses, attorneys' fees and court costs, whether incurred by settlement or otherwise, and whether such claims or actions are threatened or filed prior to or after the termination of this Agreement.

          1.9 "Confirmation" has the meaning set forth in Section 2.3.

6

 

  

          1.10 "Contract Price" means the price in $U.S. (unless otherwise provided for) to be paid by Buyer to Seller for the purchase of the Product, as specified in the Transaction. 

          1.11 "Costs" means, with respect to the Non-Defaulting Party, brokerage fees, commissions and other similar third party transaction costs and expenses reasonably incurred by such Party either in terminating any arrangement pursuant to which it has hedged its obligations or entering into new arrangements which replace a Terminated Transaction; and all reasonable attorneys' fees and expenses incurred by the Non-Defaulting Party in connection with the termination of a Transaction.

          1.12 "Credit Rating" means, with respect to any entity, the rating then assigned to such entity's unsecured, senior long-term debt obligations (not supported by third party credit enhancements) or if such entity does not have a rating for its senior unsecured long-term debt, then the rating then assigned to such entity as an issues rating by S&P, Moody's or any other rating agency agreed by the Parties as set forth in the Cover Sheet.

          1.13 "Cross Default Amount" means the cross default amount, if any, set forth in the Cover Sheet for a Party.

          1.14 "Defaulting Party" has the meaning set forth in Section 5.1.

          1.15 "Delivery Period" means the period of delivery for a Transaction, as specified in the Transaction.

          1.16 "Delivery Point" means the point at which the Product will be delivered and received, as specified in the Transaction.

          1.17 "Downgrade Event" has the meaning set forth on the Cover Sheet.

          1.18 "Early Termination Date" has the meaning set forth in Section 5.2.

          1.19 "Effective Date" has the meaning set forth on the Cover Sheet.

          1.20 "Equitable Defenses" means any bankruptcy, insolvency, reorganization and other laws affecting creditors' rights generally, and with regard to equitable remedies, the discretion of the court before which proceedings to obtain same may be pending.

          1.21 "Event of Default" has the meaning set forth in Section 5.1.

          1.22 "FERC" means the Federal Energy Regulatory Commission or any successor government agency.

7

 

  

          1.23 "Force Majeure" means an event or circumstance which prevents one Party from performing its obligations under one or more Transactions, which event or circumstance was not anticipated as of the date the Transaction was agreed to, which is not within the reasonable control of, or the result of the negligence of, the Claiming Party, and which, by the exercise of due diligence, the Claiming Party is unable to overcome or avoid or cause to be avoided. Force Majeure shall not be based on (i) the loss of Buyer's markets; (ii) Buyer's inability economically to use or resell the Product purchased hereunder; (iii) the loss or failure of Seller's supply; or (iv) Seller's ability to sell the Product at a price greater than the Contract Price. Neither Party may raise a claim of Force Majeure based in whole or in part on curtailment by a Transmission Provider unless (i) such Party has contracted for firm transmission with a Transmission Provider for the Product to be delivered to or received at the Delivery Point and (ii) such curtailment is due to "force majeure" or "uncontrollable force" or a similar term as defined under the Transmission Provider's tariff; provided, however, that existence of the foregoing factors shall not be sufficient to conclusively or presumptively prove the existence of a Force Majeure absent a showing of other facts and circumstances which in the aggregate with such factors establish that a Force Majeure as defined in the first sentence hereof has occurred. The applicability of Force Majeure to the Transaction is governed by the terms of the Products and Related Definitions contained in Schedule P.

          1.24 "Gains" means, with respect to any Party, an amount equal to the present value of the economic benefit to it, if any (exclusive of Costs), resulting from the termination of a Terminated Transaction, determined in a commercially reasonable manner. 

          1.25 "Guarantor" means, with respect to a Party, the guarantor, if any, specified for such Party on the Cover Sheet. 

          1.26 "Interest Rate" means, for any date, the lesser of (a) the per annum rate of interest equal to the prime lending rate as may from time to time be published in The Wall Street Journal under "Money Rates" on such day (or if not published on such day on the most recent preceding day on which published), plus two percent (2%) and (b) the maximum rate permitted by applicable law. 

          1.27 "Letter(s) of Credit" means one or more irrevocable, transferable standby letters of credit issued by a U.S. commercial bank or a foreign bank with a U.S. branch with such bank having a credit rating of at least A- from S&P or A3 from Moody's, in a form acceptable to the Party in whose favor the letter of credit is issued. Costs of a Letter of Credit shall be borne by the applicant for such Letter of Credit.

          1.28 "Losses" means, with respect to any Party, an amount equal to the present value of the economic loss to it, if any (exclusive of Costs), resulting from termination of a Terminated Transaction, determined in a commercially reasonable manner. 

          1.29 "Master Agreement" has the meaning set forth on the Cover Sheet.

          1.30 "Moody's" means Moody's Investor Services, Inc. or its successor. 

          1.31 "NERC Business Day" means any day except a Saturday, Sunday or a holiday as defined by the North American Electric Reliability Council or any successor organization thereto. A NERC Business Day shall open at 8:00 a.m. and close at 5:00 p.m. local time for the relevant Party's principal place of business. The relevant Party, in each instance unless otherwise specified, shall be the Party from whom the notice, payment or delivery is being sent and by whom the notice or payment or delivery is to be received.

8

 

  

          1.32 "Non-Defaulting Party" has the meaning set forth in Section 5.2.

          1.33 "Offsetting Transactions" mean any two or more outstanding Transactions, having the same or overlapping Delivery Period(s), Delivery Point and payment date, where under one or more of such Transactions, one Party is the Seller, and under the other such Transaction(s), the same Party is the Buyer.

          1.34 "Option" means the right but not the obligation to purchase or sell a Product as specified in a Transaction.

          1.35 "Option Buyer" means the Party specified in a Transaction as the purchaser of an option, as defined in Schedule P.

          1.36 "Option Seller" means the Party specified in a Transaction as the seller of an option , as defined in Schedule P.

          1.37 "Party A Collateral Threshold" means the collateral threshold, if any, set forth in the Cover Sheet for Party A.

          1.38 "Party B Collateral Threshold" means the collateral threshold, if any, set forth in the Cover Sheet for Party B.

          1.39 "Party A Independent Amount" means the amount , if any, set forth in the Cover Sheet for Party A.

          1.40 "Party B Independent Amount" means the amount , if any, set forth in the Cover Sheet for Party B.

          1.41 "Party A Rounding Amount" means the amount, if any, set forth in the Cover Sheet for Party A.

          1.42 "Party B Rounding Amount" means the amount, if any, set forth in the Cover Sheet for Party B.

          1.43 "Party A Tariff" means the tariff, if any, specified in the Cover Sheet for Party A.

          1.44 "Party B Tariff" means the tariff, if any, specified in the Cover Sheet for Party B.

          1.45 "Performance Assurance" means collateral in the form of either cash, Letter(s) of Credit, or other security acceptable to the Requesting Party. 

          1.46 "Potential Event of Default" means an event which, with notice or passage of time or both, would constitute an Event of Default.

          1.47 "Product" means electric capacity, energy or other product(s) related thereto as specified in a Transaction by reference to a Product listed in Schedule P hereto or as otherwise specified by the Parties in the Transaction.

9

 

  

          1.48 "Put Option" means an Option entitling, but not obligating, the Option Buyer to sell and deliver the Product to the Option Seller at a price equal to the Strike Price for the Delivery Period for which the option may be exercised, all as specified in a Transaction. Upon proper exercise of the Option by the Option Buyer, the Option Seller will be obligated to purchase and receive the Product.

          1.49 "Quantity" means that quantity of the Product that Seller agrees to make available or sell and deliver, or cause to be delivered, to Buyer, and that Buyer agrees to purchase and receive, or cause to be received, from Seller as specified in the Transaction.

          1.50 "Recording" has the meaning set forth in Section 2.4. 

          1.51 "Replacement Price" means the price at which Buyer, acting in a commercially reasonable manner, purchases at the Delivery Point a replacement for any Product specified in a Transaction but not delivered by Seller, plus (i) costs reasonably incurred by Buyer in purchasing such substitute Product and (ii) additional transmission charges, if any, reasonably incurred by Buyer to the Delivery Point, or at Buyer's option, the market price at the Delivery Point for such Product not delivered as determined by Buyer in a commercially reasonable manner; provided, however, in no event shall such price include any penalties, ratcheted demand or similar charges, nor shall Buyer be required to utilize or change its utilization of its owned or controlled assets or market positions to minimize Seller's liability. For the purposes of this definition, Buyer shall be considered to have purchased replacement Product to the extent Buyer shall have entered into one or more arrangements in a commercially reasonable manner whereby Buyer repurchases its obligation to sell and deliver the Product to another party at the Delivery Point.

          1.52 "S&P" means the Standard & Poor's Rating Group (a division of McGraw-Hill, Inc.) or its successor. 

          1.53 "Sales Price" means the price at which Seller, acting in a commercially reasonable manner, resells at the Delivery Point any Product not received by Buyer, deducting from such proceeds any (i) costs reasonably incurred by Seller in reselling such Product and (ii) additional transmission charges, if any, reasonably incurred by Seller in delivering such Product to the third party purchasers, or at Seller's option, the market price at the Delivery Point for such Product not received as determined by Seller in a commercially reasonable manner; provided, however, in no event shall such price include any penalties, ratcheted demand or similar charges, nor shall Seller be required to utilize or change its utilization of its owned or controlled assets, including contractual assets, or market positions to minimize Buyer's liability. For purposes of this definition, Seller shall be considered to have resold such Product to the extent Seller shall have entered into one or more arrangements in a commercially reasonable manner whereby Seller repurchases its obligation to purchase and receive the Product from another party at the Delivery Point.

          1.54 "Schedule" or "Scheduling" means the actions of Seller, Buyer and/or their designated representatives, including each Party's Transmission Providers, if applicable, of notifying, requesting and confirming to each other the quantity and type of Product to be delivered on any given day or days during the Delivery Period at a specified Delivery Point.

10

 

  

          1.55 "Seller" means the Party to a Transaction that is obligated to sell and deliver, or cause to be delivered, the Product, as specified in the Transaction.

          1.56 "Settlement Amount" means, with respect to a Transaction and the Non-Defaulting Party, the Losses or Gains, and Costs, expressed in U.S. Dollars, which such party incurs as a result of the liquidation of a Terminated Transaction pursuant to Section 5.2.

          1.57 "Strike Price" means the price to be paid for the purchase of the Product pursuant to an Option.

          1.58 "Terminated Transaction" has the meaning set forth in Section 5.2.

          1.59 "Termination Payment" has the meaning set forth in Section 5.3.

