Document:

Exhibit 10.1

 

Clarient, Inc.

31 Columbia

Aliso Viejo, CA 92626

 

September 17,
2009

 

Kenneth
J. Bloom, M.D.

31
Columbia

Aliso
Viejo, CA  92656

 

Dear
Dr. Bloom:

 

Clarient Inc., a Delaware corporation (“Clarient”), is pleased to enter into this letter agreement
(this “Letter Agreement”) with you (“Executive”) which will address the terms of Executive’s
employment with Clarient.  Clarient
considers it essential to its best interests to attract and foster the
continuous employment of key management personnel and the arrangements
described in this Letter Agreement are intended to address that goal.

 

1.             Duties.  Executive shall continue to serve as the
Chief Medical Officer of Clarient and shall report to Clarient’s Chief
Executive Officer.  Executive shall be
responsible for the technical oversight and management of the diagnostics
services laboratory operated by Clarient and Clarient Diagnostics Services, Inc.,
a Delaware corporation and wholly owned subsidiary of Clarient (“CDS”), and shall have such other duties and
responsibilities as are consistent with Executive’s position and as may be
requested from time to time by the Chief Executive Officer of Clarient.  Executive will receive compensation from
Clarient for Executive’s employment hereunder as set forth in Section 3
below.  Notwithstanding any of the
foregoing, Executive shall not be required to provide, nor shall he provide,
any professional pathology or other medical services to Clarient or CDS in his
capacity as Chief Medical Officer of Clarient, nor shall Clarient bill any
third parties (including Medicare and private health insurers), clients or
patients for any services provided by Executive in his capacity as Chief
Medical Officer to Clarient or CDS hereunder, and under no circumstances shall
Clarient compensate Executive for any professional pathology or other medical
services performed by Executive in his capacity as President of Clarient
Pathology Services, Inc., a California professional corporation (“CPS”). 
This Letter Agreement amends, restates and supersedes in its entirety
the employment letter agreement, dated as of December 15, 2008, by and
among Clarient, CPS and Executive.

 

2.             Term.  Notwithstanding anything herein to the
contrary, Executive’s employment relationship with Clarient is employment “at
will.”  Executive’s employment with
Clarient may be terminated by Clarient, on the one hand, or by Executive, on
the other hand, at any time (subject to the notice provision below), in each
case without any liability or obligation, except as set forth in this Letter
Agreement.  If Executive terminates his
employment, he shall give Clarient written notice of such termination not less
than thirty (30) days prior to the effective date of such termination.  In light of the severance benefits provided
for in Section 6, Clarient will have no obligation to give Executive prior
notice of any such termination by Clarient (whether or not such termination is
without cause).

 

3.             Compensation.

 

(a)           Base Salary.  During the term of Executive’s employment,
Executive will receive a base salary of $135,000 per annum (effective September 19,
2009), payable by Clarient in

 

 

bi-weekly increments in accordance
with Clarient’s current payroll policies and procedures, subject to annual
salary and performance review and potential salary increases (but not
reductions) at the sole discretion of Clarient’s Board of Directors or
Compensation Committee.

 

(b)           Bonus.  Executive will be eligible for a
performance-based bonus as a participant in the Clarient Management Incentive
Plan (the “MIP”) (target
incentives as determined by the Compensation Committee of Clarient’s Board of
Directors) with an annual target payment of 50% of base salary, pro-rated for
the number of months of service in any given year.  Potential exists to receive as much as twice
this figure based on achievement of corporate and personal objectives.  Any bonus that becomes payable under this
subsection (b) shall be paid in accordance with Clarient’s standard
practices under the MIP, but in no event after the later of (i) the 15th
day of the third month following Executive’s first taxable year in which such
bonus is no longer subject to a substantial risk of forfeiture, and (ii) the
15th day of the third month following the first taxable year of Clarient in
which such bonus is no longer subject to a substantial risk of forfeiture, as
determined in accordance with Section 409A of the Internal Revenue Code of
1986, as amended (the “Code”) and
any Treasury Regulations and other guidance issued thereunder.  Notwithstanding anything herein to the
contrary, for purposes of calculating any bonus that may become payable to
Executive under the MIP in respect of any calendar year during which CPS does
not maintain a comparable management incentive plan, Executive’s base salary
shall equal the Aggregate Annual Base Salary. 
For calendar year 2009, the Aggregate Annual Base Salary shall be
$450,000.  For purposes of this Letter
Agreement, “Aggregate Annual Base Salary”
means the aggregate amount of the base salaries earned by Executive from each
of Clarient and CPS in a given calendar year.

 

4.             Change of Control/Equity Grants.  If Executive is
employed by Clarient immediately prior to the occurrence of a Change of Control
(as defined below), then, notwithstanding anything to the contrary contained in
the stock option agreements by and between Clarient and Executive identified on
Schedule 1 hereto (the “Option
Agreements”), all shares subject to the stock options granted under
the Option Agreements shall vest and become exercisable immediately prior to
the consummation of such Change of Control. 
Notwithstanding the foregoing, with respect to the stock option granted
to Executive by Clarient on April 3, 2006, the parties agree that 48,000
shares which were covered by such stock option and which were subject to
performance vesting conditions, which conditions were not attained, did not
vest, and for the avoidance of doubt, such stock option shall not be
exercisable with respect to such 48,000 shares and is hereby cancelled with
respect thereto; however, this sentence shall have no effect on the
32,000 shares which were covered by such stock option, but which were not
subject to performance vesting conditions. 
Except as expressly provided herein, all terms and conditions of the
Option Agreements shall remain in full force and effect.  Additional equity grants may be awarded at
the discretion of Clarient’s Board of Directors or Compensation Committee and,
if made, will be made in a manner commensurate with equity grants made to other
senior executives of Clarient, the terms and conditions of which shall be as
determined under Clarient’s 2007 Incentive Award Plan and by Clarient’s Board
of Directors or Compensation Committee.

 

5.             Fringe Benefits.

 

(a)           Executive will be paid a car allowance at the rate of $600
per month, paid on a monthly basis. 
Without limiting Clarient’s obligation pursuant to the preceding
sentence, in no event shall the monthly allowance be made later than December 31
of the year following the year in which the expense was incurred.  The allowance paid to Executive in one year
shall not affect the allowance paid to Executive in any subsequent year and
shall not be subject to liquidation in favor of any other benefit.

 

2

 

(b)           Executive shall be eligible to participate, subject to plan
eligibility requirements, in Clarient’s group life and accidental death and
dismemberment insurance in an amount equal to one times Executive’s Aggregate
Annual Base Salary not to exceed $600,000 (assuming that Executive meets normal
insurability requirements).  If
insurability requirements cannot be met, the maximum amount of group life
insurance benefit is $225,000.  Executive
will be offered the opportunity to purchase voluntary life insurance for
himself and his spouse and children, if applicable, and otherwise be eligible
to participate in all other benefits programs offered generally by Clarient to
its other senior executives, including medical, dental and vision insurance,
short and long term disability insurance, 401(k) Plan, flexible spending
account (Section 125) plan and employee assistance program, subject to
such plans’ eligibility requirements.

 

(c)           Executive will also be entitled to twenty-two (22) days of
vacation per annum which will accrue at the rate of 6.77 hours per pay
period.  Executive may not accrue more
than forty (40) hours above his eligible vacation allowance per year.  All vacation accrued will carry over year to
year; however, the point at which the total number of vacation hours
accrued exceeds the maximum allowable, no additional accruals will be earned
until the amount is reduced below the maximum.

 

(d)           Executive shall be covered by Clarient’s directors and
officers liability insurance policies and indemnification policies on the same
terms and conditions as apply to Clarient’s other senior executives.  This provision shall survive termination of
this Agreement and shall not be covered by the release contemplated by Section 6(d).

 

6.             Severance Payments.  Subject to the provisions of subsection (d) and
Section 11 below and the other terms and conditions of this Letter
Agreement, in the event Executive has incurred a Separation from Service
(within the meaning of Section 409A(a)(2)(A)(i) of the Code, and
Treasury Regulation Section 1.409A-1(h)) (“Separation from Service”) from Clarient by reason of a
termination of Executive’s employment:  (a) by
Clarient without “cause,” (b) by Executive for “good reason” within twelve
months after a Change of Control, or (c) by Executive as a result of
Executive’s death or disability (any of the foregoing being a “Severance Termination”), Clarient will
provide Executive the benefits described in this Section 6, which shall be
the only severance benefits or other payments with respect to Executive’s
employment with Clarient to which Executive shall be entitled.  Without limiting the generality of the
foregoing, these benefits are in lieu of all salary, bonuses and vacation
accruals (except for salary, bonuses and vacation accruals for periods ending
on the date of termination as provided in Section 8 below) and other
rights Executive may have against Clarient or any of its affiliates.

 

(a)           If a Severance Termination occurs, Executive will receive
payment of an amount equal to twelve (12) months of his Aggregate Annual Base
Salary in effect at the time of the Severance Termination.

 

(b)           Upon a Severance Termination, Executive will be able to
exercise any options which have become vested and exercisable on or before the
termination date and until the earlier of (i) the first anniversary of the
date of termination or (ii) the expiration of the original term of the
option.  Except as expressly provided
herein, all terms and conditions of such Option Agreement shall remain in full
force and effect.

 

3

 

(c)           Upon a Severance Termination, Executive will receive
continued coverage under Clarient’s medical and health plans in accordance with
COBRA rules and regulations following the termination date (including any
period as may be required by law), provided that coverage will end if Executive
obtains comparable coverage from a subsequent employer or otherwise ceases to
be eligible for COBRA benefits.  If
Executive chooses such continuation health insurance coverage, Executive will
only pay the amount paid by Executive during his employment and Clarient will
subsidize the remaining costs which are normally the responsibility of the
former employee for twelve (12) months or until Executive obtains insurance through
another employer, whichever occurs sooner. 
Thereafter, Executive shall be solely responsible for paying the
premiums for COBRA continuation coverage. 
If Executive ceases to be eligible for COBRA because Clarient does not
pay the premiums for its existing or group insurance policy or Clarient ceases
to have a group healthcare plan, Clarient will pay Executive, for any portion
of the period referred to above during which Executive’s COBRA eligibility
ceases for such reasons, the amount of the premium it would have had to pay for
Executive’s coverage under the then existing, or if none, the most recently
existing, healthcare insurance policy. 
Executive should consult with Clarient’s Manager of Human Resources
concerning the process for assuming ownership of and continued premium payments
for any life insurance policy.  Executive
will be reimbursed in accordance with Clarient’s policies promptly for all of
Executive’s reasonable and necessary business expenses incurred on behalf of
Clarient prior to Executive’s termination date. 
Without limiting Clarient’s obligation under the preceding sentence, the
reimbursement of any expense under this subsection (c) shall be made no
later than December 31 of the year following the year in which the expense
was incurred.

 

(d)           All compensation and benefits described above in (a) through
(c) of this Section 6 will be contingent upon (i) Executive’s
execution of a release of all claims against Clarient and its affiliates and
expiration of the seven-day revocation period referred to in the release, and (ii) Executive’s
not engaging in any Solicitation (as defined in Section 7 of this Letter
Agreement) during the period of his employment by Clarient or the one-year
period following Executive’s termination date.

 

(e)           Subject to Section 11 below, Clarient will pay Executive
the amount described in (a) above in equal bi-weekly installments for a
period of twelve (12) months with the first payment being payable on the date
when the seven-day revocation period referred to below with respect to the
release expires.  Clarient will prepare
the final release and deliver it to Executive within five business days of
Executive’s termination of employment. 
Executive will have twenty-one (21) days in which to consider the
release although Executive may execute it sooner.  Please note that the release has a revocation
period of seven days.

 

(f)            In this Letter Agreement, the term “cause” means (i) Executive’s failure
to adhere to any lawful written policy of Clarient (unless Executive’s failure
to adhere is at the request of the Board of Directors of Clarient) if Executive
has been given a reasonable opportunity to comply with such policy and cure
Executive’s failure to comply (which reasonable opportunity to cure must be
granted for a period of at least ten (10) days and up to thirty (30) days,
if reasonable), (ii) Executive’s appropriation (or attempted
appropriation) of a business opportunity of Clarient, including attempting to
secure or securing any personal profit in connection with any transaction
entered into on behalf of Clarient, (iii) Executive’s misappropriation (or
attempted misappropriation) 

 

4

 

of any of Clarient’s funds or
property (including, without limitation, trade secrets and other intellectual
property), or (iv) Executive’s conviction of, or Executive’s entering of a
guilty plea or plea of no contest with respect to, a felony or the equivalent
thereof.  In this Letter Agreement, the
term “good reason” means (i) Executive’s
assignment (without Executive’s consent) to a position, a title,
responsibilities or duties of a materially lesser status or degree of
responsibility than the position, responsibilities or duties of Chief Medical
Officer of Clarient, or (ii) the relocation of Clarient’s offices at which
Executive is principally employed to a location which is more than thirty (30)
miles from the location of the Clarient’s principal offices on the date of this
Letter Agreement; provided, however, that Executive must have given
the written notice to Clarient that Executive believes he has the right to
terminate employment for good reason, within ninety (90) days of the initial
occurrence of such event, and Clarient fails to eliminate the good reason
within fifteen (15) days after receipt of the notice.  Further, Executive’s termination of
employment must occur within two (2) years from the initial occurrence of
an event that constitutes good reason.

 

(g)           In this Letter Agreement, the term “Change of Control” means (i) the issuance,
sale, transfer or acquisition of shares of capital stock of Clarient in a
single transaction or a group of related transactions, as a result of which any
entity, person or group (other than Safeguard Scientifics, Inc., Oak
Investment Partners and/or their respective affiliates) acquires the beneficial
ownership of newly issued, outstanding or treasury shares of the capital stock
of Clarient having 50% or more of the combined voting power of Clarient’s then
outstanding securities entitled to vote for at least a majority of the
authorized number of directors of Clarient, or (ii) any merger,
consolidation, sale of all or substantially all the assets or other comparable
transaction as a result of which all or substantially all of the assets and
business of Clarient are acquired directly or indirectly by another entity
(other than Safeguard Scientifics, Inc., Oak Investment Partners and/or
their respective affiliates).  An “affiliate” of an entity is an entity
controlling, controlled by, or under common control with the entity specified,
directly or indirectly through one or more intermediaries.  “Group”
shall have the same meaning as in Section 13(d) of the Securities
Exchange Act of 1934, as amended, and “beneficial
ownership” shall have the meaning set forth in Rule 13d-3 of
the Securities and Exchange Commission adopted under the Securities Exchange
Act of 1934, as amended.

 

(h)           Executive will not be required to mitigate the amount of any
payment provided for in this Letter Agreement by seeking other employment or
otherwise and Executive shall be entitled to receive the severance payments
provided in this Section 6 without regard to whether Executive obtains
other employment or enters into other service relationships; provided,
that Executive does not violate any of his obligations under this Section 6.

 

(i)            Executive acknowledges that the arrangements described in
this Letter Agreement will be the only obligations of Clarient or its
affiliates in connection with any determination by Clarient to terminate Executive’s
employment with Clarient.  This Letter
Agreement does not terminate, alter or affect Executive’s rights under any plan
or program of Clarient in which Executive may participate, except as explicitly
set forth herein.  Executive’s
participation in such plans or programs will be governed by the terms of such
plans and programs.

 

7.             Definition of Solicitation.

 

(a)           For purposes of Section 6(d) of this Letter
Agreement, “Solicitation” shall
mean (i) soliciting, enticing, or inducing any Customer (as defined below)
to become a client, customer, OEM, distributor or reseller of the laboratory
services business of any other person, firm or 

 

5

 

corporation with respect to
products or services which are competitive with products or services then sold
or under development by Clarient’s laboratory services business or to cease
doing business with Clarient or authorizing or knowingly approving the taking
of such actions by any other person or (ii) soliciting, enticing, or
inducing directly or indirectly, or hiring any person who presently is or at
any time during the term hereof shall be an employee of Clarient to become
employed by any other person, firm or corporation or to leave his or her
employment with Clarient or authorizing or approving any such action by any
other person or entity.  Providing a
reference for an employee of Clarient will not, however, constitute
Solicitation if the employee has decided to leave the employ of Clarient, is
seeking other employment, and requests the reference.

 

(b)           For purposes of this Section 7, “Customer” means any person or entity which
at the time of determination, if made prior to termination of employment, or,
after termination of employment, at the time of such termination, shall be, or
shall have been within one year prior to such time, a client, customer, OEM,
distributor or reseller of Clarient.

 

(c)           Executive acknowledges (i) that his experience and
capabilities are such that the conditions in Section 6(d) to his
receiving the severance benefits referred to in Section 6 will not prevent
him from obtaining employment or otherwise earning a living at the same general
economic benefit as reasonably required by him without losing the severance
benefits and (ii) that he has, prior to the execution of this Letter
Agreement, reviewed this Letter Agreement with his legal counsel.  Executive acknowledges that the provisions
contained in this Section 7 and in Section 6(d) are reasonable
and necessary to protect the legitimate business interests of Clarient, and
that Clarient would not have entered into this Letter Agreement in the absence
of such provisions.

 

8.             Other Payments in the Event of Termination of Employment.  In the event of
termination of Executive’s employment for any reason, Executive will be
entitled to receive, upon such termination, payment of all accrued, unpaid
salary to the date of termination.  In
addition, in the event of termination of Executive’s employment for any reason
other than by Clarient for “cause,” Executive will be entitled to receive, upon
such termination, a “pro rata portion” of his “bonus for the year of
termination” (as those terms are defined below) payable no later than March 15th
of the year following that in which such termination occurs.  “Pro rata
portion” means the number of days in the calendar year in which
termination occurs up to and including the date of termination divided by the
total number of days in that full calendar year.  The “bonus
for the year of termination” means the amount Executive would have
been likely to earn if he had been employed for the full year, as determined in
good faith by Clarient’s Board of Directors or Compensation Committee.

 

9.             Withholding; Nature of Obligations.  Clarient will
withhold applicable taxes and other legally required deductions from all
payments to be made hereunder.  Clarient’s
obligations to make payments under this Letter Agreement are unfunded and
unsecured and will be paid out of the general assets of Clarient.

 

10.           Representations, Warranties and Covenants of Executive.  Executive represents
and warrants to Clarient that:  (a) he
has full power and authority to enter into this Letter Agreement and to perform
his duties hereunder; (b) the execution and delivery of this Letter
Agreement and the performance of his duties hereunder shall not result in an
actual (as opposed to merely asserted) breach of, or constitute an actual (as
opposed to merely asserted) default under, any agreement or obligation to which
he may be bound or subject, including, without limitation, any obligations of
confidentiality, noncompetition, nonsolicitation or use of information; (c) this
Letter Agreement 

 

6

 

represents a valid, legally binding
obligation on him and is enforceable against him in accordance with its terms
except as the enforceability of this Letter Agreement may be subject to or
limited by general principles of equity and by bankruptcy or other similar laws
relating to or affecting the rights of creditors; (d) to Executive’s
knowledge, the services contemplated by this Letter Agreement do not (i) infringe
any third party’s copyright, patent, trademark, trade secret or other
proprietary right, or (ii) violate any law, statute, ordinance or
regulation; and (e) except with respect to Executive’s concurrent
employment by CPS, Executive has resigned from all positions as an employee,
officer, director or executive of prior employers.  Executive covenants to Clarient that during
his employment with Clarient (a) he shall not (i) intentionally use,
in connection with his employment with Clarient, any confidential or
proprietary information or materials belonging to any third person or entity,
or (ii) knowingly violate any law, statute, ordinance or regulation and (b) he
shall not breach (i) any agreement with any third party to keep in
confidence any confidential or proprietary information, knowledge or data
acquired prior to his execution of this Letter Agreement or (ii) any
obligations of confidentiality, noncompetition, nonsolicitation or use of
information.

 

11.           Section 409A.

 

(a)           Notwithstanding anything to the contrary in this Letter
Agreement, if at the time of Executive’s Separation from Service with Clarient,
Executive is a “specified employee” as defined in Section 409A of the
Code, as determined by Clarient in accordance with Section 409A of the
Code, and the deferral of the commencement of any payments or benefits
otherwise payable hereunder as a result of such Separation from Service is
necessary in order to prevent any accelerated or additional tax under Section 409A
of the Code, then Clarient will defer the commencement of the payment of any
such payments or benefits hereunder (without any reduction in the payments or
benefits ultimately paid or provided to Executive) until the date that is at
least six (6) months following Executive’s Separation from Service with
Clarient (or the earliest date permitted under Section 409A of the Code),
whereupon Clarient will pay Executive a lump-sum amount equal to the cumulative
amounts that would have otherwise been previously paid to Executive under this
Letter Agreement during the period in which such payments or benefits were
deferred.  Thereafter, payments will
resume in accordance with this Letter Agreement.

 

(b)           With respect to the provisions of this Letter Agreement which
provide for “nonqualified deferred compensation” within the meaning of Section 409A
of the Code, this Letter Agreement shall comply with the provisions of Section 409A
of the Code and the Regulations thereunder and shall be so interpreted,
construed and administered.

 

(c)           In the event that following the date hereof, Clarient or
Executive reasonably determines that any compensation or benefits payable under
this Letter Agreement may become subject to taxes, interest or penalties
imposed under Section 409A of the Code, Clarient and Executive shall work
together to adopt such amendments to this Letter Agreement or adopt other
policies or procedures (including amendments, policies and procedures with retroactive
effect), or take any other commercially reasonable actions necessary or
appropriate, to (i) exempt the compensation and benefits payable under
this Letter Agreement from Section 409A of the Code and/or preserve the
intended tax treatment of the compensation and benefits provided with respect
to this Letter Agreement or (ii) comply with the requirements of Section 409A
of the Code and related Department of Treasury guidance.

 

7

 

12.           Miscellaneous.  This Letter Agreement will inure to the
benefit of Executive’s personal representatives, executors, and heirs and
Clarient’s successors and assigns.  In
the event Executive dies while any amount payable under this Letter Agreement
remains unpaid, all such amounts will be paid to the parties legally entitled
thereto in accordance with the terms and conditions of this Letter
Agreement.  No term or condition set
forth in this Letter Agreement may be modified, waived, or discharged unless
such waiver, modification, or discharge is agreed to in writing and signed by
Executive and an officer of Clarient authorized to sign such writing by
Clarient’s Board of Directors or Compensation Committee.  This Letter Agreement will be construed and
enforced in accordance with the laws of the State of California without regard
to the conflicts of laws of any state. 
Any controversy or claim arising out of or relating to this Letter
Agreement, or the breach thereof, will be settled exclusively by arbitration in
Los Angeles County or Orange County, California in accordance with the National
Rules for the Resolution of Employment Disputes of the American
Arbitration Association, using one arbitrator, and judgment upon the award
rendered by the arbitrator may be entered in any court of competent
jurisdiction.

 

13.           Limit on Payments by Clarient.  Executive shall bear all expense of, and be
solely responsible for, all federal, state, local or foreign taxes due with
respect to any payment received hereunder, including, without limitation, any
excise tax imposed by Section 4999 of the Code; provided, however,
that any payment or benefit received or to be received by Executive in
connection with a Change of Control or the termination of Executive’s
employment (whether payable pursuant to the terms of this Letter Agreement (“Contract Payments”) or any other plan,
arrangements or agreement with Clarient or any affiliate (collectively with the
Contract Payments, the “Total Payments”)
shall be reduced to the extent necessary so that no portion thereof shall be
subject to the excise tax imposed by Section 4999 of the Code but only if,
by reason of such reduction, the net after-tax benefit received by Executive
shall exceed the net after-tax benefit received by Executive if no such
reduction was made.  For purposes of this
Section 13, “net after-tax benefit”
shall mean (i) the total of all payments and the value of all benefits
which Executive receives or is then entitled to receive from Clarient that
would constitute “parachute payments” within the meaning of Section 280G
of the Code, less (ii) the amount of all federal, state and local income
taxes payable with respect to the foregoing calculated at the maximum marginal
income tax rate for each year in which the foregoing shall be paid to Executive
(based on the rate in effect for such year as set forth in the Code as in
effect at the time of the first payment of the foregoing), less (iii) the
amount of excise taxes imposed with respect to the payments and benefits
described in (i) above by Section 4999 of the Code.  The foregoing determination shall be made by
a nationally recognized accounting firm (the “Accounting
Firm”) selected by Clarient and reasonably acceptable to Executive
(which may be, but will not be required to be, Clarient’s independent
auditors).  The Accounting Firm shall
submit its determination and detailed supporting calculations to both Executive
and Clarient within fifteen (15) days after receipt of a notice from either
Clarient or Executive that Executive may receive payments which may be “parachute
payments.”  If the Accounting Firm
determines that such reduction is required by this Section 13, Executive,
in Executive’s sole and absolute discretion, may determine which Total Payments
shall be reduced to the extent necessary so that no portion thereof shall be
subject to the excise tax imposed by Section 4999 of the Code, and
Clarient shall pay such reduced amount to Executive.  If the Accounting Firm determines that no
reduction is necessary under this Section 13, it will, at the same time as
it makes such determination, furnish Executive and Clarient an opinion that
Executive shall not be liable for any excise tax under Section 4999 of the
Code.  Executive and Clarient shall each
provide the Accounting Firm access to and copies of any books, records, and
documents in the 

 

8

 

possession of Executive or
Clarient, as the case may be, reasonably requested by the Accounting Firm, and
otherwise cooperate with the Accounting Firm in connection with the preparation
and issuance of the determinations and calculations contemplated by this Section 13.  The fees and expenses of the Accounting Firm
for its services in connection with the determinations and calculations
contemplated by this Section 13 shall be borne by Clarient.

 

If this Letter Agreement sets forth our agreement on
the subject matter hereof, kindly sign and return to us the enclosed copy of
this letter which will then constitute our legally binding agreement on this
subject and supersedes any prior discussions or agreements on this subject.

 

	
   

  	
  Sincerely,

  
	
   

  	
   

  
	
   

  	
  Clarient, Inc.

  
	
   

  	
   

  
	
   

  	
  /S/
  RONALD A. ANDREWS

  
	
   

  	
  By:
  Ronald A. Andrews

  
	
   

  	
  Title:
  Chief Executive Officer

  

 

I
agree to the terms and conditions of this Letter Agreement

 

 

	
  /S/
  KENNETH J. BLOOM

  	
   

  
	
  Kenneth
  J. Bloom, M.D.

