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Exhibit 10.12    
    

July 21,
2006 

Duke
Energy Murray Operating, LLC

139 East Fourth Street

5 Atrium II

Cincinnati, Ohio 45202 

Attn:
Mr. Dave Ledonne, Contract Manager 

        Reference
is made to the Operation and Maintenance Agreement dated August 5, 2004 ("Agreement") between Duke Energy Murray Operating, LLC ("DEMO") and KGen Murray I and II LLC
("KGen Murray"). 

        DEMO
and KGen Murray, hereby agree that subject to the Lenders Consents described below, Section 6.5 of the Agreement is amended by replacing the reference to "sixty
(60) days" contained therein to "one hundred twenty (120) days." 

        The
amendment described above shall be effective upon the date that KGen Murray notifies DEMO that KGen Murray has received all consents and approvals of its lenders necessary for the
amendment of the Agreement contained herein ("Lenders Consents"). KGen Murray agrees that it shall provide DEMO prompt notice of its receipt of the Lender Consents. 

        Except
as amended hereby, the Agreement shall remain in full force and effect. 

[Signatures
follow] 

 

	 	 	 	 	KGEN MURRAY I AND II LLC
	

 	
 	

 	
 	

By:	
 	

/s/ Donald E. Boyd
 Donald E. Boyd

Sr. Vice President—Operations
	

AGREED TO AND ACKNOWLEDGED BY:	
 	

 	
 	

 
	

DUKE ENERGY MURRAY OPERATING LLC	
 	

 	
 	

 
	

By:	
 	

/s/ David A. Ledonne
	
 	

 	
 	

 
	

Name:	
 	

David A. Ledonne
	
 	

 	
 	

 
	

Title:	
 	

Contract Manager
	
 	

 	
 	

 

2

QuickLinks

Exhibit 10.12Exhibit
10.13

 

REDACTED

 

 

EXECUTION COPY

 

OPERATION
AND MAINTENANCE AGREEMENT

 

by and between

 

KGEN HINDS LLC

as Owner

 

and

 

CINERGY SOLUTIONS O&M LLC

as Operator

 

for the

 

KGEN HINDS GENERATING FACILITY

 

 

TABLE OF
CONTENTS

 

	
   

  	
   

  	
  Page

  	 

	
   

  	
   

  	
   

  	 

	
  ARTICLE I DEFINITIONS

  	
   

  	
  1

  	 

	
  Section 1.1

  	
  Defined Terms

  	
  1

  	 

	
  Section 1.2

  	
  Construction

  	
  7

  
	
   

  	
   

  	 

	
  ARTICLE II RELATIONSHIP OF OWNER, OPERATOR AND
  SUBCONTRACTORS

  	
  8

  
	
  Section 2.1

  	
  Status of Operator

  	
  8

  	 

	
  Section 2.2

  	
  Subcontractors and Affiliates

  	
  8

  
	
   

  	
   

  	
   

  
	
  ARTICLE III OPERATOR RIGHTS AND RESPONSIBILITIES

  	
  8

  	 

	
  Section 3.1

  	
  General

  	
  8

  	 

	
  Section 3.2

  	
  Site Procedures

  	
  8

  
	
  Section 3.3

  	
  Operation and Performance of Services

  	
  9

  
	
  Section 3.4

  	
  Annual Management Plan

  	
  9

  
	
  Section 3.5

  	
  Management/Meetings and Third Parties

  	
  10

  
	
  Section 3.6

  	
  Maintenance and Technical Services

  	
  10

  
	
  Section 3.7

  	
  Equipment, Spare Parts, Consumables, Tools and
  Materials

  	
  11

  
	
  Section 3.8

  	
  Operator’s Personnel

  	
  12

  
	
  Section 3.9

  	
  Reports by Operator

  	
  12

  
	
  Section 3.10

  	
  Taxes and Employee Costs

  	
  13

  
	