          1.60 "Transaction" means a particular transaction agreed to by the Parties relating to the sale and purchase of a Product pursuant to this Master Agreement.

          1.61 "Transmission Provider" means any entity or entities transmitting or transporting the Product on behalf of Seller or Buyer to or from the Delivery Point in a particular Transaction.

ARTICLE TWO: TRANSACTION TERMS AND CONDITIONS

          2.1 Transactions. A Transaction shall be entered into upon agreement of the Parties orally or, if expressly required by either Party with respect to a particular Transaction, in writing, including an electronic means of communication. Each Party agrees not to contest, or assert any defense to, the validity or enforceability of the Transaction entered into in accordance with this Master Agreement (i) based on any law requiring agreements to be in writing or to be signed by the parties, or (ii) based on any lack of authority of the Party or any lack of authority of any employee of the Party to enter into a Transaction.

          2.2 Governing Terms. Unless otherwise specifically agreed, each Transaction between the Parties shall be governed by this Master Agreement. This Master Agreement (including all exhibits, schedules and any written supplements hereto), , the Party A Tariff, if any, and the Party B Tariff, if any, any designated collateral, credit support or margin agreement or similar arrangement between the Parties and all Transactions (including any Confirmations accepted in accordance with Section 2.3) shall form a single integrated agreement between the Parties. Any inconsistency between any terms of this Master Agreement and any terms of the Transaction shall be resolved in favor of the terms of such Transaction.

          2.3 Confirmation. Seller may confirm a Transaction by forwarding to Buyer by facsimile within three (3) Business Days after the Transaction is entered into a confirmation ("Confirmation") substantially in the form of Exhibit A. If Buyer objects to any term(s) of such Confirmation, Buyer shall notify Seller in writing of such objections within two (2) Business Days of Buyer's receipt thereof, failing which Buyer shall be deemed to have accepted the terms as sent. If Seller fails to send a Confirmation within three (3) Business Days after the Transaction is entered into, a Confirmation substantially in the form of Exhibit A, may be forwarded by Buyer to Seller. If Seller objects to any term(s) of such Confirmation, Seller shall notify Buyer of such objections within two (2) Business Days of Seller's receipt thereof, failing which Seller shall be deemed to have accepted the terms as sent. If Seller and Buyer each send a Confirmation and neither Party objects to the other Party's Confirmation within two (2) Business Days of receipt, Seller's Confirmation shall be deemed to be accepted and shall be the controlling Confirmation, unless (i) Seller's Confirmation was sent more than three (3) Business Days after the Transaction was entered into and (ii) Buyer's Confirmation was sent prior to Seller's Confirmation, in which case Buyer's Confirmation shall be deemed to be accepted and shall be the controlling Confirmation. Failure by either Party to send or either Party to return an executed Confirmation or any objection by either Party shall not invalidate the Transaction agreed to by the Parties.

11

 

  

          2.4 Additional Confirmation Terms. If the Parties have elected on the Cover Sheet to make this Section 2.4 applicable to this Master Agreement, when a Confirmation contains provisions, other than those provisions relating to the commercial terms of the Transaction (e.g., price or special transmission conditions), which modify or supplement the general terms and conditions of this Master Agreement (e.g., arbitration provisions or additional representations and warranties), such provisions shall not be deemed to be accepted pursuant to Section 2.3 unless agreed to either orally or in writing by the Parties; provided that the foregoing shall not invalidate any Transaction agreed to by the Parties.

          2.5 Recording. Unless a Party expressly objects to a Recording (defined below) at the beginning of a telephone conversation, each Party consents to the creation of a tape or electronic recording ("Recording") of all telephone conversations between the Parties to this Master Agreement, and that any such Recordings will be retained in confidence, secured from improper access, and may be submitted in evidence in any proceeding or action relating to this Agreement. Each Party waives any further notice of such monitoring or recording, and agrees to notify its officers and employees of such monitoring or recording and to obtain any necessary consent of such officers and employees. The Recording, and the terms and conditions described therein, if admissible, shall be the controlling evidence for the Parties' agreement with respect to a particular Transaction in the event a Confirmation is not fully executed (or deemed accepted) by both Parties. Upon full execution (or deemed acceptance) of a Confirmation, such Confirmation shall control in the event of any conflict with the terms of a Recording, or in the event of any conflict with the terms of this Master Agreement. 

ARTICLE THREE: OBLIGATIONS AND DELIVERIES

          3.1 Seller's and Buyer's Obligations. With respect to each Transaction, Seller shall sell and deliver, or cause to be delivered, and Buyer shall purchase and receive, or cause to be received, the Quantity of the Product at the Delivery Point, and Buyer shall pay Seller the Contract Price; provided, however, with respect to Options, the obligations set forth in the preceding sentence shall only arise if the Option Buyer exercises its Option in accordance with its terms. Seller shall be responsible for any costs or charges imposed on or associated with the Product or its delivery of the Product up to the Delivery Point. Buyer shall be responsible for any costs or charges imposed on or associated with the Product or its receipt at and from the Delivery Point. 

          3.2 Transmission and Scheduling. Seller shall arrange and be responsible for transmission service to the Delivery Point and shall Schedule or arrange for Scheduling services with its Transmission Providers, as specified by the Parties in the Transaction, or in the absence thereof, in accordance with the practice of the Transmission Providers, to deliver the Product to the Delivery Point. Buyer shall arrange and be responsible for transmission service at and from the Delivery Point and shall Schedule or arrange for Scheduling services with its Transmission Providers to receive the Product at the Delivery Point.

12

 

  

          3.3 Force Majeure. To the extent either Party is prevented by Force Majeure from carrying out, in whole or part, its obligations under the Transaction and such Party (the "Claiming Party") gives notice and details of the Force Majeure to the other Party as soon as practicable, then, unless the terms of the Product specify otherwise, the Claiming Party shall be excused from the performance of its obligations with respect to such Transaction (other than the obligation to make payments then due or becoming due with respect to performance prior to the Force Majeure). The Claiming Party shall remedy the Force Majeure with all reasonable dispatch. The non-Claiming Party shall not be required to perform or resume performance of its obligations to the Claiming Party corresponding to the obligations of the Claiming Party excused by Force Majeure.

ARTICLE FOUR: REMEDIES FOR FAILURE TO DELIVER/RECEIVE

          4.1 Seller Failure. If Seller fails to schedule and/or deliver all or part of the Product pursuant to a Transaction, and such failure is not excused under the terms of the Product or by Buyer's failure to perform, then Seller shall pay Buyer, on the date payment would otherwise be due in respect of the month in which the failure occurred or, if "Accelerated Payment of Damages" is specified on the Cover Sheet, within five (5) Business Days of invoice receipt, an amount for such deficiency equal to the positive difference, if any, obtained by subtracting the Contract Price from the Replacement Price. The invoice for such amount shall include a written statement explaining in reasonable detail the calculation of such amount.

          4.2 Buyer Failure. If Buyer fails to schedule and/or receive all or part of the Product pursuant to a Transaction and such failure is not excused under the terms of the Product or by Seller's failure to perform, then Buyer shall pay Seller, on the date payment would otherwise be due in respect of the month in which the failure occurred or, if "Accelerated Payment of Damages" is specified on the Cover Sheet, within five (5) Business Days of invoice receipt, an amount for such deficiency equal to the positive difference, if any, obtained by subtracting the Sales Price from the Contract Price. The invoice for such amount shall include a written statement explaining in reasonable detail the calculation of such amount.

ARTICLE FIVE: EVENTS OF DEFAULT; REMEDIES

          5.1 Events of Default. An "Event of Default" shall mean, with respect to a Party (a "Defaulting Party"), the occurrence of any of the following:

	
 

	
 

	
 

	
 

	
 

	
(a)

	
the failure to make, when due, any payment required pursuant to this Agreement if such failure is not remedied within three (3) Business Days after written notice;

13

 

  

	
 

	
 

	
 

	
 

	
(b)

	
any representation or warranty made by such Party herein is false or misleading in any material respect when made or when deemed made or repeated;

	
 

	
 

	
 

	
 

	
(c)

	
the failure to perform any material covenant or obligation set forth in this Agreement (except to the extent constituting a separate Event of Default, and except for such Party's obligations to deliver or receive the Product, the exclusive remedy for which is provided in Article Four) if such failure is not remedied within three (3) Business Days after written notice;

	
 

	
 

	
 

	
 

	
(d)

	
such Party becomes Bankrupt;

	
 

	
 

	
 

	
 

	
(e)

	
the failure of such Party to satisfy the creditworthiness/collateral requirements agreed to pursuant to Article Eight hereof;

	
 

	
 

	
 

	
 

	
(f)

	
such Party consolidates or amalgamates with, or merges with or into, or transfers all or substantially all of its assets to, another entity and, at the time of such consolidation, amalgamation, merger or transfer, the resulting, surviving or transferee entity fails to assume all the obligations of such Party under this Agreement to which it or its predecessor was a party by operation of law or pursuant to an agreement reasonably satisfactory to the other Party; 

	
 

	
 

	
 

	
 

	
(g)

	
if the applicable cross default section in the Cover Sheet is indicated for such Party, the occurrence and continuation of (i) a default, event of default or other similar condition or event in respect of such Party or any other party specified in the Cover Sheet for such Party under one or more agreements or instruments, individually or collectively, relating to indebtedness for borrowed money in an aggregate amount of not less than the applicable Cross Default Amount (as specified in the Cover Sheet), which results in such indebtedness becoming, or becoming capable at such time of being declared, immediately due and payable or (ii) a default by such Party or any other party specified in the Cover Sheet for such Party in making on the due date therefor one or more payments, individually or collectively, in an aggregate amount of not less than the applicable Cross Default Amount (as specified in the Cover Sheet);

	
 

	
 

	
 

	
 

	
(h)

	
with respect to such Party's Guarantor, if any:

	
 

	
 

	
 

	
 

	
 

	
(i)

	
if any representation or warranty made by a Guarantor in connection with this Agreement is false or misleading in any material respect when made or when deemed made or repeated;

	
 

	
 

	
 

	
 

	
 

	
 

	
(ii)

	
the failure of a Guarantor to make any payment required or to perform any other material covenant or obligation in any guaranty made in connection with this Agreement and such failure shall not be remedied within three (3) Business Days after written notice;

14

 

  

	
 

	
 

	
 

	
 

	
 

	
 

	
(iii)

	
a Guarantor becomes Bankrupt; 

	
 

	
 

	
 

	
 

	
 

	
 

	
(iv)

	
the failure of a Guarantor's guaranty to be in full force and effect for purposes of this Agreement (other than in accordance with its terms) prior to the satisfaction of all obligations of such Party under each Transaction to which such guaranty shall relate without the written consent of the other Party; or

	
 

	
 

	
 

	
 

	
 

	
 

	
(v)

	
a Guarantor shall repudiate, disaffirm, disclaim, or reject, in whole or in part, or challenge the validity of any guaranty. 