  

 

9Exhibit 10.1

 

CONSTELLATION ENERGY NUCLEAR GROUP, LLC

a Maryland limited liability company

 

SECOND AMENDED AND RESTATED OPERATING AGREEMENT

 

[            ],
2009

 

 

TABLE OF
CONTENTS

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE II Organization and Name; Office; Purpose

  	
  18

  
	
  Section 2.1

  	
  Organization

  	
  18

  
	
  Section 2.2

  	
  Name of the Company

  	
  18

  
	
  Section 2.3

  	
  Purpose

  	
  18

  
	
  Section 2.4

  	
  Principal Office

  	
  19

  
	
  Section 2.5

  	
  Resident Agent

  	
  19

  
	
  Section 2.6

  	
  Term

  	
  19

  
	
  Section 2.7

  	
  No State Law Partnership; No Concerted Action

  	
  19

  
	
  Section 2.8

  	
  Lack of Authority of Members

  	
  20

  
	
  Section 2.9

  	
  Limitation of Liability of Members

  	
  20

  
	
  Section 2.10

  	
  No Personal Liability of Members

  	
  20

  
	
   

  	
   

  	
   

  
	
  ARTICLE III Membership Interests; Additional Members

  	
  20

  
	
  Section 3.1

  	
  Membership Interests

  	
  20

  
	
  Section 3.2

  	
  Additional Members

  	
  21

  
	
  Section 3.3

  	
  Representations and Warranties

  	
  21

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV Capital Contributions

  	
  23

  
	
  Section 4.1

  	
  Initial Capital Contributions

  	
  23

  
	
  Section 4.2

  	
  Additional Capital Contributions

  	
  23

  
	
  Section 4.3

  	
  Nonpayment of Additional Capital Contributions

  	
  24

  
	
  Section 4.4

  	
  Advances by Members

  	
  24

  
	
   

  	
   

  	
   

  
	
  ARTICLE V Books and Records

  	
  24

  
	
  Section 5.1

  	
  Books and Records

  	
  24

  
	
  Section 5.2

  	
  Fiscal Year

  	
  24

  
	
  Section 5.3

  	
  Bank Accounts

  	
  24

  
	
  Section 5.4

  	
  Company Information

  	
  24

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI DISTRIBUTIONS

  	
  25

  
	
  Section 6.1

  	
  Extraordinary Distribution

  	
  25

  
	
  Section 6.2

  	
  Distributions Other Than Under Section 12.4

  	
  25

  
	
  Section 6.3

  	
  Distribution Dates and Amounts

  	
  26

  
	
  Section 6.4

  	
  Limitations on Distributions

  	
  27

  
	
  Section 6.5

  	
  Limitation on Certain Distribution Rights

  	
  27

  
	
  Section 6.6

  	
  Withheld Taxes

  	
  28

  
	
  Section 6.7

  	
  Information to be Provided by Members

  	
  29

  
	
   

  	
   

  	
   

  
	
  ARTICLE VII Management: Rights, Powers and Duties

  	
  30

  
	
  Section 7.1

  	
  General

  	
  30

  
	
  Section 7.2

  	
  The Board of Directors

  	
  30

  
	
  Section 7.3

  	
  Officers

  	
  36

  
	
  Section 7.4

  	
  Budget
  and Strategic Plan

  	
  39

  

 

ii

 

	
  Section 7.5

  	
  Nuclear Advisory Committee

  	
  41

  
	
  Section 7.6

  	
  Existing Nuclear Plant Subsidiaries

  	
  41

  
	
  Section 7.7

  	
  Liability and Indemnification

  	
  41

  
	
  Section 7.8

  	
  Member Approvals

  	
  43

  
	
  Section 7.9

  	
  Staffing

  	
  44

  
	
  Section 7.10

  	
  Governance of Subsidiaries

  	
  45

  
	
  Section 7.11

  	
  Events of Default

  	
  45

  
	
  Section 7.12

  	
  Delegation of Financial Authority

  	
  45

  
	
   

  	
   

  	
   

  
	
  ARTICLE VIII TAX MATTERS AND CAPITAL ACCOUNTS

  	
  45

  
	
  Section 8.1

  	
  Tax Treatment

  	
  45

  
	
  Section 8.2

  	
  Tax Returns and Information

  	
  45

  
	
  Section 8.3

  	
  Tax Matters Partner and Elections

  	
  46

  
	
  Section 8.4

  	
  Tax Sharing Procedures

  	
  47

  
	
  Section 8.5

  	
  Capital Accounts

  	
  49

  
	
  Section 8.6

  	
  Consistent Tax Treatment

  	
  52

  
	
   

  	
   

  	
   

  
	
  ARTICLE IX TRANSFER OF MEMBERSHIP INTERESTS

  	
  52

  
	
  Section 9.1

  	
  Restrictions Applicable to All Transfers by the Members

  	
  52

  
	
  Section 9.2

  	
  Permitted Transfers

  	
  54

  
	
  Section 9.3

  	
  Right of First Offer

  	
  55

  
	
  Section 9.4

  	
  Change of Control of a Member or Terminating Event

  	
  56

  
	
   

  	
   

  	
   

  
	
  ARTICLE X Certain Obligations of the Company and the
  Members

  	
  57

  
	
  Section 10.1

  	
  Preemptive Rights

  	
  57

  
	
  Section 10.2

  	
  Related Party Transactions

  	
  58

  
	
  Section 10.3

  	
  Operational Matters

  	
  58

  
	
   

  	
   

  	
   

  
	
  ARTICLE XI Corporate opportunities and non-solicitation

  	
  59

  
	
  Section 11.1

  	
  Corporate Opportunities

  	
  59

  
	
  Section 11.2

  	
  Non-Solicitation

  	
  59

  
	
   

  	
   

  	
   

  
	
  ARTICLE XII Withdrawal, DISSOLUTION AND LIQUIDATION

  	
  59

  
	
  Section 12.1

  	
  No Right of Withdrawal; No Interest

  	
  59

  
	
  Section 12.2

  	
  Terminating Event

  	
  60

  
	
  Section 12.3

  	
  Dissolution

  	
  61

  
	
  Section 12.4

  	
  Winding Up

  	
  61

  
	
   

  	
   

  	
   

  
	
  ARTICLE XIII General Provisions

  	
  63

  
	
  Section 13.1

  	
  Notices

  	
  63

  
	
  Section 13.2

  	
  Successors and Assigns

  	
  64

  
	
  Section 13.3

  	
  Parallel Vehicle

  	
  64

  
	
  Section 13.4

  	
  Dispute Resolution

  	
  64

  
	
  Section 13.5

  	
  Guarantee

  	
  66

  
	
  Section 13.6

  	
  Governing Law

  	
  66

  
	
  Section 13.7

  	
  Entire Agreement; Amendment

  	
  66

  
	
  Section 13.8

  	
  No Waiver

  	
  66

  

 

iii

 

	
  Section 13.9

  	
  Separability of Provisions

  	
  67

  
	
  Section 13.10

  	
  Confidentiality

  	
  67

  
	
  Section 13.11

  	
  Expenses

  	
  67

  
	
  Section 13.12

  	
  Counterparts

  	
  67

  
	
  Section 13.13

  	
  Headings

  	
  68

  
	
  Section 13.14

  	
  Gender and Number

  	
  68

  
	
  Section 13.15

  	
  Further Assurances

  	
  68

  
	
  Section 13.16

  	
  Survival of Obligations

  	
  68

  
	
  Section 13.17

  	
  Insurance

  	
  68

  
	
  Section 13.18

  	
  Nuclear Insurance

  	
  68

  
	
  Section 13.19

  	
  FIRPTA

  	
  68

  
	
  Section 13.20

  	
  Exclusive Remedies

  	
  69

  
	
  Section 13.21

  	
  Title to Company Property

  	
  69

  
	
  Section 13.22

  	
  Waiver of Partition Action

  	
  69

  
	
  Section 13.23

  	
  Statutory References

  	
  69

  
	
  Section 13.24

  	
  Legal Fees

  	
  69

  

 

EXHIBITS

 

	
  EXHIBIT A

  	
  Capital Contributions

  	
  A-1

  
	
  EXHIBIT B

  	
  Initial Annual Budget

  	
  B-1

  
	
  EXHIBIT C 

  	
  Illustrative
  Examples Showing the Operation of the Section 8.4 Calculation Provisions
  and the Section 6.2 Distribution Provisions

  	
  C-1

  
	
  EXHIBIT D

  	
  Risk Profile Guidelines

  	
  D-1

  

 

iv

 

CONSTELLATION ENERGY NUCLEAR GROUP, LLC

 

Second Amended and Restated Operating Agreement

 

This Second Amended and Restated Operating Agreement
(this “Agreement”) is entered into as of this [    ]
day of
[            ],
2009 (the “Effective Date”), by and among Constellation Nuclear, LLC (“CNL”),
a Delaware limited liability company and wholly owned subsidiary of
Constellation Energy Group, Inc. (“Constellation”), CE Nuclear, LLC
(“CEN”), a Delaware limited liability company, and EDF Development Inc.
(“EDFD”), a Delaware corporation and a wholly owned subsidiary of E.D.F.
International S.A. (“EDFI”), as Members (as defined below), Constellation Energy
Nuclear Group, LLC, a Maryland limited liability company (the “Company”),
for the purposes of Section 13.5 only, EDFI, and for the purposes of
Sections 8.4(b) and 13.5 only, Constellation.

 

RECITALS

 

WHEREAS, on December 15, 1999, the Company
was formed as a wholly owned subsidiary of Constellation under the Maryland
Limited Liability Company Act, as amended from time to time (the “Act”),
pursuant to Articles of Organization filed with the Maryland Department of
Assessments and Taxation;

 

WHEREAS, Constellation entered into an amended
and restated operating agreement of the Company, dated as of July 1, 2002
(the “Original Agreement”);

 

WHEREAS, pursuant to that certain Contribution
Agreement, dated as of
                                ,
2009, CNL acquired Constellation’s 100% Membership Interest (as defined below)
in a transaction intended to qualify as a “reorganization” under Section 368
of the Code (as defined below);

 

WHEREAS, pursuant to that certain Contribution
Agreement, dated as of                                 ,
2009, CEN acquired a 1% Membership Interest;

 

WHEREAS, concurrently with the execution of this
Agreement, EDFD and Constellation are consummating certain of the transactions
pursuant to that certain Master Put Option and Membership Interest Purchase
Agreement, dated as of December 17, 2008 (as amended from time to time in
accordance with its terms, the “Master Agreement”), pursuant to which
EDFD is acquiring a 49.99% Membership Interest;

 

WHEREAS, in connection with the acquisition by
CNL, CEN and EDFD of a Membership Interest and their admission to the Company
as Members, the parties desire to enter into this Agreement to set forth their
respective rights and obligations as Members of the Company and to provide for
the management and affairs of the Company and for the conduct of the business
of the Company;

 

WHEREAS, the parties will assure that the
Company and its subsidiaries are in compliance with U.S. laws and regulations
regarding foreign domination and control, and therefore will assign
decision-making authority for matters regulated by the NRC (as defined 

 

1

 

below) and other U.S.
Governmental Authorities (as defined below), where required or prudent to do
so, to U.S. citizens pursuant to the process set forth herein; and

 

WHEREAS, the parties hereto desire to amend and
restate the Original Agreement on the terms set forth herein.

 

NOW, THEREFORE, in consideration of the agreements and
obligations set forth herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:

 

ARTICLE
I

 

DEFINED
TERMS

 

As used in this Agreement, the following terms shall
have the following meanings:

 

“Act” has the meaning set forth in the
recitals.

 

“Accrued Special Distribution Amount” shall mean, as
of any date:

 

, where:

 

A = the EDFD Tax Sharing Amount (calculated as of the
end of the Fiscal Year immediately preceding the Fiscal Year in which such date
falls),

B = the Constellation Tax Sharing Amount (calculated as
of the end of the Fiscal Year immediately preceding the Fiscal Year in which
such date falls),

C = the aggregate Percentage Interest with respect to
all Members holding A Units as of such date, and

D = the aggregate amount distributed pursuant to
Sections 6.2(c) and (e) prior to such date;

 

provided, that the Accrued Special Distribution Amount as of
any date shall equal $0 if it would otherwise be negative as of such date.  Interest shall accrue on (and shall
thereafter be considered part of) the Accrued Special Distribution Amount from
time to time at a rate of 7.5% per annum; provided, that such interest
shall accrue on any date on which, and only to the extent that, the Accrued
Special Distribution Amount exceeds the Unit A Accelerated Distribution
Amount.  Exhibit C to this
Agreement contains an example of the computation of the Accrued Special
Distribution Amount.

 

“Accrued Tax Distribution Amount” shall mean,
as of any date, the quotient obtained by dividing (i) the Accrued Tax
Shortfall of the Member with the greatest Accrued Tax Shortfall (in relation to
its Percentage Interest) as of such date by (ii) the Percentage Interest
with respect to such Member.  Exhibit C
to this Agreement contains an example of the computation of the Accrued Tax
Distribution Amount.

 

“Accrued Tax Shortfall”
shall mean, for each Member, as of any date:

 

2

 

, where:

 

A = the aggregate amount of taxable income allocated to
such Member pursuant to this Agreement through the end of the taxable year
immediately preceding the taxable year in which such date falls,

B = the Effective Tax Rate, and

C = the aggregate amount distributed to such Member
pursuant to Section 6.2 through the end of the taxable year immediately
preceding the taxable year in which such date falls;

 

provided, that the Accrued Tax Shortfall for any Member as of
any date shall equal $0 if it would otherwise be negative as of such date.  Exhibit C to this Agreement
contains an example of the computation of the Accrued Tax Shortfall.

 

“Additional Capital Contribution” means, with
respect to each Member, any Capital Contribution by such Member to the capital
of the Company other than any Initial Capital Contribution pursuant to Section 4.1.

 

“Administrative Services Agreements” means
those certain Administrative Services Agreements, dated as of
[                ],
2009, between the Company and Constellation Generation Group, LLC.

 

“Affiliate” means, with respect to any Person,
any other Person directly or indirectly Controlled by, Controlling or under
common Control with such Person.

 

“Affiliate Contract” has the meaning set forth
in Section 7.2(k).

 

“Affiliate Contract Party” has the meaning set
forth in Section 7.2(k).

 

“Agreement” means this Agreement, as amended
from time to time.

 

“Annual Budget” has the meaning set forth in Section 7.4(a).

 

“Applicable Law” means, for any Person, any
domestic or foreign law, rule or regulation, or judgment, decree, order,
permit, license, certificate of authority, order or governmental approval, in
each case of or by any Governmental Authority, to which the Person or any of
its business is subject.

 

“Articles of Organization” means the articles
of organization of the Company, as amended from time to time, filed with the
Department of Assessments and Taxation of the State of Maryland pursuant to the
Act.

 

“Atomic Energy Act” has the meaning set forth
in Section 13.18.

 

“A Units” has the meaning set forth in Section 3.1(b).

 

“Bankruptcy Event” means, with respect to any
Person, the occurrence of any of the following: (a) such Person shall
institute a voluntary case seeking liquidation or reorganization under
Bankruptcy Law, or shall consent to the institution of an involuntary case thereunder

 

3

 

against it; (b) such
Person shall file a petition or consent or shall otherwise institute any
similar proceeding under any other applicable federal or state law, or shall
consent thereto; (c) such Person shall apply for, or by consent there
shall be an appointment of, a receiver, liquidator, sequestrator, trustee or
other officer with similar powers for itself or any substantial part of its
assets; (d) such Person shall make an assignment for the benefit of its
creditors; (e) such Person shall admit in writing its inability to pay its
debts generally as they become due; (f) an involuntary case shall be
commenced seeking liquidation or reorganization of such Person under Bankruptcy
Law or any similar proceedings shall be commenced against such Person under any
other applicable federal or state law (which petition commencing such
involuntary case against Constellation or its Affiliates is not filed or caused
to be filed by EDFD or any of its Affiliates, and in the case of a petition
commenced against EDFD or its Affiliates, such petition is not filed or caused
to be filed by Constellation or any of its Affiliates) and (i) the
petition commencing the involuntary case is not dismissed within sixty (60)
days of its filing, (ii) an interim trustee is appointed to take
possession of all or a portion of the property, and/or to operate all or any
part of the business of such Person and such appointment is not vacated within
sixty (60) days, or (iii) an order for relief shall have been issued or
entered therein; (g) a decree or order of a court having jurisdiction in
the premises for the appointment of a receiver, liquidator, sequestrator,
trustee or other officer having similar powers of such Person or all or a part
of its property shall have been entered; or (h) any other similar relief
shall be granted against such Person under any applicable federal or state law.

 

“Bankruptcy Law” shall mean, with respect to
any Person, any bankruptcy or insolvency law or other similar law affecting
creditors’ rights promulgated by any federal, state, foreign or international
government or any political subdivision of any of the foregoing.

 

“Baseball Arbitration” means the following
procedure for determination of Fair Market Value or Implied Acquisition
Price.  The Members and any Withdrawn
Member, if any, or Unadmitted Assignee, if any, shall first attempt to agree on
fair market value in good faith.  If the
Members, Withdrawn Members, if any, or Unadmitted Assignees, if any, cannot
agree on fair market value within sixty (60) Days, then the selling Member
(either EDFD or the Constellation Members), Withdrawn Member, if any, or
Unadmitted Assignee, if any (as applicable), on the one hand, and the
non-selling Member (either EDFD or the Constellation Members) or the Company
(as applicable), on the other hand, shall each select an independent investment
banking firm of national reputation and with experience in valuing assets of
the type in question, and such investment banking firms shall each determine
the fair market value of the subject property within sixty (60) Days of
selection, with the average of the two valuations constituting Fair Market
Value. If the two valuations in the previous sentence differ by five percent
(5%) or more, then the average of the two valuations shall not be binding, and
the respective Parent CEOs shall use their reasonable efforts to agree on Fair
Market Value within thirty (30) Days of receiving the valuations.  If the respective Parent CEOs cannot reach
agreement within such thirty (30) Day period, then the two investment banking
firms shall mutually agree on a third independent investment banking firm of
national reputation within thirty (30) Days of the end of such period, and such
third independent investment banking firm shall then determine, within sixty
(60) Days of selection, which of the two valuations of the original investment
banking firms is closer to fair market value, and such valuation shall
constitute Fair Market Value.  Any such
determination shall be binding on the parties. 
In connection with any determination of Fair Market Value, each 

 

4

 

party shall bear the cost
of the investment banking firm that it selects, and the cost of any valuation
prepared by a third investment banking firm shall be borne by the party whose
investment banking firm’s valuation was not selected.  If the Company is involved in the
determination of Fair Market Value pursuant to Baseball Arbitration, the decision
of the Company shall be made without participation of the Directors appointed
by the Member, Withdrawn Member or Unadmitted Assignee involved in the Baseball
Arbitration as the seller and the requirements for a quorum and the necessary
vote of the Board of Directors shall be deemed amended as required to allow
such action without the approval of such Directors.

 

“Board of Directors” has the meaning set forth
in Section 7.1(a).

 

“B Units” has the meaning set forth in Section 3.1(b).

 

“Business Day” means any working day in France
and the United States other than a Saturday, a Sunday or a day on which banks
located in Paris, France or New York, New York generally are authorized or
required by Applicable Law to close.

 

“Capital Account” has the meaning set forth in Section 8.5(a).

 

“Capital Contribution” means, with respect to
any Member, the amount of money and the Gross Asset Value of any property
(other than money) contributed to the capital of the Company by such Member.

 

“CECG” means Constellation Energy Commodities
Group, Inc., a Delaware corporation.

 

“CECG Power Purchase Agreement” means each 1992
ISDA Master Agreement (U.S. Version) (Multicurrency - Cross Border), dated as
of the Effective Date, between CECG (and its permitted successors and assigns) and
the applicable Company-Generation Sub, together with each Confirmation (as
defined in such power purchase agreement) thereunder.

 

“CEO” has the meaning set forth in Section 7.3(b).

 

“Change of Control” of a Person means the
consummation of any Transfer or series of related Transfers to one entity or
group of entities acting in concert that is not an affiliate of such Person
that would result in (i) the aggregate disposition, directly or
indirectly, of more than fifty percent (50%) of the economic or voting power of
the then-outstanding equity interests of such Person or (ii) a change in a
majority of the directors of such Person not effected by the continuing
directors of such Person.  For avoidance
of doubt, “Change of Control” will not include Transfers between wholly owned
subsidiaries of a common parent company or equivalent internal corporate
reorganizations, but will include a merger, business combination, acquisition
or other transaction with a non-Affiliate involving the Person or the direct or
indirect parent of the Person.

 

“CNL Directors” has the meaning set forth in Section 7.2(a)

 

“Code” means the Internal Revenue Code of 1986,
as amended, or any corresponding provision of any succeeding law.

 

5

 

“Company” has the meaning set forth in the
preamble.

 

“Company Change of Control” means the
consummation of any Transfer or series of related Transfers to one entity or
group of entities acting in concert that is not a Member or an Affiliate of a
Member that would result in (i) the aggregate disposition, directly or
indirectly, of more than fifty percent (50%) of the economic or voting power of
the ownership interests of the Company, or (ii) a change in a majority of
directors of the Company not effected by the continuing directors.

 

“Company-Generation Sub” means each subsidiary
of the Company that generates nuclear power.

 

“Constellation” has the meaning set forth in
the preamble.

 

“Constellation 704(c) Tax Costs” means,
for each Fiscal Year, the amount determined to be the Constellation 704(c) Tax
Costs for such Fiscal Year pursuant to Section 8.4(a).

 

“Constellation Initial Tax Savings Amount”
means the amount determined to be the Constellation Initial Tax Savings Amount
pursuant to Section 8.4(b).  Exhibit C
to this Agreement contains an example of the computation of the Constellation
Initial Tax Savings Amount.

 

“Constellation Members” means CNL and CEN.

 

“Constellation Tax Savings Amount” means, on
any date, the Constellation Initial Tax Savings Amount minus the aggregate of all Constellation
704(c) Tax Costs for all Fiscal Years ending prior to such date.  Interest shall accrue on (and shall
thereafter be considered part of) the Constellation Tax Savings Amount at a
rate of 7.5% per annum, but only on each date on which, and only to the extent
that, the Constellation Tax Savings Amount exceeds the EDFD Tax Savings Amount;
provided, that, for purposes of computing such interest, it shall be
presumed that, in the Fiscal Year that includes the Effective Date and in each
subsequent Fiscal Year in which the Constellation Tax Savings Amount increases
or decreases (as compared to the immediately preceding Fiscal Year),
twenty-five percent (25%) of the Constellation Tax Savings Amount (in the case
of the Fiscal Year that includes the Effective Date) and twenty-five percent
(25%) of the amount of such increase or decrease (in the case of each
subsequent Fiscal Year) was recognized on each of the four installment due
dates (as specified in Section 6655(c) of the Code) occurring in such
Fiscal Year, unless CNL demonstrates otherwise. 
Exhibit C to this Agreement contains an example of the
computation of the Constellation Tax Savings Amount.

 

“Constellation Tax Sharing Amount” means, on
any date, 50% of the Constellation Tax Savings Amount on such date.  Exhibit C to this Agreement
contains an example of the computation of the Constellation Tax Sharing Amount.

 

“Control” means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of an entity, whether through the ownership of securities, by contract
or otherwise.  The terms “Controlled”
and “Controlling” shall have correlative meanings.

 

6

 

“Current Exposure” means, with respect to a
Company-Generation Sub and the CECG Power Purchase Agreement to which it is a
party, for any given month, the positive difference, if any, between (i) the
aggregate amount of Hedge Payments (as defined in the relevant CECG Power
Purchase Agreement) due and payable by CECG (or its permitted successors or
assigns) in connection with delivery of Fixed Product (as defined in the
relevant CECG Power Purchase Agreement) during such month pursuant to such CECG
Power Purchase Agreement and (ii) the aggregate sum of, for each hour
during such month, the product of (x) with respect to Calvert Cliffs
Nuclear Power Plant, Inc., the Day-Ahead Energy Market LMP hourly price
(in $/MWh) corresponding to the Delivery Point (as defined in the relevant CECG
Power Purchase Agreement) as published by PJM, or with respect to the other
Company-Generation Subs, the Day-Ahead Market Generator LBMP hourly price (in
$/MWh) corresponding to the Delivery Point (as defined in the relevant CECG Power
Purchase Agreement), as published by the NYISO, and (y) the quantity of
Fixed Product (as defined in the relevant CECG Power Purchase Agreement)
delivered to CECG for such hour pursuant to such CECG Power Purchase Agreement.

 

“Current Special Distribution Amount” shall
mean, as of any date:

 

	
  , where:

  

 

 

A = the EDFD Tax Sharing Amount as of such
date,

B = the Constellation Tax Sharing Amount as
of such date,

C = the aggregate Percentage Interest with
respect to all Members holding A Units as of such date, and

D = the aggregate amount distributed
pursuant to Section 6.2(c) on or prior to such date and Section 6.2(e) prior
to such date;

 

provided, that the Current Special Distribution Amount as of
any date shall equal $0 if it would otherwise be negative as of such date.  Exhibit C to this Agreement
contains an example of the computation of the Current Special Distribution
Amount.

 

“Current Tax Distribution Amount” shall mean (i) as
of any date that is the fifth day preceding an installment due date specified
in Section 6655(c) of the Code, the quotient obtained by dividing (a) the
Current Tax Shortfall of the Member with the greatest Current Tax Shortfall (in
relation to its Percentage Interest) as of such date by (b) the Percentage
Interest with respect to such Member, and (ii) $0 as of any other
date.  Exhibit C to this
Agreement contains an example of the computation of the Current Tax
Distribution Amount.

 

“Current Tax Shortfall” shall mean, for each
Member, as of any date:

 

	
   , where:

  

 

A = the aggregate amount of taxable income
allocable to such Member pursuant to this Agreement through such date for the
taxable year during which such date falls,

B = the Effective Tax Rate, and

 

7

 

C = the aggregate amount distributed to
such Member pursuant to Section 6.2 on or prior to such date but during
such taxable year;

 

provided, that the Current Tax Shortfall for any Member as of
any date shall equal $0 if it would otherwise be negative as of such date.  Exhibit C to this Agreement
contains an example of the computation of the Current Tax Shortfall.

 

“Day” means a calendar day.

 

“Declared Distribution Amount” shall mean, as
of any date, the aggregate amount declared, but not yet paid, by the Board of
Directors to be distributed to all Members as of such date other than in
connection with the early termination of any CECG Power Purchase Agreement.

 

“Defaulting Member” has the meaning specified
in the definition of “Event of Default.”

 

“Depreciation” means, for each Fiscal Year, an
amount equal to the depreciation, amortization or other cost recovery deduction
allowable for federal income Tax purposes with respect to an asset for such
Fiscal Year; provided, however, that if the Gross Asset Value of
an asset differs from its adjusted basis for federal income Tax purposes at the
beginning of such Fiscal Year, Depreciation shall be an amount that bears the
same ratio to such beginning Gross Asset Value as the federal income Tax
depreciation, amortization or other cost recovery deduction with respect to
such asset for such Fiscal Year bears to such beginning adjusted Tax basis;
and, provided  further, that if the federal income Tax
depreciation, amortization or other cost recovery deduction with respect to
such asset for such Fiscal Year is zero, Depreciation shall be determined with
reference to such beginning Gross Asset Value using any reasonable method
selected by the Board of Directors.

 

“Director” means any person hereafter elected
to act and who is serving as a member of the Board of Directors as provided in
this Agreement.

 

“EDFD” has the meaning set forth in the
preamble.

 

“EDFD Annual Tax Savings Amount” means, for
each Fiscal Year, the amount determined to be the EDFD Annual Tax Savings
Amount for such Fiscal Year pursuant to Section 8.4(a).  Interest shall accrue on (and shall
thereafter be considered part of) the EDFD Annual Tax Savings Amount for each
Fiscal Year at a rate of 7.5% per annum until the 15th day after the filing of
the Company’s annual IRS Form 1065 for such Fiscal Year; provided,
that, (i) for purposes of computing such interest, it shall be presumed
that twenty-five percent (25%) of the EDFD Annual Tax Savings Amount for each
Fiscal Year was recognized by EDFD and each of its Affiliates that holds A
Units on each of the four installment due dates (as specified in Section 6655(c) of
the Code) occurring in such Fiscal Year, unless EDFD demonstrates otherwise, (ii) such
interest shall not accrue on the EDFD Annual Tax Savings Amount for any Fiscal
Year in which the Constellation Tax Savings Amount exceeds the EDFD Tax Savings
Amount, and (iii) for the first Fiscal Year in which the EDFD Tax Savings
Amount exceeds the Constellation Tax Savings Amount, and for any subsequent
Fiscal Year in which the excess of the EDFD Tax Savings Amount over the
Constellation Tax Savings Amount is less
than the 

 

8

 

EDFD Annual Tax Savings
Amount for such Fiscal Year, such interest shall accrue solely on an amount of
the EDFD Annual Tax Savings Amount which equals the difference between the EDFD
Tax Savings Amount and the Constellation Tax Savings Amount.  Exhibit C to this Agreement contains
an example of the computation of the EDFD Annual Tax Savings Amount.

 

“EDFD Directors” has the meaning set forth in Section 7.2(a).

 

“EDFD Tax Savings Amount” means, on any date,
the aggregate of all EDFD Annual Tax Savings Amounts for all Fiscal Years
ending prior to such date.  Exhibit C to this
Agreement contains an example of the computation of the EDFD Tax Savings
Amount.

 

“EDFD Tax Sharing Amount” means, on any date,
50% of the EDFD Tax Savings Amount.  Exhibit C to this
Agreement contains an example of the computation of the EDFD Tax Sharing
Amount.

 

“EDFI” has the meaning set forth in the
preamble.

 

“EDFTNA Power Purchase Agreement” means each
1992 ISDA Master Agreement (U.S. Version) (Multicurrency - Cross Border), dated
as of the Effective Date, between EDF Trading North America, LLC (and its
permitted successors and assigns) and the applicable Company-Generation Sub,
together with each Confirmation (as defined in such power purchase agreement)
thereunder.

 

“Effective Tax Rate”
means forty 40% or such other percentage rate as determined by the Board of
Directors in its reasonable discretion to reflect the highest composite federal
and state statutory income tax rate (net of the federal income tax benefit of
the state income tax deduction).

 

“Event of Default” means, as to any Member (the
“Defaulting Member”) (it being understood that the Constellation Members
shall collectively be considered a Defaulting Member if either CNL or CEN is a
Defaulting Member), the occurrence of the Defaulting Member’s material
violation, breach or default of its obligations under a material provision of
this Agreement, which has not been cured within thirty (30) Days following
notice from a Member other than the Defaulting Member, except that:

 

(a)        in connection with a violation,
breach or default of a Defaulting Member’s payment obligations under this Agreement,
the cure period shall be five (5) Business Days following notice from a
Member other than the Defaulting Member; and

 

(b)        in connection with any violation,
breach or default of a Defaulting Member’s obligations other than payment
obligations under this Agreement, if the Defaulting Member makes reasonably
diligent efforts to cure such Event of Default the cure period shall be
extended, but only to the extent reasonably necessary, for up to an additional
thirty (30) Days.

 

“Excluded
Transfers” has the meaning set forth in Section 9.1(a).

 

“Fair
Market Value” means a valuation agreed by the parties or determined through
Baseball Arbitration.

 

9

 

“Fiscal
Year” has the meaning set forth in Section 5.2.

 

“Fixed
Product” has the meaning assigned to such term in the applicable CECG Power
Purchase Agreement.

 

“Fixed
Product Exposure” means Total Exposure less amounts in respect of
deliveries under the CECG Power Purchase Agreements that are payable under the
CECG Power Purchase Agreements but not yet due.

 

“GAAP”
means accounting principles generally accepted in the United States, as
consistently applied throughout the relevant period.

 

“Governmental
Authority” means any domestic or foreign governmental or regulatory
authority, agency, court, commission or other governmental or regulatory entity
(including any self-regulatory organization).