  Section 3.11

  	
  Environmental, Health and Safety Plan, Security and
  Hazardous Materials Management

  	
  13

  
	
  Section 3.12

  	
  Emergencies

  	
  14

  
	
  Section 3.13

  	
  Notice of Non-Compliance With Laws and Governmental
  Requirements

  	
  14

  
	
  Section 3.14

  	
  Permits, Reporting and Liens

  	
  14

  
	
  Section 3.15

  	
  Owner’s Access

  	
  14

  
	
  Section 3.16

  	
  Records

  	
  15

  
	
  Section 3.17

  	
  Title to Goods, Documents and Data

  	
  15

  
	
  Section 3.18

  	
  Operator Guaranty

  	
  15

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV OWNER RIGHTS AND RESPONSIBILITIES

  	
  15

  	 

	
  Section 4.1

  	
  Management, Strategic Decisions and Owner Directions

  	
  15

  	 

	
  Section 4.2

  	
  Owner’s Representatives and Review Committee

  	
  16

  
	
  Section 4.3

  	
  Commodity Procurement, Scheduling and Trading

  	
  17

  
	
  Section 4.4

  	
  Reports and Plans

  	
  17

  
	
  Section 4.5

  	
  Taxes

  	
  17

  
	
  Section 4.6

  	
  Accounting

  	
  17

  
	
  Section 4.7

  	
  Permits and Reporting

  	
  17

  
	
  Section 4.8

  	
  Operator’s Access

  	
  18

  
	
  Section 4.9

  	
  Other Facilities and Services

  	
  18

  
						

 

i

 

	
  ARTICLE V PAYMENTS

  	
  18

  	 

	
  Section 5.1

  	
  Payments for Services

  	
  18

  	 

	
  Section 5.2

  	
  O&M Account

  	
  21

  
	
  Section 5.3

  	
  Advance O&M Cost Estimate; Progress Report

  	
  21

  
	
  Section 5.4

  	
  Final Billing

  	
  21

  
	
  Section 5.5

  	
  Invoice or Payment Disputes or Errors

  	
  21

  
	
  Section 5.6

  	
  Employee Incentive Plan

  	
  22

  
	
  Section 5.7

  	
  Interest on Late Payments

  	
  22

  
	
  Section 5.8

  	
  Audit

  	
  22

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI TERM OF AGREEMENT; TERMINATION

  	
  22

  	 

	
  Section 6.1

  	
  Initial Term

  	
  22

  	 

	
  Section 6.2

  	
  Termination Upon Insolvency

  	
  23

  
	
  Section 6.3

  	
  Termination by Owner for Material Default; Right to
  Cure

  	
  23

  
	
  Section 6.4

  	
  Termination for Convenience

  	
  23

  
	
  Section 6.5

  	
  Termination by Operator for Material Default

  	
  23

  
	
  Section 6.6

  	
  Rights and Obligations Upon Termination

  	
  24

  
	
   

  	
   

  	
   

  
	
  ARTICLE VII INDEMNITY AND LIMITATIONS ON LIABILITY

  	
  25

  	 

	
  Section 7.1

  	
  General Indemnity

  	
  25

  	 

	
  Section 7.2

  	
  Owner’s Property

  	
  26

  
	
  Section 7.3

  	
  Third Party Claims

  	
  26

  
	
  Section 7.4

  	
  Limitation of Liability

  	
  27

  
	
  Section 7.5

  	
  Co-Owners

  	
  27

  
	
   

  	
   

  	
   

  
	
  ARTICLE VIII WARRANTIES

  	
  28

  	 

	
  Section 8.1

  	
  Operator’s Warranty

  	
  28

  	 

	
  Section 8.2

  	
  Third Party Warranties

  	
  28

  
	
  Section 8.3

  	
  Warranties Limited

  	
  28

  
	
   

  	
   

  	
   

  
	