          5.2 Declaration of an Early Termination Date and Calculation of Settlement Amounts. If an Event of Default with respect to a Defaulting Party shall have occurred and be continuing, the other Party (the "Non-Defaulting Party") shall have the right (i) to designate a day, no earlier than the day such notice is effective and no later than 20 days after such notice is effective, as an early termination date ("Early Termination Date") to accelerate all amounts owing between the Parties and to liquidate and terminate all, but not less than all, Transactions (each referred to as a "Terminated Transaction") between the Parties, (ii) withhold any payments due to the Defaulting Party under this Agreement and (iii) suspend performance. The Non-Defaulting Party shall calculate, in a commercially reasonable manner, a Settlement Amount for each such Terminated Transaction as of the Early Termination Date (or, to the extent that in the reasonable opinion of the Non-Defaulting Party certain of such Terminated Transactions are commercially impracticable to liquidate and terminate or may not be liquidated and terminated under applicable law on the Early Termination Date, as soon thereafter as is reasonably practicable).

          5.3 Net Out of Settlement Amounts. The Non-Defaulting Party shall aggregate all Settlement Amounts into a single amount by: netting out (a) all Settlement Amounts that are due to the Defaulting Party, plus, at the option of the Non-Defaulting Party, any cash or other form of security then available to the Non-Defaulting Party pursuant to Article Eight, plus any or all other amounts due to the Defaulting Party under this Agreement against (b) all Settlement Amounts that are due to the Non-Defaulting Party, plus any or all other amounts due to the Non-Defaulting Party under this Agreement, so that all such amounts shall be netted out to a single liquidated amount (the "Termination Payment") payable by one Party to the other. The Termination Payment shall be due to or due from the Non-Defaulting Party as appropriate.

          5.4 Notice of Payment of Termination Payment. As soon as practicable after a liquidation, notice shall be given by the Non-Defaulting Party to the Defaulting Party of the amount of the Termination Payment and whether the Termination Payment is due to or due from the Non-Defaulting Party. The notice shall include a written statement explaining in reasonable detail the calculation of such amount. The Termination Payment shall be made by the Party that owes it within two (2) Business Days after such notice is effective.

          5.5 Disputes With Respect to Termination Payment. If the Defaulting Party disputes the Non-Defaulting Party's calculation of the Termination Payment, in whole or in part, the Defaulting Party shall, within two (2) Business Days of receipt of Non-Defaulting Party's calculation of the Termination Payment, provide to the Non-Defaulting Party a detailed written explanation of the basis for such dispute; provided, however, that if the Termination Payment is due from the Defaulting Party, the Defaulting Party shall first transfer Performance Assurance to the Non-Defaulting Party in an amount equal to the Termination Payment. 

15

 

  

          5.6 Closeout Setoffs. 

          Option A: After calculation of a Termination Payment in accordance with Section 5.3, if the Defaulting Party would be owed the Termination Payment, the Non-Defaulting Party shall be entitled, at its option and in its discretion, to (i) set off against such Termination Payment any amounts due and owing by the Defaulting Party to the Non-Defaulting Party under any other agreements, instruments or undertakings between the Defaulting Party and the Non-Defaulting Party and/or (ii) to the extent the Transactions are not yet liquidated in accordance with Section 5.2, withhold payment of the Termination Payment to the Defaulting Party. The remedy provided for in this Section shall be without prejudice and in addition to any right of setoff, combination of accounts, lien or other right to which any Party is at any time otherwise entitled (whether by operation of law, contract or otherwise). 

          Option B: After calculation of a Termination Payment in accordance with Section 5.3, if the Defaulting Party would be owed the Termination Payment, the Non-Defaulting Party shall be entitled, at its option and in its discretion, to (i) set off against such Termination Payment any amounts due and owing by the Defaulting Party or any of its Affiliates to the Non-Defaulting Party or any of its Affiliates under any other agreements, instruments or undertakings between the Defaulting Party or any of its Affiliates and the Non-Defaulting Party or any of its Affiliates and/or (ii) to the extent the Transactions are not yet liquidated in accordance with Section 5.2, withhold payment of the Termination Payment to the Defaulting Party. The remedy provided for in this Section shall be without prejudice and in addition to any right of setoff, combination of accounts, lien or other right to which any Party is at any time otherwise entitled (whether by operation of law, contract or otherwise). 

          Option C: Neither Option A nor B shall apply.

          5.7 Suspension of Performance. Notwithstanding any other provision of this Master Agreement, if (a) an Event of Default or (b) a Potential Event of Default shall have occurred and be continuing, the Non-Defaulting Party, upon written notice to the Defaulting Party, shall have the right (i) to suspend performance under any or all Transactions; provided, however, in no event shall any such suspension continue for longer than ten (10) NERC Business Days with respect to any single Transaction unless an early Termination Date shall have been declared and notice thereof pursuant to Section 5.2 given, and (ii) to the extent an Event of Default shall have occurred and be continuing to exercise any remedy available at law or in equity. 

ARTICLE SIX: PAYMENT AND NETTING

          6.1 Billing Period. Unless otherwise specifically agreed upon by the Parties in a Transaction, the calendar month shall be the standard period for all payments under this Agreement (other than Termination Payments and, if "Accelerated Payment of Damages" is specified by the Parties in the Cover Sheet, payments pursuant to Section 4.1 or 4.2 and Option premium payments pursuant to Section 6.7). As soon as practicable after the end of each month, each Party will render to the other Party an invoice for the payment obligations, if any, incurred hereunder during the preceding month.

16

 

  

          6.2 Timeliness of Payment. Unless otherwise agreed by the Parties in a Transaction, all invoices under this Master Agreement shall be due and payable in accordance with each Party's invoice instructions on or before the later of the twentieth (20th) day of each month, or tenth (10th) day after receipt of the invoice or, if such day is not a Business Day, then on the next Business Day. Each Party will make payments by electronic funds transfer, or by other mutually agreeable method(s), to the account designated by the other Party. Any amounts not paid by the due date will be deemed delinquent and will accrue interest at the Interest Rate, such interest to be calculated from and including the due date to but excluding the date the delinquent amount is paid in full.

          6.3 Disputes and Adjustments of Invoices. A Party may, in good faith, dispute the correctness of any invoice or any adjustment to an invoice, rendered under this Agreement or adjust any invoice for any arithmetic or computational error within twelve (12) months of the date the invoice, or adjustment to an invoice, was rendered. In the event an invoice or portion thereof, or any other claim or adjustment arising hereunder, is disputed, payment of the undisputed portion of the invoice shall be required to be made when due, with notice of the objection given to the other Party. Any invoice dispute or invoice adjustment shall be in writing and shall state the basis for the dispute or adjustment. Payment of the disputed amount shall not be required until the dispute is resolved. Upon resolution of the dispute, any required payment shall be made within two (2) Business Days of such resolution along with interest accrued at the Interest Rate from and including the due date to but excluding the date paid. Inadvertent overpayments shall be returned upon request or deducted by the Party receiving such overpayment from subsequent payments, with interest accrued at the Interest Rate from and including the date of such overpayment to but excluding the date repaid or deducted by the Party receiving such overpayment. Any dispute with respect to an invoice is waived unless the other Party is notified in accordance with this Section 6.3 within twelve (12) months after the invoice is rendered or any specific adjustment to the invoice is made. If an invoice is not rendered within twelve (12) months after the close of the month during which performance of a Transaction occurred, the right to payment for such performance is waived.

          6.4 Netting of Payments. The Parties hereby agree that they shall discharge mutual debts and payment obligations due and owing to each other on the same date pursuant to all Transactions through netting, in which case all amounts owed by each Party to the other Party for the purchase and sale of Products during the monthly billing period under this Master Agreement, including any related damages calculated pursuant to Article Four (unless one of the Parties elects to accelerate payment of such amounts as permitted by Article Four), interest, and payments or credits, shall be netted so that only the excess amount remaining due shall be paid by the Party who owes it. 

          6.5 Payment Obligation Absent Netting. If no mutual debts or payment obligations exist and only one Party owes a debt or obligation to the other during the monthly billing period, including, but not limited to, any related damage amounts calculated pursuant to Article Four, interest, and payments or credits, that Party shall pay such sum in full when due. 

17

 

  

          6.6 Security. Unless the Party benefiting from Performance Assurance or a guaranty notifies the other Party in writing, and except in connection with a liquidation and termination in accordance with Article Five, all amounts netted pursuant to this Article Six shall not take into account or include any Performance Assurance or guaranty which may be in effect to secure a Party's performance under this Agreement.

          6.7 Payment for Options. The premium amount for the purchase of an Option shall be paid within two (2) Business Days of receipt of an invoice from the Option Seller. Upon exercise of an Option, payment for the Product underlying such Option shall be due in accordance with Section 6.1.

          6.8 Transaction Netting. If the Parties enter into one or more Transactions, which in conjunction with one or more other outstanding Transactions, constitute Offsetting Transactions, then all such Offsetting Transactions may by agreement of the Parties, be netted into a single Transaction under which:

	
 

	
 

	
 

	
 

	
(a)

	
the Party obligated to deliver the greater amount of Energy will deliver the difference between the total amount it is obligated to deliver and the total amount to be delivered to it under the Offsetting Transactions, and

	
 

	
 

	
 

	
 

	
(b)

	
the Party owing the greater aggregate payment will pay the net difference owed between the Parties.

Each single Transaction resulting under this Section shall be deemed part of the single, indivisible contractual arrangement between the parties, and once such resulting Transaction occurs, outstanding obligations under the Offsetting Transactions which are satisfied by such offset shall terminate.