 

“Gross
Asset Value” means, with respect to any asset, such asset’s adjusted basis
for federal income Tax purposes, except as follows:

 

(a)        the initial Gross Asset Value of any
asset contributed by a Member to the Company shall be the fair market value of
such asset at the time of such contribution;

 

(b)        the Gross Asset Values of all Company
assets may, in the sole discretion of the Board of Directors, be adjusted to
equal their respective gross fair market values (as determined by the Board of
Directors), as of the following times: (i) the acquisition of an
additional interest in the Company by any new or existing Member in exchange
for more than a de minimis Capital Contribution; (ii) the
distribution by the Company to a Member of more than a de minimis
amount of Company property as consideration for an interest in the Company; and
(iii) the liquidation of the Company within the meaning of Treasury
Regulations Section 1.704-1(b)(2)(ii)(g);

 

(c)        the Gross Asset Value of any Company
asset distributed to any Member shall be adjusted immediately prior to such
distribution to equal the gross fair market value of such asset as of the date
of distribution (as determined by the Board of Directors); and

 

(d)        the Gross Asset Values of Company
assets shall be increased (or decreased) to reflect any adjustments to the
adjusted basis of such assets pursuant to Code Section 734(b) or Code
Section 743(b), but only to the extent that such adjustments are taken
into account in determining Capital Accounts pursuant to Section 1.704-1(b)(2)(iv)(m) of
the Treasury Regulations.

 

If the
Gross Asset Value of an asset has been determined or adjusted pursuant to
paragraph (a), (c) or (d) above, such Gross Asset Value shall
thereafter be adjusted by the Depreciation taken into account with respect to
such asset for purposes of computing Net Income and Net Loss.

 

“Guarantee”
has the meaning set forth in Section 13.5.

 

10

 

“Inconsistent
Position” has the meaning set forth in Section 8.5(b).

 

“Investee
Company” means a Person in which the Company or any of its Subsidiaries
owns equity constituting less than 50% of the total equity interests of such
Person.

 

“IRS”
means the U.S. Internal Revenue Service or any successor agency.

 

“Licensed
Facility” means a facility that maintains an NRC license.

 

“Licensed
Subsidiary” means a Subsidiary of the Company that maintains a license with
the NRC.

 

“Master
Agreement” has the meaning set forth in the recitals.

 

“Member”
or “Members” means, unless such Person ceases to be a Member, CNL, CEN,
EDFD and any Person who subsequently is admitted as a member of the Company in
accordance with Section 3.2, Section 7.8, Article IX, or Section 12.2,
as applicable.

 

“Membership
Interest” means the total of all ownership rights of a Member in the
Company, which Membership Interest shall be expressed by the number of Units
held by a Member.

 

“Monthly
Distribution Amount” shall mean, as of any date, the excess of (i) the
sum obtained by adding up the Current Exposures of all CECG Power Purchase
Agreements for each of the months ending prior to such date over (ii) the
aggregate amount distributed pursuant to Section 6.2(g) prior to such
date; provided, that (a) for purposes of clause (i) of this
sentence, the Current Exposures of all CECG Power Purchase Agreements for any
month shall be deemed to be $0 if the aggregate of the Total Exposures with
respect to all CECG Power Purchase Agreements would be $0 or a negative number
assuming that the Early Termination Dates (as defined in the CECG Power
Purchase Agreements) were to all occur during such month, and (b) the
Monthly Distribution Amount as of any date shall equal $0 if, as of such date,
the Unit A Accelerated Distribution Amount is greater than $0.

 

“Monthly
Energy Hedge Transaction” has the meaning assigned to such term in the
applicable CECG Power Purchase Agreement.

 

“Moody’s”
means Moody’s Investors Service, Inc. or its successor.

 

“NAC”
has the meaning set forth in Section 7.5, and shall be composed initially
of those individuals listed on Exhibit B.

 

“Net
Available Cash” shall mean, at any time, all cash of the Company that the
Board of Directors determines is available for distribution, after taking into
account projected cash requirements (including reserves for future operations
of the business and contingencies, and capital requirements) and subject to any
restrictions set forth in any credit or other agreement binding on the Company.

 

11

 

“Net
Income” and “Net Loss” means, as appropriate, for any Fiscal Year,
the taxable income or taxable loss of the Company determined in accordance with
Code Section 703(a) for such period or other applicable period for
federal income Tax purposes taking into account any separately stated items,
increased by the amount of any Tax-exempt income of the Company during such
period and decreased by the amount of any Code Section 705(a)(2)(B) expenditures
(within the meaning of Treasury Regulations Section 1.704-1(b)(2)(iv)(i))
of the Company.  Gain or loss from any
disposition of property shall be computed by reference to the Gross Asset Value
of the property disposed of, notwithstanding that the adjusted Tax basis of
such property may differ from its Gross Asset Value.  In lieu of the depreciation, amortization, or
other cost recovery deductions taken into account in computing taxable income
or loss, there shall be taken into account depreciation computed in accordance
with the definition of Depreciation.  In
the event that the Gross Asset Value of any Company asset is adjusted, the
amount of such adjustment shall be treated as an item of gain or loss, as
appropriate and shall be taken into account for purposes of computing Net
Income or Net Loss.

 

“New
Securities” has the meaning set forth in Section 10.1(b).

 

“Non-Controllable
Items” has the meaning set forth in Section 7.4(c).

 

“NRC”
means the U.S. Nuclear Regulatory Commission or any successor agency.

 

“Objection
Notice” has the meaning set forth in Section 8.2(b).

 

“Offering
Member” has the meaning set forth in Section 9.3(a).

 

“Original
Master Agreement” shall mean that certain Master Put Option and Membership
Interest Purchase Agreement, dated as of December 17, 2008 (as in effect
prior to any amendments thereof), by and among Constellation, EDFD, EDFI and
the Company.

 

“Parallel
Vehicle” has the meaning set forth in Section 13.3.

 

“Parent” means, as applicable, Constellation or
EDFI.

 

“Parent
CEO” means, with respect to any Member, the chief executive officer of the
ultimate parent entity of such Member.

 

“Percentage
Interest” with respect to a Member is set forth on Exhibit A,
as the same shall be amended from time to time in accordance with this
Agreement.  The Percentage Interest of
each Member is calculated by dividing the number of Units owned by a Member by
the total number of Units owned by all Members, and shall be adjusted from time
to time in accordance with Section 3.1(d).

 

“Permitted
Transfer” has the meaning set forth in Section 9.1(a).

 

“Permitted
Transferee” means a Member’s Affiliate that is wholly-owned by the same
ultimate parent entity; provided, however, that no Person shall
be a Permitted Transferee (a) if the Transfer to such Person is made with
the intent that the Transferee will make a subsequent Transfer or the
transferor will subsequently Transfer interests in such Transferee in order to 

 

12

 

avoid the Transfer restrictions that would otherwise
be applicable and (b) unless such Person agrees in writing with the
Company at the time of such Transfer to Transfer back to the transferring
Member the Transferred Membership Interests if such Person ceases to be a
Permitted Transferee.

 

“Person”
means any natural person, corporation, limited liability company, trust, joint
venture, association, company, partnership or other entity.

 

“Power
Services Agency Agreement” means that certain Power Services Agency
Agreement, dated as of
[                ],
2009, between the Company and CECG.

 

“PPA
Amounts Owed” has the meaning set forth in Section 6.5(b).

 

“PPA
Payments” has the meaning set forth in Section 6.5(a).

 

“Preemptive
Notice” has the meaning set forth in Section 10.1(a).

 

“Prime
Rate” means the prime rate published in the Wall Street Journal on the last
Day of each month (or, if not a publication Day, the prime rate last published
prior to such last Day).

 

“Provisional
Budget” has the meaning set forth in Section 7.4(b).

 

“Redemption
Price” has the meaning set forth in Section 12.2(a).

 

“Repurchase
Election Period” has the meaning set forth in Section 12.2(a).

 

“Risk
Profile Guidelines” means the risk profile guidelines of the Company
established and maintained in accordance with Section 10.3(e).

 

“Rules”
has the meaning set forth in Section 13.4(b).

 

“S&P”
means the Standard & Poor’s Rating Group, a Division of The
McGraw-Hill Companies, Inc., or its successor.

 

“Special
Matter” has the meaning set forth in Section 7.2(j).

 

“Specified
Actions” has the meaning set forth in Section 7.2(k).

 

“Strategic
Plan” has the meaning set forth in Section 7.4(a).

 

“Subsidiary”
means, for any Person (the “parent”) at any date, any other Person the
accounts of which would be consolidated with those of the parent in the parent’s
consolidated financial statements if such financial statements were prepared in
accordance with GAAP as of such date, as well as any other Person (a) of
which securities or other ownership interests representing more than 50% of the
equity or more than 50% of the ordinary voting power or, in the case of a
partnership, more than 50% of the general partnership interest are, as of such
date, owned, Controlled or held, directly or indirectly, by the parent, or (b) that
is, as of such date, otherwise Controlled by the parent or one or more
Subsidiaries of the parent.

 

13

 

“Tax”
means any U.S. federal, state, local or non-U.S. tax or other governmental charge,
fee, levy or assessment of whatever kind or nature, including all U.S. federal,
state, local or non-U.S. income, gross receipts, windfall profits, severance,
property, production, sales, use, license, excise, franchise, employment,
premium, recording, documentary, transfer, back-up withholding, turnover, net
asset, capital gains, value added, estimated, ad valorem, payroll and employee
withholding, stamp, customs, occupation or similar taxes, and any social
charges or contributions together with any interest, additions, or penalties
with respect to these Taxes and any interest or penalties.

 

“Tax
structure” has the meaning set forth in Section 13.10.

 

“Terminating
Event” means, and shall occur upon the following:

 

(a)        If a Member:

 

(i)    Makes
an assignment for the benefit of creditors;

 

(ii)   Files
a voluntary petition in bankruptcy;

 

(iii)  Is
adjudged bankrupt or insolvent or has entered against the person an order for
relief in any bankruptcy or insolvency proceeding;

 

(iv)  Files
a petition or answer seeking for that person any reorganization, arrangement,
composition, readjustment, liquidation, dissolution, or similar relief under
any statute, law or regulation;

 

(v)   Seeks,
consents to, or acquiesces in the appointment of a trustee for, receiver for, or
liquidation of the Member or of all or any substantial part of the person’s
properties; or

 

(vi)  Files
an answer or other pleading admitting or failing to contest the material
allegations of a petition filed against the person in any proceeding described
in this subsection.

 

(b)        The continuation of any proceeding
against the Member seeking reorganization, arrangement, composition,
readjustment, liquidation, dissolution, or similar relief under any statute,
law, or regulation, for one hundred and twenty (120) Days after the
commencement thereof, or the appointment of a trustee, receiver, or liquidator
for the Member or all or any substantial part of the Member’s properties
without the Member’s agreement or acquiescence, which appointment is not
vacated or stayed for one hundred and twenty (120) days or, if the appointment
is stayed, for one hundred and twenty (120) days after the expiration of the
stay during which period the appointment is not vacated.

 

(c)        In the event not covered under (a) or
(b), if a Bankruptcy Event occurs with respect to a Member;

 

(d)        In the case of a Member:

 

14

 

(i)    who
is an individual, the individual’s death or 
adjudication by a court of competent jurisdiction as incompetent to manage
the individual’s person or property;

 

(ii)   who
is acting as a Member by virtue of being a trustee of a trust, the termination
of the trust;

 

(iii)  that
is a partnership or a limited liability company, the dissolution and
commencement of winding up of the partnership or limited liability company;

 

(iv)  that
is a corporation, the dissolution of the corporation or the revocation of its
charter; or

 

(v)   the
distribution by the fiduciary of the estate’s entire interest in the Company;

 

and, in
any such case under (d)(i) through (d)(v), the successor or successors to
the Member do not comply and/or cannot comply with the provisions of Article IX
of this Agreement.

 

“Three-Year
Budget” has the meaning set forth in Section 7.4(a).

 

“Total
Exposure” means, with respect to each Company-Generation Sub and the CECG
Power Purchase Agreement to which it is a party, the amount payable, if any, by
CECG to such Company-Generation Sub upon the occurrence of an Early Termination
Date (as defined in the relevant CECG Power Purchase Agreement) pursuant to Section 6(e) of
such CECG Power Purchase Agreement, after giving effect to any setoff made in
accordance with Section 6(f) of such CECG Power Purchase Agreement
and any payment received from or on behalf of CECG in respect of the amount
payable on such Early Termination Date, in each case as determined by each
Company Generation -Sub, respectively, in the manner provided for in the
respective CECG Power Purchase Agreements.

 

“Transfer”
means, when used as a noun, any direct or indirect voluntary or involuntary
sale, hypothecation, pledge, assignment, attachment or other transfer,
including a transfer resulting from a merger, consolidation, assignment of
assets or other similar transaction, and, when used as a verb, means voluntarily
or involuntarily to sell, hypothecate, pledge, assign or otherwise transfer.

 

“Transferee”
has the meaning set forth in Section 9.1(a).

 

“Transfer
Notice” means the written notice given by a Member proposing to Transfer a
Membership Interest, which shall include all details of such proposed Transfer,
including the name of the Transferee and its material Affiliates, the date of
the proposed Transfer, the portion of the Member’s Membership Interest to be
Transferred, and the cash purchase price for the Membership Interest.

 

15

 

“Treasury
Regulations” means the income Tax regulations, including temporary
regulations, promulgated under the Code, as such regulations may be amended
from time to time (including corresponding provisions of succeeding
regulations).

 

“Unadmitted
Assignee” has the meaning set forth in Section 12.2(a).

 

“Unburdened
Cost” shall mean such party’s out-of-pocket cost (including overhead and
benefits), but shall exclude any profit.

 

“Unit
A Accelerated Distribution Adjustment Amount” shall mean, as of any date
specified as an “Early Termination Date” under Section 6 of any CECG Power
Purchase Agreement:

 

	
   , where:

  

 

A = the aggregate Percentage Interest with respect to
all Members holding A Units as of such date,

B = the Declared Distribution Amount as of such date, provided,
however, that for purposes of calculating a Unit A Accelerated
Distribution Adjustment Amount, the Declared Distribution Amount shall not
include any portion thereof that has been included in a prior Unit A
Accelerated Distribution Adjustment Amount, and

C = the aggregate of the Total Exposures with respect
to all such CECG Power Purchase Agreements.

 

Exhibit C to this Agreement contains an example of the
computation of the Unit A Accelerated Distribution Adjustment Amount.

 

“Unit
A Accelerated Distribution Amount” shall mean, as of any date, (i) $0,
if, on or prior to such date, no CECG Power Purchase Agreement is or has been
subject to an early termination, and (ii) otherwise, (a) the
aggregate amount of all Unit A Accelerated Distribution Adjustment Amounts as
of such date and all dates prior to such date minus (b) the aggregate
amount distributed pursuant to Section 6.2(a) prior to such
date.  Exhibit C to this
Agreement contains an example of the computation of the Unit A Accelerated
Distribution Amount.

 

“Unit
A Accelerated Liquidation Amount” shall mean, as of any date, (i) $0,
if, on or prior to such date, no CECG Power Purchase Agreement is or has been
subject to an early termination, and (ii) otherwise:

 

	
  , where:

  

 

 

A = the aggregate of the Total Exposures with respect
to all CECG Power Purchase Agreements that are or have been subject to an early
termination on or prior to such date,

B = the aggregate Percentage Interest with respect to
all Members holding A Units as of such date,

C = the aggregate Percentage Interest with respect to
all Members holding B Units as of such date, and

 

16

 

D = the aggregate amount distributed pursuant to Section 6.2(a) (other
than amounts attributable to Declared Distribution Amounts) and Section 12.4(b)(iv) prior
to such date.

 

Exhibit C to this Agreement contains an example of the
computation of the Unit A Accelerated Liquidation Amount.

 

“Unit
B Accelerated Distribution Adjustment Amount” shall mean, as of any date
specified as an “Early Termination Date” under Section 6 of any CECG Power
Purchase Agreement, the product of (i) the aggregate Percentage Interest
with respect to all Members holding B Units as of such date multiplied by (ii) the
Declared Distribution Amount as of such date, provided, however,
that for purposes of calculating a Unit B Accelerated Distribution Adjustment
Amount, the Declared Distribution Amount shall not include any portion thereof
that has been included in a prior Unit B Accelerated Distribution Adjustment
Amount.  Exhibit C to this
Agreement contains an example of the computation of the Unit B Accelerated
Distribution Adjustment Amount.

 

“Unit
B Accelerated Distribution Amount” shall mean, as of any date, (i) $0,
if, on or prior to such date, no CECG Power Purchase Agreement is or has been
subject to an early termination, and (ii) otherwise, (a) the
aggregate amount of all Unit B Accelerated Distribution Adjustment Amounts as
of such date and all dates prior to such date minus (b) the aggregate
amount distributed pursuant to Section 6.2(b) prior to such
date.  Exhibit C to this
Agreement contains an example of the computation of the Unit B Accelerated
Distribution Amount.

 

“Units”
means units of Membership Interests in the Company having the rights set forth
in this Agreement.

 

“Withdrawal
Interest” has the meaning set forth in Section 12.2(a).

 

“Withdrawn
Member” has the meaning set forth in Section 12.2(a).

 

“Withholding
Agent” has the meaning set forth in Section 6.6(a).

 

Capitalized terms not otherwise defined in this Article I
shall have the meanings ascribed to such terms in this Agreement.

 

17

 

ARTICLE II

 

ORGANIZATION AND NAME; OFFICE;
PURPOSE

 

Section 2.1             Organization.  The Company was formed on December 15,
1999 by the execution and filing with the Department of Assessments and
Taxation of the State of Maryland of the Articles of Organization.

 

Section 2.2             Name
of the Company.  The name of the
Company is “Constellation Energy Nuclear Group, LLC.”  The Company may do business under that name
and under any other name or names that the Board of Directors may, in its sole
discretion, determine.  If the Company
does business under a name other than that set forth above, then the Company
shall file a trade name application as required by law.

 

Section 2.3             Purpose.  The Company is organized:

 

(a)          To
operate as a holding company;

 

(b)          To
directly and indirectly, purchase, own, operate, manage and sell assets
involved in nuclear power generation, storage and distribution businesses,
including, without limitation, ownership interests in the Company’s
Subsidiaries, and their respective assets;

 

(c)          To
enter into any agreement providing for the management, operation and
administration of the activities of the Company and its Subsidiaries including
any agreements for the sale of electric capacity, energy or ancillary services;

 

(d)          To
negotiate, authorize, execute, deliver and perform any agreement or instrument
or document relating to the activities set forth in clauses (a) through (c) above;
and

 

(e)          To
have all of the powers permitted by the Act.

 

18

 

Section 2.4             Principal
Office.  The principal office of the
Company shall be located at 750 East Pratt Street, Baltimore, Maryland 21202,
or at any other place or places within the State of Maryland as the Board of
Directors shall, in its sole discretion, deem necessary or advisable.

 

Section 2.5             Resident
Agent.  The name and address of the
Company’s resident agent in the State of Maryland shall be CT Corporation
System, 300 East Lombard Street, Baltimore, Maryland 21202.  The name and/or address of the resident agent
of the Company may at any time be changed by filing the new name and/or address
with the Maryland Department of Assessments and Taxation pursuant to the Act.

 

Section 2.6             Term.  This Agreement shall be
effective as of the date hereof.  The
existence of the Company shall be perpetual, unless terminated in accordance
with the provisions of this Agreement.

 

Section 2.7             No
State Law Partnership; No Concerted Action.

 

(a)        Notwithstanding
the provisions of Article VIII, the Members intend that the Company shall
not be a partnership (including a general partnership or a limited
partnership), and that no Member shall be a partner of any other Member with
respect to the business of the Company for any purposes other than U.S.
federal, state and local Tax purposes, and this Agreement shall not be
construed to suggest otherwise.

 

(b)        Each
Member hereby acknowledges and agrees that, except as expressly provided
herein, in performing its obligations or exercising its rights hereunder, it is
acting independently and is not acting in concert with, on behalf of, as agent
for, or as joint venturer or partner of, the other Member.  Other than in respect of the Company, nothing
contained in this Agreement shall be construed as creating a corporation, association,
joint stock company, business trust, organized group of persons, whether
incorporated or not, among or involving any Member or its Affiliates, and
nothing in this Agreement shall be construed as creating or requiring any
continuing relationship or commitment as between such parties other than as
specifically set forth herein.  Nothing
contained in this Agreement shall be construed as creating any fiduciary
relationship of any nature between the Members.

 

19

 

Section 2.8             Lack
of Authority of Members.  Except as expressly set forth herein, the
Members shall not have the authority or power to act for or on behalf of the
Company, to do any act that would be binding on the Company, or to incur any
expenditures, debts, liabilities or obligations on behalf of the Company.  Accordingly, no Member shall be considered an
agent of the Company solely by virtue of being a Member, and no Member shall
have authority to act for or bind the Company solely by virtue of being a
Member.

 

Section 2.9             Limitation
of Liability of Members.  To the fullest extent permitted by Applicable
Law, each Member’s liability to provide capital or other assets to the Company
shall be limited to such Member’s agreed investment in the Company, including
any Additional Capital Contributions such Member is committed to make under this Agreement to the extent
such investment or contribution has not yet been made, and in the case of
Additional Capital Contributions, such obligation shall be solely to provide
such contributions for the purposes such Member has committed to make such
Additional Capital Contributions, and no Member shall have any further
obligation to make any other contributions of capital or provide other property
to the Company.

 

Section 2.10           No
Personal Liability of Members.  The debts, obligations and liabilities of the
Company, whether arising in contract, tort or otherwise, shall be solely the
debts, obligations and liabilities of the Company, and, to the fullest extent
permitted by Applicable Law, no Member shall be obligated personally for any
such debt, obligation or liability of the Company solely by reason of being a
Member of the Company.  No Member shall
be liable for any obligation of the Company unless such liability is expressly
assumed by such Member in a separate written agreement signed by such Member.

 

ARTICLE III

 

MEMBERSHIP INTERESTS; ADDITIONAL
MEMBERS

 

Section 3.1             Membership
Interests.

 

(a)        The
Company has authorized the issuance of 10,000 Units, which may be designated as
one or more classes or series of Units. 
The Board of Directors may authorize the issuance of additional Units or
the creation of additional classes of Units having such powers, designations
and preferences and rights as may be determined by the Board of Directors
pursuant to an action of the Board of Directors (subject to the other terms of
this Agreement (e.g., Section 3.2)),
and the Board of Directors shall have the authority to make such amendments to
this Agreement as are necessary or appropriate to give effect to the foregoing,
subject to the requisite Member consent under Section 7.8.

 

(b)        On the effective date hereof, EDFD
acquired 49.99% of the outstanding Units pursuant to the terms of the Master
Agreement.  For so long as EDFD or any of
its Affiliates maintains ownership of such acquired Units, the Units held by
EDFD and its Affiliates shall be designated as “A Units.”  All other Units shall be designated as “B
Units” provided, however, to the extent EDFD or any of its
Affiliates transfers any of the A Units to another Person, such transferred
Units shall not be designated as B Units.

 

20

 

(c)        The
Membership Interests shall be uncertificated; provided, however,
that all or a portion of a Member’s Membership Interest shall be certificated
upon written request of such Member, in which event the Board of Directors
shall establish procedures related to certificated Membership Interests.

 

(d)        The
Units (as set forth on Exhibit A) shall be adjusted from time to
time, as applicable, to reflect (i) the Transfer by a Member of its
Membership Interests in accordance with this Agreement, (ii) the admission
of a new Member in accordance with this Agreement, (iii) Additional
Capital Contributions made by the Members in accordance with Section 4.2,
and (iv) such other events as otherwise may give rise to a change in a
Member’s ownership of its Membership Interests under this Agreement.  Upon any change in a Member’s ownership of
its Membership Interests, the Board of Directors shall (or shall cause the CEO
to) amend Exhibit A to properly reflect such change, including any
change to the Percentage Interests of the Members, and the Board of Directors
shall (or shall cause the CEO to) deliver a copy of Exhibit A, as
so amended, to each Member.

 

Section 3.2             Additional
Members.

 

(a)        After
the date hereof, a Person may be admitted to the Company as a Member only
pursuant to an action by the Board of Directors in accordance with Section 7.2(j)(vii) (but
subject to the restrictions in Section 10.1 and the requirement for Member
approval in Section 7.8, or pursuant to Article IX in the case of
Transfers of Membership Interests by existing Members, or pursuant to Section 12.2,
as applicable.  Notwithstanding, and in
addition to, the foregoing, no Person shall be admitted as a Member unless (x) such
Person shall execute and deliver a counterpart of this Agreement, and (y) the
Board of Directors is satisfied that such admission would not result in a
violation of any Applicable Law or any term or condition of this Agreement.

 

(b)        In
the event a new Member is to be admitted by the Board of Directors as provided
in Section 3.2(a), the Board of Directors shall determine, in accordance
with Section 7.2(j)(vii), the terms of such new Member’s admission,
including the amount of such new Member’s Capital Contribution and the number
of Units to be issued to such new Member.

 

Section 3.3             Representations
and Warranties.

 

(a)        Member Representations.  Each
Member represents and warrants to the other Members and the Company, as to
itself only, that:

 

(i)        It has the power and authority to
execute and deliver this Agreement and to perform its obligations under this
Agreement.

 

(ii)       The execution, delivery and performance
by it of this Agreement has been duly authorized, and no other action on the
part of such Member or its officers, managers, board of directors, shareholders
or members is necessary to authorize the execution and delivery by it of this
Agreement and the performance by it of its obligations under this Agreement.

 

21

 

(iii)      This Agreement has been duly executed and
delivered by it and is a legal, valid and binding obligation of such Member,
enforceable against such Member in accordance with its terms except (1) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance and other similar laws of general application affecting
enforcement of creditors’ rights generally, and (2) the availability of the
remedy of specific performance or injunctive or other forms of equitable relief
may be subject to equitable defenses and would be subject to the discretion of
the court before which any proceeding therefore may be brought.

 

(iv)     It understands that the Company intends to
be classified and taxed as a partnership for U.S. federal Tax purposes and not
as a publicly traded partnership, and accordingly agrees that it will not
Transfer any Membership Interests, or cause any Membership Interests to be
marketed, on or through an “established securities market” within the meaning
of Section 7704(b)(1) of the Code or a “secondary market (or the
substantial equivalent thereof)” within the meaning of Section 7704(b)(2) of
the Code, including, without limitation, an over-the-counter market or an
interdealer quotation system that regularly disseminates firm buy or sell
quotations.

 

(v)      It is either:

 

(1)     Not a partnership, grantor trust, S
corporation, limited liability company or other pass-through entity for U.S.
federal income Tax purposes; or

 

(2)     If it is an
entity referred to in clause (1), then either: (x) it was not formed for
the purpose of acquiring all or part of the Membership Interests and not more
than 40% of the value of the interest of each of its beneficial owners will be
attributable to the Membership Interests so acquired, or (y) it has and
will have only the number of ultimate beneficial owners (looking through a
pass-through entity described in clause (1) above to its beneficial
owners, unless such an entity is able to give the certification in (1) or
(2)(x)) identified to the Company in a written letter accompanying this
Agreement.

 

(b)        Company Representations.  The Company has the power and authority to
execute and deliver this Agreement and to perform its obligations under this
Agreement.  The execution, delivery and
performance by the Company of this Agreement has been duly authorized by the
Company, and no other action on the part of the Company or the Company’s Board
of Directors or Members is necessary to authorize the execution and delivery by
the Company of this Agreement and the performance by it of its obligations
under this Agreement.  This Agreement has
been duly executed and delivered by the Company and is a legal, valid and
binding obligation of the Company, enforceable against the Company in
accordance with its terms except (1) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance and other similar
laws of general application affecting enforcement of creditors’ rights
generally, and (2) the availability of the remedy of 

 

22

 

specific
performance or injunctive or other forms of equitable relief may be subject to
equitable defenses and would be subject to the discretion of the court before
which any proceeding therefore may be brought.

 

ARTICLE IV

CAPITAL CONTRIBUTIONS

 

Section 4.1             Initial
Capital Contributions.  No Member
shall be required to make any initial capital contributions to the Company other
than those specified in the Master Agreement.

 

Section 4.2             Additional
Capital Contributions.

 

(a)        The
Board of Directors shall have the right to call for an Additional Capital
Contribution upon approval of the Board of Directors in accordance with Section 7.2(j).

 

(b)        Prior
to making any Additional Capital Contributions, the Members shall discuss
alternative sources of financing (including debt financing).

 

(c)        A
Member’s obligation to make Capital Contributions, if any such obligation
exists, shall not inure to the benefit of, or be enforceable by, any Person
other than the Company, the Board of Directors and the other Members.

 

(d)        The
making of or failure to make any Additional Capital Contributions pursuant to
this Section 4.2 shall not affect the right of any Member to participate
in the management of the Company or the governance provisions set forth in this
Agreement.

 

23

 

Section 4.3             Nonpayment
of Additional Capital Contributions. 
If a Member fails to make any Additional Capital Contributions required
in accordance with this Article IV within thirty (30) Business Days after
it is requested, interest shall accrue on the unpaid portion at the lesser of (a) the
Prime Rate plus 4% per annum and (b) the maximum rate permitted by
Applicable Law.  The Company or the other
Member(s) who is not an Affiliate of the Member failing to make the
Additional Capital Contribution, on behalf of the Company, may institute
proceedings under Sections 13.4(b) and 13.4(c) (it being understood
that the escalation process of Section 13.4(a) would not apply)
against a Member that fails to make any Additional Capital Contributions
provided for in this Article IV.