  ARTICLE IX REPRESENTATIONS

  	
  29

  	 

	
  Section 9.1

  	
  Operator Representations

  	
  29

  	 

	
  Section 9.2

  	
  Owner Representations

  	
  29

  
	
   

  	
   

  	
   

  
	
  ARTICLE X FORCE MAJEURE

  	
  30

  	 

	
  Section 10.1

  	
  Definition of Force Majeure Event

  	
  30

  	 

	
  Section 10.2

  	
  No Breach or Liability

  	
  30

  
	
  Section 10.3

  	
  Mitigation

  	
  31

  
	
  Section 10.4

  	
  Suspension of Performance

  	
  31

  
	
   

  	
   

  	
   

  
	
  ARTICLE XI INSURANCE

  	
  31

  	 

	
  Section 11.1

  	
  Insurance to be Provided by Operator

  	
  31

  	 

	
  Section 11.2

  	
  Insurance to be Provided by Owner

  	
  32

  
	
  Section 11.3

  	
  Evidence of Insurance

  	
  32

  
	
  Section 11.4

  	
  Subcontractors’ Insurance

  	
  32

  
	
  Section 11.5

  	
  Right to Insure

  	
  33

  
						

 

ii

 

	
  ARTICLE XII CONFIDENTIALITY

  	
  33

  
	
  Section 12.1

  	
  Confidential Information

  	
  33

  
	
  Section 12.2

  	
  Agreement Confidential

  	
  34

  
	
   

  	
   

  	
   

  
	
  ARTICLE XIII MISCELLANEOUS

  	
  34

  
	
  Section 13.1

  	
  Entire Agreement

  	
  34

  
	
  Section 13.2

  	
  Amendments

  	
  34

  
	
  Section 13.3

  	
  Captions

  	
  34

  
	
  Section 13.4

  	
  Notices

  	
  34

  
	
  Section 13.5

  	
  Severability

  	
  35

  
	
  Section 13.6

  	
  Assignment

  	
  35

  
	
  Section 13.7

  	
  No Waiver

  	
  36

  
	
  Section 13.8

  	
  Applicable Law

  	
  36

  
	
  Section 13.9

  	
  Exhibits

  	
  36

  
	
  Section 13.10

  	
  No Partnership Created

  	
  36

  
	
  Section 13.11

  	
  Consequential Damages

  	
  36

  
	
  Section 13.12

  	
  Limitations Application

  	
  36

  
	
  Section 13.13

  	
  Accommodation of Owner’s Financing

  	
  36

  
	
  Section 13.14

  	
  Survival

  	
  37

  
	
  Section 13.15

  	
  Dispute Resolution

  	
  37

  
				

 

iii

 

EXHIBIT
LIST

 

	
  Exhibit A

  	
   

  	
  Organizational
  Chart

  
	
  Exhibit
  B

  	
   

  	
  Site
  Description

  
	
  Exhibit
  C

  	
   

  	
  Operator
  Permits

  
	
  Exhibit
  D

  	
   

  	
  Owner
  Permits

  
	
  Exhibit
  E

  	
   

  	
  Form
  of Monthly Management Report

  
	
  Exhibit
  F

  	
   

  	
  Material
  Project Agreements

  
	
  Exhibit
  G

  	
   

  	
  Support
  Functions

  
	
  Exhibit
  H

  	
   

  	
  Form
  of Guaranty

  
	
  Exhibit
  I

  	
   

  	
  Section
  6.9 of the Purchase and Sale Agreement, dated May 3, 2004 by and among Duke
  Energy North America, LLC, Duke Energy Capital of Texas, Inc. and KGen
  Partners LLC

  

 

iv

 

OPERATION
AND MAINTENANCE AGREEMENT

 

THIS OPERATION AND
MAINTENANCE AGREEMENT dated and effective as of September 13, 2004, is by and
between KGEN HINDS LLC, a Delaware limited liability company, and its
successors and permitted assigns (“Owner”),
having its principal office at 1330 Post Oak Boulevard, Houston, Texas 77056
and CINERGY SOLUTIONS O&M LLC a Delaware limited liability company, and its
successors and assigns (“Operator”),
having a place of business at 139 East Fourth Street, 5 Atrium II, Cincinnati,
OH 45202.