ARTICLE SEVEN: LIMITATIONS

          7.1 Limitation of Remedies, Liability and Damages. EXCEPT AS SET FORTH HEREIN, THERE IS NO WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, AND ANY AND ALL IMPLIED WARRANTIES ARE DISCLAIMED. THE PARTIES CONFIRM THAT THE EXPRESS REMEDIES AND MEASURES OF DAMAGES PROVIDED IN THIS AGREEMENT SATISFY THE ESSENTIAL PURPOSES HEREOF. FOR BREACH OF ANY PROVISION FOR WHICH AN EXPRESS REMEDY OR MEASURE OF DAMAGES IS PROVIDED, SUCH EXPRESS REMEDY OR MEASURE OF DAMAGES SHALL BE THE SOLE AND EXCLUSIVE REMEDY, THE OBLIGOR'S LIABILITY SHALL BE LIMITED AS SET FORTH IN SUCH PROVISION AND ALL OTHER REMEDIES OR DAMAGES AT LAW OR IN EQUITY ARE WAIVED. IF NO REMEDY OR MEASURE OF DAMAGES IS EXPRESSLY PROVIDED HEREIN OR IN A TRANSACTION, THE OBLIGOR'S LIABILITY SHALL BE LIMITED TO DIRECT ACTUAL DAMAGES ONLY, SUCH DIRECT ACTUAL DAMAGES SHALL BE THE SOLE AND EXCLUSIVE REMEDY AND ALL OTHER REMEDIES OR DAMAGES AT LAW OR IN EQUITY ARE WAIVED. UNLESS EXPRESSLY HEREIN PROVIDED, NEITHER PARTY SHALL BE LIABLE FOR CONSEQUENTIAL, INCIDENTAL, PUNITIVE, EXEMPLARY OR INDIRECT DAMAGES, LOST PROFITS OR OTHER BUSINESS INTERRUPTION DAMAGES, BY STATUTE, IN TORT OR CONTRACT, UNDER ANY INDEMNITY PROVISION OR OTHERWISE. IT IS THE INTENT OF THE PARTIES THAT THE LIMITATIONS HEREIN IMPOSED ON REMEDIES AND THE MEASURE OF DAMAGES BE WITHOUT REGARD TO THE CAUSE OR CAUSES RELATED THERETO, INCLUDING THE NEGLIGENCE OF ANY PARTY, WHETHER SUCH NEGLIGENCE BE SOLE, JOINT OR CONCURRENT, OR ACTIVE OR PASSIVE. TO THE EXTENT ANY DAMAGES REQUIRED TO BE PAID HEREUNDER ARE LIQUIDATED, THE PARTIES ACKNOWLEDGE THAT THE DAMAGES ARE DIFFICULT OR IMPOSSIBLE TO DETERMINE, OR OTHERWISE OBTAINING AN ADEQUATE REMEDY IS INCONVENIENT AND THE DAMAGES CALCULATED HEREUNDER CONSTITUTE A REASONABLE APPROXIMATION OF THE HARM OR LOSS.

18

 

  

ARTICLE EIGHT: CREDIT AND COLLATERAL REQUIREMENTS

          8.1 Party A Credit Protection. The applicable credit and collateral requirements shall be as specified on the Cover Sheet. If no option in Section 8.1(a) is specified on the Cover Sheet, Section 8.l(a) Option C shall apply exclusively. If none of Sections 8.1(b), 8.1(c) or 8.1(d) are specified on the Cover Sheet, Section 8.1(b) shall apply exclusively.

                    (a) Financial Information. Option A: If requested by Party A, Party B shall deliver (i) within 120 days following the end of each fiscal year, a copy of Party B's annual report containing audited consolidated financial statements for such fiscal year and (ii) within 60 days after the end of each of its first three fiscal quarters of each fiscal year, a copy of Party B's quarterly report containing unaudited consolidated financial statements for such fiscal quarter. In all cases the statements shall be for the most recent accounting period and prepared in accordance with generally accepted accounting principles; provided, however, that should any such statements not be available on a timely basis due to a delay in preparation or certification, such delay shall not be an Event of Default so long as Party B diligently pursues the preparation, certification and delivery of the statements.

          Option B: If requested by Party A, Party B shall deliver (i) within 120 days following the end of each fiscal year, a copy of the annual report containing audited consolidated financial statements for such fiscal year for the party(s) specified on the Cover Sheet and (ii) within 60 days after the end of each of its first three fiscal quarters of each fiscal year, a copy of quarterly report containing unaudited consolidated financial statements for such fiscal quarter for the party(s) specified on the Cover Sheet. In all cases the statements shall be for the most recent accounting period and shall be prepared in accordance with generally accepted accounting principles; provided, however, that should any such statements not be available on a timely basis due to a delay in preparation or certification, such delay shall not be an Event of Default so long as the relevant entity diligently pursues the preparation, certification and delivery of the statements.

          Option C: Party A may request from Party B the information specified in the Cover Sheet. 

19

 

  

                    (b) Credit Assurances. If Party A has reasonable grounds to believe that Party B's creditworthiness or performance under this Agreement has become unsatisfactory, Party A will provide Party B with written notice requesting Performance Assurance in an amount determined by Party A in a commercially reasonable manner. Upon receipt of such notice Party B shall have three (3) Business Days to remedy the situation by providing such Performance Assurance to Party A. In the event that Party B fails to provide such Performance Assurance, or a guaranty or other credit assurance acceptable to Party A within three (3) Business Days of receipt of notice, then an Event of Default under Article Five will be deemed to have occurred and Party A will be entitled to the remedies set forth in Article Five of this Master Agreement.

                    (c) Collateral Threshold. If at any time and from time to time during the term of this Agreement (and notwithstanding whether an Event of Default has occurred), the Termination Payment that would be owed to Party A plus Party B's Independent Amount, if any, exceeds the Party B Collateral Threshold, then Party A, on any Business Day, may request that Party B provide Performance Assurance in an amount equal to the amount by which the Termination Payment plus Party B's Independent Amount, if any, exceeds the Party B Collateral Threshold (rounding upwards for any fractional amount to the next Party B Rounding Amount) ("Party B Performance Assurance"), less any Party B Performance Assurance already posted with Party A. Such Party B Performance Assurance shall be delivered to Party A within three (3) Business Days of the date of such request. On any Business Day (but no more frequently than weekly with respect to Letters of Credit and daily with respect to cash), Party B, at its sole cost, may request that such Party B Performance Assurance be reduced correspondingly to the amount of such excess Termination Payment plus Party B's Independent Amount, if any, (rounding upwards for any fractional amount to the next Party B Rounding Amount). In the event that Party B fails to provide Party B Performance Assurance pursuant to the terms of this Article Eight within three (3) Business Days, then an Event of Default under Article Five shall be deemed to have occurred and Party A will be entitled to the remedies set forth in Article Five of this Master Agreement. 

          For purposes of this Section 8.1(c), the calculation of the Termination Payment shall be calculated pursuant to Section 5.3 by Party A as if all outstanding Transactions had been liquidated, and in addition thereto, shall include all amounts owed but not yet paid by Party B to Party A, whether or not such amounts are due, for performance already provided pursuant to any and all Transactions.

                    (d) Downgrade Event. If at any time there shall occur a Downgrade Event in respect of Party B, then Party A may require Party B to provide Performance Assurance in an amount determined by Party A in a commercially reasonable manner. In the event Party B shall fail to provide such Performance Assurance or a guaranty or other credit assurance acceptable to Party A within three (3) Business Days of receipt of notice, then an Event of Default shall be deemed to have occurred and Party A will be entitled to the remedies set forth in Article Five of this Master Agreement.

                    (e) If specified on the Cover Sheet, Party B shall deliver to Party A, prior to or concurrently with the execution and delivery of this Master Agreement a guarantee in an amount not less than the Guarantee Amount specified on the Cover Sheet and in a form reasonably acceptable to Party A.

20

 

  

          8.2 Party B Credit Protection. The applicable credit and collateral requirements shall be as specified on the Cover Sheet. If no option in Section 8.2(a) is specified on the Cover Sheet, Section 8.2(a) Option C shall apply exclusively. If none of Sections 8.2(b), 8.2(c) or 8.2(d) are specified on the Cover Sheet, Section 8.2(b) shall apply exclusively.

                    (a) Financial Information. Option A: If requested by Party B, Party A shall deliver (i) within 120 days following the end of each fiscal year, a copy of Party A's annual report containing audited consolidated financial statements for such fiscal year and (ii) within 60 days after the end of each of its first three fiscal quarters of each fiscal year, a copy of such Party's quarterly report containing unaudited consolidated financial statements for such fiscal quarter. In all cases the statements shall be for the most recent accounting period and prepared in accordance with generally accepted accounting principles; provided, however, that should any such statements not be available on a timely basis due to a delay in preparation or certification, such delay shall not be an Event of Default so long as such Party diligently pursues the preparation, certification and delivery of the statements.

          Option B: If requested by Party B, Party A shall deliver (i) within 120 days following the end of each fiscal year, a copy of the annual report containing audited consolidated financial statements for such fiscal year for the party(s) specified on the Cover Sheet and (ii) within 60 days after the end of each of its first three fiscal quarters of each fiscal year, a copy of quarterly report containing unaudited consolidated financial statements for such fiscal quarter for the party(s) specified on the Cover Sheet. In all cases the statements shall be for the most recent accounting period and shall be prepared in accordance with generally accepted accounting principles; provided, however, that should any such statements not be available on a timely basis due to a delay in preparation or certification, such delay shall not be an Event of Default so long as the relevant entity diligently pursues the preparation, certification and delivery of the statements.

          Option C: Party B may request from Party A the information specified in the Cover Sheet. 

                    (b) Credit Assurances. If Party B has reasonable grounds to believe that Party A's creditworthiness or performance under this Agreement has become unsatisfactory, Party B will provide Party A with written notice requesting Performance Assurance in an amount determined by Party B in a commercially reasonable manner. Upon receipt of such notice Party A shall have three (3) Business Days to remedy the situation by providing such Performance Assurance to Party B. In the event that Party A fails to provide such Performance Assurance, or a guaranty or other credit assurance acceptable to Party B within three (3) Business Days of receipt of notice, then an Event of Default under Article Five will be deemed to have occurred and Party B will be entitled to the remedies set forth in Article Five of this Master Agreement.

21

 

  

                    (c) Collateral Threshold. If at any time and from time to time during the term of this Agreement (and notwithstanding whether an Event of Default has occurred), the Termination Payment that would be owed to Party B plus Party A's Independent Amount, if any, exceeds the Party A Collateral Threshold, then Party B, on any Business Day, may request that Party A provide Performance Assurance in an amount equal to the amount by which the Termination Payment plus Party A's Independent Amount, if any, exceeds the Party A Collateral Threshold (rounding upwards for any fractional amount to the next Party A Rounding Amount) ("Party A Performance Assurance"), less any Party A Performance Assurance already posted with Party B. Such Party A Performance Assurance shall be delivered to Party B within three (3) Business Days of the date of such request. On any Business Day (but no more frequently than weekly with respect to Letters of Credit and daily with respect to cash), Party A, at its sole cost, may request that such Party A Performance Assurance be reduced correspondingly to the amount of such excess Termination Payment plus Party A's Independent Amount, if any, (rounding upwards for any fractional amount to the next Party A Rounding Amount). In the event that Party A fails to provide Party A Performance Assurance pursuant to the terms of this Article Eight within three (3) Business Days, then an Event of Default under Article Five shall be deemed to have occurred and Party B will be entitled to the remedies set forth in Article Five of this Master Agreement. 