 

Section 4.4             Advances
by Members.  If the Company does not
have sufficient cash to pay its obligations, any Member, upon the approval of
the Board of Directors in accordance with Section 7.2(j), may advance all
or part of the needed funds to or on behalf of the Company, provided, however,
that if such advance is necessary due to a failure by a Member to make an
Additional Capital Contribution, an advance by the Member(s) who is not an
Affiliate of the Member failing to make such Additional Capital Contribution
shall not require approval of the Board of Directors in accordance with Section 7.2(j).  An advance described in this Section 4.4
shall constitute a loan from such Member(s) to the Company, shall bear
such interest rate as agreed to by the Board of Directors and such Member(s) from
the date of the advance until the date of payment, and shall not constitute a
Capital Contribution.

 

ARTICLE V

 

BOOKS AND RECORDS

 

Section 5.1             Books
and Records.  The officers of the
Company, acting under the general supervision of the Board of Directors, shall
cause to be performed all general and administrative services on behalf of the
Company in order to assure that complete and accurate books and records of the
Company are maintained at such place designated by the Board of Directors
showing the names, addresses and respective Membership Interests of the
relevant Members, all receipts and expenditures, assets and liabilities,
profits and losses, and all other records necessary for recording the Company’s
respective business and affairs.

 

Section 5.2             Fiscal
Year.  The fiscal year of the Company
for financial and Tax reporting purposes (the “Fiscal Year”) shall end
on December 31 of each year or, if applicable, on the date of dissolution
of the Company, unless a different fiscal year for Tax reporting purposes is
required by the Code.

 

Section 5.3             Bank
Accounts.  All funds of the Company
will be deposited in its name in an account or accounts maintained with such
bank or banks selected by the Company. 
The funds of the Company shall not be commingled with the funds of any
Member.  Checks will be drawn upon the
Company account or accounts only for the purposes of the Company and shall be
signed by one or more authorized officers of the Company.

 

Section 5.4             Company
Information.

 

(a)        The
Company agrees to deliver to each Member:

 

24

 

(i)    within
fifteen (15) Days after the end of each month in each Fiscal Year, unaudited
monthly income statements and balance sheets of the Company and its
consolidated Subsidiaries;

 

(ii)   within
forty-five (45) Days after the end of each fiscal quarter in each Fiscal Year,
unaudited quarterly financial statements of the Company and its consolidated
Subsidiaries;

 

(iii)  within
ninety (90) Days after the end of each Fiscal Year, audited annual consolidated
and consolidating financial statements of the Company and its consolidated
Subsidiaries prepared in accordance with GAAP and audited by
PricewaterhouseCoopers LLP (or any successor auditor (which shall be an
independent nationally recognized accounting firm selected by the Board of
Directors in accordance with Section 7.2(g))); and

 

(iv)  with
reasonable promptness, such other data and information regularly prepared for
senior management of the Company as from time to time may be reasonably
requested by any Member.

 

(b)        The
Company shall afford, and shall cause its Subsidiaries and its and their
respective officers, Directors, employees, auditors, counsel and agents to
afford, each Member (and the Member’s employees and agents) reasonable access
during regular business hours to the Company’s and its Subsidiaries’ respective
officers, Directors, employees, auditors, counsel and agents and to all of the
Company’s respective properties, books and records, and shall furnish
(including the right to copy) the Member (and the Member’s respective employees
and agents) with all financial, operating and other data and information as the
Members may reasonably request.

 

ARTICLE VI

DISTRIBUTIONS

 

Section 6.1             Extraordinary
Distribution.  Notwithstanding any
provisions herein to the contrary, within seven (7) Business Days of the
Effective Date, the Company shall make a distribution to CNL and shall repay
certain liabilities owed to Constellation in the aggregate amount equal to the
Capital Contribution made by EDFD on the Effective Date.

 

Section 6.2             Distributions
Other Than Under Section 12.4. 
Subject to Section 6.4, and except as provided in Section 12.4,
the Company shall make distributions to the Members in the following order and
priority:

 

(a)        first, to the
Members holding A Units, pro rata in proportion to their relative Percentage
Interests, an amount equal to the Unit A Accelerated Distribution Amount as of
the date of the applicable distribution;

 

25

 

(b)        second, to the
Members holding B Units, pro rata in proportion to their relative Percentage
Interests, an amount equal to the Unit B Accelerated Distribution Amount as of
the date of the applicable distribution;

 

(c)        third, to the
Members holding B Units, pro rata in proportion to their relative Percentage
Interests, an amount equal to the Accrued Special Distribution Amount as of the
date of the applicable distribution;

 

(d)        fourth, to the
Members, pro rata in proportion to their relative Percentage Interests, an
amount equal to the Current Tax Distribution Amount as of the date of the
applicable distribution;

 

(e)        fifth, to the
Members holding B Units, pro rata in proportion to their relative Percentage
Interests, an amount equal to the Current Special Distribution Amount as of the
date of the applicable distribution;

 

(f)         sixth, to the
Members, pro rata in proportion to their relative Percentage Interests, an
amount equal to the Accrued Tax Distribution Amount as of the date of the
applicable distribution;

 

(g)        seventh, to the
Members, pro rata in proportion to their relative Percentage Interests, an
amount equal to the Monthly Distribution Amount as of the date of the
applicable distribution; and

 

(h)        eighth, to the
Members, pro rata in proportion to their relative Percentage Interests, the
remaining amount of the applicable distribution, which amount is approved by
the Board of Directors in accordance with Section 7.2(j)(v).

 

Section 6.3             Distribution Dates and Amounts.  Subject to Section 6.4, and except as
provided in Section 12.4, the Company shall make distributions to the
Members pursuant to Section 6.2 as follows:

 

(a)        on
each date specified as an “Early Termination Date” under Section 6 of each
CECG Power Purchase Agreement, or as soon as practicable thereafter, in the
minimum amount necessary such that distributions are made pursuant to Sections
6.2(a) and (b) in the full amounts described therein;

 

(b)        on
the fifth day preceding each installment due date specified in Section 6655(c) of
the Code, or as soon as practicable thereafter, in the minimum amount necessary
such that distributions are made pursuant to Section 6.2(d) in the
full amount described therein;

 

(c)        within
fifteen (15) days after the filing of the Company’s annual IRS Form 1065
for each Fiscal Year, or as soon as practicable thereafter, in the minimum
amount necessary such that distributions are made pursuant to Sections 6.2(c) and
(e) in the full amounts described therein; and

 

26

 

(d)        on the first
Business Day following the 14th day after the end of each month, or as soon as
practicable thereafter, in the minimum amount necessary such that distributions
are made pursuant to Section 6.2(g) in the full amount described
therein.

 

For the
avoidance of doubt, all distributions made pursuant to this Section 6.3
shall be made in the order and priority set forth in Section 6.2.  Notwithstanding anything in this Agreement to
the contrary, the approval of the Board of Directors shall not be required for
the Company to make the distributions provided for in this Section 6.3 or
in subsections (a) through (g) of Section 6.2.

 

Section 6.4             Limitations
on Distributions.

 

(a)        Notwithstanding
any provisions herein to the contrary, the Company shall not make a
distribution to any Member if such distribution would violate the Act.

 

(b)        Notwithstanding
any provisions herein to the contrary, the Company shall not make
distributions, other than the distributions required to be made under Section 6.3,
at any time in excess of the Net Available Cash at such time.  Distributions made pursuant to Section 6.2(h) shall
be calculated based on funds from operations (net income plus (i) depreciation
and amortization, and (ii) budgeted capital expenditures and other cash
requirements for which a Member has injected its proportionate share of cash or
assets to satisfy such budgeted amounts, and minus (iii) gains on sales of
properties), provided that the Member receiving such distributions, prior to
the receipt of such distribution, has contributed the full amount of capital to
the Company represented in the calculation for capital expenditures and other
projected cash requirements.  If a Member
has not contributed its proportionate share of such capital expenditures and
other projected cash requirements, its distributions made pursuant to Section 6.2(h) shall
be net of such amounts.  For the
avoidance of doubt, the Company shall make the distributions required to be
made under Section 6.3 as soon as the Company has cash available for
distribution, subject to any restrictions set forth in any credit or other
agreement binding on the Company, but regardless of projected cash
requirements.

 

(c)        If any
obligation or liability of the Company is determined by the Company or the IRS
to be an obligation or liability pursuant to which Tax losses or deductions are
allocated to Members holding B Units in a manner inconsistent with allocations
of the economic losses related thereto, distributions pursuant to Sections 6.2(c) and
(e) will be reduced by an amount equal to the product of the Effective Tax
Rate multiplied by the aggregate amount of such Tax losses and deductions.

 

Section 6.5             Limitation
on Certain Distribution Rights.

 

(a)        In
consideration of the right to receive distributions pursuant to Section 6.2(a),
upon receipt of the full Unit A Accelerated Distribution Amount distributable
in connection with the early termination of any particular CECG Power Purchase
Agreement (but only to the extent such Unit A Accelerated Distribution Amount
is not subject to future avoidance, defeasement, offset, repayment or claw
back), the Members holding A Units shall receive on account of such A Units
further distributions pursuant to Section 6.2 of any payments made by or
on behalf of CECG (or CECG’s estate in the event of CECG’s bankruptcy) to the 

 

27

 

relevant
Company-Generation Sub on account of CECG’s obligations under such particular
CECG Power Purchase Agreement (the “PPA Payments”) only to the extent the
product of (i) the Percentage Interest of the Members holding A Units and (ii) the
PPA Payments exceeds the Unit A Accelerated Distribution Amount with respect to
such particular CECG Power Purchase Agreement. 
To the extent that the Unit A Accelerated Distribution Amount
distributed to the Members holding A Units in connection with the early
termination of any particular CECG Power Purchase Agreement is subsequently
avoided, defeased, offset, repaid or clawed back, then the Members holding A
Units shall be entitled to receive payment of their full pro rata share of any
payments made by or on behalf of CECG (or CECG’s estate) to the relevant
Company-Generation Sub on account of CECG’s obligations under such particular
CECG Power Purchase Agreement.

 

(b)        In the event
that CECG has failed to make payment to any Company-Generation Sub under any
particular CECG Power Purchase Agreement (the “PPA Amounts Owed”) and such
failure to make payment has caused a breach under such particular CECG Power
Purchase Agreement, the distributions to which the Members holding B Units
shall be entitled to under Section 6.2 shall be reduced by the aggregate
outstanding PPA Amounts Owed.  To the
extent that CECG subsequently pays to the Company any such PPA Amounts Owed,
then the Members holding B Units shall be entitled to receive distributions in
an amount equal to the total of any such PPA Amounts Owed that are paid to the
Company up to the amount by which their distributions were previously reduced.

 

Section 6.6             Withheld
Taxes.

 

(a)        Each Member shall, to the fullest
extent permitted by Applicable Law, indemnify and hold harmless each Person who
is, or who is deemed to be, the responsible withholding agent (the “Withholding
Agent”) for federal, state, local and non-U.S. Tax purposes against all
claims, liabilities and expenses of whatever nature relating to the Withholding
Agent’s obligation to withhold and to pay over, or otherwise pay, any
withholding or other Taxes on income or gain allocable to such Member, payable
by the Company or as a result of such Member’s participation in the Company.

 

(b)        Notwithstanding
any other provision herein, each Member hereby authorizes the Company to
withhold and to pay over, or otherwise pay, any withholding or other Taxes payable
by the Company with respect to such Member or as a result of such Member’s
participation in the Company if, and to the extent that, the Company shall be
required to withhold or pay any such Taxes (including any amounts withheld from
amounts payable to the Company to the extent attributable, in the judgment of
the Company, to the interest of such Member in the Company).  The Member shall be deemed for all purposes
stated herein to have received a payment from the Company pursuant to Section 6.2
as of the time such withholding or Tax is required to be paid, which payment
shall be deemed to be a distribution with respect to such Member’s
Interests.  To the extent that the
aggregate of such deemed payments to a Member for any period does not exceed
the distributions to which such Member is otherwise entitled for such period,
the Company shall reduce the amount of the distributions which would otherwise
have been made to such Member, and if such distributions are not sufficient to
reimburse the Company for such Tax payments (as the Company reasonably
determines), the Company shall notify such Member who shall pay over to the
Company, within fifteen (15) 

 

28

 

Business
Days of such notice, an amount equal to such shortfall.  Interest shall accrue on any amounts that a
Member fails to pay to the Withholding Agent within fifteen (15) Business Days
after it is requested under this Section 6.6 at the lesser of (A) the
Prime Rate plus 4% per annum and (B) the maximum rate permitted by
Applicable Law.  To the extent commercially reasonable, the Company shall give prompt notice to each Member of any potential
withholding or other Taxes payable by the Company with respect to such Member
or as a result of such Member’s participation in the Company and shall
cooperate with each Member desiring to take reasonable steps to mitigate any
such Tax liability provided, that (i) any expenses associated with
such cooperation shall be borne solely by the applicable Member and (ii) the
Company shall not be precluded from fulfilling all its withholding and other
Tax obligations under Applicable Law (and shall not be liable to any Member for
fulfilling such obligations).

 

(c)        To the
extent able, each Member shall deliver to the Company:  (i) an affidavit in form satisfactory to
the Company that such Member (or its partners, members, shareholders or other
owners as the case may be) is or is not subject to Tax withholding under the
provisions of any federal, state, local, foreign or other law as of the date of
this Agreement; and/or (ii) a certificate of non-foreign status under
Treasury Regulations Section 1.1445-5(b)(3)(ii) (or any successor
provision), and any other certificates, forms, or instruments reasonably
requested by the Company relating to such Member’s status under such laws.  Each Member shall cooperate with the Company
to the extent reasonably requested by it in connection with any Tax audit of or
involving the Company or any of its existing or former investments.

 

(d)        The economic
burden of any Tax (whether collected through withholding or directly imposed on
the Company or any subsidiary (whether by law, regulation or contract)) that,
in the Company’s reasonable discretion (as determined by the Board of
Directors), is attributable to the identity or jurisdiction of a Member or to
such Member’s failure to provide the information described in Section 6.6(c) will
be specially allocated by the Company to any such Member and the Company may
similarly specially allocate amounts held in reserve by the Company or any
subsidiary related to such Tax, or an indemnity related thereto, or a purchase
price discount, holdback, offset or similar reduction in gross proceeds
reasonably related to such Tax.  Any such
Member shall be treated as having received an amount equal to all such Taxes
paid or withheld as a distribution pursuant to Section 6.2.

 

Section 6.7             Information
to be Provided by Members.

 

(a)        Prior to
this Agreement becoming effective, each Member shall provide a duly completed
and executed valid IRS Form W-9 or W-8BEN, and shall provide a new IRS Form W-9
or W-8BEN (or successor forms) promptly upon learning that any form provided to
the Company has become obsolete or incorrect.

 

(b)        In case of
any assignment of a Membership Interest or admission of a new Member pursuant
to this Agreement, a Member shall (unless waived in writing by the Company)
provide a duly completed and executed valid IRS Form W-9 or W-8BEN (or
successor forms) prior to such assignment or admission becoming effective and
shall provide a new IRS Form W-9 or W-8BEN (or successor form) promptly
upon learning that any form provided to the Company has become obsolete or
incorrect.

 

29

 

ARTICLE
VII

MANAGEMENT: RIGHTS, POWERS AND DUTIES

 

Section 7.1             General.

 

(a)        Except as
provided in this Agreement and except for situations in which the approval of
any or all Members is expressly required by this Agreement or non-waivable
provisions of Applicable Law, (i) all of the powers of the Company shall
be exercised by or under the authority of, and the business and affairs of the
Company shall be managed under the direction of, a board of directors (the “Board
of Directors”) and (ii) the Board of Directors may make all decisions
and take all actions for the Company not otherwise provided for in this
Agreement.  The Board of Directors must
act as a board in accordance with the provisions of this Agreement, and no
individual Director, as such, shall have any authority to bind or act for, or
assume any obligation or responsibility on behalf of, the Company unless
expressly authorized to do so by action taken by the Board of Directors in
accordance with this Agreement.

 

(b)        The Members
shall have no power to participate in the management or affairs of the Company
other than the right to appoint Directors and the right to nominate or
designate officers as expressly set forth herein and the right to vote on the
matters set forth in Section 7.8 or matters requiring approval of the
Members as set forth herein or under Applicable Law.  The Members shall not have meetings or voting
rights with respect to the management of the Company and shall not be entitled
to vote on or consent to or approve or disapprove actions or decisions
regarding the Company except as expressly provided herein or as required by
Applicable Law.  Accordingly, no Member
shall be considered an agent of the Company solely by virtue of being a Member,
and no Member shall have authority to act for or bind the Company solely by
virtue of being a Member.  Members shall
act by written consent with respect to any action required or permitted to be
taken by the Members.

 

Section 7.2             The
Board of Directors.

 

(a)        Composition. 
The Board of Directors shall be composed of ten (10) Directors.  Each of CNL and EDFD and their respective
successors, if any, shall have the right as a Member to appoint five (5) Directors
to the Board (such Directors, the “CNL Directors” and the “EDFD
Directors,” respectively), which directors shall include the Chairman (who
shall be a U.S. citizen). All of the Directors appointed by CNL or any
successor to CNL shall be U.S. citizens. 
The Board shall elect the CEO of the Company.

 

The
initial Directors appointed by CNL shall be: Michael Wallace, Henry Barron,
Charles Berardesco, Jonathan Thayer and Kathleen Hyle.

 

The
initial Directors appointed by EDFD shall be: 
Jean-Pierre Benqué, Jean-Paul Palma, Stéphane Ramon, Jacques Regaldo,
and Jacques Sacreste.

 

30

 

(b)        Election and Tenure of Directors.  Each Director shall hold office until his
successor has been appointed and qualified, or until the earlier of his death,
disability, resignation or removal as provided in this Agreement.

 

(c)        Removals and Vacancies.  Any Director
may be removed at any time, with or without cause, only by the Member or its
successor, if any, if such successor is a Member, that appointed such
Director.  Any Director may resign at any
time upon written notice to the Board of Directors and the Members.  Such resignation shall take effect at the
time specified in the written notice, or, if no time is specified therein, at
the time of its receipt by the Members; provided, however, that
the acceptance of a resignation will not be necessary to make it effective,
unless so specified in the resignation. 
Any vacancy on the Board of Directors may only be filled by the Member
or their respective successors, if any, if such successor is a Member, that
originally appointed the Director who is no longer serving in such
capacity.  The applicable Member or their
respective successors, if any, if such successor is a Member, shall promptly
appoint a replacement for any such Director who has resigned or was removed.

 

(d)        Regular Meetings. 
Regular meetings of the Board of Directors shall be held no less
frequently than quarterly at such time as may be designated from time to time
by the Board of Directors.  All meetings
of the Board of Directors shall be held at the general offices of the Company
or elsewhere, as determined from time to time by the Board of Directors.

 

(e)        Special Meetings. 
Special meetings of the Board of Directors may be held at any time or
place upon call by the Chairman of the Board of Directors or the CEO or upon
the written request of at least two (2) Directors (addressed to the
Secretary of the Company).

 

(f)         Notice of Meeting. 
The Secretary shall give notice to each Director of each regular and
special meeting of the Board of Directors. 
The notice shall state the time, place and agenda of the meeting and
include appropriate documentation to be considered at the meeting.  Notice for regular meetings is given to a
Director when it is delivered personally to the Director, left at the Director’s
principal residence or usual place of business, or transmitted by facsimile or
telephone, at least seven (7) Business Days before the date of the meeting
or, in the alternative, sent by first priority, overnight (if available)
courier addressed to the Director’s address as it shall appear on the records
of the Company, at least eight (8) Business Days for domestic deliveries
to overnight delivery areas or nine (9) Business Days for international
and other deliveries before the day of the meeting.  Notice for special meetings shall be given to
each Director with as much advance notice as is practicable under the
circumstances.  Notice of any meeting of
the Board of Directors is waived by any Director who attends the meeting or
who, before or after the meeting, signs a waiver of notice which is filed with
the records of the meeting.  Any meeting
of the Board of Directors, regular or special, may adjourn from time to time to
reconvene at the same or some other place, and no notice need be given of any
such adjourned meeting other than by announcement.

 

(g)        Quorum; Action by Directors.  Except as
set forth in Sections 7.2(j) and 7.2(k), the action of a majority of the
Directors present in person or by proxy (which proxy shall only be given to a
Director) at a meeting at which a quorum is present is an action of the 

 

31

 

Board of
Directors, provided, that at least one director appointed by each of
CNL, if it is a Member, or its respective successor, if any, if such successor
is a Member, and EDFD, if it is a Member, or its respective successor, if any,
if such successor is a Member, votes in favor of the action, with the exception
of matters decided by a casting vote pursuant to Section 7.3(c) or
decided pursuant to Section 7.2(k). 
A majority of the entire Board of Directors, including at least one
Director appointed by each of CNL, if it is a Member, or its respective
successor, if any, if such successor is a Member, and EDFD, if it is a Member,
or its respective successor, if any, if such successor is a Member, shall constitute
a quorum for the transaction of business. 
In the absence of a quorum, the Directors present, by majority vote and
without notice other than by announcement, may adjourn the meeting from time to
time until a quorum shall be present.  At
any such reconvened meeting at which a quorum shall be present, any business
may be transacted which might have been transacted at the meeting as originally
notified.  Any action required or
permitted to be taken at a meeting of the Board of Directors may be taken without
a meeting, if a unanimous written consent which sets forth the action is signed
by each Director and filed with the minutes of proceedings of the Board of
Directors.

 

(h)        Meeting by Telephone Conference.  Members of the
Board of Directors may participate in a meeting by means of a conference
telephone or similar communications equipment if all persons participating in
the meeting can hear each other at the same time.  Participation in a meeting by these means constitutes
presence in person at a meeting.

 

(i)         Committees of the Board of Directors.  From time to time, the Board of Directors may
establish one or more committees with such composition, responsibilities and
powers as the Board of Directors may determine, provided, however,
that such committees shall, at a minimum, include an audit committee, a
compensation committee and a governance committee; and provided, further,
that Directors appointed by each of CNL, if it is a Member, or its respective
successor, if any, if such successor is a Member, and EDFD, if it is a Member,
or its respective successor, if any, if such successor is a Member, shall be
appointed in equal numbers on all such committees.  Committees shall meet at such times as they
or the Board of Directors directs.  The
decisions of any committee shall be subject to the ultimate approval of the
Board of Directors.  The Board of
Directors shall establish rules governing the organization and actions of
each committee based on the provisions of this Agreement with respect to the
Board of Directors.  The governance
committee shall review the Company’s organizational structure at least
annually.

 

(j)         Special Matters. 
Notwithstanding anything herein to the contrary, but subject to Section 7.3(c),
approval of all the Directors then in office shall be required with respect to
the following matters (each of which shall constitute a “Special Matter”).  At any time that the Directors are
considering a Special Matter, all of the Directors appointed by a Member must
vote in the same manner, either for or against.

 

(i)            The timing of the
presentation and adoption of each Annual Budget, Three-Year Budget and
Strategic Plan;

 

(ii)           Any increase in the
cost of a material element identified in the Annual Budget or Provisional
Budget that individually or in the 

 

32

 

aggregate
amounts to a material increase in the cost of such element in the Annual Budget
or Provisional Budget, or any increase in any other costs incurred in
accordance with the Annual Budget or Provisional Budget that amounts to a
material increase in the aggregate costs under the Annual Budget or Provisional
Budget (other than any variance relating to a Non-Controllable Item);

 

(iii)          The entry into of
any contract that exceeds $50 million in total potential liability or risk to
the Company over the term of the contract, unless the expenditures for such
contract are provided for in the Annual Budget, Three-Year Budget or
Provisional Budget;

 

(iv)          The entry into of
any contract between the Company and any Member or any of such Member’s
Affiliates not specifically provided for in the Annual Budget, Three-Year
Budget or Provisional Budget and exceeding $10 million in total potential
liability or risk to the Company over the term of the contract;

 

(v)           The making of any
distribution by the Company to its Members (other than distributions required
to be made pursuant to Section 6.3) or by any Subsidiary to the Company
(other than as necessary so that the Company may make distributions required to
be made pursuant to Section 6.3);

 

(vi)          Any change to the
organization, governance or management of any Subsidiary of the Company from
the principles set forth in Section 7.10, and any commitments to provide
capital or credit support to a Subsidiary or Investee Company;

 

(vii)         The issuance of any New Securities or
the admission of any new Member to the Company (other than in connection with a
Transfer of a Membership Interest in compliance with Article IX or Section 12.2
and subject to any approval required under Section 7.8);

 

(viii)        Any incurrence of indebtedness,
individually or in a series of related transactions that have not been
expressly approved as a Special Matter, in excess of $50 million, or the
granting of any guaranty or lien, mortgage or pledge over all or substantially
all of the assets of the Company and its Subsidiaries;

 

(ix)           Initiating or
making any settlement or compromise of a claim in excess of $10 million in
connection with a dispute (whether or not involving litigation) involving a
third party, or any dispute with a Governmental Authority;

 

(x)            Staffing of key
executive officer positions of the Company, consistent with Section 7.9;

 

33

 

(xi)           A grant of
authority to the Chairman, CEO or other officers of the Company that would
materially alter the authority granted to such officer under this Agreement
other than delegations of authority in the ordinary course of business;

 

(xii)          Any reorganization,
dissolution, liquidation, winding up or bankruptcy of the Company or any
Subsidiary of the Company, or any vote by the Company relating to its ownership
interest in any Subsidiary or Investee Company;

 

(xiii)         Any decision requiring the Members to
make any Additional Capital Contributions;

 

(xiv)        Amending in any material respect the
charter, bylaws or other organizational documents of any Company Subsidiary or
Investee Company;

 

(xv)         Any decision by the Company to enter
into a new line of business;

 

(xvi)        Changes in material accounting
policies, other than as required by GAAP;

 

(xvii)       The engagement or discharge of
independent auditors;

 

(xviii)      Any decision by the Company to enter
into any material acquisition, divestiture, joint venture or partnership;

 

(xix)    Any decision by the Company to enter
into a Company Change of Control transaction or to effect an initial public
offering of the Company;

 

(xx)          Any
recapitalization, reclassification or similar event by the Company;

 

(xxi)         Any loans or advances provided to the
Company by a Member, except for any loan made by a Member to the Company in
satisfaction of a failure by another Member who is not an Affiliate of the
Member providing the loan or advance to make a capital contribution in
accordance with Section 4.2;

 

(xxii)        The decision as to whether or not to
stop operations and/or close a nuclear facility to begin its decommissioning;

 

(xxiii)       The decision to seek re-licensing of
a nuclear facility;

 

(xxiv)       The decision to buy, sell, lease or
otherwise dispose of its interest in a nuclear facility;

 

34

 

(xxv)        Beginning on January 1, 2011,
from such time that (i) the credit rating of Constellation’s senior
unsecured debt is below BBB- according to S&P or Baa3 according to Moody’s
or (ii) the aggregate Fixed Product Exposure under all CECG Power Purchase
Agreements exceeds $100 million, the decision to enter into any Monthly Energy
Hedge Transaction under any CECG Power Purchase Agreement after such event
which requires the delivery of Fixed Product on or after January 1, 2012 ;
provided, that this decision shall no longer be deemed to be a Special
Matter if, prior to January 1, 2011, CECG and each Company-Generation Sub
have amended each of the CECG Power Purchase Agreements to include a mutually
acceptable credit arrangement supporting CECG’s obligations under each of the
CECG Power Purchase Agreements;

 

(xxvi)       Any decision to terminate,
restructure or repurchase any Monthly Energy Hedge Transaction;

 

(xxvii)      On or before December 31, 2010,
any decision to amend the Company’s Risk Profile Guidelines from those
established as of the Effective Date;

 

(xxviii)     The decision to cause a
Company-Generation Sub to extend the term of a CECG Power Purchase Agreement or
an EDFTNA Power Purchase Agreement;

 

(xxix)       The decision to cause a
Company-Generation Sub to accept amended credit support provisions under a CECG
Power Purchase Agreement; and

 

(xxx)        Entering into any agreement or
arrangement to do any of the above.

 

(k)        Affiliate Contract Default Matters.  Notwithstanding anything herein to the
contrary, in the event that the Company or any of its Subsidiaries, on the one
hand, is party to an agreement (an “Affiliate Contract”) with a Member
or an Affiliate of a Member (not including the Company or any of its
Subsidiaries), on the other hand (an “Affiliate Contract Party”), the
Directors appointed by the Member that is the Affiliate Contract Party or is an
Affiliate of the Affiliate Contract Party shall recuse themselves from actions
and decisions with respect to Specified Actions regarding any such Affiliate
Contract.  The Directors appointed by the
other Member(s) who is not an Affiliate Contract Party or an Affiliate of
the Affiliate Contract Party shall have the sole right to (1) direct or
cause, as applicable, the Company and (2) act on behalf of the Company in
its capacity as sole shareholder of any Company-Generation Sub to direct or
cause, as applicable, such Company-Generation Sub, as appropriate, with respect
to all actions and decisions under such Affiliate Contract (other than such
actions or decisions that are ordinary course or day-to-day business decisions)
such as consent to assignment, declaration of defaults and termination events,
declarations of early termination dates, suspension of performance, enforcement
of remedies, termination and material amendments (the “Specified Actions”);
provided, however, that this Section 7.2(k) shall not 

 

35

 

apply (i) to
any action subject to the Chairman casting vote enumerated in Section 7.3(c);
or (ii) to any action or decision that would constitute a Special Matter
pursuant to Section 7.2(j). 
Notwithstanding the foregoing, the Members acknowledge that the Company
has entered into the Affiliate Contracts set forth on Schedule 7.2(k) as
of the date hereof.