 

W I T N
E S S E T H:

 

WHEREAS,
Owner owns the Facility (as hereinafter defined) located in Hinds County,
Mississippi;

 

WHEREAS,
Operator, by itself and through suppliers, subcontractors and Affiliates,
desires to provide certain operation and maintenance services for the Facility;

 

WHEREAS,
Operator together with its Affiliates has experience in performing services
required for the operation and maintenance of the Facility; and

 

WHEREAS,
Owner and Operator desire to set forth the terms of an Agreement pursuant to
which Operator shall provide services for the operation and maintenance of the
Facility.

 

NOW,
THEREFORE, in consideration of the
premises and the mutual promises and agreements of the parties herein
expressed, the parties, intending to be legally bound, hereby agree to the
following:

 

ARTICLE
I

DEFINITIONS

 

Section 1.1      Defined
Terms.  The following terms when used in this Agreement (or in
exhibits to this Agreement) with initial letters capitalized shall have the
meanings set forth below (such meanings to be equally applicable to both the
singular and the plural forms of the terms defined), unless otherwise expressly
indicated:

 

“Advance O&M Cost Estimate” shall have
the meaning set forth in Section 5.3.

 

“Affiliate” shall mean any Person that
directly, or indirectly, through one or more intermediaries, controls, is
controlled by or is under common control with the Person specified. For
purposes of this definition, control of a Person means the power, direct or
indirect, to direct or cause the direction of the management and policies of
such Person whether through ownership of voting securities or ownership
interests, by contract or otherwise, and specifically with respect to a
corporation, partnership or limited liability company, means direct or indirect
ownership of more than 50% of the voting securities in such corporation or of
the voting interest in a partnership or limited liability company. For purposes
of this Agreement, Operator and Owner shall not be considered Affiliates.

 

 

“Agreement” shall mean this Operation and
Maintenance Agreement (including all exhibits attached hereto), as it may be amended
and supplemented from time to time.

 

“Annual Management Plan” shall have the
meaning set forth in Section 3.4.

 

“Asset Manager” shall mean an individual
designated by Owner to manage and administer Owner’s affairs and to act as
liaison with Operator.

 

“Base Rate” shall mean for any day, a rate
per annum equal to the greater of (a) the rate of interest per annum from time
to time published in The
Wall Street Journal as the prime commercial lending rate, such rate
to change when and as such prime commercial lending rate (or such comparable
rate, if The Wall
Street Journal does not so designate a “prime commercial lending
rate”) changes and (b) 1⁄2 of one percent above the Federal Funds Rate. If for
any reason Operator shall have determined (which determination shall be
conclusive absent manifest error) that it is unable to ascertain the Federal
Funds Rate specified in clause (b) of the first sentence of this definition,
for any reason, including, without limitation, the inability or failure of
Operator to obtain sufficient quotations in accordance with the terms hereof,
the Base Rate shall be determined without regard to clause (b) of the first
sentence of this definition until the circumstances giving rise to such
inability no longer exist. Any change in the Base Rate shall be effective on
the effective date of any change in such rate.

 

“Budget” shall mean a detailed (by month)
projection of expenses for the one year period following the Commencement Date,
as established pursuant to Section 3.4 and included in the Annual
Management Plan, which shall include major maintenance reserve accruals.

 

“Business Day” shall mean a day other than
Saturday, Sunday or any day on which banks located in the State of New York are
authorized or obligated to close.

 

“Commencement Date” shall mean September 15,
2004.