          For purposes of this Section 8.2(c), the calculation of the Termination Payment shall be calculated pursuant to Section 5.3 by Party B as if all outstanding Transactions had been liquidated, and in addition thereto, shall include all amounts owed but not yet paid by Party A to Party B, whether or not such amounts are due, for performance already provided pursuant to any and all Transactions.

                    (d) Downgrade Event. If at any time there shall occur a Downgrade Event in respect of Party A, then Party B may require Party A to provide Performance Assurance in an amount determined by Party B in a commercially reasonable manner. In the event Party A shall fail to provide such Performance Assurance or a guaranty or other credit assurance acceptable to Party B within three (3) Business Days of receipt of notice, then an Event of Default shall be deemed to have occurred and Party B will be entitled to the remedies set forth in Article Five of this Master Agreement.

                    (e) If specified on the Cover Sheet, Party A shall deliver to Party B, prior to or concurrently with the execution and delivery of this Master Agreement a guarantee in an amount not less than the Guarantee Amount specified on the Cover Sheet and in a form reasonably acceptable to Party B.

          8.3 Grant of Security Interest/Remedies. To secure its obligations under this Agreement and to the extent either or both Parties deliver Performance Assurance hereunder, each Party (a "Pledgor") hereby grants to the other Party (the "Secured Party") a present and continuing security interest in, and lien on (and right of setoff against), and assignment of, all cash collateral and cash equivalent collateral and any and all proceeds resulting therefrom or the liquidation thereof, whether now or hereafter held by, on behalf of, or for the benefit of, such Secured Party, and each Party agrees to take such action as the other Party reasonably requires in order to perfect the Secured Party's first-priority security interest in, and lien on (and right of setoff against), such collateral and any and all proceeds resulting therefrom or from the liquidation thereof. Upon or any time after the occurrence or deemed occurrence and during the continuation of an Event of Default or an Early Termination Date, the Non-Defaulting Party may do any one or more of the following: (i) exercise any of the rights and remedies of a Secured Party with respect to all Performance Assurance, including any such rights and remedies under law then in effect; (ii) exercise its rights of setoff against any and all property of the Defaulting Party in the possession of the Non-Defaulting Party or its agent; (iii) draw on any outstanding Letter of Credit issued for its benefit; and (iv) liquidate all Performance Assurance then held by or for the benefit of the Secured Party free from any claim or right of any nature whatsoever of the Defaulting Party, including any equity or right of purchase or redemption by the Defaulting Party. The Secured Party shall apply the proceeds of the collateral realized upon the exercise of any such rights or remedies to reduce the Pledgor's obligations under the Agreement (the Pledgor remaining liable for any amounts owing to the Secured Party after such application), subject to the Secured Party's obligation to return any surplus proceeds remaining after such obligations are satisfied in full.

22

 

  

ARTICLE NINE: GOVERNMENTAL CHARGES

          9.1 Cooperation. Each Party shall use reasonable efforts to implement the provisions of and to administer this Master Agreement in accordance with the intent of the parties to minimize all taxes , so long as neither Party is materially adversely affected by such efforts.

          9.2 Governmental Charges. Seller shall pay or cause to be paid all taxes imposed by any government authority("Governmental Charges") on or with respect to the Product or a Transaction arising prior to the Delivery Point. Buyer shall pay or cause to be paid all Governmental Charges on or with respect to the Product or a Transaction at and from the Delivery Point (other than ad valorem, franchise or income taxes which are related to the sale of the Product and are, therefore, the responsibility of the Seller). In the event Seller is required by law or regulation to remit or pay Governmental Charges which are Buyer's responsibility hereunder, Buyer shall promptly reimburse Seller for such Governmental Charges. If Buyer is required by law or regulation to remit or pay Governmental Charges which are Seller's responsibility hereunder, Buyer may deduct the amount of any such Governmental Charges from the sums due to Seller under Article 6 of this Agreement. Nothing shall obligate or cause a Party to pay or be liable to pay any Governmental Charges for which it is exempt under the law.

ARTICLE TEN: MISCELLANEOUS

          10.1 Term of Master Agreement. The term of this Master Agreement shall commence on the Effective Date and shall remain in effect until terminated by either Party upon (thirty) 30 days' prior written notice; provided, however, that such termination shall not affect or excuse the performance of either Party under any provision of this Master Agreement that by its terms survives any such termination and, provided further, that this Master Agreement and any other documents executed and delivered hereunder shall remain in effect with respect to the Transaction(s) entered into prior to the effective date of such termination until both Parties have fulfilled all of their obligations with respect to such Transaction(s), or such Transaction(s) that have been terminated under Section 5.2 of this Agreement.

          10.2 Representations and Warranties. On the Effective Date and the date of entering into each Transaction, each Party represents and warrants to the other Party that: 

	
 

	
 

	
 

	
 

	
(i)

	
it is duly organized, validly existing and in good standing under the laws of the jurisdiction of its formation;

23

 

  

	
 

	
 

	
 

	
 

	
(ii)

	
it has all regulatory authorizations necessary for it to legally perform its obligations under this Master Agreement and each Transaction (including any Confirmation accepted in accordance with Section 2.3);

	
 

	
 

	
 

	
 

	
(iii)

	
the execution, delivery and performance of this Master Agreement and each Transaction (including any Confirmation accepted in accordance with Section 2.3) are within its powers, have been duly authorized by all necessary action and do not violate any of the terms and conditions in its governing documents, any contracts to which it is a party or any law, rule, regulation, order or the like applicable to it;

	
 

	
 

	
 

	
 

	
(iv)

	
this Master Agreement, each Transaction (including any Confirmation accepted in accordance with Section 2.3), and each other document executed and delivered in accordance with this Master Agreement constitutes its legally valid and binding obligation enforceable against it in accordance with its terms; subject to any Equitable Defenses.

	
 

	
 

	
 

	
 

	
(v)

	
it is not Bankrupt and there are no proceedings pending or being contemplated by it or, to its knowledge, threatened against it which would result in it being or becoming Bankrupt;

	
 

	
 

	
 

	
 

	
(vi)

	
there is not pending or, to its knowledge, threatened against it or any of its Affiliates any legal proceedings that could materially adversely affect its ability to perform its obligations under this Master Agreement and each Transaction (including any Confirmation accepted in accordance with Section 2.3);

	
 

	
 

	
 

	
 

	
(vii)

	
no Event of Default or Potential Event of Default with respect to it has occurred and is continuing and no such event or circumstance would occur as a result of its entering into or performing its obligations under this Master Agreement and each Transaction (including any Confirmation accepted in accordance with Section 2.3);

	
 

	
 

	
 

	
 

	
(viii)

	
it is acting for its own account, has made its own independent decision to enter into this Master Agreement and each Transaction (including any Confirmation accepted in accordance with Section 2.3) and as to whether this Master Agreement and each such Transaction (including any Confirmation accepted in accordance with Section 2.3) is appropriate or proper for it based upon its own judgment, is not relying upon the advice or recommendations of the other Party in so doing, and is capable of assessing the merits of and understanding, and understands and accepts, the terms, conditions and risks of this Master Agreement and each Transaction (including any Confirmation accepted in accordance with Section 2.3);

	
 

	
 

	
 

	
 

	
(ix)

	
it is a "forward contract merchant" within the meaning of the United States Bankruptcy Code;

24

 

  

	
 

	
 

	
 

	
 

	
(x)

	
it has entered into this Master Agreement and each Transaction (including any Confirmation accepted in accordance with Section 2.3) in connection with the conduct of its business and it has the capacity or ability to make or take delivery of all Products referred to in the Transaction to which it is a Party;

	
 

	
 

	
 

	
 

	
(xi)

	
with respect to each Transaction (including any Confirmation accepted in accordance with Section 2.3) involving the purchase or sale of a Product or an Option, it is a producer, processor, commercial user or merchant handling the Product, and it is entering into such Transaction for purposes related to its business as such; and 

	
 

	
 

	
 

	
 

	
(xii)

	
the material economic terms of each Transaction are subject to individual negotiation by the Parties.

          10.3 Title and Risk of Loss. Title to and risk of loss related to the Product shall transfer from Seller to Buyer at the Delivery Point. Seller warrants that it will deliver to Buyer the Quantity of the Product free and clear of all liens, security interests, claims and encumbrances or any interest therein or thereto by any person arising prior to the Delivery Point. 

          10.4 Indemnity. Each Party shall indemnify, defend and hold harmless the other Party from and against any Claims arising from or out of any event, circumstance, act or incident first occurring or existing during the period when control and title to Product is vested in such Party as provided in Section 10.3. Each Party shall indemnify, defend and hold harmless the other Party against any Governmental Charges for which such Party is responsible under Article Nine.

          10.5 Assignment. Neither Party shall assign this Agreement or its rights hereunder without the prior written consent of the other Party, which consent may be withheld in the exercise of its sole discretion; provided, however, either Party may, without the consent of the other Party (and without relieving itself from liability hereunder), (i) transfer, sell, pledge, encumber or assign this Agreement or the accounts, revenues or proceeds hereof in connection with any financing or other financial arrangements, (ii) transfer or assign this Agreement to an affiliate of such Party which affiliate's creditworthiness is equal to or higher than that of such Party, or (iii) transfer or assign this Agreement to any person or entity succeeding to all or substantially all of the assets whose creditworthiness is equal to or higher than that of such Party; provided, however, that in each such case, any such assignee shall agree in writing to be bound by the terms and conditions hereof and so long as the transferring Party delivers such tax and enforceability assurance as the non-transferring Party may reasonably request.

          10.6 Governing Law. THIS AGREEMENT AND THE RIGHTS AND DUTIES OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED, ENFORCED AND PERFORMED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. EACH PARTY WAIVES ITS RESPECTIVE RIGHT TO ANY JURY TRIAL WITH RESPECT TO ANY LITIGATION ARISING UNDER OR IN CONNECTION WITH THIS AGREEMENT.

25

 

  

          10.7 Notices. All notices, requests, statements or payments shall be made as specified in the Cover Sheet. Notices (other than scheduling requests) shall, unless otherwise specified herein, be in writing and may be delivered by hand delivery, United States mail, overnight courier service or facsimile. Notice by facsimile or hand delivery shall be effective at the close of business on the day actually received, if received during business hours on a Business Day, and otherwise shall be effective at the close of business on the next Business Day. Notice by overnight United States mail or courier shall be effective on the next Business Day after it was sent. A Party may change its addresses by providing notice of same in accordance herewith.