 

Section 7.3             Officers.

 

(a)        Election, Tenure and Removal of Officers.  The officers shall
be elected by the Board of Directors, which shall establish the roles and
responsibilities of such officers.  Where
this Agreement provides that the holder of a particular office is to be
nominated by one Member, any person elected to such office must have been
nominated by such Member.  An officer
shall serve until his death, resignation or removal.  All officers or agents of the Company may be removed
at any time by the Board of Directors.  The removal of an officer or agent
does not prejudice any of his contract rights. 
The Board of Directors (or any committee or officer authorized by the
Board of Directors) shall fill a vacancy which occurs in any office subject to
the nomination rights of a Member specified in this Agreement.

 

(b)        Executive Officers.  The Company
shall have a President who shall be the Chief Executive Officer (the “CEO”)
and who shall be a U.S. citizen, a Secretary, a Treasurer, a Chief Nuclear
Officer and such other officers as the Board of Directors may deem necessary
for the conduct of the business and affairs of the Company.  A person may hold more than one office in the
Company. Notwithstanding anything to the contrary in this Section 7.3
describing the responsibilities of the executive officers of the Company, the
Board of Directors shall confer at least annually on the roles and
responsibilities of key employees of the Company.

 

(c)        Chairman of the Board.  The Chairman
of the Board and anyone who acts for him must be a U.S. citizen.  The Chairman shall be designated by CNL, if
it is a Member, from among the Directors appointed by CNL and shall preside at
all meetings of the Board of Directors at which he shall be present.  He shall have such powers as are from time to
time assigned to him by the Board of Directors. 
Notwithstanding the prior sentence, the Chairman’s primary duties will
include overseeing relationships with U.S. Governmental Authorities and other
key relationships, reviewing corporate communications and providing an
interface with the public.  In connection
with the latter functions, the Chairman shall make reasonable efforts, taking
into account the urgency of the matter, to inform and consult with the Board of
Directors with regard to corporate communications and public interface
activities involving sensitive matters. 
In the event of a deadlock of the Board of Directors, the Chairman shall
have a casting (deciding) vote on the following matters:

 

(i)    Any matter
that, in view of U.S. laws or regulations, requires or makes it reasonably
necessary to assure U.S. control;

 

(ii)   Any matter relating to nuclear
safety, security or reliability, including, but not be limited to, the
following matters:

 

(1)     implementation
or compliance with any NRC generic letter, bulletin, order, confirmatory order,
or similar requirement issued by the NRC;

 

36

 

(2)                      prevention
or mitigation of a nuclear event or incident or the unauthorized release of
radioactive material;

 

(3)                      placement of
the plant in a safe condition following any nuclear event or incident;

 

(4)                      compliance
with the Atomic Energy Act, the Energy Reorganization Act, or any NRC rule;

 

(5)                      the
obtaining of or compliance with a specific license issued by the NRC and its
technical specifications; and

 

(6)                      compliance
with a specific Final Safety Analysis Report, or other licensing basis
document; provided, that the Chairman shall not exercise the casting
vote in connection with any matter specified in this Section 7.3(c)(ii) to
implement an option that is less likely to promote safety than that being
proposed by the EDFD Directors;

 

(iii)       Any decision relating to U.S.
regulatory strategy or the relationship with the NRC consistent with Section 7.8;

 

(iv)      The adoption of any charter, any
change in the authority or composition, or any matter relating to compensation,
of the NAC, provided, that such change does not alter the non-voting
advisory nature of the NAC;

 

(v)         Any
settlement or compromise of a claim in excess of $10 million but not in excess
of $30 million in connection with a dispute (whether or not involving
litigation) involving a U.S. or Canadian Governmental Authority, provided,
that such settlement or compromise does not involve (1) an agreement to a
consent decree or agreement materially restricting and decreasing the value of
the lawful business of the Company or (2) an admission of criminal liability
on the part of the Company or any of its Subsidiaries;

 

(vi)      Any other issue reasonably determined
by the Chairman in his prudent exercise of discretion to be an exigent nuclear
safety, security or reliability issue; and

 

(vii)   Staffing of key executive officer
positions of the Company, and upon any vacancy in the office of CEO,
consideration of the second candidate nominated for such position under Section 7.2(j);

 

and,
notwithstanding Section 7.2(g), any such action approved pursuant to this Section 7.3(c) shall
constitute an action of the Board of Directors. 
The Chairman’s casting vote shall not apply to any Tax matters.

 

(d)                           CEO.  The CEO shall be a U.S. citizen.  In the absence of the Chairman of the
Board, the CEO shall perform all duties of the Chairman of the Board but shall 

 

37

 

not
have a vote other than any vote he may have if he is otherwise a Director.  The CEO shall have the power and authority to
operate the Company on a day-to-day basis within the broad parameters set forth
in the Annual Budget and Strategic Plan, including the ability to sign
contracts and take other actions within the scope typically granted to a CEO of
a business enterprise, and shall manage the organization and responsibilities
of senior management to achieve the goals established by the Board of
Directors.  The CEO may sign and execute,
in the name of the Company, all authorized deeds, mortgages, bonds, contracts
or other instruments, except in cases in which the signing and execution
thereof shall have been expressly delegated to some other officer or agent of
the Company; and, in general, he shall perform all duties incident to the
office of a president of a corporation, and such other duties as are from time to
time assigned to him by the Board of Directors. 
The CEO shall be responsible, in consultation with the Chief Nuclear
Officer, for appointing key executive officers at each Licensed Subsidiary, in
accordance with Section 7.9.  The
CEO (including any successor CEO) shall be appointed by the Board of Directors
and may be removed only by the Board of Directors.

 

(e)                            Vice Chairman of the Board.  The Vice Chairman shall be designated by the
EDFD Directors and shall have such powers and duties as may be assigned to him
by the Board of Directors.  In no event
shall the Vice Chairman have a casting (deciding) vote.

 

(f)                              Vice Presidents.  Each Vice
President, if one is appointed, shall have such powers and duties as may be
assigned to him by the Board of Directors or the Chairman of the Board.  A Vice President may be designated by the
Board of Directors or the Chairman of the Board to perform, in the absence of
the CEO, all the duties of the CEO.

 

(g)                           Secretary. 
The Secretary shall attend all meetings of the Board of Directors and
shall notify the Directors of such meetings in the manner provided in this
Agreement.  He shall record the
proceedings of all such meetings in books kept for that purpose.  He shall have such other powers and duties as
may be assigned to him by the Board of Directors or the Chairman of the Board,
as well as the specific powers assigned by this Agreement.

 

(h)                           Treasurer. 
The Treasurer shall have the care and custody of the funds and valuable
papers of the Company, and shall receive and disburse all monies in such manner
as may be prescribed by the Board of Directors or the Chairman of the
Board.  He shall have such other powers
and duties as may be assigned to him by the Board of Directors or the Chairman
of the Board, as well as the specific powers assigned by this Agreement.

 

(i)                               Assistant Officers.  Each assistant officer can act in the place of the person holding the office to
which his position relates and perform all of the duties of such officer,
consistent with Applicable Law.  In addition,
he shall have such powers as are from time to time assigned to him by the
person holding the office to which his position relates, the CEO, the Chairman
of the Board or the Board of Directors.

 

(j)                               Chief Nuclear Officer.  The Chief
Nuclear Officer of the Company shall be a U.S. Citizen (not a dual
national).  The Chief Nuclear Officer
shall be responsible for operation of the Licensed Facilities of the Company
and its Subsidiaries.  The Chief Nuclear
Officer shall report directly to the CEO.

 

38

 

(k)                            Compensation. 
Subject to the limitations of the Annual Budget, officers of the Company
(other than the CEO) shall receive such compensation as shall be determined by
the CEO after consultation with the compensation committee.  Subject to the limitations of the Annual
Budget, the CEO and any independent Directors shall receive such compensation
as shall be determined by the Board of Directors (after receiving a recommendation
from the compensation committee).

 

(l)                               Paramount Responsibility of Certain Officers.  The Chairman of the Board of Directors, the
Company’s CEO and the Company’s Chief Nuclear Officer shall have the
responsibility and authority to ensure, and shall ensure, that the business and
activities of the Company and its Subsidiaries with respect to its Licensed
Facilities are at all times conducted in a manner consistent with the
protection of the public health and safety and common defense and security of
the United States.

 

Section 7.4             Budget and Strategic Plan.

 

(a)                            Annual Budget and Strategic Plan. 
The initial operating budget for
the Company for the period beginning upon execution of this Agreement through December 31,
2010 shall be the budget as in effect at such time, which is attached hereto as
Exhibit B.  In the absence of
contrary direction from the Board of Directors, the CEO shall
present to the Board, no later than the fourth quarter of each Fiscal Year
(beginning in the year of the execution of this Agreement), (i) an annual
operating budget for the Company for the following fiscal year (the “Annual
Budget”), (ii) an operating and capital expenditures budget for the
Company for the following three (3) Fiscal Years (a “Three-Year Budget”),
and (iii) a strategic business and operating plan for the following three (3) years
(a “Strategic Plan”), for the Company, its Subsidiaries and its Investee
Companies for review and approval by the Board. 
The Board will seek to approve the Annual Budget, the Three-Year Budget
and the Strategic Plan, in accordance with the requirements of Section 7.2(j)(i),
no later than the end of the calendar year of the Fiscal Year with respect to
the following year’s budgets and Strategic Plan.

 

(b)                           Provisional Budget.  If a
proposed Annual Budget is not adopted by the Board of Directors prior to the
end of a Fiscal Year, then the Annual Budget previously approved by the Board
for the preceding Fiscal Year shall remain in effect, after giving effect to
any dispositions or other material changes to the assets of the Company or any
of its Subsidiaries during such Fiscal Year (the “Provisional Budget”).  Any items of the proposed Annual Budget that
have been approved will become operative. 
If the Board of Directors adopts an Annual Budget prior to the end of
such Fiscal Year, such Annual Budget shall then become effective.

 

(c)                            A
Provisional Budget shall be adjusted automatically for the following (to the
extent it does not already incorporate such item): (i) the budgeted amount
for any expenditures over which the Company, its Subsidiaries and its Investee
Companies have little or no control, such as real property Taxes, insurance
premiums, utility charges, interest and principal due on then-existing
indebtedness entered into in accordance with terms of this Agreement and
amounts payable pursuant to the terms of then-existing contracts by which the
Company, its Subsidiaries and relevant Investee Companies are bound
(collectively, “Non-Controllable Items”) shall be the amount required to
pay such items, and (ii) the budgeted 

 

39

 

amount
for recurring capital expenditures and any other items of expense that are not
Non-Controllable Items shall be the applicable amount set forth in the then
most recently approved Annual Budget or, if not represented in the Annual
Budget, in the Three-Year Budget, such amounts in (ii) above being
adjusted for changes in inflation as reflected in the appropriate price index
for such item and/or locale.

 

(d)                           The Company
and its Subsidiaries may make any expenditures that are consistent with the
Annual Budget or the Provisional Budget.

 

(e)                            Notwithstanding
the vote required to approve the Annual Budget, Three-Year Budget and Strategic
Plan as set forth in Section 7.2(j)(ii), to the extent a Special Matter
has been unanimously approved by the Board of Directors pursuant to Section 7.2(j),
the Annual Budget, Three-Year Budget and Strategic Plan shall be considered to
have been revised accordingly.

 

40

 

Section 7.5                                      Nuclear Advisory Committee. 
The Nuclear Advisory Committee (the “NAC”) shall serve the
Company in a non-voting advisory capacity, shall report to and provide
transparency to the NRC and other U.S. Governmental Authorities regarding
foreign ownership and control of nuclear operations.  The NAC shall be composed of U.S. citizens
who are not officers, directors or employees of the Company, EDFD, CNL or CEN,
and shall be appointed by the Board of Directors.  Members of the NAC shall be appointed for a
term of two (2) years, at the end of which they shall be reappointed or
replaced by the Board of Directors.  The
initial members of the NAC shall be composed of the individuals who, as of the
date hereof, serve on the Advisory Committee of Unistar Nuclear Energy, LLC
pursuant to the Unistar Nuclear Energy, LLC Operating Agreement, dated as of July 20,
2007, by and among Constellation, EDFD and Unistar Nuclear Energy, LLC.  At least annually, the NAC shall prepare a
report and supporting documentation to be delivered to the Board of Directors,
which report shall advise the Company as to whether additional measures should
be taken to ensure that the Company is in compliance with U.S. laws and
regulations regarding foreign domination or control of nuclear operations and
that a decision of a foreign government could not adversely affect or interfere
with the reliable and safe operation of any nuclear assets of the Company, its
Subsidiaries or Affiliates.  In
connection with its duties, the NAC shall have the power and authority, at the
Company’s reasonable expense, to retain outside consultants, lawyers and
accountants, delegate matters to Company personnel and otherwise do such other
acts as are reasonably necessary or advisable to carry out its duties hereunder.  The Board of Directors may at reasonable
times and upon reasonable cause request the NAC to provide a justification or
explanation regarding the expenses of the NAC. 
The Board of Directors will have direct access to the NAC regarding
issues pertaining to foreign ownership and control of the Company.  The NAC will advise on and recommend
appropriate additional policies to prudently assure the Company’s continued
compliance with provisions of U.S. law and regulations regarding (i) nuclear
security plans, including physical security and cyber security; (ii) screening
of nuclear personnel; (iii) protection of critical nuclear
infrastructures; and (iv) U.S. export regulations.

 

Section 7.6                                      Existing Nuclear Plant Subsidiaries. 
Each Licensed Subsidiary will have a board of directors appointed by the
Board of Directors of the Company in accordance with Section 7.9.  The Board of Directors of each Licensed
Subsidiary shall be appointed in accordance with Section 7.2(j).

 

Section 7.7                                      Liability and Indemnification.

 

(a)                            Liability for Certain Acts. 
Each Director and officer shall perform his duties (i) in good
faith; (ii) in a manner the person reasonably believes to be in the best
interests of the Company, and (iii) with such care as an ordinarily
prudent person in a like position would use under similar circumstances.  Notwithstanding the foregoing, (1) Directors
may vote or consent in accordance with the direction of the Member appointing
them, and shall not be held liable to the Company or any Member for a breach of
any obligation to the Company or a Member when acting in accordance with any
such directions and (2) the Directors and officers shall not be liable to
the Company or any Member for any action taken or omission in managing the
business or affairs of the Company if the Directors and officers have the
reasonable belief that such act or omission is in or is not contrary to the
best interests of the Company and is within the scope of authority granted to
them by the Agreement.  In performing his
duties, a Director or officer shall be entitled to rely on any information,
opinion, report, or 

 

41

 

statement,
including any financial statement or other financial data, prepared or
presented by (x) any officer (in the case of a Director) or any other
officer (in the case of an officer) or any employee of the Company whom the
person reasonably believes to be reliable and competent in the matters
presented; (y) a lawyer, certified public accountant, or other person, as
to a matter which the person reasonably believes to be within such person’s
professional or expert competence; or (z) with respect to a Director only,
a committee of the Board of Directors on which the Director does not serve, as
to a matter within the committee’s designated authority, if the Director
reasonably believes the committee to merit confidence.  However, a Director or officer will not be
acting in good faith if he has any actual knowledge concerning the matter in question
which would cause such reliance to be unwarranted.

 

(b)                           Members. 
The Members shall not be engaged in the management of the Company, and
shall not be liable to the Company for any loss or damage sustained by the
Company except for (i) any loss or damage resulting from intentional misconduct
or knowing violation of Applicable Law or (ii) liability for any breach of
this Agreement.  To the fullest extent
provided by law, no Member shall have any fiduciary duty, duty of care or any
other duty to any other Members or to the Company; provided, however,
that the foregoing shall not limit any Member’s obligation under or liability
for breach of the express terms of this Agreement or the Master Agreement.  The Members shall be entitled to rely on
information, opinions, reports or statements, including but not limited to
financial statements or other financial data, prepared or presented by any
Director, officer or any employee of the Company whom the person reasonably
believes to be reliable and competent in the matters presented, or any lawyer,
certified public accountant, or other person, as to a matter which the person
reasonably believes to be within such person’s professional or expert
competence.

 

(c)                         Indemnification.

 

(i)             The Company shall
indemnify, advance expenses and hold each Director, each officer and each
member of the NAC harmless against any and all claims, actions, demands, costs,
expenses (including attorneys fees), damages and losses as a result of any
allegation, claim or proceeding relating to any act, decision or omission
concerning the activities of the Company and/or the authority granted such
person pursuant to this Agreement, except for fraud.  The Board of Directors may cause the Company
to indemnify and advance expenses to other employees and agents of the Company
to the same or to a lesser extent as indemnification is provided to the
Directors, officers and members of the NAC. 
Any indemnification and advancement of expenses provided by the Company
shall inure to the benefit of the heirs, executors, administrators, successors
and assigns of the person entitled to indemnification.

 

(ii)          The foregoing
rights of indemnification shall not be exclusive of any other rights to which
those seeking indemnification may be entitled.

 

(iii)       The Board of Directors may take such
action as is necessary to carry out these indemnification provisions and is
expressly empowered to adopt, approve and amend from time to time this
Agreement, 

 

42

 

resolutions
or contracts implementing such provisions and to provide for any further
indemnification arrangements as may be permitted by law.  No amendment of this Agreement or repeal of
any of its provisions shall limit or eliminate the right to indemnification or
advancement of expenses provided hereunder with respect to any act or omission
occurring prior to such amendment or repeal. 
The Company may, if the Board of Directors deems it appropriate in its
sole discretion, obtain insurance for the benefit of the Board of Directors and
the officers, employees and agents of the Company.

 

(iv)      Notwithstanding anything to the
contrary contained herein, no person serving as a Director, officer or member
of the NAC shall be liable to the Company or any Member for money damages
except to the extent that (1) it is proved that the person actually
received an improper benefit or profit in money, property or services for the
amount of the benefit or profit in money, property or services actually
received, or (2) a judgment or other final adjudication adverse to the
person is entered in a proceeding based on a finding in the proceeding that the
person’s action, or failure to act, was the result of active and deliberate
dishonesty and was material to the cause of action adjudicated in the
proceeding.  No amendment of this
Agreement or repeal of any of its provisions shall limit or eliminate the
limitation on liability for money damages provided to Directors, officers and
members of the NAC hereunder with respect to any act or omission occurring
prior to such amendment or repeal.

 

(v)         Notwithstanding anything to the
contrary contained herein, the advancement of expenses to any Person shall be
conditioned upon the Person seeking such advancement providing the Company (1) a
written affirmation that the Person has a good faith belief that the standard
of conduct necessary for indemnification as provided in this Section 7.7
has been met and (2) a written undertaking to repay the amount advanced if
it is ultimately determined that the standard of conduct was not met.

 

Section 7.8             Member Approvals. 
The following actions will require approval by written consent of all
Members in addition to any approval required of the Board of Directors:

 

(a)                            Approval of
any amendment to this Agreement other than amendments expressly permitted to be
made by the Board of Directors pursuant to this Agreement;

 

(b)                           Transfer of
a Membership Interest (except as expressly permitted by this Agreement) or the
admission of any Person as a Member (except for a transferee pursuant to a
Transfer expressly permitted by this Agreement);

 

(c)                            Approval of
any amendment to the Company’s Articles of Organization; and

 

(d)                           Except as
provided in this Section 7.8, no act of the Company requires the unanimous
consent of the Members.  Accordingly,
except as provided in this 

 

43

 

Section 7.8,
wherever the Act would otherwise require unanimous consent of the Members to
approve or take any action, such consent shall not be required.

 

Section 7.9                                      Staffing.

 

(a)                            Non-Discrimination
Policy.  The Members
acknowledge that U.S. law and policy require that certain activities of the
Company remain under the control and management of U.S. citizens and direct
that the Company at all times comply with such foreign ownership, control or influence
limitations as have been established by U.S. law, regulation or agreement with
any Governmental Authority.  Without in
any way diminishing the foregoing, it shall be the policy of the Company to
endeavor, to the maximum extent possible consistent with the foregoing, to
permit the involvement of Directors, executive officers, officers and other
personnel appointed, seconded, assigned or nominated by EDFD or any of its
Affiliates, or its successor, if any, in accordance with this Agreement, the assignment
and secondment agreement or the technical services agreement to a position with
the Company or a Subsidiary of the Company, without regard to nationality.  This policy shall be subject to such
exceptions as may be necessary or appropriate to avoid even an appearance of
foreign control or influence over such additional areas of the Company’s
business deemed sensitive by U.S. Governmental Authorities, but such exceptions
shall be subject to approval by the Board of Directors.

 

(b)                           Appointment
of Employees.  Each Member
will agree to contribute adequate staff for the management of the Company, its
Subsidiaries and Investee Companies in accordance with the Member’s special
competencies, capabilities, the requirements of Applicable Law, the regulatory
strategy of the Company and other agreements.

 

44

 

Section 7.10                                Governance of Subsidiaries. 
Except as determined in accordance with Section 7.2(j)(vi) and
Section 7.6, the agreements regarding organization, management and
governance with respect to Subsidiaries and the responsibilities of the Members
with respect thereto shall be substantially equivalent to those of the Company,
with appropriate changes to reflect their positions as Subsidiaries of the
Company.

 

Section 7.11                                Events of Default.  Upon an Event of Default or a Terminating Event, the
non-Defaulting Member or the Member that does not suffer the Terminating Event
(and in each case, provided such Member is not an Affiliate of the Defaulting
Member or Member suffering the Terminating Event) may elect to transfer all or
any portion of its membership interests in the Company without regard to the
requirements of Section 9.3 but subject to compliance with clauses
(a)(iii), (a)(iv), (a)(v), (a)(vi), and (a)(vii) of Section 9.2.

 

Section 7.12                                Delegation of Financial Authority. 
The Company and its Subsidiaries shall implement and operate pursuant to
a written delegation of financial authority policy, which shall be reviewed and
approved periodically by the Audit Committee of the Board of Directors.

 

ARTICLE VIII

 

TAX MATTERS AND CAPITAL ACCOUNTS

 

Section 8.1                                      Tax Treatment.  The Company and each of the Members intends that, for
U.S. federal income Tax purposes, pursuant to Treasury Regulations Sections
1.707-4 and 1.707-5, the distribution to CNL on the Effective Date pursuant to Section 6.1
be treated as a reimbursement of “preformation expenditures” and the payment to
Constellation pursuant to Section 6.1 be treated as a repayment of “qualified
liabilities.”  Each of the Members
intends for the Company to be treated as a partnership for U.S. federal income
Tax purposes, and neither the Company nor any Member shall take any action or
position that is inconsistent with such classification.

 

Section 8.2                                      Tax Returns and Information.

 

(a)                            The Board of
Directors shall cause to be prepared at the expense of the Company and shall
timely file or cause to be filed all required and necessary Tax or information
returns and all other filings for the Company, which shall be prepared by a
nationally recognized accounting firm and in accordance with Applicable
Law.  The Board of Directors shall cause,
at the expense of the Company, to be provided to each Member a copy of any Tax
return or other information statement reasonably required by such Member,
including IRS Schedule K-1, within ninety (90) Days after the end of the Fiscal
Year (or as soon as reasonably practicable thereafter) in order to properly
comply with its Tax filing requirements and shall cause to be provided to each Member
all other information as may be reasonably requested by such Member in order to
enable such Member (or the holder of a direct or indirect interest therein) to
comply with its Tax obligations, including without limitation copies of notices
from Tax authorities and other Tax-related information received by the
Company.  In addition, the Company shall
cause to be prepared any filings, applications or elections necessary to obtain
any available exemption from, or refund of, any material withholding or other
Taxes 

 

45

 

imposed
by any non-U.S. (whether sovereign or local) Taxing authority with respect to
amounts distributable to the Members pursuant to this Agreement, to the extent
the Company can do so without unreasonable effort or expense.  Each Member agrees that it will cooperate
with the Company in making any such filings, applications or elections to the
extent the Company determines that such cooperation is necessary or
desirable.  If any Member must make any
such filings, applications or elections directly, the Company, at the request
of such Member shall provide such information and take such other action as may
reasonably be necessary to complete or make such filings, applications or
elections, to the extent the Company can do so without unreasonable effort or
expense.  The Company shall distribute
any amounts received as refunds of such non-U.S. Taxes to the Members in
respect of which such non-U.S. Taxes were imposed.  Any refunds of such non-U.S. Taxes received
by the Company or a Member shall be treated as an additional distribution
pursuant to Section 6.2 unless such amounts were already treated as having
been distributed to such Member.  In the
event that a Member makes a request for a refund of non-U.S. Taxes previously
paid by such Member or the Company, a copy of the request shall be sent by the
Member to the Company.

 

(b)                           The Company
shall deliver to EDFD, if it is a Member, or its respective successor, if any,
if such successor is a Member, CNL, if it is a Member, or its respective
successor, if any, if such successor is a Member, and CEN, if it is a Member,
or its respective successor, if any, if such successor is a Member, a draft IRS
Form 1065 and drafts of any state income Tax returns, thirty (30) days
prior to the date on which the relevant return is to be filed (including
extensions). Each of EDFD, if it is a Member, or its respective successor, if
any, if such successor is a Member, CNL, if it is a Member, or its respective
successor, if any, if such successor is a Member, and CEN, if it is a Member,
or its respective successor, if any, if such successor is a Member, shall have
the right within fifteen (15) days of receipt of the draft return to deliver a
notice (an “Objection Notice”) to the Company stating that EDFD, CNL or
CEN (as may be the case) objects to any information contained on or omitted
from any draft Company Tax return and setting forth an alternative treatment of
the item or items disputed.  If EDFD, CNL
or CEN files an Objection Notice, the Board of Directors shall negotiate in
good faith to resolve the item or items disputed.  If EDFD, CNL or CEN (as the case may be) and
the Board of Directors fail to resolve any disputed item, the Company shall
file the Company Tax return in a manner consistent with the draft Company Tax
return provided to EDFD, CNL, and CEN.

 

Section 8.3                                      Tax Matters Partner and Elections.

 

(a)                            The Members
agree and consent that, so long as it is a Member, CNL may, on behalf of the
Company, at any time, and without further notice to or consent from any Member,
act as the tax matters partner within the meaning of Section 6231(a)(7) of
the Code for U.S. federal income, state or local Tax purposes.

 

(b)                           All material
Tax decisions and other matters not specifically and expressly provided for by
the terms of this Agreement concerning accounting procedures and the allocation
of profits, gains, deductions, losses and credits among the Members (including,
but not limited to, special allocations under Section 704(c) of the
Code), shall be determined by the Board of Directors in good faith, except that
(i) the Company shall elect to use the “traditional method” described in
Treasury Regulations Section 1.704-3 with respect to

 

46

 

allocations
under Section 704(c) of the Code and (ii) the Company shall make
the election provided for in Section 754 of the Code with respect to the
Fiscal Year in which EDFD first acquires a Membership Interest.  Such determinations made in good faith by the
Board of Directors shall, in the absence of manifest error, be final as applied
to all Members.  The tax matters partner
shall, after any such determinations are made, file any elections or forms or
documents with the IRS in accordance with these determinations, and shall
otherwise take reasonable action with respect to any remaining Tax matters as
may from time-to-time be required or advisable under the Treasury Regulations
or other Applicable Law.

 

Section 8.4                                      Tax Sharing Procedures.

 

(a)                            EDFD Annual
Tax Savings Amount and Constellation 704(c) Tax Costs - Draft Computations.  The Company shall deliver to EDFD and CNL, no
later than thirty (30) days prior to the date on which the Company files its
IRS Form 1065 with respect to each Fiscal Year, a draft computation of (i) the
EDFD Annual Tax Savings Amount for such Fiscal Year (calculated in accordance
with Section 8.4(c)) and (ii) the Constellation 704(c) Tax Costs
for such Fiscal Year (calculated in accordance with Section 8.4(e)).  Each of EDFD and CNL shall have the right
within fifteen (15) days of receipt of such computations to deliver a notice to
the Company objecting to such computations. 
If no such objection notices are delivered to the Company within such
15-day period, then such calculations of the EDFD Annual Tax Savings Amount and
the Constellation 704(c) Tax Costs for such Fiscal Year shall be
considered final and conclusive.  If one
or more objection notices are delivered to the Company within such 15-day
period, then the Board of Directors shall negotiate with EDFD or CNL, as
appropriate, in good faith to resolve any such objection(s).  If the Board of Directors and EDFD or CNL, as
appropriate, cannot resolve all such objections within fifteen (15) days of the
Company receiving such objection notices, the calculations in dispute shall be
submitted for resolution to an independent, nationally recognized accounting
firm selected by the Board of Directors in accordance with Section 7.2(g).  The resolution decided by such firm shall be
final and conclusive.

 

(b)                           Constellation
Initial Tax Savings Amount - Draft Computation.  No later than thirty (30) days prior to the
date on which Constellation files its IRS Form 1120 for its 2009 taxable
year, Constellation shall deliver to EDFD and the Company a draft computation
of the Constellation Initial Tax Savings Amount (calculated in accordance with Section 8.4(d)).  EDFD shall have the right within fifteen (15)
days of receipt of such computation to deliver a notice to Constellation
objecting to such computation.  If no
such objection notice is delivered to Constellation within such 15-day period,
then such calculation of the Constellation Initial Tax Savings Amount shall be
considered final and conclusive.  If an
objection notice is delivered to Constellation within such 15-day period, then
EDFD and Constellation shall negotiate in good faith to resolve such
objection.  If EDFD and Constellation
cannot resolve such objection within fifteen (15) days of Constellation
receiving such objection notice, the calculation shall be submitted for
resolution to an independent, nationally recognized accounting firm selected by
the Board of Directors in accordance with Section 7.2(g).  The resolution decided by such firm shall be
final and conclusive.