 

“Consumables” shall mean all items consumed
or needing regular periodic replacement during the operation and maintenance of
the Facility, including water treatment chemicals, small tools, lubricants,
rags, oils, filter media, additives, anti-corrosion devices, gases (CO2 , O2 ,
H2 , Halon, etc.) and other expendable materials, but not spare parts or fuel.

 

“Contract Manager” shall mean an individual
designated by Operator pursuant to Section 3.8 hereof to manage Operator’s
interests with respect to this Agreement and to act as a liaison with Owner.

 

“Depositary Agreement” shall mean the
Depositary Agreement dated as of August 5, 2004, among KGen Murray LLC and
certain of its Affiliates, KGen Power LLC, The Bank of New York and Credit
Suisse First Boston.

 

“Duke Personnel” shall have the meaning set
forth in Section 3.8(d).

 

“Employee Incentive Plan” shall mean a plan,
if any, developed by Operator for an Operation Year in accordance with
Section 5.7 pursuant to which the Operator shall provide 

 

2

 

payments to the
Facility Work Force based on the accomplishment of specific performance
measures.

 

“Energy Management Agreements” shall mean
any energy management agreement and related agreements entered into from time
to time with respect to the Facility, in each case as amended from time to
time.

 

“Equipment” shall mean, collectively, all
equipment, materials, apparatus, structures and other goods (other than spare
parts, Consumables or tools) installed at, or used for the operation of, the
Facility.

 

“Facility” shall mean the Hinds Facility,
located at the Site and associated natural gas, water and waste water
pipelines, pumping and meter stations and electric transmission facilities on
Owner’s side of the Interconnection Point and under Owner’s control, in each
case including any additions, expansions, enhancements, improvements and
betterments.

 

“Facility Work Force” shall mean employees
of Operator or its Affiliates who shall perform Services and who are employed
on-Site at the Facility.

 

“Federal Funds Rate” shall mean, for any period, a
fluctuating interest rate per annum equal for each day during such period to
the weighted average of the rates on overnight federal funds transactions with
members of the Federal Reserve System arranged by federal funds brokers, as
published for such day (or, if such day is not a Business Day, for the next
preceding Business Day) by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day which is a Business Day, the average of
the quotations for such day for such transactions received by Operator from
three Federal funds brokers of recognized standing selected by it.

 

“Forced Outage” shall mean an unplanned interruption
of the Facility’s generation that causes the Facility to fail to maintain its
dispatched operating level (regardless of the level of such dispatch within the
design limits).

 

“Force Majeure Event” shall have the meaning
set forth in Section 10.1.

 

“GAAP” shall mean generally accepted
accounting principles in the United States of America.

 

“Governmental Authority” shall mean any
court, tribunal, arbitrator, authority, agency, commission, official or other
instrumentality of the United States or any state, county, city or other
political subdivision or similar governing entity, and including any
governmental, quasi–governmental or non-governmental body administering,
regulating or having general oversight over gas, electricity, power or other
markets.

 

“Governmental Requirements” shall mean all
authorizations, consents, exemptions, decrees, licenses, permits, certificates,
requirements, orders and approvals imposing requirements enforced by any
Governmental Authority having jurisdiction or potential jurisdiction with
respect to purchase or transportation of fuel to the Facility, sale of capacity
and corresponding energy of the Facility, or the operation and maintenance of
the Facility, other than Laws.