          10.8 General. This Master Agreement (including the exhibits, schedules and any written supplements hereto), the Party A Tariff, if any, the Party B Tariff, if any, any designated collateral, credit support or margin agreement or similar arrangement between the Parties and all Transactions (including any Confirmation accepted in accordance with Section 2.3) constitute the entire agreement between the Parties relating to the subject matter. Notwithstanding the foregoing, any collateral, credit support or margin agreement or similar arrangement between the Parties shall, upon designation by the Parties, be deemed part of this Agreement and shall be incorporated herein by reference. This Agreement shall be considered for all purposes as prepared through the joint efforts of the parties and shall not be construed against one party or the other as a result of the preparation, substitution, submission or other event of negotiation, drafting or execution hereof. Except to the extent herein provided for, no amendment or modification to this Master Agreement shall be enforceable unless reduced to writing and executed by both Parties. Each Party agrees if it seeks to amend any applicable wholesale power sales tariff during the term of this Agreement, such amendment will not in any way affect outstanding Transactions under this Agreement without the prior written consent of the other Party. Each Party further agrees that it will not assert, or defend itself, on the basis that any applicable tariff is inconsistent with this Agreement. This Agreement shall not impart any rights enforceable by any third party (other than a permitted successor or assignee bound to this Agreement). Waiver by a Party of any default by the other Party shall not be construed as a waiver of any other default. Any provision declared or rendered unlawful by any applicable court of law or regulatory agency or deemed unlawful because of a statutory change (individually or collectively, such events referred to as "Regulatory Event") will not otherwise affect the remaining lawful obligations that arise under this Agreement; and provided, further, that if a Regulatory Event occurs, the Parties shall use their best efforts to reform this Agreement in order to give effect to the original intention of the Parties. The term "including" when used in this Agreement shall be by way of example only and shall not be considered in any way to be in limitation. The headings used herein are for convenience and reference purposes only. All indemnity and audit rights shall survive the termination of this Agreement for twelve (12) months. This Agreement shall be binding on each Party's successors and permitted assigns.

          10.9 Audit. Each Party has the right, at its sole expense and during normal working hours, to examine the records of the other Party to the extent reasonably necessary to verify the accuracy of any statement, charge or computation made pursuant to this Master Agreement. If requested, a Party shall provide to the other Party statements evidencing the Quantity delivered at the Delivery Point. If any such examination reveals any inaccuracy in any statement, the necessary adjustments in such statement and the payments thereof will be made promptly and shall bear interest calculated at the Interest Rate from the date the overpayment or underpayment was made until paid; provided, however, that no adjustment for any statement or payment will be made unless objection to the accuracy thereof was made prior to the lapse of twelve (12) months from the rendition thereof, and thereafter any objection shall be deemed waived.

26

 

  

          10.10 Forward Contract. The Parties acknowledge and agree that all Transactions constitute "forward contracts" within the meaning of the United States Bankruptcy Code. 

          10.11 Confidentiality. If the Parties have elected on the Cover Sheet to make this Section 10.11 applicable to this Master Agreement, neither Party shall disclose the terms or conditions of a Transaction under this Master Agreement to a third party (other than the Party's employees, lenders, counsel, accountants or advisors who have a need to know such information and have agreed to keep such terms confidential) except in order to comply with any applicable law, regulation, or any exchange, control area or independent system operator rule or in connection with any court or regulatory proceeding; provided, however, each Party shall, to the extent practicable, use reasonable efforts to prevent or limit the disclosure. The Parties shall be entitled to all remedies available at law or in equity to enforce, or seek relief in connection with, this confidentiality obligation.

27

 

  

SCHEDULE M

(THIS SCHEDULE IS INCLUDED IF THE APPROPRIATE BOX ON THE COVER SHEET IS MARKED INDICATING A PARTY IS A GOVERNMENTAL ENTITY OR PUBLIC POWER SYSTEM)

          A. The Parties agree to add the following definitions in Article One.

	
 

	
 

	
 

	
          "Act" means ______________________________.[1]

	
 

	
 

	
 

	
          "Governmental Entity or Public Power System" means a municipality, county, governmental board, public power authority, public utility district, joint action agency, or other similar political subdivision or public entity of the United States, one or more States or territories or any combination thereof.

	
 

	
 

	
 

	
          "Special Fund" means a fund or account of the Governmental Entity or Public Power System set aside and or pledged to satisfy the Public Power System's obligations hereunder out of which amounts shall be paid to satisfy all of the Public Power System's obligations under this Master Agreement for the entire Delivery Period.

	
 

	
 

	
          B. The following sentence shall be added to the end of the definition of "Force Majeure" in Article One.

	
 

	
 

	
          If the Claiming Party is a Governmental Entity or Public Power System, Force Majeure does not include any action taken by the Governmental Entity or Public Power System in its governmental capacity.

	
 

	
 

	
          C. The Parties agree to add the following representations and warranties to Section 10.2:

	
 

	
 

1 Cite the state enabling and other relevant statutes applicable to Governmental Entity or Public Power System.

28

 

  

	
 

	
 

	
 

	
Further and with respect to a Party that is a Governmental Entity or Public Power System, such Governmental Entity or Public Power System represents and warrants to the other Party continuing throughout the term of this Master Agreement, with respect to this Master Agreement and each Transaction, as follows: (i) all acts necessary to the valid execution, delivery and performance of this Master Agreement, including without limitation, competitive bidding, public notice, election, referendum, prior appropriation or other required procedures has or will be taken and performed as required under the Act and the Public Power System's ordinances, bylaws or other regulations, (ii) all persons making up the governing body of Governmental Entity or Public Power System are the duly elected or appointed incumbents in their positions and hold such positions in good standing in accordance with the Act and other applicable law, (iii) entry into and performance of this Master Agreement by Governmental Entity or Public Power System are for a proper public purpose within the meaning of the Act and all other relevant constitutional, organic or other governing documents and applicable law, (iv) the term of this Master Agreement does not extend beyond any applicable limitation imposed by the Act or other relevant constitutional, organic or other governing documents and applicable law, (v) the Public Power System's obligations to make payments hereunder are unsubordinated obligations and such payments are (a) operating and maintenance costs (or similar designation) which enjoy first priority of payment at all times under any and all bond ordinances or indentures to which it is a party, the Act and all other relevant constitutional, organic or other governing documents and applicable law or (b) otherwise not subject to any prior claim under any and all bond ordinances or indentures to which it is a party, the Act and all other relevant constitutional, organic or other governing documents and applicable law and are available without limitation or deduction to satisfy all Governmental Entity or Public Power System' obligations hereunder and under each Transaction or (c) are to be made solely from a Special Fund, (vi) entry into and performance of this Master Agreement and each Transaction by the Governmental Entity or Public Power System will not adversely affect the exclusion from gross income for federal income tax purposes of interest on any obligation of Governmental Entity or Public Power System otherwise entitled to such exclusion, and (vii) obligations to make payments hereunder do not constitute any kind of indebtedness of Governmental Entity or Public Power System or create any kind of lien on, or security interest in, any property or revenues of Governmental Entity or Public Power System which, in either case, is proscribed by any provision of the Act or any other relevant constitutional, organic or other governing documents and applicable law, any order or judgment of any court or other agency of government applicable to it or its assets, or any contractual restriction binding on or affecting it or any of its assets.

	
 

	
 

	
          D. The Parties agree to add the following sections to Article Three:

	
 

	
 

	
          Section 3.4 Public Power System's Deliveries. On the Effective Date and as a condition to the obligations of the other Party under this Agreement, Governmental Entity or Public Power System shall provide the other Party hereto (i) certified copies of all ordinances, resolutions, public notices and other documents evidencing the necessary authorizations with respect to the execution, delivery and performance by Governmental Entity or Public Power System of this Master Agreement and (ii) an opinion of counsel for Governmental Entity or Public Power System, in form and substance reasonably satisfactory to the Other Party, regarding the validity, binding effect and enforceability of this Master Agreement against Governmental Entity or Public Power System in respect of the Act and all other relevant constitutional organic or other governing documents and applicable law.

29

 

  

	
 

	
 

	
 

	
          Section 3.5 No Immunity Claim. Governmental Entity or Public Power System warrants and covenants that with respect to its contractual obligations hereunder and performance thereof, it will not claim immunity on the grounds of sovereignty or similar grounds with respect to itself or its revenues or assets from (a) suit, (b) jurisdiction of court (including a court located outside the jurisdiction of its organization), (c) relief by way of injunction, order for specific performance or recovery of property, (d) attachment of assets, or (e) execution or enforcement of any judgment.

	
 

	
 

	
          E. If the appropriate box is checked on the Cover Sheet, as an alternative to selecting one of the options under Section 8.3, the Parties agree to add the following section to Article Three:

	
 

	
 

	
          Section 3.6 Governmental Entity or Public Power System Security. With respect to each Transaction, Governmental Entity or Public Power System shall either (i) have created and set aside a Special Fund or (ii) upon execution of this Master Agreement and prior to the commencement of each subsequent fiscal year of Governmental Entity or Public Power System during any Delivery Period, have obtained all necessary budgetary approvals and certifications for payment of all of its obligations under this Master Agreement for such fiscal year; any breach of this provision shall be deemed to have arisen during a fiscal period of Governmental Entity or Public Power System for which budgetary approval or certification of its obligations under this Master Agreement is in effect and, notwithstanding anything to the contrary in Article Four, an Early Termination Date shall automatically and without further notice occur hereunder as of such date wherein Governmental Entity or Public Power System shall be treated as the Defaulting Party. Governmental Entity or Public Power System shall have allocated to the Special Fund or its general funds a revenue base that is adequate to cover Public Power System's payment obligations hereunder throughout the entire Delivery Period.

	
 

	
 

	
          F. If the appropriate box is checked on the Cover Sheet, the Parties agree to add the following section to Article Eight:

	
 

	
 

	
          Section 8.4 Governmental Security. As security for payment and performance of Public Power System's obligations hereunder, Public Power System hereby pledges, sets over, assigns and grants to the other Party a security interest in all of Public Power System's right, title and interest in and to [specify collateral].

30

 

  

	
 

	
 

	
          G. The Parties agree to add the following sentence at the end of Section 10.6 - Governing Law:

	
 

	
 

	
NOTWITHSTANDING THE FOREGOING, IN RESPECT OF THE APPLICABILITY OF THE ACT AS HEREIN PROVIDED, THE LAWS OF THE STATE OF _____________[2] SHALL APPLY.

 

	
 

	
 

2 Insert relevant state for Governmental Entity or Public Power System.

31

 

  

SCHEDULE P: PRODUCTS AND RELATED DEFINITIONS

          "Ancillary Services" means any of the services identified by a Transmission Provider in its transmission tariff as "ancillary services" including, but not limited to, regulation and frequency response, energy imbalance, operating reserve-spinning and operating reserve-supplemental, as may be specified in the Transaction. 

          "Capacity" has the meaning specified in the Transaction.