 

(c)                            EDFD Annual
Tax Savings Amount - Calculation. 
The EDFD Annual Tax Savings Amount for each Fiscal Year shall equal the
Tax reduction (calculated by 

 

47

 

reference
to the Effective Tax Rate) to EDFD and each of its Affiliates that holds A
Units arising from depreciation and amortization deductions allocated to EDFD
and each of its Affiliates that holds A Units for such Fiscal Year that are
both (A) attributable to the increase in the U.S. federal income Tax basis
of the Company’s assets resulting from the election provided for in Section 754
of the Code or required pursuant to Section 704(c) of the Code in
order to reflect the variation in the U.S. federal income Tax basis of property
contributed to the Company and its fair market value at the time of
contribution and (B) offset by the taxable income of the Company that is
allocated to EDFD and each of its Affiliates that holds A Units for such Fiscal
Year (without taking into account the deductions described in clause (A)).  For purposes of the immediately preceding
sentence, computation of the Company’s taxable income for any Fiscal Year shall
take into account any interest accrued or payable during such Fiscal Year on
intercompany debt between EDFD or any of its Affiliates that holds A Units, on
the one hand, and the Company, on the other hand.  If, for any Fiscal Year, the amount of
depreciation and amortization deductions that are allocated to EDFD and each of
its Affiliates that holds A Units and are described in clause (A) above is
less than the taxable income of the Company that is allocated to EDFD and each
of its Affiliates that holds A Units for such Fiscal Year (without taking into
account such deductions), then such difference shall be taken into account in
computing the EDFD Annual Tax Savings Amount for a subsequent Fiscal Year if
and to the extent that such difference (when added to the depreciation and
amortization deductions allocated to EDFD and each of its Affiliates that holds
A Units for such subsequent Fiscal Year and described in clause (A) above)
is offset by the taxable income of the Company that is allocated to EDFD and
each of its Affiliates that holds A Units for such subsequent Fiscal Year
(without taking into account such deductions). 
For the avoidance of doubt, the calculation of the EDFD Annual Tax
Savings Amount for any Fiscal Year shall not take into account any Tax
deductions realized by EDFD or any of its Affiliates that holds A Units arising
from interest accrued or payable with respect to financing obtained in
connection with the transactions contemplated by the Master Agreement.

 

(d)                           Constellation
Initial Tax Savings Amount - Calculation.  The Constellation Initial Tax Savings Amount
shall equal the excess of (i) the amount of Tax (calculated by reference
to the Effective Tax Rate) that would have been imposed on Constellation (or
any of its Subsidiaries) in connection with the sale of the Designated Interest
(as defined in the Original Master Agreement) as contemplated by the Original
Master Agreement over (ii) the amount of Tax (calculated by reference to
the Effective Tax Rate) imposed on Constellation (or any of its Subsidiaries)
in connection with the sale of the Transferred Designated Interest (as defined
in the Master Agreement) pursuant to the Master Agreement.

 

(e)                            Constellation
704(c) Tax Costs - Calculation. 
The Constellation 704(c) Tax Costs for any Fiscal Year shall equal
the amount of any Tax costs (calculated by reference to the Effective Tax Rate)
incurred by Constellation (or any of its Subsidiaries) for such Fiscal Year as
a result of allocations required pursuant to Section 704(c) of the
Code that mirror those allocations to EDFD and each of its Affiliates that
holds A Units described in Section 8.4(c).

 

(f)                              Recalculation
of Tax Savings and Sharing Amounts. 
If either (i) an audit adjustment by a Tax authority or (ii) a
change in Tax law results in a change to the amount 

 

48

 

of
any Tax item used, directly or indirectly, to calculate the amount of the
Constellation Tax Sharing Amount on any date or the EDFD Tax Sharing Amount on
any date, such Tax item, as so changed, shall be used to recalculate, as
appropriate, the Constellation Tax Sharing Amount and the EDFD Tax Sharing
Amount, it being understood that such recalculations shall be made beginning
with the Fiscal Year to which the audit adjustment or change in Tax law
relates.  Such recalculations shall be
used in determining the Accrued Special Distribution Amount as of any date
after the date on which occurred such audit adjustment or change in Tax
law.  In no event shall any recalculation
under this Section 8.4(f) take into account any interest or penalties
imposed by a Tax authority.

 

Section 8.5                                      Capital Accounts.

 

(a)                            “Capital
Account” means, with respect to any Member, the Capital Account the Company
shall maintain for such Member in accordance with the following provisions:

 

(i)             Each Member’s
Capital Account shall be increased by the amount of any money and the Gross
Asset Value of any other property contributed to the Company by such Member, as
may be adjusted pursuant to a revaluation, as well as any Net Income allocated
to such Member pursuant to this Section 8.5 and the amount of any Company
liabilities assumed by such Member or secured by any Company assets distributed
to such Member.

 

(ii)          Each Member’s
Capital Account shall be decreased by the amount of money and the Gross Asset
Value of any other Company property distributed to such Member pursuant to any
provision of this Agreement, any Net Loss allocated to such Member pursuant to
this Section 8.5 (including the Member’s share of expenditures described
in Section 705(a)(2)(B) of the Code) and the amount of any
liabilities of such Member assumed by the Company.

 

(iii)       In the event any Member’s Membership
Interest (or portion thereof) is transferred in accordance with the terms of
this Agreement, the transferee shall succeed to the Capital Account of such
Member to the extent such Capital Account relates to the transferred Membership
Interest (or portion thereof) and the Company’s Net Income and Net Loss shall
be allocated between the transferor and the transferee on a basis consistent
with applicable requirements under Section 706 of the Code; provided,
that no allocation agreed to between the transferor and the transferee shall be
effective unless (A) the transferor and the transferee shall have given
the Company written notice, prior to the effective date of such Transfer,
stating their agreement that such allocation shall be made on a certain basis
consistent with the applicable requirements under Section 706 of the Code,
(B) the tax matters partner shall have consented, in its sole discretion,
to the manner the transferor and transferee have agreed to with respect to such
allocation, and (C) the transferor and the transferee shall have agreed to
reimburse the Company for any incremental accounting fees and other expenses
incurred by the Company in making such allocation.

 

49

 

(b)                           Except as
otherwise provided in Section 12.4(e), for Capital Account purposes, after
giving effect to the special allocations required by this Agreement (including
pursuant to Sections 6.6 and 8.5(e), (f), (g), (h), and (i), if any, Net Income
and Net Loss of the Company for each Fiscal Year (or shorter Tax accounting
period selected by the tax matters partner or as required by law) shall be
allocated among the Members, based on their relative Percentage Interests.

 

(c)                            For U.S.
federal, state and local income Tax purposes, items of income, gain, loss and
deduction shall be allocated to the Members in accordance with the allocations
of the corresponding items for Capital Account purposes under this Section 8.5,
except that each Member’s allocable share of each item of income, gain, loss
and deduction shall be adjusted to reflect the difference between such Member’s
share of the adjusted Tax basis and the Gross Asset Value of each of the
Company assets, and the Board of Directors shall specially allocate any
adjustments pursuant to Section 482 of the Code, if any, to the Members
that may be subject to such potential adjustments.  The adjusted Tax basis and the Gross Asset
Value (for the Company) of the initial Capital Contributions of the Company
assets are indicated in Exhibit A (as it may be amended or
supplemented from time-to-time).  The
Company shall elect to use the “traditional method” of making Tax allocations
described in Treasury Regulations Section 1.704-3 with respect to Company
assets.  This provision is intended to
comply with the requirements of Section 704(c) of the Code, the
Treasury Regulations thereunder, and Treasury Regulations Section 1.704-1(b)(4)(i) and
shall be interpreted as in conformity therewith.  Credits (including without limitation credits
under Section 45J of the Code) shall be allocated among the Members in
accordance with their respective Percentage Interests and in accordance with
Treasury Regulations Section 1.704-1(b)(4)(ii).

 

(d)                           The
provisions of this Section 8.5 and the other provisions of this Agreement
relating to the maintenance of Capital Accounts are intended to comply with the
rules of the Treasury Regulations promulgated under Section 704 of
the Code and shall be interpreted and applied in a manner consistent with such
Treasury Regulations.  The Board of
Directors shall be authorized to make appropriate amendments to the allocations
of items pursuant to this Section 8.5 if necessary in order to comply with
Section 704 of the Code or applicable Treasury Regulations thereunder.

 

(e)                            In the event
the Company incurs any nonrecourse liabilities within the meaning of Treasury
Regulations Section 1.704-2(b)(3), or any Member incurs any partner
nonrecourse debt within the meaning of Treasury Regulations Section 1.704-2(b)(4),
income and gain shall be allocated in accordance with the “minimum gain
chargeback” provisions of Sections 1.704-1(b)(4)(iv) and 1.704-2 of the
Treasury Regulations.

 

(f)                              In the event
any Member unexpectedly receives any adjustments, allocations, or distributions
described in Treasury Regulations Sections 1.704-1(b)(2)(ii)(d)(4), (5) and
(6), items of Company income and gain shall be specially allocated to such
Member in an amount and manner sufficient to eliminate as quickly as possible
any deficit balance in its Capital Account in excess of that permitted under Section 8.5(g) created
by such adjustments, allocations or distributions.  Any special allocations of items of income or
gain pursuant to this Section 8.5(f) shall be taken into account in
computing subsequent allocations pursuant to this Section 8.5 so that the
net amount of any items so allocated and all other items allocated to each 

 

50

 

Member
pursuant to this Section 8.5 shall, to the extent possible, be equal to
the net amount that would have been allocated to each such Member pursuant to
the provisions of this Section 8.5 if such unexpected adjustments,
allocations or distributions had not occurred.

 

(g)                           Notwithstanding
any provision set forth in this Section 8.5, no item of deduction or loss
shall be allocated to a Member to the extent the allocation would cause a
negative balance in such Member’s Capital Account (after crediting to such
Capital Account any amounts that such Member is deemed to be obligated to
restore pursuant to Treasury Regulations Sections 1.704-2(g) and
1.704-2(i)(5), and after taking into account the adjustments, allocations and
distributions described in Treasury Regulations Sections
1.704-1(b)(2)(ii)(d)(4), (5) and (6)) that exceeds the amount that such
Member would be required to reimburse the Company pursuant to this Agreement or
under Applicable Law.  In the event any
but not all of the Members would have such excess Capital Account deficits as a
consequence of such an allocation of loss or deduction, the limitation set
forth in this Section 8.5(g) shall be applied on a Member by Member
basis so as to allocate the maximum permissible deduction or loss to each
Member under Section 1.704-1(b)(2)(ii)(d) of the Treasury
Regulations.  In the event any loss or
deduction shall be specially allocated to a Member pursuant to either of the
two preceding sentences, an equal amount of income of the Company shall be
specially allocated to such Member prior to any allocation pursuant to Section 8.5(b).

 

(h)                           Any “nonrecourse
deductions” within the meaning of Treasury Regulations Sections 1.704-2(b) and
1.704-2(i) shall be allocated as provided in the applicable Treasury
Regulations.

 

(i)                               To the
extent that any interest accrued or payable by the Company in connection with a
loan by a Member described in Section 4.4 gives rise to a deduction or
loss to the Company, such deduction or loss shall be specially allocated to
such Member.

 

(j)                               The Capital
Accounts of the Members may be adjusted at the Board of Directors’ discretion
in accordance with Treasury Regulations Section 1.704-1(b)(2)(iv)(f) to
reflect the fair market value of Company property (i) whenever a
Membership Interest in the Company is relinquished to the Company, (ii) whenever
a new or existing Member acquires an interest in the Company in exchange for
more than a de minimis Capital Contribution, (iii) upon any termination of
the Company within the meaning of Section 708 of the Code, and (iv) when
the Company is liquidated pursuant to Article XII, and shall be adjusted
in accordance with Treasury Regulations Section 1.704-1(b)(2)(iv)(e) in
the case of a distribution of any property (other than cash) to a Member.

 

51

 

Section 8.6                                      Consistent Tax Treatment. 
Each Member agrees that without the prior written consent of the
Company, approved by the Board of Directors, it shall not (i) treat on its
own income Tax returns or any other Tax-related filings, any item of income,
gain, loss, deduction or credit relating to its Membership Interests in a
manner inconsistent with the terms of this Agreement or the treatment of such
items by the Company as reflected on the Tax return or other information
statements furnished to such Member pursuant to Section 8.2 hereof, or (ii) file
any claim for a refund relating to any such item based on, or which would
result in, such inconsistent treatment, or take any other inconsistent action
(an “Inconsistent Position”). 
Notwithstanding the foregoing sentence, a Member shall be allowed to
take an Inconsistent Position, if (i) it obtains a written opinion from
nationally recognized counsel approved by the Company that the treatment
adopted by the Company is not consistent with law, (ii) notifies the
Company in writing in advance and attaches a copy of such opinion to such
notice, and (iii) discusses its position in good faith with the
Company.  Nothing in this Article VIII
shall limit the ability of any Member to take any position in its individual capacity
relating to any audit or other administrative proceedings of Company matters
that is left to the determination of any individual Member under the Code or
under any similar state or local provision.

 

ARTICLE IX

 

TRANSFER OF MEMBERSHIP INTERESTS

 

Section 9.1                                      Restrictions Applicable to All Transfers
by the Members.

 

(a)                            Each Member
agrees with the other Members and the Company that such Member shall not
Transfer to any Person (a “Transferee”) all or any portion of its
Membership Interests except as hereinafter expressly permitted in this Article IX
(each such permitted Transfer, a “Permitted Transfer”), provided,
however, that this Section 9.1, Section 9.2 and Section 9.3
shall not apply to (i) a Transfer resulting from a Change of Control of,
or Terminating Event with respect to, Constellation, or of Électricité de
France, S.A., (ii) Transfers
of capital stock or other equity interests of Constellation, or Électricité de
France, S.A., or (iii) Transfers that are governed by Section 12.2 of
this Agreement (each and collectively, “Excluded Transfers”).  Any purported Transfer of Membership
Interests other than a Permitted Transfer and an Excluded Transfer shall
be null and void.

 

(b)                           No Member
shall Transfer any of its Membership Interests at any time unless such action
would not:

 

(i)             constitute a
violation of any Applicable Laws of any jurisdiction or a breach of the
conditions to any exemption from registration of securities under any
Applicable Law or a breach of any undertaking or agreement of such Member
entered into pursuant to any Applicable Law or in connection with obtaining an
exemption thereunder;

 

(ii)          affect the Company’s
existence or qualification as a limited liability company under the Act or any
other Applicable Law;

 

52

 

(iii)       in the opinion of nationally
recognized counsel, render the Company a publicly traded partnership under
Sections 7704 or 469 of the Code, or otherwise cause it to be an association
taxable as a corporation for U.S. federal income Tax purposes; or

 

(iv)      cause the Company to be terminated
under Section 708(b)(1)(B) of the Code (unless this restriction is
waived by the other Members).

 

(c)                            Each
Transferee of Membership Interests that is not already a Member shall execute,
and deliver to each Member and the Company, a counterpart of this
Agreement.  Each such Transferee of
Membership Interests shall thereafter be deemed to be a Member hereunder and
shall have the benefit of, and be subject to, all of the rights, obligations and
limitations with respect to such Transferred Membership Interests (including
the restrictions on Transfers set forth in this Article IX) to the same
extent as the transferring Member under this Agreement; provided, that
in the event of a Transfer by a Member to an Affiliate (whether or not a
Permitted Transferee), such Member shall not be relieved of its obligations
hereunder unless the Transfer has been approved by the Company and the other
Members.  With respect to Transfers to
Affiliates, no such Transfer shall be effective unless, as a condition to the
Transfer, such Affiliate agrees that it will not cease to be an Affiliate of
such Member, unless prior to ceasing to be an Affiliate, such Affiliate
Transfers to such Member or another Affiliate thereof all of the Membership
Interests then owned by such Affiliate.

 

(d)                           No Transfer
of Membership Interests hereunder shall release the transferring Member from
any liability or obligation it may have hereunder with respect to liabilities
and obligations incurred prior to the date of such Transfer or with respect to
Membership Interests that it continues to own after the date of such Transfer.

 

(e)                            Each
certificate, if any, evidencing any Membership Interests owned by any Member on
the date hereof, or hereafter acquired by any Member, shall contain the
following restrictive legend:

 

THE SALE,
ASSIGNMENT, TRANSFER OR OTHER DISPOSITION OF THE SECURITIES EVIDENCED BY THIS
CERTIFICATE IS RESTRICTED BY THE TERMS OF THE SECOND AMENDED AND RESTATED
OPERATING AGREEMENT OF CONSTELLATION ENERGY NUCLEAR GROUP, LLC, A MARYLAND
LIMITED LIABILITY COMPANY, DATED AS OF
[            ],
COPIES OF WHICH ARE ON FILE WITH THE ISSUER OF THIS CERTIFICATE.  NO SALE, ASSIGNMENT, TRANSFER OR OTHER
DISPOSITION SHALL BE EFFECTIVE UNLESS AND UNTIL THE TERMS AND CONDITIONS OF THE
AFORESAID OPERATING AGREEMENT SHALL HAVE BEEN COMPLIED WITH IN FULL.

 

THE SECURITIES
REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED, UNDER THE SECURITIES LAWS OF ANY
STATE OF THE UNITED STATES OR UNDER THE SECURITIES LAWS OF ANY OTHER
JURISDICTION; AND SUCH SECURITIES MAY NOT BE SOLD OR 

 

53

 

TRANSFERRED UNLESS
(I) A REGISTRATION STATEMENT COVERING SUCH SECURITIES IS EFFECTIVE UNDER
THE SECURITIES ACT OF 1933 OR (II) THE TRANSACTION IS EXEMPT FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933 AND, IF THE COMPANY REQUESTS, AN
OPINION SATISFACTORY TO THE COMPANY TO SUCH EFFECT HAS BEEN RENDERED BY
COUNSEL.

 

In the event the requirement that all or any part of the restrictive
legend above be placed upon a certificate has terminated, or in the event that
the Board of Directors determines it is advisable to remove, replace or modify
such restrictive legend (based on the advice of competent outside legal
counsel), the Company shall provide each Member and any other Person that owns
any such securities, at its request, without any expense (other than applicable
transfer Taxes and similar governmental charges, if any), with new
certificates, if any, for such securities of like tenor either (i) not
bearing the legend with respect to which the restriction has ceased and
terminated and/or (ii) bearing such additional and/or modified restrictive
legends as the Board of Directors determines advisable based on the
above-mentioned legal advice.

 

(f)                              Prior to any
transfer by EDFD of its A Units to any Person who is not an Affiliate of EDFD,
EDFD agrees to discuss in good faith with CNL and CEN in order to structure
such transfer in a manner that may allow, to the extent possible, CNL and CEN
to share in the tax benefits, if any, resulting to the transferee in connection
with such transfer; provided, however, that such structure does
not result in an economic detriment to EDFD.

 

Section 9.2                                      Permitted Transfers.

 

(a)                            At any time,
a Member may Transfer its Membership Interests if the Transfer otherwise
complies with the following terms and conditions:

 

(i)             such Member shall
have delivered a Transfer Notice in accordance with Section 9.3(a) (except
in the case of a Transfer to a Permitted Transferee pursuant to this Section 9.2);

 

(ii)          the Member
delivering the Transfer Notice has complied with the right of first offer
provisions in Section 9.3 and otherwise shall comply with Section 9.1;

 

(iii)       such Transfer would not, in the
reasonable view of the non-transferring Members, create a regulatory challenge
or restriction that has the potential to materially disrupt operation of the
Company or its Subsidiaries;

 

(iv)      such Member and its Transferee
execute, acknowledge and deliver to the Company such instruments of Transfer
and assignment with respect to such Transfer as are in form and substance
reasonably satisfactory to the Company, including without limitation, the
execution of this Agreement;

 

54

 

(v)         the Company has determined, at such
Member’s expense, that the Transfer would not violate Section 9.1(b);

 

(vi)      such Member provides the Company with
the notification required by Section 6050K(c)(1) of the Code;

 

(vii)   all costs and expenses incurred by
the Company in connection with the Transfer of Membership Interests shall be
paid by the transferring Member or by the Transferee; and

 

(viii)                                                to the
extent that any Members are Affiliates, the Membership Interests held by each
such Affiliate must be transferred to a single Person or to Persons which are
also Affiliates.

 

(b)                           Notwithstanding
anything in Section 9.2(a) to the contrary, a Member may Transfer all
or any portion of its Membership Interests to Permitted Transferees of the
Member at any time and without being subject to the right of first offer
provisions in Section 9.3, but subject to compliance with clauses
(a)(iii), (a)(iv), (a)(v), (a)(vi) and (a)(vii) of this Section 9.2.

 

(c)                            In the event
the conditions set forth in Section 9.2(a) (and 9.2(b) in the
case of Transfers to Permitted Transferees) above are not satisfied in
connection with any Transfer subject thereto, the Transfer shall be null and
void ab initio, the Company shall not recognize the attempted purchaser,
assignee or Transferee for any purpose whatsoever, and the non-transferring
Member attempting such Transfer shall have breached this Agreement, for which
the Company and the other Members shall have all remedies available under
Applicable Law.  Each Member specifically
acknowledges that a breach of this Article IX would cause the Company and
the Member to suffer immediate and irreparable harm, which could not be
remedied by the payment of money.  In the
event of a breach or threatened breach by a Member of the provisions of this Article IX,
the Company or other Members shall be entitled to injunctive relief to prevent
or end such breach.  Nothing herein shall
be construed to prevent the Company or other Members from pursuing any other
remedies available to them for such breach or such threatened breach, including
the recovery of damages, reasonable attorneys’ fees and expenses.  A Transferee shall automatically be admitted
as a Member of the Company with respect to the transferred Membership Interest
upon consummation of the Transfer in compliance with this Article IX.

 

Section 9.3                                      Right of First Offer.

 

(a)                            Except in
the case of a Transfer to a Permitted Transferee pursuant to Section 9.2,
prior to the Transfer of Membership Interests, the Member(s) proposing to
Transfer all or any portion of its Membership Interest (the “Offering Member”)
must deliver a Transfer Notice to the other Member(s) who is not an
Affiliate of the Offering Member at least sixty (60) Days but no more than
ninety (90) Days prior to the proposed Transfer.  The other Member(s) who is not an
Affiliate of the Offering Member shall have the option to purchase (or to
designate a third party to purchase) all of the Membership Interests proposed
to be Transferred for the cash purchase price set forth in the Transfer Notice
and pursuant to the other 

 

55

 

terms
and conditions set forth in this Agreement. 
The other Member(s) who is not an Affiliate of the Offering Member
shall have sixty (60) Days from receipt of the Transfer Notice in which to
exercise its option to purchase (or to designate a third party to purchase) all
of the Membership Interests pursuant to this Section 9.3(a) by
providing written notice of exercise of the option to the Offering Member and
to the Company.

 

(b)                           In the event
that at the end of the sixty (60) Day period contemplated by Section 9.3(a),
the other Member(s) who is not an Affiliate of the Offering Member have
not elected to purchase (or to designate a third party to purchase) all of the
Membership Interests proposed to be Transferred, then the Offering Member shall
be free to consummate the transaction described in the Transfer Notice, provided,
that within sixty (60) Days after the end of the sixty (60) Day period
contemplated by Section 9.3(a), a definitive agreement is executed for the
sale of such Membership Interests, and the terms and conditions (including
price) in such agreement are no more favorable to the purchaser than those set
forth in the Transfer Notice.  In the
event a Member exercises the option to purchase (or to designate a third party
to purchase) under Section 9.3(a), but such Member (or its designee, if
applicable) fails to tender the required consideration at the closing, in
addition to being entitled to complete the proposed transaction, the Offering
Member shall have all rights and remedies against the other Member (and its
designee, if applicable) available for breach of contract.

 

(c)                            The parties
shall use their reasonable efforts to close any purchase under Section 9.3
as promptly as possible after (i) the other Members provide written notice
of the exercise of their option under Section 9.3(a) or (ii) the
Offering Member executes a definitive agreement as contemplated by Section 9.3(b),
as applicable.  At the closing, the
Offering Member shall deliver to the purchaser an executed assignment of the
subject Membership Interest satisfactory in form to counsel for the Company,
and the purchaser shall deliver the purchase price in cash or immediately
available funds.  The Offering Member and
the purchaser each shall execute and deliver such other documents as may
reasonably be requested by the other.  If
the closing of any purchase by the other Members (or their designee, if
applicable) under Section 9.3(a) does not occur within one year of
the expiration of the sixty (60) Day period contemplated by Section 9.3(a),
then the right to close on the purchase shall lapse and the Offering Member may
sell the Membership Interests proposed to be Transferred in accordance with Section 9.3(b) (on
terms and conditions (including price) no more favorable to the purchaser than
those set forth in the Transfer Notice) as if the other Members had elected not
to purchase the Offering Member’s interests.

 

Section 9.4                                      Change of
Control of a Member or Terminating Event.  If any Member should undergo a Change of
Control or Terminating Event, then the other Member(s) who is not an
Affiliate of such Member may elect to transfer all or any portion of its
Membership Interests in the Company without regard to the requirements of Section 9.3.  In the event of a Change of Control or
Terminating Event of Constellation, certain provisions of Article II and Article III
of, and as specified in, the Amended and Restated Investor Agreement, dated as
of December 17, 2008, by and between EDFI and Constellation shall
terminate and shall be of no further force and effect, as provided for therein.

 

56

 

ARTICLE X

 

CERTAIN
OBLIGATIONS OF THE COMPANY AND THE MEMBERS

 

Section  10.1           Preemptive Rights.

 

(a)         If the Company offers to issue or sell
any New Securities in accordance with Section 7.2(j)(vii), each Member shall
have the right (exercisable for a period of not less than thirty (30) Days
after notice to the other Members of the intent to issue such New Securities
and the terms (including the minimum price) of such proposed issue (the “Preemptive
Notice”)) to subscribe to all or any portion of such New Securities on the
same terms and conditions and for the same price per New Securities as the
Company proposes to issue or sell such New Securities.  If all Members exercise this right, the
purchase of New Securities shall be in such proportion as they agree, or
failing an agreement, each shall have the prior right to purchase a pro-rata
portion based on their Percentage Interests and a secondary right to purchase
any New Securities not purchased by the other Members exercising its full prior
right.

 

(b)         “New Securities” shall mean any
direct equity or ownership interest of any kind in the Company, whether now or
hereafter authorized, and rights, options or warrants to purchase such an
interest, and securities of any type whatsoever that are, or may become, convertible
into such an interest in the Company; provided, however, that “New
Securities” shall not include:

 

(i)    Equity
or ownership interests issued in connection with the acquisition of another
business entity or line of business of another business entity by the Company
through merger, consolidation, purchase of all or substantially all of the
assets, or other reorganization as a result of which the Company owns not less
than 51% of the voting power of such entity; provided, that any dilution
to the Membership Interests of the Members resulting from the issuance of such
securities shall be borne by the Members, pro rata, in proportion to their
respective Percentage Interests; or

 

(ii)   Equity
or ownership interests issued in connection with any recapitalization,
reclassification or similar event by the Company; provided, that any
dilution to the Membership Interests of the Members resulting from such
recapitalization, reclassification or similar event shall be allocated among
the Members, pro rata, in proportion to their Percentage Interests.

 

(c)         Following the completion of the
decision period for the Members to exercise their preemptive rights pursuant to
this Section 10.1, the Company shall have the right, for a period of one
hundred and eighty (180) Days, to sell any New Securities not purchased by the
Members, on terms and conditions no more favorable to the purchaser than those
specified in the Preemptive Notice, including with respect to the price per New
Security.  Thereafter, any issuance or
reissuance of New Securities shall be subject to the provisions of this Section
10.1.

 

57

 

Section  10.2           Related Party Transactions.

 

(a)         Subject to Section 7.2(j) and to the
terms of the Administrative Services Agreement, to the extent any Member or an
Affiliate of any Member provides assigned or seconded personnel or
administrative services to the Company, such services shall be priced at
Unburdened Cost.

 

(b)         To support the operations of the
Company in areas in which it needs additional resources, the Members shall
negotiate in good faith the necessary agreements to govern the assignment and
secondment of personnel employed by the Members to the Company and the
provision of administrative services to the Company.

 

Section 10.3           Operational
Matters.

 

(a)         The Company shall cause the
Company-Generation Subs to enter into the CECG Power Purchase Agreements and
the EDFTNA Power Purchase Agreements whereby the Company-Generation Subs shall
sell and deliver energy generated by the nuclear generation facilities owned by
the Company-Generation Subs to CECG and EDF Trading North America, LLC,
respectively.

 

(b)         Pursuant to the Power Services Agency
Agreement, the Company will enter into an agreement, or will cause the Company-Generation
Subs to enter into one or more agreements, with CECG for CECG to provide
services on behalf of each Company-Generation Sub including:  (i) marketing capacity, ancillary services
and other products that have not been sold under the CECG Power Purchase
Agreements, the EDFTNA Power Purchase Agreements or other power purchase
agreements; (ii) scheduling energy from the nuclear generation facilities owned
by the Company-Generation Subs; and (iii) interfacing with the applicable
independent system operator on behalf of each Company-Generation Sub.  In consideration for providing such services,
the Company or the Company-Generation Subs, as applicable, shall pay CECG an
aggregate amount equal to [$87,500,000](1), which shall be payable, subject to
any adjustments, in accordance with the terms and conditions of the Power
Services Agency Agreement.