 

3

 

“Hazardous Materials” shall mean (a) those
materials included within the definitions of “hazardous substances,” “hazardous
materials,” “toxic substances,” or “hazardous wastes” in the Federal Water
Pollution Control Act, as amended, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, the Hazardous Materials
Transportation Act, as amended, the Toxic Substance Control Act, as amended, or
the Resource Conservation and Recovery Act of 1976, as amended, or in the regulations
promulgated pursuant to said laws; (b) those substances defined as a “pesticide”
pursuant to Section 2(u) of the Federal Insecticide, Fungicide, and
Rodenticide Act as amended by the Federal Environmental Pesticide Control Act
of 1972 and by the Federal Pesticide Act of 1978 (7 U.S.C. Sections 136 et seq.), as amended or in the regulations
promulgated pursuant thereto; (c) those substances defined as “hazardous air
pollutants” pursuant to Section 112(a)(6) or “regulated substance”
pursuant to Section 12(a)(2)(B) of the Clean Air Act (42 U.S.C. Sections
7401 et seq.), as amended or in
the regulations promulgated pursuant thereto; (d) those substances for which
remediation standards are established in any applicable environmental clean-up
statutes; (e) those substances listed in the U.S. Department of Transportation’s
Hazardous Materials Table (49 CFR 172.101 and amendments thereto) or by the
U.S. Environmental Protection Agency as hazardous substances (40 CFR Part 302
or 40 CFR Part 116 and amendments thereto); and (f) those substances defined as
hazardous or toxic substances pursuant to other present or future applicable
Laws.

 

“Hinds Facility” shall mean that certain
nominal 520 MW, natural gas-fired, combined cycle facility located within the
city limits of Jackson, Mississippi.

 

“Hinds PPA” shall mean (a) the Master Power
Purchase and Sale Agreement and Cover Sheet between KGen Hinds LLC (as assignee
of Duke Energy Trading and Marketing, L.L.C.) and Entergy Services, Inc., as
Agent for Entergy Arkansas, Inc., Entergy Mississippi, Inc., and Entergy Gulf
States, Inc., dated January 31, 2003; (b) the Master Power Purchase and Sale
Agreement Confirmation between KGen Hinds LLC (as assignee of Duke Energy
Trading and Marketing, L.L.C.) and Entergy Services, Inc., as Agent for the
Entergy Operating Companies, dated June 30, 2003; and (c) the Amendment to
Confirmation and to the Additional Provisions to Master Power Purchase and Sale
Agreement Confirmation, each dated June 30, 2003, between KGen Hinds LLC (as
assignee of Duke Energy Trading and Marketing, L.L.C.) and Entergy Services,
Inc., as Agent for Entergy Arkansas, Inc., Entergy Mississippi, Inc., and
Entergy Gulf States, Inc., dated February 10, 2004, in each case, as amended
from time to time.

 

“Indemnitee” shall have the meaning set
forth in Section 7.3(d).

 

“Indemnitor” shall have the meaning set
forth in Section 7.3(d).

 

“Inflation Index” shall mean 1.5 times the
Consumer Price Index for All Urban Consumers (CPI-U) published by the bureau
for Labor Statistics of the United States Department of Labor with respect to
the previous year, or if publication of that index ceases, a similar index
published by such other organization as Owner and Operator may mutually agree.

 

“Interconnection Agreements” shall mean (a)
the Entergy Operating Companies First Revised Service Agreement No. 222
(Attaching Amended and Restated Interconnection and Operating Agreement by and
between Duke Energy Hinds, LLC and Entergy Mississippi, Inc.) between Duke
Energy Hinds, LLC and Entergy Mississippi, Inc., dated November 27, 2001, 

 

4

 

including
Generator Imbalance Agreement between Entergy Services, Inc. as Agent for
Entergy Mississippi, Inc., and Duke Energy Hinds, LLC and (b) any other
interconnection agreement entered into from time to time with respect to the
Facility, in each case, as amended from time to time.

 

“Interconnection Point” shall mean (a) with
respect to electric transmission, each Interconnection Point as defined in the
respective Interconnection Agreements, and (b) with respect to pipelines, the
physical point(s) on the Site where the pipelines owned or leased by Owner
connect with the third-party pipelines transporting the relevant substance.

 

“Laws” shall mean all laws, statutes,
ordinances, rules and regulations, in each case of and from any Governmental
Authority having valid jurisdiction.

 

“Legacy Employees” shall
have the meaning set forth in Section 6.6(d)(iv).