          "Energy" means three-phase, 60-cycle alternating current electric energy, expressed in megawatt hours. 

          "Firm (LD)" means, with respect to a Transaction, that either Party shall be relieved of its obligations to sell and deliver or purchase and receive without liability only to the extent that, and for the period during which, such performance is prevented by Force Majeure. In the absence of Force Majeure, the Party to which performance is owed shall be entitled to receive from the Party which failed to deliver/receive an amount determined pursuant to Article Four.

          "Firm Transmission Contingent - Contract Path" means, with respect to a Transaction, that the performance of either Seller or Buyer (as specified in the Transaction) shall be excused, and no damages shall be payable including any amounts determined pursuant to Article Four, if the transmission for such Transaction is interrupted or curtailed and (i) such Party has provided for firm transmission with the transmission provider(s) for the Product in the case of the Seller from the generation source to the Delivery Point or in the case of the Buyer from the Delivery Point to the ultimate sink, and (ii) such interruption or curtailment is due to "force majeure" or "uncontrollable force" or a similar term as defined under the applicable transmission provider's tariff. This contingency shall excuse performance for the duration of the interruption or curtailment notwithstanding the provisions of the definition of "Force Majeure" in Section 1.23 to the contrary.

          "Firm Transmission Contingent - Delivery Point" means, with respect to a Transaction, that the performance of either Seller or Buyer (as specified in the Transaction) shall be excused, and no damages shall be payable including any amounts determined pursuant to Article Four, if the transmission to the Delivery Point (in the case of Seller) or from the Delivery Point (in the case of Buyer) for such Transaction is interrupted or curtailed and (i) such Party has provided for firm transmission with the transmission provider(s) for the Product, in the case of the Seller, to be delivered to the Delivery Point or, in the case of Buyer, to be received at the Delivery Point and (ii) such interruption or curtailment is due to "force majeure" or "uncontrollable force" or a similar term as defined under the applicable transmission provider's tariff. This transmission contingency excuses performance for the duration of the interruption or curtailment, notwithstanding the provisions of the definition of "Force Majeure" in Section 1.23 to the contrary. Interruptions or curtailments of transmission other than the transmission either immediately to or from the Delivery Point shall not excuse performance

          "Firm (No Force Majeure)" means, with respect to a Transaction, that if either Party fails to perform its obligation to sell and deliver or purchase and receive the Product, the Party to which performance is owed shall be entitled to receive from the Party which failed to perform an amount determined pursuant to Article Four. Force Majeure shall not excuse performance of a Firm (No Force Majeure) Transaction.

32

 

  

          "Into ______________ (the "Receiving Transmission Provider"), Seller's Daily Choice" means that, in accordance with the provisions set forth below, (1) the Product shall be scheduled and delivered to an interconnection or interface ("Interface") either (a) on the Receiving Transmission Provider's transmission system border or (b) within the control area of the Receiving Transmission Provider if the Product is from a source of generation in that control area, which Interface, in either case, the Receiving Transmission Provider identifies as available for delivery of the Product in or into its control area; and (2) Seller has the right on a daily prescheduled basis to designate the Interface where the Product shall be delivered. An "Into" Product shall be subject to the following provisions:

          1. Prescheduling and Notification. Subject to the provisions of Section 6, not later than the prescheduling deadline of 11:00 a.m. CPT on the Business Day before the next delivery day or as otherwise agreed to by Buyer and Seller, Seller shall notify Buyer ("Seller's Notification") of Seller's immediate upstream counterparty and the Interface (the "Designated Interface") where Seller shall deliver the Product for the next delivery day, and Buyer shall notify Seller of Buyer's immediate downstream counterparty.

          2. Availability of "Firm Transmission" to Buyer at Designated Interface; "Timely Request for Transmission," "ADI" and "Available Transmission." In determining availability to Buyer of next-day firm transmission ("Firm Transmission") from the Designated Interface, a "Timely Request for Transmission" shall mean a properly completed request for Firm Transmission made by Buyer in accordance with the controlling tariff procedures, which request shall be submitted to the Receiving Transmission Provider no later than 30 minutes after delivery of Seller's Notification, provided, however, if the Receiving Transmission Provider is not accepting requests for Firm Transmission at the time of Seller's Notification, then such request by Buyer shall be made within 30 minutes of the time when the Receiving Transmission Provider first opens thereafter for purposes of accepting requests for Firm Transmission.

          Pursuant to the terms hereof, delivery of the Product may under certain circumstances be redesignated to occur at an Interface other than the Designated Interface (any such alternate designated interface, an "ADI") either (a) on the Receiving Transmission Provider's transmission system border or (b) within the control area of the Receiving Transmission Provider if the Product is from a source of generation in that control area, which ADI, in either case, the Receiving Transmission Provider identifies as available for delivery of the Product in or into its control area using either firm or non-firm transmission, as available on a day-ahead or hourly basis (individually or collectively referred to as "Available Transmission") within the Receiving Transmission Provider's transmission system.

          3. Rights of Buyer and Seller Depending Upon Availability of/Timely Request for Firm Transmission. 

          A. Timely Request for Firm Transmission made by Buyer, Accepted by the Receiving Transmission Provider and Purchased by Buyer. If a Timely Request for Firm Transmission is made by Buyer and is accepted by the Receiving Transmission Provider and Buyer purchases such Firm Transmission, then Seller shall deliver and Buyer shall receive the Product at the Designated Interface. 

33

 

  

	
 

	
 

	
 

	
          i. If the Firm Transmission purchased by Buyer within the Receiving Transmission Provider's transmission system from the Designated Interface ceases to be available to Buyer for any reason, or if Seller is unable to deliver the Product at the Designated Interface for any reason except Buyer's non-performance, then at Seller's choice from among the following, Seller shall: (a) to the extent Firm Transmission is available to Buyer from an ADI on a day-ahead basis, require Buyer to purchase such Firm Transmission from such ADI, and schedule and deliver the affected portion of the Product to such ADI on the basis of Buyer's purchase of Firm Transmission, or (b) require Buyer to purchase non-firm transmission, and schedule and deliver the affected portion of the Product on the basis of Buyer's purchase of non-firm transmission from the Designated Interface or an ADI designated by Seller, or (c) to the extent firm transmission is available on an hourly basis, require Buyer to purchase firm transmission, and schedule and deliver the affected portion of the Product on the basis of Buyer's purchase of such hourly firm transmission from the Designated Interface or an ADI designated by Seller. 

	
 

	
 

	
 

	
          ii. If the Available Transmission utilized by Buyer as required by Seller pursuant to Section 3A(i) ceases to be available to Buyer for any reason, then Seller shall again have those alternatives stated in Section 3A(i) in order to satisfy its obligations.

	
 

	
 

	
 

	
          iii. Seller's obligation to schedule and deliver the Product at an ADI is subject to Buyer's obligation referenced in Section 4B to cooperate reasonably therewith. If Buyer and Seller cannot complete the scheduling and/or delivery at an ADI, then Buyer shall be deemed to have satisfied its receipt obligations to Seller and Seller shall be deemed to have failed its delivery obligations to Buyer, and Seller shall be liable to Buyer for amounts determined pursuant to Article Four.

	
 

	
 

	
 

	
          iv. In each instance in which Buyer and Seller must make alternative scheduling arrangements for delivery at the Designated Interface or an ADI pursuant to Sections 3A(i) or (ii), and Firm Transmission had been purchased by both Seller and Buyer into and within the Receiving Transmission Provider's transmission system as to the scheduled delivery which could not be completed as a result of the interruption or curtailment of such Firm Transmission, Buyer and Seller shall bear their respective transmission expenses and/or associated congestion charges incurred in connection with efforts to complete delivery by such alternative scheduling and delivery arrangements. In any instance except as set forth in the immediately preceding sentence, Buyer and Seller must make alternative scheduling arrangements for delivery at the Designated Interface or an ADI under Sections 3A(i) or (ii), Seller shall be responsible for any additional transmission purchases and/or associated congestion charges incurred by Buyer in connection with such alternative scheduling arrangements.

34

 

  

          B. Timely Request for Firm Transmission Made by Buyer but Rejected by the Receiving Transmission Provider. If Buyer's Timely Request for Firm Transmission is rejected by the Receiving Transmission Provider because of unavailability of Firm Transmission from the Designated Interface, then Buyer shall notify Seller within 15 minutes after receipt of the Receiving Transmission Provider's notice of rejection ("Buyer's Rejection Notice"). If Buyer timely notifies Seller of such unavailability of Firm Transmission from the Designated Interface, then Seller shall be obligated either (1) to the extent Firm Transmission is available to Buyer from an ADI on a day-ahead basis, to require Buyer to purchase (at Buyer's own expense) such Firm Transmission from such ADI and schedule and deliver the Product to such ADI on the basis of Buyer's purchase of Firm Transmission, and thereafter the provisions in Section 3A shall apply, or (2) to require Buyer to purchase (at Buyer's own expense) non-firm transmission, and schedule and deliver the Product on the basis of Buyer's purchase of non-firm transmission from the Designated Interface or an ADI designated by the Seller, in which case Seller shall bear the risk of interruption or curtailment of the non-firm transmission; provided, however, that if the non-firm transmission is interrupted or curtailed or if Seller is unable to deliver the Product for any reason, Seller shall have the right to schedule and deliver the Product to another ADI in order to satisfy its delivery obligations, in which case Seller shall be responsible for any additional transmission purchases and/or associated congestion charges incurred by Buyer in connection with Seller's inability to deliver the Product as originally prescheduled. If Buyer fails to timely notify Seller of the unavailability of Firm Transmission, then Buyer shall bear the risk of interruption or curtailment of transmission from the Designated Interface, and the provisions of Section 3D shall apply.

          C. Timely Request for Firm Transmission Made by Buyer, Accepted by the Receiving Transmission Provider and not Purchased by Buyer. If Buyer's Timely Request for Firm Transmission is accepted by the Receiving Transmission Provider but Buyer elects to purchase non-firm transmission rather than Firm Transmission to take delivery of the Product, then Buyer shall bear the risk of interruption or curtailment of transmission from the Designated Interface. In such circumstances, if Seller's delivery is interrupted as a result of transmission relied upon by Buyer from the Designated Interface, then Seller shall be deemed to have satisfied its delivery obligations to Buyer, Buyer shall be deemed to have failed to receive the Product and Buyer shall be liable to Seller for amounts determined pursuant to Article Four.