 

(c)         Pursuant
to the Administrative Services Agreement, the Company will enter into an
agreement with Constellation Energy Group, Inc. for Constellation Energy
Group, Inc. to provide certain administrative services to the Company.

 

(d)         The Members shall cause the
Company-Generation Subs not to agree to any extension to the term of any CECG
Power Purchase Agreement or EDFTNA Power Purchase Agreement, unless all the
Directors then in office shall agree to such extension.  At any time that the Directors are
considering such an extension, all of the Directors appointed by a Member must
vote in the same manner, either for or against.

 

(1)   This amount assumes a September 30, 2009
closing date.  This amount will be
reduced by $3,500,000 each month, as adjusted pro rata, based on the actual
date of closing.

 

58

 

(e)         The Company shall establish and
maintain Risk Profile Guidelines, which shall govern each Company-Generation
Sub and which may include, without limitation, hedge ratios, policies regarding
affiliate transactions, counterparty credit requirements, and limitations on
unit contingent or firm power sales transactions.  The Company’s initial Risk Profile Guidelines
are attached hereto as Exhibit D.

 

ARTICLE XI

 

CORPORATE
OPPORTUNITIES AND NON-SOLICITATION

 

Section  11.1           Corporate Opportunities. 
Except as specifically provided in Unistar Nuclear Energy, LLC Operating
Agreement, dated as of July 20, 2007, by and among Constellation, EDFD and
Unistar Nuclear Energy, LLC, neither the Company nor any Member shall have any
expectation or interest in any business opportunity that is presented to any of
the Members or any of their respective officers, directors or employees or
designees to the Board, unless, in the case of any such person who is a
director or officer of the Company, such business opportunity is expressly
offered to such director or officer in his or her capacity as a Company
director or officer.  Each of the Members
and their Affiliates shall be expressly permitted to acquire and hold any debt
securities or evidence of indebtedness issued by the Company or its Affiliates.

 

Section  11.2           Non-Solicitation. 
From and after the date hereof through the date such Member no longer
owns any Membership Interests, and other than expressly set forth herein or in
any ancillary agreement hereto, no Member or its Affiliates shall, directly or
indirectly, solicit, induce, encourage or attempt to persuade any employee of
the Company, its Subsidiaries, the Members or their Affiliates (a) to leave his
employment with the Company, its Subsidiaries, the Members or their Affiliates
in order to become an employee, consultant or independent contractor to or for
any other Person or (b) to terminate or adversely modify such employee’s
relationship with the Company, its Subsidiaries, the Members or their
Affiliates; provided, however, that this Section 11.2 shall not
restrict an employer from publishing or posting open positions in the course of
normal hiring practices that are not specifically sent to, or do not
specifically target, employees of the Company, its Subsidiaries, the Members or
their Affiliates.

 

ARTICLE XII

 

WITHDRAWAL,
DISSOLUTION AND LIQUIDATION

 

Section  12.1           No Right of Withdrawal; No Interest.

 

(a)         Except as otherwise provided herein, no
Member shall have the right to withdraw from the Company or to demand or to
receive the return of all or any part of its Capital Account.  In the event a Member withdraws in violation
of this Section 12.1(a), such Member hereby agrees that such withdrawal will
constitute a breach of this Agreement and such Member also agrees that the
Company, in addition to any remedies otherwise available to the Company, may
offset any damages due to such breach against any amounts otherwise
distributable to such Member or another Member who is an Affiliate of such
Member.  Subject

 

59

 

to
the foregoing, upon withdrawal by any Member, such Person shall immediately
cease to be a Member, shall not be entitled to receive any monies or property
for its Membership Interest and the Withdrawn Member or the successor to the
Withdrawn Member shall be deemed to be and shall only have the rights of an
assignee of the Withdrawn Member under Sections 4A-603 and 4A-604 of the Act.

 

(b)         Except as otherwise provided herein, no
interest shall be paid to any Member in respect of its Capital Contribution or
Capital Account balance.  Except as
otherwise provided in this Agreement, no Member shall be entitled or permitted
to withdraw any Capital Contributions or any money or other property from the
Company without the written consent of the Board of Directors which consent may
be withheld for any reason or for no reason. 
If circumstances require a return of any capital, no Member shall have
the right to receive property other than cash, unless otherwise specifically
agreed in writing by the Board of Directors at the time of such distribution.

 

Section  12.2           Terminating Event.

 

(a)         Notwithstanding anything to the
contrary contained in this Agreement, upon the occurrence of a Terminating
Event with respect to a Member, the Person that suffers the Terminating Event
shall immediately notify the Company, and the Company, for one hundred and
twenty (120) days after it first learns of such Terminating Event, may elect to
purchase or may designate a third party to purchase (the “Repurchase
Election Period”) such Person’s entire Membership Interest in the Company
and all economic rights of the Person in the Company (the “Withdrawal
Interest”) from such Person or such Person’s legal or personal
representative(s) or successor(s) (as applicable) (individually and
collectively, the “Withdrawn Member”) for a price equal to the Fair
Market Value of the Withdrawal Interest (the “Redemption Price”).  If the Company timely makes that election,
the Company or its designee shall purchase from the Withdrawn Member, and the
Withdrawn Member shall sell to the Company or the Company’s designee, the
Withdrawal Interest at the Redemption Price and on the terms set forth in the
next paragraph.  Effective as of the
occurrence of the Terminating Event, the Person that suffers the Terminating
Event shall immediately cease to be a Member and, if such Person’s Withdrawal
Interest is not purchased by the Company or the Company’s designee pursuant to
this Section 12.2, unless the Board of Directors determines otherwise, such
Person shall be and shall only have the rights of an unadmitted assignee under Section
4A-603 and Section 4A-604 of the Act (an “Unadmitted Assignee”).

 

(b)         The closing for any sale of a
Withdrawal Interest of a Withdrawn Member, and purchase by the Company or its
designee, shall take place at the Company’s principal office on the tenth
Business Day following the end of the Repurchase Election Period (unless the
Fair Market Value has not been determined as of such date, in which case the
purchase shall take place on the fifth Business Day following the determination
of Fair Market Value).  At the closing, (i)
the Withdrawn Member shall assign and transfer to the Company or its designee
all right, title and interest in and to the Withdrawal Interest (free and clear
of all liens and encumbrances) and shall execute and deliver to the Company or
its designee such other and further assurances as the Company or its designee
may reasonably require to transfer to and vest the Withdrawal Interest in the
Company or the designee, and (ii) the Company or its designee shall pay the
Redemption Price in cash.  If the
Withdrawal Interest is transferred to a

 

60

 

designee
of the Company, such designee, at the option of the Member that did not suffer
the Terminating Event and is not an Affiliate of the Member suffering the
Terminating Event, may be admitted as a Member of the Company.  Notwithstanding anything to the contrary
contained in this Agreement, any decisions and/or determinations to be made by
the Company pursuant to this Section 12.2 (e.g., whether to elect to purchase
the Withdrawal Interest) shall be made solely by the Directors appointed by the
Member that did not suffer the Terminating Event and is not an Affiliate of the
Member suffering the Terminating Event and not by the Directors appointed by
the Member that suffered the Terminating Event (or by an Affiliate of such
Member) or the management of the Company.

 

(c)         Notwithstanding anything to the
contrary contained in this Agreement, an assignee of the Withdrawn Member
pursuant to Section 12.1(a) or an Unadmitted Assignee may not transfer any of
its rights in the Company without the unanimous consent of the Member(s) of the
Company.

 

Section  12.3           Dissolution. 
The Company shall be dissolved and its affairs wound upon the occurrence
of any of the following events:

 

(a)         upon a sale or condemnation of all or
substantially all of the equity securities or the assets of the Subsidiaries of
the Company and the receipt of cash consideration therefor;

 

(b)         upon an affirmative vote of the Board
of Directors in accordance with Section 7.2(j)(xii);

 

(c)         upon the appointment of a trustee,
custodian or other similar receiver for the Company or the occurrence of a
Bankruptcy Event with respect to the Company;

 

(d)         upon the filing by the last remaining
Member of a petition in bankruptcy, the occurrence of any other Bankruptcy
Event with respect to such last remaining Member or the termination of the
legal existence of the last remaining Member;

 

(e)         at any time that there are no Members of
the Company, unless the business of the Company is continued without
dissolution in a manner permitted by the Act; or

 

(f)          upon the entry of a decree of judicial
dissolution of the Company pursuant to the Act.

 

Section  12.4           Winding Up.

 

(a)         Upon dissolution pursuant to Section 12.3,
the Board of Directors shall proceed as promptly as practicable to wind up the
affairs of the Company and distribute the assets thereof or appoint one or more
liquidating trustees to do so; provided, that the assets of the Company
shall be liquidated in an orderly and businesslike manner so as not to obtain
less than fair market value therefor. 
The appointment of any one or more liquidating trustees may be revoked,
or a successor or additional liquidating trustee(s) may be appointed, by the
Board of Directors.

 

61

 

(b)        Upon
dissolution pursuant to Section 12.3, all of the Company’s assets, or the
proceeds therefrom, shall be distributed in the following order of priority:

 

(i)    first, to creditors of the Company, including any Member in
its capacity as creditor, to the extent otherwise permitted by law, in
satisfaction of debts, liabilities and obligations of the Company;

 

(ii)   second, to the payment of the expenses of liquidation;

 

(iii)  third, to the setting up of any reserves that the Board of
Directors or the liquidating trustee(s), as the case may be, may deem
reasonably necessary for any contingent, conditional or unmatured claims and
obligations of the Company;

 

(iv)  fourth, to the Members holding A Units, pro rata in
proportion to their relative Percentage Interests, an amount equal to the Unit
A Accelerated Liquidation Amount as of the date of the applicable distribution;
and

 

(v)   fifth, to the Members, in accordance with the positive balances of their respective
Capital Accounts and otherwise in compliance with Treasury Regulations Section 1.704-1(b)(2)(ii)(b)(2),
after taking into account all adjustments to their Capital Accounts for all
periods.

 

(c)         At no time during the term of the
Company or upon dissolution or liquidation of the Company shall a Member with a
deficit balance in its Capital Account have any obligation to the Company or to
the other Members to restore such deficit balance, except as may be required by
Applicable Law or in respect of any deficit balance resulting from a
distribution made in contravention of this Agreement.

 

(d)         Upon compliance with the distribution
plan set forth herein, the proper officers of the Company shall execute,
acknowledge and cause to be filed with the Department of Assessments and
Taxation of the State of Maryland Articles of Cancellation of the Company.  Subject to the provisions of the Act, upon
the filing of Articles of Cancellation, the Company’s existence shall
terminate.

 

(e)         Notwithstanding the provisions of Section
8.5, for the taxable year or period during which the Company is dissolved (and
the taxable year or period immediately preceding the taxable year of
dissolution, if the event which gives rise to such dissolution of the Company
under Section 12.3 occurs in such prior taxable year), Net Income or Net Loss
(and, to the extent necessary, items of gross income, gain, loss and
deduction), shall be allocated among the Members such that, to the maximum
extent possible, each Member’s Capital Account balance immediately prior to the
distribution in Section 12.4(b)(iv) equals the amount that would be distributed
to such Member under Sections 12.4(b)(iv) and 12.4(b)(v) if distributions under
Section 12.4(b)(v) were instead made in accordance with the Members’ respective
Percentage Interests.

 

62

 

ARTICLE XIII

 

GENERAL
PROVISIONS

 

Section  13.1           Notices. 
All notices, requests, consents, agreements or other communications
under this Agreement must be in writing to be effective and, except as set
forth in Section 7.2(f), will take effect (or be deemed to have been given or
delivered, as the case may be):  (a) on
the Business Day sent, when delivered by hand or facsimile transmission (with
confirmation) during normal business hours of the recipient or (b) on the
Business Day following the Business Day of sending, if delivered by
internationally recognized overnight courier, in each case, to such party at
its address (or number) set forth below or such other address (or number) as
the party may specify by notice.  Any new
Member of the Company admitted pursuant to Article IX hereof, promptly upon its
admission, shall provide its address for notices to the Secretary of the
Company and to the other Members.

 

If to CNL or CEN:

 

Constellation Energy
Group, Inc.

750 East Pratt Street, 17th Floor

Baltimore, Maryland 21202

Attention:  General Counsel

Phone:  (410) 470-3011

Fax:  (410) 470-5766

 

If to EDFD:

 

EDF Development Inc.

c/o E.D.F. International S.A.

20 Place de la Défense

Paris la Défense Cedex, France 92050

Attention:  Marianne Laigneau

Phone:  +33 1 56 65 39 71

Fax:   +33 1 40 42 61 67

 

If to the Company:

 

Constellation Energy
Nuclear Group, LLC

750 East Pratt Street, 17th Floor

Baltimore, Maryland 21202

Attention:  General Counsel

Phone:  (410) 470-3312

Fax:  (443) 213-3680

 

63

 

Section  13.2           Successors and Assigns. 
This Agreement shall be binding upon and shall inure to the benefit of
the Members, the Company, their respective successors and Permitted
Transferees.  This Agreement is personal
to the Members and the Company, and no Member or the Company may assign or
Transfer (except in connection with Transfers permitted or required by the
terms of this Agreement) the rights accruing hereunder nor (except as permitted
or required by this Agreement) may performance of any duties by any Member or
the Company be delegated or assumed by any other Person without the prior
written consent of the other Members and the Company.  Assignments or delegations made in violation
of this Section 13.2 shall be null and void. 
References in this Agreement to Members shall also be deemed to
constitute a reference to an Unadmitted Assignee where the provision relates to
economic rights and obligations.  By way
of illustration and not limitation, such provisions would include those
regarding Capital Accounts, distributions, allocations and contributions.

 

Section  13.3           Parallel Vehicle. 
If the Company encounters legal, Tax, business, accounting, regulatory
or other impediments to the making of a potential investment, or the Company
determines that having the Members make a potential investment or hold an
existing investment through an entity other than the Company would be more
favorable from a Tax, legal, business, accounting, regulatory or other
perspective, the Company may require such Members to participate in the
potential or existing investment, as the case may be, through one or more other
entities organized by or on behalf of the Company or the Members and having
economic terms and conditions substantially identical (on a single investment
basis, if applicable), to the extent practicable, to those of the Company (the “Parallel
Vehicle”).   The
agreements regarding organization, management and governance with respect to
the Parallel Vehicle and the responsibilities of the Members with respect
thereto shall be substantially equivalent to those of the Company, with
appropriate changes to reflect its position as a parallel vehicle of the
Company.

 

Section  13.4           Dispute Resolution.

 

(a)         In the event of a deadlock vote of the Board of
Directors on a matter presented for determination, a failure of the Members to
agree on a matter requiring Member approval under Section 7.8 or requiring
unanimous approval by the Board of Directors under Section 7.2(j) (other than a
matter subject to resolution pursuant to Section 7.3(c)), or in connection with
any dispute between the Members concerning the Company, the Members will use
their reasonable efforts to resolve the dispute within thirty (30) Days.  If the issue has not been resolved within
such 30-Day period, the Members will escalate the dispute to the respective
Parent CEOs, who will meet to discuss and use their reasonable efforts to
resolve the dispute.  Such resolution may
include, if the respective Parent CEOs so agree (subject to any required
approval by the respective Members’ boards of directors): (i) to dissolve the
Company; (ii) to allow one Member to depart the Company by having such Member
sell all of its Membership Interests to a third party; (iii) to have any Member
withdraw from the Company; or (iv) any other resolution upon which the Parent
CEOs may so agree. If
the Members remain unable to resolve the dispute within thirty (30) Days of the
initial meeting of the Parent CEOs, either party may submit the dispute to binding arbitration
pursuant to this Section 13.4.

 

(b)         Except as otherwise specifically
provided herein, all disputes arising out of or in connection with this
Agreement, including any dispute regarding its

 

64

 

existence,
termination or validity, each Member shall have the right to have recourse to
and shall be bound by the pre-arbitral referee procedure of the International
Chamber of Commerce in accordance with its rules for a Pre-Arbitral Referee
Procedure.  All disputes arising out of
or in connection with this Agreement (including as to existence, termination
and validity) shall be finally settled under the Rules of Arbitration of the
International Chamber of Commerce (the “Rules”) by three (3) arbitrators
appointed in accordance with said Rules. The place of the pre-arbitral referee
procedure and of the arbitration procedure shall be New York, New York, United
States of America.  The proceedings
before the arbitral tribunal (including with respect to the Pre-Arbitral
Referee Procedure) shall be governed by the Rules.  The rules of law to be applied by the
arbitral tribunal to the merits of the dispute shall be the rules of laws of
the State of New York.  In the event of a
dispute arising out of Section 7.2(j)(v) herein, the sole issue to be
considered and decided by the arbitral tribunal shall be whether or not the
Member that is in favor of the distribution that is the subject of the dispute
submitted to the arbitral tribunal shall have demonstrated by a preponderance
of the evidence that such distribution would not materially and adversely
affect the business, operations or financial condition of the Company and its
Subsidiaries, taken as a whole.  The
language of the arbitration shall be English. 
Evidence shall be provided in English and pleadings shall be done in
English.  The arbitral tribunal shall
render its decision within six (6) months from the date of signature on the
terms of reference, except that with regard a dispute arising out of Section 7.2(j)(v),
the arbitral tribunal shall use its best efforts to render its decision and
award within sixty (60) days of the signing or approval of the terms of
reference.  Any decision or award of the
arbitral tribunal shall be final and binding upon the parties to the
arbitration proceeding.  The Members
waive to the extent permitted by applicable law any rights to appeal or to
review of such award by any court or tribunal. 
The Members agree that the arbitral award may be enforced against the
parties to the arbitration proceeding or their assets wherever they may be
found and that a judgment upon the arbitral award may be entered in any court
having jurisdiction thereof.

 

65

 

Section  13.5           Guarantee.  Each of
Constellation and EDFI, unless the Parent is the Member, unconditionally,
absolutely and, subject to the following sentence, irrevocably guarantees to
each Member (other than the Member(s) of which such Parent is an Affiliate) the
full and prompt payment, as and when due and payable, of all financial
obligations hereunder (the “Guarantee”). The Parent’s Guarantee shall
remain in effect for so long as this Agreement remains in effect and an
Affiliate of Parent remains a Member. 
Parent hereby guarantees that its Guarantee will be paid and performed
strictly in accordance with the terms of this Agreement, regardless of any law,
regulation or order now or hereafter in effect in any jurisdiction affecting
any of such terms or the rights of any Member with respect thereto.  Each Parent agrees that its Guarantee
constitutes a guarantee of payment when due and not of collection, and hereby
waives demand, presentment and notice of default or breach for non-performance
of any of the covenants, terms, conditions or agreements in any other matter or
thing mentioned and described in this Agreement.  Furthermore, the occurrence of any one or
more of the following shall not affect the enforceability or effectiveness of
the Parent’s Guarantee: (i) any modification, amendment, settlement, release
(in whole or in part) or enforcement of the obligations guaranteed, (ii) any
merger, consolidation, restructuring or termination of the corporate existence
of the Member or Unadmitted Assignee that is an Affiliate of Parent, (iii) the
illegality, invalidity or unenforceability of all or any part of the
obligations guaranteed or any agreement or instrument related thereto, (iv) the
failure of any Member or Unadmitted Assignee or the Company to exhaust any
right, remedy, power or privilege it may have against the Member(s) or
Unadmitted Assignee that is an Affiliate of Parent (including failure to file
or enforce a claim in any bankruptcy or other proceeding), (v) any Terminating
Event, Bankruptcy Event, or proceedings similar to those incorporated in such
terms, commenced by or against such Member(s) or Unadmitted Assignee, including
any discharge of, or bar or stay against collecting, all or any part of the
obligations guaranteed, and (vi) any other defense with respect to the
performance of all or any part of the Parent’s Guarantee, including but not
limited to the effect of any statute of limitations.

 

Section  13.6           Governing Law. 
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF MARYLAND WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS.

 

Section  13.7           Entire Agreement; Amendment. 
This Agreement (including the exhibits hereto) contains the entire agreement
among the parties hereto with respect to the transactions contemplated herein,
supersedes all prior written agreements and negotiations and oral
understandings, if any, including the Original Agreement, and this Agreement
(including exhibits hereto) may not be amended or supplemented except with the
written consent of each Member or as otherwise permitted by the terms of this
Agreement to be amended by the Board of Directors.

 

Section  13.8           No Waiver.  No failure to
exercise and no delay in exercising any right, power or privilege of a Member
shall operate as a waiver or a consent to the modification of the terms hereof
unless given by that Member in writing.

 

66

 

Section  13.9           Separability
of Provisions.  Each provision of this Agreement shall be
considered separable; and if, for any reason, any provision or provisions
herein are determined to be invalid and contrary to any existing or future law,
such invalidity shall not impair the operation of or affect those portions of
this Agreement which are valid.

 

Section  13.10         Confidentiality. 
Each Member shall use reasonable efforts to keep, and shall ensure that
its Affiliates, shareholders, members, directors, officers, employees, agents
and other representatives use reasonable efforts to keep, from and after the
date hereof through a period of two (2) years from the date such Member no
longer owns any Membership Interests, confidential all information acquired
from the Company or its Subsidiaries or Affiliates or from the other Members or
their Affiliates pursuant to this Agreement or otherwise, including the
contents of this Agreement, except that the foregoing restriction shall not
apply to any information that (a) is or hereafter becomes generally available
to the public other than by reason of any default with respect to a
confidentiality obligation under this Agreement; (b) was already known to the
recipient; (c) is disclosed to the recipient by a third party who, to the
recipient’s knowledge, is not in default of any confidentiality obligation to
the disclosing Member hereunder; (d) was developed by or on behalf of the
receiving Member without reliance on confidential information received
hereunder; (e) is disclosed by any Member to its auditors, attorneys, financial
advisors, consultants and other advisors, provided, that any such
auditors and attorneys have been informed of the confidential nature of such
information and any such financial advisors, consultants and other advisors
have signed a confidentiality agreement agreeing to treat such information as
confidential; (f) is disclosed to a regulatory authority to the extent that
disclosure is, in the Member’s good faith judgment, required or appropriate; provided,
that such Member requests confidential treatment for any information so
disclosed; or (g) is otherwise required to be disclosed in compliance with
Applicable Law or stock exchange rules or regulations or order by a court or
other regulatory body having competent jurisdiction; provided, that such
Member provides the other Members with prior notice of such disclosure to the
extent permitted by Applicable Law, stock exchange rules or other
regulation.  Notwithstanding the
foregoing, each Member (and each employee, representative, or other agent of
such Member) may disclose to any and all persons, without limitation of any
kind, the Tax treatment and Tax structure of: (i) the Company and (ii) any
transactions of the Company, and all materials of any kind (including opinions
or other Tax analyses) that are provided to the Member relating to such Tax
treatment and Tax structure.  For this
purpose, “Tax structure” means any facts relevant to the Tax treatment
of a transaction but does not include information relating to the identity of
the Company or its Members.

 

Section  13.11         Expenses.  Each Member
agrees that it shall be solely responsible for any fees or expenses incurred by
it in connection with the drafting, negotiation or execution of this Agreement
and any ancillary documents hereto (including the cost of any attorneys,
accountants, consultants and any other representatives or agents retained by
such Member).

 

Section  13.12         Counterparts. 
This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.

 

67

 

Section  13.13         Headings.  The section
and other headings contained in this Agreement are for reference purposes only
and shall not affect the meaning or interpretation of this Agreement.

 

Section  13.14         Gender and Number. 
Whenever required by the context hereof, all pronouns and any variations
thereof will be deemed to refer to the masculine, feminine and neuter, singular
and plural.

 

Section  13.15         Further Assurances. 
From time to time, at the reasonable request of any party hereto and
without further consideration, each other party hereto shall execute and
deliver such additional documents and take all such further action as may be
necessary or appropriate to consummate and make effective, in the most
expeditious manner practicable, the transactions contemplated by this Agreement
or to carry out the terms of this Agreement.

 

Section  13.16         Survival of Obligations. 
The obligations of the Members under Section 7.7, Section 13.3, Section 13.4,
Section 13.6, Section 13.9, Section 13.10 and Section 13.24 of this Agreement
shall survive any expiration, termination or cancellation of this Agreement or
the dissolution of the Company.

 

Section  13.17         Insurance.  The Company
shall, and shall cause each of its Subsidiaries and Investee Companies to
maintain with financially sound and reputable insurance companies, insurance in
such amounts and against such risks as are customarily maintained by companies
engaged in the same or similar businesses operating in the same or similar
locations.

 

Section  13.18         Nuclear Insurance. 
The Company shall cause each of its Licensed Subsidiaries and each
Investee Companies that is an NRC licensee to obtain and maintain insurance
coverage, for itself and its contractors, for public liability arising in
connection with a nuclear incident (as those terms are defined in the Atomic
Energy Act of 1954, as amended (the “Atomic Energy Act”)) at, or arising
out of, the operation of such nuclear power units.  This insurance shall be in such form and in
such amount as required by the NRC pursuant to Section 170 of the Atomic Energy
Act.  The Company shall cause each of its
Licensed Subsidiaries and each Investee Companies that is an NRC licensee to
execute the governmental indemnity agreement required by Section 170 of the
Atomic Energy Act.  In the event the
nuclear liability protection requirements in effect on the date of this
Agreement expire or are amended or repealed, the Company shall cause each of
its Licensed Subsidiaries and each Investee Company that is an NRC licensee and
each such company operating any nuclear project to maintain (i) the insurance
coverage provided by law and (ii) at least the same level insurance coverage
and public liability protection as is currently provided through governmental
indemnity and liability insurance to the extent available.

 

Section  13.19         FIRPTA.  Upon the
reasonable request of any Member in connection with any proposed Transfer by
such Member of its Membership Interest in accordance with the terms of this
Agreement, and at the Member’s sole expense, the Company will issue a written
statement certifying as to whether or not fifty percent or more of the value of
the gross assets of the Company consists of U.S. real property interests under Section
897(c)(1)(A) of the Code or ninety percent or more of the value of the gross
assets of the Company consists of U.S. real property interests plus cash or
cash equivalents.

 

68

 

Section  13.20         Exclusive Remedies. 
Each Member’s exclusive remedies and liabilities for any alleged or
actual breach of this Agreement shall be as set forth in this Agreement.

 

Section  13.21         Title to Company Property. 
All property owned by the Company, whether real or personal, tangible or
intangible, shall be deemed to be owned by the Company as an entity, and no
Member or Unadmitted Assignee, or their respective Affiliates, individually, shall
have any ownership of such property.  The
Company may hold any of its assets in its own name or in the name of its
nominee, which nominee may be one or more Persons.

 

Section  13.22         Waiver of Partition Action. 
Each of the Members irrevocably waives any right which it may have to
maintain an action for partition with respect to Company property.

 

Section  13.23         Statutory References. 
Each reference in this Agreement to a particular statute or regulation,
or a provision thereof shall, at any particular time, be deemed to be a
reference to such statute or regulation, or provision thereof or to any similar
or superseding statute or regulation, or provision thereof, as at such time is
in effect.

 

Section  13.24         Legal Fees.  In the event
of any litigation arising out of or in connection with this Agreement or with
any parties’ performance hereunder, the party that prevails in any such
litigation shall be paid its reasonable attorney’s fees and expenses, through
all appeals, by the party that does not prevail in such litigation.  The provisions of this Section 13.24 shall
survive any dissolution of the Company.

 

[Remainder
of Page Intentionally Left Blank.]

 

69

 

IN
WITNESS WHEREOF, the Members and the Company have executed this Second Amended
and Restated Agreement as of the date set forth above.

 

 

	
  MEMBERS:

  	
  CONSTELLATION
  NUCLEAR, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Its:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  CE NUCLEAR, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Its:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  EDF
  DEVELOPMENT INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Its:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  THE
  COMPANY:

  	
  CONSTELLATION
  ENERGY NUCLEAR GROUP, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Its:

  

 

 

	
  FOR
  PURPOSES OF SECTIONS 8.4(b) AND 13.5 ONLY:

  	
  CONSTELLATION
  ENERGY GROUP, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Its:

  
	
  FOR
  PURPOSES OF SECTION 13.5 ONLY:

  	
  E.D.F. INTERNATIONAL S.A.

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Its:

  

 

 

EXHIBIT A

 

Capital Contributions

 

A-1

 

EXHIBIT B

 

Initial Annual Budget

 

The
Annual Budget will reflect:

 

·                  The Company will pay Constellation for
support services as follows: for 2010 will be $66 million, and for 2009 the $66
million will be pro-rated for any applicable period post closing in 2009.

·                  During the remainder of 2009 and 2010
Constellation and EDF will work to develop a direct charging mechanism
(reflecting the actual cost of the service) for support services provided by
Constellation that will be implemented beginning January 2011, provided that
support services for the existing business will not exceed $66 million in any
year.  For any services that a direct
charge mechanism cannot be developed the parties will agree to an appropriate
allocation methodology.

 

B-1

 

EXHIBIT C

 

Illustrative Examples Showing the Operation of the Section 8.4

Calculation Provisions and the Section 6.2 Distribution Provisions

 

Background:

 

Assume
that (i) CNL recognizes a $200 gain at the Closing in connection with the sale
of the Transferred Designated Interest (as defined in the Master Agreement) and
(ii) had the transaction been consummated as described in the Original Master
Agreement, Constellation would have recognized a $250 gain at the Closing.  Immediately after the Closing, the Company
holds one asset (which was contributed to the Company by CNL and CEN) with a
fair market value of $1,000 and a tax basis of $600.  The asset is depreciable over 10 years using
the straight line method.

 

The
Members’ Percentage Interests, and book and tax capital accounts, immediately
after the Closing are as follows:

 

	
   

  	
   

  	
  Percentage Interest(2)

  	
   

  	
  Book Capital Acct.

  	
   

  	
  Tax Capital Acct.

  	
   

  
	
  CNL

  	
   

  	
  49

  	
  %

  	
  $

  	
  490.00

  	
   

  	
  $294.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  CEN

  	
   

  	
  1

  	
  %

  	
  $

  	
  10.00

  	
   

  	
  $6.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  EDFD 

  	
   

  	
  50

  	
  %

  	
  $

  	
  500.00

  	
   

  	
  $300.00 (and a $200.00 § 743(b) adjustment)

  	
   

  

 

Example 1: Calculation of the EDFD
Tax Sharing Amount and the Constellation Tax Sharing Amount.

 

Calculation
of the Constellation Initial Tax Savings Amount.  Assume that Constellation is planning to file
its IRS Form 1120 for its 2009 taxable year on September 15, 2010.  On August 16, 2010, Constellation delivers to
EDFD a draft computation of the Constellation Initial Tax Savings Amount.  The Constellation Initial Tax Savings Amount
equals $20.00 (the excess of $100 (the amount
of tax, calculated by reference to the Effective Tax Rate, that would have been
imposed on the $250 of gain Constellation would have recognized had the
transaction been consummated as described in the Original Master Agreement)
over $80 (the amount of tax, calculated by reference to the Effective Tax Rate,
that was imposed on the $200 of gain CNL recognized at the Closing)).

 

Calculation
of the EDFD Annual Tax Savings Amount and the Constellation 704(c) Tax Costs.  Assume that the Company has revenue of $200
in its 2009 Fiscal Year.  The Company is
planning to file its IRS Form 1065 for its 2009 Fiscal Year on September 15,
2010.  On August

 

(2)          NOTE: These Percentage Interests are for
illustrative purposes only.  The actual
Percentage Interest with respect to EDFD will be 49.99%.

 

C-1

 

16,
2010, the Company delivers to EDFD and CNL a draft computation of the EDFD
Annual Tax Savings Amount for the 2009 Fiscal Year and the Constellation 704(c)
Tax Costs for the 2009 Fiscal Year.

 

The
EDFD Annual Tax Savings Amount for the 2009 Fiscal Year is computed as follows:

(a)               EDFD took into account $20
of depreciation for the 2009 Fiscal Year attributable to the $200 § 743(b) adjustment.(3)

(b)              EDFD would have been
allocated $30 of depreciation by the Company for the 2009 Fiscal Year.  However, EDFD was allocated $31.50 of
depreciation for such Fiscal Year pursuant to § 704(c).

(c)               EDFD is allocated $100 of
taxable income by the Company for the 2009 Fiscal Year (without taking into
account the deductions described in (a) and (b)).

(d)              The EDFD Annual Tax Savings
Amount for the 2009 Fiscal Year equals $8.60 (40% (the
Effective Tax Rate) multiplied by $21.50 (the sum of the $20 of depreciation
attributable to the § 743(b) adjustment and the $1.50 of additional
depreciation allocated to EDFD pursuant to § 704(c)).

 

The
Constellation 704(c) Tax Costs for the 2009 Fiscal Year are computed as
follows:

(a)               CNL and CEN would have been
allocated, in the aggregate, $30 of depreciation by the Company for the 2009
Fiscal Year.  However, CNL and CEN were
allocated, in the aggregate, $28.50 of depreciation for such Fiscal Year
pursuant to § 704(c).

(b)              The Constellation 704(c) Tax
Costs for the 2009 Fiscal Year equals $0.60 (40% (the
Effective Tax Rate) multiplied by $1.50 (the amount of depreciation allocated
away from CNL and CEN, and to EDFD, pursuant to § 704(c)).

 

Calculation
of the EDFD Tax Sharing Amount and the Constellation Tax Sharing Amount.  The EDFD Tax Savings Amount (calculated in
2010) equals $8.60 (the EDFD Annual Tax Savings
Amount for the 2009 Fiscal Year).  No
interest accrued on the EDFD Annual Tax Savings Amount for the 2009 Fiscal Year
because, as shown below, the Constellation Tax Savings Amount exceeded the EDFD
Tax Savings Amount.  The EDFD Tax Sharing
Amount (calculated in 2010) equals $4.30 (50% of
the EDFD Tax Savings Amount).

 

The
Constellation Tax Savings Amount (calculated in 2010) equals $19.40 (the difference between $20, which is the
Constellation Initial Tax Savings Amount, and $0.60, the Constellation 704(c) Tax
Costs for the 2009 Fiscal Year) plus interest. 
Interest accrues on $10.80 of the Constellation Tax Savings Amount
(interest accrues to the extent that the Constellation Tax Savings Amount
exceeds the EDFD Tax Savings Amount).  The
Constellation

 

(3)          NOTE: The depreciation
amounts herein are for illustrative purposes only.  The actual depreciation amounts will depend
on, among other things, the depreciation methods and conventions employed by
the Company, and the dates on which assets are placed in service by the
Company.

 

C-2

 

Tax
Sharing Amount (calculated in 2010) equals $9.70 plus half
of the accrued interest described above.

 

Example 2: Calculation of the
Current Special Distribution Amount.

 

Assume
the same facts as Example 1.  The Company
files its IRS Form 1065 for the 2009 Fiscal Year on September 15, 2010.  As of September 30, 2010 (the last day by
which the Company must distribute the Current Special Distribution Amount), the
Current Special Distribution Amount equals $0 (because the
EDFD Tax Sharing Amount ($4.30) does not exceed the Constellation Tax Sharing
Amount ($9.70 plus interest)).

 

Assume
that (i) the Company has revenue of $200 in each of its 2010 and 2011 Fiscal Years,
(ii) the depreciation deductions for the 2010 and 2011 Fiscal Years are the
same as those for the 2009 Fiscal Year, (iii) the Constellation Tax Savings
Amount accrues $0.70 of interest during the 2009 Fiscal Year, $0.15 of interest
during the 2010 Fiscal Year, and $0.00 of interest during the 2011 Fiscal Year,
and (iv) the EDFD Annual Tax Savings Amount for the 2011 Fiscal Year accrues
$0.40 of interest during the 2011 Fiscal Year.(4)  The EDFD Tax Savings Amounts and the
Constellation Tax Savings Amounts for the 2009, 2010 and 2011 Fiscal Years
(calculated in 2010, 2011 and 2012, respectively) are as follows:

 

	
   

  	
   

  	
  2009

  	
   

  	
  2010

  	
   

  	
  2011

  	
   

  
	
  EDFD Tax Savings Amount

  	
   

  	
  $

  	
  8.60

  	
   

  	
  $

  	
  17.20

  	
   

  	
  $

  	
  26.20

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Constellation Tax Savings
  Amount

  	
   

  	
  $

  	
  20.10

  	
   

  	
  $

  	
  19.65

  	
   

  	
  $

  	
  19.05

  	
   

  

 

The
Company files its IRS Form 1065 for the 2011 Fiscal Year on August 26,
2012.  As of September 10, 2012 (the last
day by which the Company must distribute the Current Special Distribution
Amount), the Current Special Distribution Amount equals $7.14
(the quotient obtained by dividing (i) the difference between $13.10 (the EDFD
Tax Sharing Amount) and $9.53 (the Constellation Tax Sharing Amount) by (ii) 50%
(the Percentage Interest with respect to EDFD)).

 

Example 3: Calculation of the Current
Tax Distribution Amount and Distribution of the Current Tax Distribution Amount
and the Current Special Distribution Amount.

 

Calculation
of the Current Tax Distribution Amount.  Assume the same facts as Example 2 and assume
that no distributions have been made in 2012 prior to September 10, 2012.  September 10, 2012, the day on which the
Company will distribute the Current Special Distribution Amount, is the fifth
day preceding an installment due date specified in Section 6655(c) of the
Code.  Accordingly, the Company must
distribute the Current Tax Distribution Amount as of such date as well.

 

(4)          NOTE: The interest amounts herein are
approximations, not precise calculations.

 

C-3

 

Assume that the Company
has $130 of taxable income thus far in 2012 ($66 of which is allocable to CNL
and CEN and $64 of which is allocable to EDFD). 
The Current Tax Distribution Amount as of September 10, 2012, is
computed as follows:

(a)     The Current Tax Shortfall for each Member
as of such date is computed:

The Current Tax Shortfall for CNL equals $18.87 (the difference between (i) the product of (a) $64.68
(the aggregate amount of taxable income allocable to CNL thus far in 2012)
multiplied by (b) 40% (the Effective Tax Rate), and (ii) $7 (the
portion of the Current Special Distribution Amount that will be distributed to
CNL on such date)).

The Current Tax Shortfall for CEN equals $0.39 (the difference between (i) the product of (a) $1.32
(the aggregate amount of taxable income allocable to CEN thus far in 2012)
multiplied by (b) 40% (the Effective Tax Rate), and (ii) $0.14 (the
portion of the Current Special Distribution Amount that will be distributed to
CEN on such date)).

The Current Tax Shortfall for EDFD equals $25.60 (the difference between (i) the product of (a) $64
(the aggregate amount of taxable income allocable to EDFD thus far in 2012)
multiplied by (b) 40% (the Effective Tax Rate), and (ii) $0 (the
aggregate amount distributed thus far in 2012 to EDFD)).

(b)     The Current Tax Distribution Amount as of
such date equals $51.20 ($25.60 (the Current Tax
Shortfall of the Member with the greatest Current Tax Shortfall in relation to
its Percentage Interest as of such date) divided by 50% (the Percentage
Interest with respect to that Member)).

 

Distribution of the
Current Tax Distribution Amount and the Current Special Distribution Amount. 
On September 10, 2012, the Company distributes $58.34 as follows:

 

	
   

  	
   

  	
  Amount Distributed To:

  	
   

  
	
   

  	
   

  	
  CNL

  	
   

  	
  CEN

  	
   

  	
  EDFD

  	
   

  
	
  Step 1: The Current Tax Distribution Amount

  	
   

  	
  $

  	
  25.09

  	
   

  	
  $

  	
  0.51

  	
   

  	
  $

  	
  25.60

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Step 2: The Current Special Distribution Amount

  	
   

  	
  $

  	
  7.00

  	
   

  	
  $

  	
  0.14

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total

  	
   

  	
  $

  	
  32.09

  	
   

  	
  $

  	
  0.65

  	
   

  	
  $

  	
  25.60

  	
   

  

 

Example 4: Operation of the Section 6.4(b) “Available
Cash” Limitation and Calculation and Distribution of the Accrued Special
Distribution Amount and the Accrued Tax Distribution Amount.

 

Operation of the Section 6.4(b) “Available
Cash” Limitation.  Assume the same facts as Example 3 except
that the cash available for distribution by the Company on September 10,
2012, equals $56.20.  The Company would
distribute that $56.20 as follows:

 

C-4

 

	
   

  	
   

  	
  Amount Distributed To:

  	
   

  
	
   

  	
   

  	
  CNL

  	
   

  	
  CEN

  	
   

  	
  EDFD

  	
   

  
	
  Step 1: The Current Tax Distribution Amount

  	
   

  	
  $

  	
  25.09

  	
   

  	
  $

  	
  0.51

  	
   

  	
  $

  	
  25.60

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Step 2: The Current Special Distribution Amount

  	
   

  	
  $

  	
  4.90

  	
   

  	
  $

  	
  0.10

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total

  	
   

  	
  $

  	
  29.99

  	
   

  	
  $

  	
  0.61

  	
   

  	
  $

  	
  25.60

  	
   

  

 

Calculation of the
Accrued Special Distribution Amount and the Accrued Tax Distribution Amount. 
Assume that on September 10, 2013, the Current Tax Distribution Amount
equals $50.00 and the Current Special Distribution Amount equals $7.00.  In addition to distributing that $57.00, the
Company also distributes the Accrued Special Distribution Amount and the
Accrued Tax Distribution Amount.

 

The Accrued Special
Distribution Amount equals $2.14 (the
difference between (i) the quotient obtained by dividing (a) $3.57
(the difference between $13.10, the EDFD Tax Sharing Amount, and $9.53, the
Constellation Tax Sharing Amount (each calculated as of the end of the 2012
Fiscal Year)) by (b) 50% (the Percentage Interest with respect to EDFD),
and (ii) $5.00 (the aggregate amount distributed pursuant to Sections 6.2(c) and
(e) prior to September 10, 2013)) plus interest.  Assume that $0.15
of interest has accrued on the Accrued Special Distribution Amount.

 

Assume that the Company
had $560 of taxable income through the end of the 2012 taxable year ($286 of
which was allocated to CNL and CEN and $274 of which was allocated to
EDFD).  Also assume that tax
distributions were made to the Members in 2009, 2010 and 2011 in the aggregate
amount of $216.  The Accrued Tax
Distribution Amount as of September 10, 2013, is computed as follows:

(a)     The Accrued Tax Shortfall for each Member
as of such date is computed:

The Accrued Tax Shortfall for CNL equals $1.37 (the difference between (i) the product of (a) $280.28
(the aggregate amount of taxable income allocated to CNL through the end of
2012) multiplied by (b) 40% (the Effective Tax Rate), and (ii) $110.74
(the aggregate amount distributed to CNL through the end of 2012)).

The Accrued Tax Shortfall for CEN equals $0.03 (the difference between (i) the product of (a) $5.72
(the aggregate amount of taxable income allocated to CEN through the end of
2012) multiplied by (b) 40% (the Effective Tax Rate), and (ii) $2.26
(the aggregate amount distributed to CEN through the end of 2012)).

The Accrued Tax Shortfall for EDFD equals $1.60 (the difference between (i) the product of (a) $274
(the aggregate amount of taxable income allocated to EDFD through the end of
2012) multiplied by (b) 40% (the Effective Tax Rate), and (ii) $108
(the aggregate amount distributed to EDFD through the end of 2012)).

 

C-5

 

(b)     The Accrued Tax Distribution Amount as of
such date equals $3.20 ($1.60 (the Accrued Tax
Shortfall of the Member with the greatest Accrued Tax Shortfall in relation to
its Percentage Interest as of such date) divided by 50% (the Percentage
Interest with respect to that Member)).

 

Distribution of the
Accrued Special Distribution Amount and the Accrued Tax Distribution Amount. 
On September 10, 2013, the Company distributes $62.49
(the $2.29 Accrued Special Distribution Amount (including interest), the $50.00
Current Tax Distribution Amount, the $7.00 Current Special Distribution Amount,
and the $3.20 Accrued Tax Distribution Amount) as follows:

 

	
   

  	
   

  	
  Amount Distributed To:

  	
   

  
	
   

  	
   

  	
  CNL

  	
   

  	
  CEN

  	
   

  	
  EDFD

  	
   

  
	
  Step 1: The Accrued Special Distribution Amount

  	
   

  	
  $

  	
  2.24

  	
   

  	
  $

  	
  0.05

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Step 2: The Current Tax Distribution Amount

  	
   

  	
  $

  	
  24.50

  	
   

  	
  $

  	
  0.50

  	
   

  	
  $

  	
  25.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Step 3: The Current Special Distribution Amount

  	
   

  	
  $

  	
  6.86

  	
   

  	
  $

  	
  0.14

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Step 4: The Accrued Tax Distribution Amount

  	
   

  	
  $

  	
  1.57

  	
   

  	
  $

  	
  0.03

  	
   

  	
  $

  	
  1.60

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total

  	
   

  	
  $

  	
  35.17

  	
   

  	
  $

  	
  0.72

  	
   

  	
  $

  	
  26.60

  	
   

  

 

Example 5: Calculation and
Distribution of the Unit A Accelerated Distribution Amount and the Unit B
Accelerated Distribution Amount.

 

On January 1, 2014,
a CECG Power Purchase Agreement becomes subject to an early termination (and
such date is specified as the “Early Termination Date” under Section 6 of
that CECG Power Purchase Agreement).  The
Total Exposure with respect to that CECG Power Purchase Agreement as of that
date is $100.  Prior to January 1,
2014, without regard to the early termination of that CECG Power Purchase
Agreement, the Board of Directors had declared that $20 will be distributed to
the Members on such date.

 

The Unit A Accelerated
Distribution Adjustment Amount as of January 1, 2014, equals $60.00 (50% (the Percentage Interest with respect to EDFD)
multiplied by $120 (the sum of $20, the amount declared by the Board of
Directors to be distributed other than in connection with the early termination
of the CECG Power Purchase Agreement, and $100, the Total Exposure with respect
to the CECG Power Purchase Agreement subject to an early termination)).  Because no CECG Power Purchase Agreement has
been subject to an early termination prior to January 1, 2014, the Unit A
Accelerated Distribution Amount as of January 1, 2014, also equals $60.00.

 

C-6

 

The Unit B Accelerated
Distribution Adjustment Amount as of January 1, 2014, equals $10.00 (50% (the aggregate Percentage Interest with respect
to CNL and CEN) multiplied by $20 (the amount declared by the Board of
Directors to be distributed other than in connection with the early termination
of the CECG Power Purchase Agreement)). 
Because no CECG Power Purchase Agreement has been subject to an early
termination prior to January 1, 2014, the Unit B Accelerated Distribution
Amount as of January 1, 2014, also equals $10.00.

 

On January 1, 2014,
the Company distributes $70 as follows:

 

	
   

  	
   

  	
  Amount Distributed To:

  	
   

  
	
   

  	
   

  	
  CNL

  	
   

  	
  CEN

  	
   

  	
  EDFD

  	
   

  
	
  Step 1: The Unit A Accelerated Distribution Amount

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  $

  	
  60.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Step 2: The Unit B Accelerated Distribution Amount

  	
   

  	
  $

  	
  9.80

  	
   

  	
  $

  	
  0.20

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total

  	
   

  	
  $

  	
  9.80

  	
   

  	
  $

  	
  0.20

  	
   

  	
  $

  	
  60.00

  	
   

  

 

Example 6: Dissolution of the Company.

 

On July 1, 2014, the
Company’s assets are worth $2,000.  On
that date, another CECG Power Purchase Agreement becomes subject to an early
termination (and such date is specified as the “Early Termination Date” under Section 6
of that CECG Power Purchase Agreement). 
The Total Exposure with respect to that CECG Power Purchase Agreement as
of that date is $1,000.  The Board of
Directors has not declared any amounts to be distributed to the Members on such
date other than in connection with the early termination of the CECG Power
Purchase Agreement.

 

The Unit A Accelerated
Distribution Adjustment Amount as of July 1, 2014, equals $500.00 (50% (the Percentage Interest with respect to EDFD)
multiplied by $1,000 (the sum of $0, the amount declared by the Board of
Directors to be distributed other than in connection with the early termination
of the CECG Power Purchase Agreement, and $1,000, the Total Exposure with
respect to the CECG Power Purchase Agreement subject to an early
termination)).  The Unit A Accelerated
Distribution Amount as of July 1, 2014, also equals $500.00
(the difference between $560 (the aggregate amount of all Unit A Accelerated
Distribution Adjustment Amounts as of July 1, 2014, and all dates prior to
July 1, 2014) and $60 (the aggregate amount distributed pursuant to Section 6.2(a) prior
to July 1, 2014)).

 

The Unit B Accelerated
Distribution Adjustment Amount as of July 1, 2014, equals $0.00 (50% (the aggregate Percentage Interest with respect
to CNL and CEN) multiplied by $0 (the amount declared by the Board of Directors
to be distributed other than in connection with the early termination of the
CECG Power Purchase Agreement)).  The
Unit B Accelerated Distribution Amount as of July 1, 2014, also equals $0.00 (the difference between $10 (the aggregate amount of
all Unit B Accelerated Distribution Adjustment Amounts as of July 1, 2014,

 

C-7

 

and all dates prior to July 1,
2014) and $10 (the aggregate amount distributed pursuant to Section 6.2(b) prior
to July 1, 2014)).

 

On July 1, 2014, the
Company distributes $500 as follows:

 

	
   

  	
   

  	
  Amount Distributed To:

  	
   

  
	
   

  	
   

  	
  CNL

  	
   

  	
  CEN

  	
   

  	
  EDFD

  	
   

  
	
  Step 1: The Unit A Accelerated Distribution Amount

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  $

  	
  500.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total

  	
   

  	
  $

  	
  0.00

  	
   

  	
  $

  	
  0.00

  	
   

  	
  $

  	
  500.00

  	
   

  
											

 

On July 2, 2014, the
Company’s assets are worth $1,500. 
Assume that (i) the Company dissolves on that date and all such
assets are available for distribution to the Members and (ii) there are
sufficient items of gross income, gain, loss and deduction to achieve the
purposes of Section 12.4(e).

 

The Unit A Accelerated
Liquidation Amount as of July 2, 2014, equals $550.00
(the difference between (a) $1,100 (the product of $1,100, the aggregate
of the Total Exposures with respect to all CECG Power Purchase Agreements that
have been subject to an early termination prior to such date, multiplied by
50/50, a fraction, the numerator of which is the Percentage Interest with
respect to EDFD and the denominator of which is the aggregate Percentage
Interest with respect to CNL and CEN) and (b) $550 (the aggregate amount
distributed pursuant to Section 6.2(a) prior to such date, other than
amounts attributable to Declared Distribution Amounts)).

 

In the dissolution, the
Company distributes $1,500 as follows:

 

	
   

  	
   

  	
  Amount Distributed To:

  	
   

  
	
   

  	
   

  	
  CNL

  	
   

  	
  CEN

  	
   

  	
  EDFD

  	
   

  
	
  Step 1: The Unit A Accelerated Liquidation Amount

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  $

  	
  550.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Step 2: The Remaining Amount

  	
   

  	
  $

  	
  465.50

  	
   

  	
  $

  	
  9.50

  	
   

  	
  $

  	
  475.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total

  	
   

  	
  $

  	
  465.50

  	
   

  	
  $

  	
  9.50

  	
   

  	
  $

  	
  1,025.00

  	
   

  

 

C-8

 

EXHIBIT
D

 

Risk
Profile Guidelines

 

Any
capitalized term used in this Exhibit D and not otherwise defined in this
Agreement shall have the meaning given to such term in the CECG Power Purchase
Agreements.

 

Core Risk Policy

 

·      These Risk Profile Guidelines will guide
the activities of the Company and the Company Generation-Subs.

 

·      These Risk Profile Guidelines may be
amended from time to time by the Board of Directors upon the recommendation of
the Audit and Finance Committee.

 

·      The Audit and Finance Committee of the
Board of Directors will identify the products which the Company may use to
implement its risk management strategy. 
Use of such products will serve two objectives:

 

(1)           fixing the price of a portion of the Company’s
anticipated future energy sales so as to (A) provide the Company with an
acceptable rate of return on the Nuclear Facilities and (B) help control
potential EBITDA volatility over a three-year planning horizon; and

 

(2)           providing the Company’s management with flexibility in
managing the future physical operation of the Nuclear Facilities.

 

·      The Company will implement the hedging
strategy (the “Hedging Strategy”), as described below.

 

·      The Company will not engage in any
speculative trading based on the Nuclear Facilities’ physical generation
position, due to price anticipation or otherwise.

 

·      The Company will take reasonable
measures, if available, to address “intrinsic” or “unhedgeable” risk (e.g.,
volume uncertainty, macroeconomic events).

 

·      The Company will ensure the adequacy of
its risk policy given available capital and financial constraints.

 

·      The Company will ensure consistency
between its risk policy, financial objectives and hedging strategy.

 

·      In implementing the Risk Profile
Guidelines, the Company will comply with all applicable rules and
regulations.

 

D-1

 

Hedging Strategy

 

·      The
Hedging Strategy focuses on reducing exposure to forward energy and related
product prices through a rolling hedging process aimed at fixing revenues over
the next three full calendar years.

 

·      Pursuant to the
Hedging Strategy, during each calendar year:

 

(i)            The initial target hedge ratios will be:

 

(a)           Year 1: 
95%

 

(b)           Year 2: 
60%

 

(c)           Year 3: 
30%

 

(ii)           The target hedge ratios may be adjusted
from time to time by the Board of Directors upon the recommendation of the
Audit and Finance Committee.

 

(iii)          During the Terms of the CECG Power Purchase
Agreements and the EDFTNA Power Purchase Agreements, if the Company-Generation Subs enter into Monthly Energy Hedge Transactions
under the CECG Power Purchase Agreements and the EDFTNA Power Purchase
Agreements, it will do so such that the aggregate amount of Fixed Product
represents a percentage of the aggregate Available Energy of all the Nuclear
Units during Years 1—3 approximately equal to the target hedge ratios.

 

(a)           Except as set forth in clause (b) below, the Company-Generation Subs
will enter into Monthly Energy Hedge Transactions under the EDFTNA Power
Purchase Agreements and the CECG Power Purchase Agreements so that, at the
conclusion of each calendar month, (x) the ratio of Fixed Product to total
Quantity in each of Years 1—3 under the CECG Power Purchase Agreements approximately
equals (y) the ratio Fixed Product to total Quantity in each of Years
1—3 under the EDFTNA Power Purchase Agreements.

 

(b)           Clause (a) will not apply at any time that the decision described at Section 7.2(j)(xxv)
of the Agreement constitutes a “Special Matter,” at which time no further Monthly
Energy Hedge Transactions will be entered into under the CECG Power Purchase
Agreements unless agreed to by the Board of Directors and CECG.

 

D-2

 

(c)           During the
period that the decision described at Section 7.2(j)(xxv) of the
Agreement constitutes a “Special Matter,” the Company may utilize third-party
products (e.g., financial hedges) to hedge market risk with respect to future
deliveries of Product under the CECG Power Purchase Agreements.

 

(iv)          At the Risk
Group’s discretion, volumes of Energy subject to the “Monthly Price Adjustment”
(as defined in the RSAs) may be subtracted from the available Energy output of the Nuclear Units in order to calculate Available Energy with
respect to any month during Years 1—3.

 

Additional Guidelines

 

·      In the case of any exposure to foreign
currency (“FX”) markets or interest rate (“IR”) risk  associated with the sale or purchase of any
commodity (including in connection with nuclear fuel procurement activities),
the Company will ensure that its FX and IR risk allocation process is
consistent with the hedging strategies it employs in connection with the
related commodities.

 

·      With respect to counterparty credit risk,
the Company will have no non-collateralized exposure to counterparties that
fail to meet a credit rating threshold. 
This provision will not apply to the CECG Power Purchase Agreements,
EDFTNA Power Purchase Agreements and any other contracts in effect as of the
Effective Date.

 

·      Any transaction or investment to be
entered into by the Company or any Company Generation-Sub with a term greater
than three years must be approved by the Board of Directors.

 

·      The Company will ensure that long-term
investment or contractual decisions are based on an explicit consideration of
risk exposure, employ a consistent risk/return approach (identifying the impact
of the transaction on the Company’s net consolidated exposure) and serve to
implement the Company’s risk management strategy.

 

Constellation Energy
Nuclear Group, LLC Risk Group Responsibilities

 

·      The Company’s consolidated physical and
financial exposure will be continually assessed and managed by its risk
personnel (the “Risk Group”). 
Certain functions to be provided by the Risk Group may be outsourced to
Constellation’s Corporate Risk personnel as of the Effective Date; provided,
that the Company establishes an internal risk function within a reasonable
period of time after the Effective Date.

 

D-3

 

·      The Risk Group will assess exposure
through the use of various risk indicators, including open position analysis,
value-at-risk, earnings-at-risk, cash-at-risk, credit risk, operational risk
and liquidity risk.

 

·      The Risk Group will develop and implement
an auditable deal capture and risk management information system.  This system will be designed to update market
information (e.g., price, volatilities, volumes) as frequently as possible.

 

·      The Risk Group will deliver risk reports
at least monthly to the Board of Directors. 
Such reports will include a quantitative assessment of the Company’s and
each Company Generation-Sub’s financial and physical exposure.

 

·      The Risk Group will develop and implement
“alert procedures” which will notify the Board of Directors upon the occurrence
of a breach of these Risk Profile Guidelines.

 

Additional
Defined Terms

 

“RSAs” means (i) that certain Revenue
Sharing Agreement, dated as of December 11,
2000, between Nine Mile Point Nuclear Station, LLC (as assignee of
Constellation Nuclear, LLC) and Niagara Mohawk Power Corporation; (ii) that
certain Revenue Sharing Agreement,
dated as of December 11, 2000, between Nine Mile Point Nuclear Station,
LLC (as assignee of Constellation Nuclear, LLC) and New York State Electric &
Gas Corporation; (iii) that certain Revenue Sharing Agreement, dated as of December 11,
2000, between Nine Mile Point Nuclear Station, LLC (as assignee of
Constellation Nuclear, LLC) and Rochester Gas and Electric Corporation; and (iv) that
certain Revenue Sharing Agreement,
dated as of December 11, 2000, between Nine Mile Point Nuclear Station,
LLC (as assignee of Constellation Nuclear, LLC) and Central Hudson Gas &
Electric Corporation.

 

D-4

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