          D. No Timely Request for Firm Transmission Made by Buyer, or Buyer Fails to Timely Send Buyer's Rejection Notice. If Buyer fails to make a Timely Request for Firm Transmission or Buyer fails to timely deliver Buyer's Rejection Notice, then Buyer shall bear the risk of interruption or curtailment of transmission from the Designated Interface. In such circumstances, if Seller's delivery is interrupted as a result of transmission relied upon by Buyer from the Designated Interface, then Seller shall be deemed to have satisfied its delivery obligations to Buyer, Buyer shall be deemed to have failed to receive the Product and Buyer shall be liable to Seller for amounts determined pursuant to Article Four.

35

 

  

          4. Transmission. 

	
 

	
 

	
 

	
          A. Seller's Responsibilities. Seller shall be responsible for transmission required to deliver the Product to the Designated Interface or ADI, as the case may be. It is expressly agreed that Seller is not required to utilize Firm Transmission for its delivery obligations hereunder, and Seller shall bear the risk of utilizing non-firm transmission. If Seller's scheduled delivery to Buyer is interrupted as a result of Buyer's attempted transmission of the Product beyond the Receiving Transmission Provider's system border, then Seller will be deemed to have satisfied its delivery obligations to Buyer, Buyer shall be deemed to have failed to receive the Product and Buyer shall be liable to Seller for damages pursuant to Article Four.

	
 

	
 

	
 

	
          B. Buyer's Responsibilities. Buyer shall be responsible for transmission required to receive and transmit the Product at and from the Designated Interface or ADI, as the case may be, and except as specifically provided in Section 3A and 3B, shall be responsible for any costs associated with transmission therefrom. If Seller is attempting to complete the designation of an ADI as a result of Seller's rights and obligations hereunder, Buyer shall co-operate reasonably with Seller in order to effect such alternate designation.

          5. Force Majeure. An "Into" Product shall be subject to the "Force Majeure" provisions in Section 1.23. 

          6. Multiple Parties in Delivery Chain Involving a Designated Interface. Seller and Buyer recognize that there may be multiple parties involved in the delivery and receipt of the Product at the Designated Interface or ADI to the extent that (1) Seller may be purchasing the Product from a succession of other sellers ("Other Sellers"), the first of which Other Sellers shall be causing the Product to be generated from a source ("Source Seller") and/or (2) Buyer may be selling the Product to a succession of other buyers ("Other Buyers"), the last of which Other Buyers shall be using the Product to serve its energy needs ("Sink Buyer"). Seller and Buyer further recognize that in certain Transactions neither Seller nor Buyer may originate the decision as to either (a) the original identification of the Designated Interface or ADI (which designation may be made by the Source Seller) or (b) the Timely Request for Firm Transmission or the purchase of other Available Transmission (which request may be made by the Sink Buyer). Accordingly, Seller and Buyer agree as follows:

	
 

	
 

	
 

	
          A. If Seller is not the Source Seller, then Seller shall notify Buyer of the Designated Interface promptly after Seller is notified thereof by the Other Seller with whom Seller has a contractual relationship, but in no event may such designation of the Designated Interface be later than the prescheduling deadline pertaining to the Transaction between Buyer and Seller pursuant to Section 1.

	
 

	
 

	
 

	
          B. If Buyer is not the Sink Buyer, then Buyer shall notify the Other Buyer with whom Buyer has a contractual relationship of the Designated Interface promptly after Seller notifies Buyer thereof, with the intent being that the party bearing actual responsibility to secure transmission shall have up to 30 minutes after receipt of the Designated Interface to submit its Timely Request for Firm Transmission.

36

 

  

	
 

	
 

	
 

	
          C. Seller and Buyer each agree that any other communications or actions required to be given or made in connection with this "Into Product" (including without limitation, information relating to an ADI) shall be made or taken promptly after receipt of the relevant information from the Other Sellers and Other Buyers, as the case may be.

	
 

	
 

	
 

	
          D. Seller and Buyer each agree that in certain Transactions time is of the essence and it may be desirable to provide necessary information to Other Sellers and Other Buyers in order to complete the scheduling and delivery of the Product. Accordingly, Seller and Buyer agree that each has the right, but not the obligation, to provide information at its own risk to Other Sellers and Other Buyers, as the case may be, in order to effect the prescheduling, scheduling and delivery of the Product

          "Native Load" means the demand imposed on an electric utility or an entity by the requirements of retail customers located within a franchised service territory that the electric utility or entity has statutory obligation to serve.

          "Non-Firm" means, with respect to a Transaction, that delivery or receipt of the Product may be interrupted for any reason or for no reason, without liability on the part of either Party.

          "System Firm" means that the Product will be supplied from the owned or controlled generation or pre-existing purchased power assets of the system specified in the Transaction (the "System") with non-firm transmission to and from the Delivery Point, unless a different Transmission Contingency is specified in a Transaction. Seller's failure to deliver shall be excused: (i) by an event or circumstance which prevents Seller from performing its obligations, which event or circumstance was not anticipated as of the date the Transaction was agreed to, which is not within the reasonable control of, or the result of the negligence of, the Seller; (ii) by Buyer's failure to perform; (iii) to the extent necessary to preserve the integrity of, or prevent or limit any instability on, the System; (iv) to the extent the System or the control area or reliability council within which the System operates declares an emergency condition, as determined in the system's, or the control area's, or reliability council's reasonable judgment; or (v) by the interruption or curtailment of transmission to the Delivery Point or by the occurrence of any Transmission Contingency specified in a Transaction as excusing Seller's performance. Buyer's failure to receive shall be excused (i) by Force Majeure; (ii) by Seller's failure to perform, or (iii) by the interruption or curtailment of transmission from the Delivery Point or by the occurrence of any Transmission Contingency specified in a Transaction as excusing Buyer's performance. In any of such events, neither party shall be liable to the other for any damages, including any amounts determined pursuant to Article Four.

          "Transmission Contingent" means, with respect to a Transaction, that the performance of either Seller or Buyer (as specified in the Transaction) shall be excused, and no damages shall be payable including any amounts determined pursuant to Article Four, if the transmission for such Transaction is unavailable or interrupted or curtailed for any reason, at any time, anywhere from the Seller's proposed generating source to the Buyer's proposed ultimate sink, regardless of whether transmission, if any, that such Party is attempting to secure and/or has purchased for the Product is firm or non-firm. If the transmission (whether firm or non-firm) that Seller or Buyer is attempting to secure is from source to sink is unavailable, this contingency excuses performance for the entire Transaction. If the transmission (whether firm or non-firm) that Seller or Buyer has secured from source to sink is interrupted or curtailed for any reason, this contingency excuses performance for the duration of the interruption or curtailment notwithstanding the provisions of the definition of "Force Majeure" in Article 1.23 to the contrary.

37

 

  

          "Unit Firm" means, with respect to a Transaction, that the Product subject to the Transaction is intended to be supplied from a generation asset or assets specified in the Transaction. Seller's failure to deliver under a "Unit Firm" Transaction shall be excused: (i) if the specified generation asset(s) are unavailable as a result of a Forced Outage (as defined in the NERC Generating Unit Availability Data System (GADS) Forced Outage reporting guidelines) or (ii) by an event or circumstance that affects the specified generation asset(s) so as to prevent Seller from performing its obligations, which event or circumstance was not anticipated as of the date the Transaction was agreed to, and which is not within the reasonable control of, or the result of the negligence of, the Seller or (iii) by Buyer's failure to perform. In any of such events, Seller shall not be liable to Buyer for any damages, including any amounts determined pursuant to Article Four. 

38

 

  

EXHIBIT A

EXHIBIT A

          MASTER POWER PURCHASE AND SALE AGREEMENT

CONFIRMATION LETTER

This confirmation letter shall confirm the Transaction agreed to on ___________, ___ between __________________________ ("Party A") and _____________________ ("Party B") regarding the sale/purchase of the Product under the terms and conditions as follows:

	
 

	
 

	
 

	
 

	
Seller:

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Buyer:

	
 

	
 

	
 

 

	
Product:

	
 

	
 

	
 

	
 

	
 

	
o

	
Into _________________, Seller's Daily Choice

	
 

	
 

	
o

	
Firm (LD)

	
 

	
 

	
o

	
Firm (No Force Majeure)

	
 

	
 

	
o

	
System Firm 

	
 

	
 

	
 

	
(Specify System: 

	
 

	
)

	
 

	
 

	
 

	
 

	
o

	
Unit Firm

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
(Specify Unit(s): 

	
 

	
)

	
 

	
 

	
 

	
 

	
o

	
Other 

	
 

	
 

	
 

	
 

	
o

	
Transmission Contingency (If not marked, no transmission contingency)

	
 

	
 

	
 

	
o

	
FT-Contract Path Contingency 

	
o      Seller 

	
o      Buyer

	
 

	
 

	
 

	
 

	
 

	
 

	
o

	
FT-Delivery Point Contingency 

	
o      Seller 

	
o      Buyer

	
 

	
 

	
 

	
 

	
 

	
 

	
o

	
Transmission Contingent 

	
o       Seller 

	
o      Buyer

	
 

	
 

	
 

	
 

	
 

	
 

	
o

	
Other transmission contingency

	
 

	
 

	
 

	
 

	
(Specify:

	
 

	
)

	
 

	
 

	 	 	 	 	 	 	 

 

	
 

	
 

	
 

	
Contract Quantity:

	
 

	
 

	
 

	
 

	
 

	
Delivery Point: 

	
 

	
 

	
 

	
 

	
 

	
Contract Price: 

	
 

	
 

	
 

	
 

	
 

	
Energy Price: 

	
 

	
 

	
 

	
 

	
 

	
Other Charges: 

	
 

	
 

39

 

  

Confirmation Letter

Page 2

	
 

	
 

	
 

	
Delivery Period: 

	
 

	
 

	
Special Conditions: 

	
 

	
 

	
Scheduling: 

	
 

	
 

	
Option Buyer: 

	
 

	
 

	
Option Seller: 

	
 

	
 

	
Type of Option: 

	
 

	
 

	
Strike Price: 

	
 

	
 

	
Premium: 

	
 

	
 

	
Exercise Period: 

	
 

	
 

          This confirmation letter is being provided pursuant to and in accordance with the Master Power Purchase and Sale Agreement dated ______________ (the "Master Agreement") between Party A and Party B, and constitutes part of and is subject to the terms and provisions of such Master Agreement. Terms used but not defined herein shall have the meanings ascribed to them in the Master Agreement.

	
 

	
 

	
 

	
[Party A]

	
 

	
 

	
[Party B]

	
 

	
 

	
 

	
 

	
 

	
 

	
Name:

	
 

	
 

	
Name: 

	
 

	
Title:

	
 

	
 

	
Title: 

	
 

	
Phone No:

	
 

	
 

	
Phone No:

	
 

	
Fax:

	
 

	
 

	
Fax: 

	
 

	
 

	
 

	
 

40

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00202-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00202-of-00352.parquet"}]]