 

“Maintenance” shall mean Scheduled
Maintenance, Unscheduled Maintenance and Routine Maintenance.

 

“Major Line Item” shall mean, with respect
to any Budget, the following major expense line items in such Budget: (i)
administration (labor), (ii) administration (other), (iii) Scheduled and
Routine Maintenance (including labor costs), (iv) outage costs, (v) regular
labor (operations), (vi) Monthly Management Fee, (vii) utilities, (viii)
auxiliary power, and (ix) other.

 

“Material Project Agreements” shall mean the
agreements set forth on Exhibit F hereto, as such schedule may be amended from
time to time in writing by the parties hereto.

 

“Monthly Management Fee” shall have the
meaning set forth in Section 5.1(a).

 

“Monthly Management Report” shall mean the
report delivered pursuant to Section 3.9(a) in the form of Exhibit E,
as such form may be modified by the parties hereto from time to time.

 

“Notice of Claim” shall have the meaning set
forth in Section 7.3(d).

 

“O&M  Account”
shall mean the “Hinds O&M Account” as defined in the Depositary Agreement.

 

“O&M Costs” shall have the meaning set
forth in Section 5.1(b).

 

“Operating Representative” shall have the
meaning set forth in Section 4.1(a)(iv).

 

“Operation Year” shall mean (a) for the
initial year of operation of the Facility, the period from Commencement Date
until June 30 of the following year and (b) for each successive year of
operation, July 1 of such year through June 30 of the following year, except
that the final Operation Year shall begin on July 1 and end upon the
termination or expiration of this Agreement. For an Operation Year of lass than
365 days, any calculation in this Agreement determined by reference to an
Operation Year shall be adjusted by multiplication of the 

 

5

 

appropriate figure
by a fraction, the numerator of which shall be the number of days in that
Operation Year and the denominator of which shall be 365.

 

“Operator Guarantor” shall have the meaning
set forth in Section 3.18.

 

“Operator Permits” shall mean the
authorizations, consents, exemptions, decrees, licenses, permits, certificates,
requirements, orders and approvals identified on Exhibit C and all other
authorizations, consents, exemptions, decrees, licenses, permits, certificates,
requirements, orders and approvals (other than the Owner Permits) now or
hereafter required under applicable Law and Governmental Requirements to
qualify Operator to operate the Facility and to perform the Services.

 

“Owner Permits” shall mean the
authorizations, consents, exemptions, decrees, licenses, permits, certificates,
requirements, orders and approvals identified on Exhibit D and all other
authorizations, consents, exemptions, decrees, licenses, permits, certificates,
requirements, orders and approvals (other than the Operator Permits) now or hereafter
required to be obtained and maintained under applicable Law and Governmental
Requirements in connection with the ownership and operation of the Facility.

 

“Person” shall mean any natural person,
corporation, general partnership, limited partnership, limited liability
company, proprietorship, other business organization, trust, union, association
or Governmental Authority.

 

“Plant Manager” shall mean an individual
designated by Operator and approved by Owner pursuant to Section 3.8
hereof, who shall supervise the day-to-day performance of the Services at the
Facility on behalf of Operator.

 

“PPA” shall mean the Hinds PPA and any other
power purchase agreement entered into from time to time with respect to the
Facility, in each case as amended from time to time.

 

“Project Company Permitted Liens” shall have
the meaning set forth in the Depositary Agreement.

 

“Prudent Industry Practices” shall mean,
with respect to a particular time, those practices, methods, techniques and
standards, as at such time, that are generally accepted for use in the electric
generation and transmission industry, and that at a particular time, in the
exercise of reasonable judgment in light of the facts known at the time a
decision is made or action is taken, would be expected to accomplish the
design, engineering, construction, testing, operation and maintenance of
electric generation and transmission equipment in a safe and prudent manner,
including those practices, methods, techniques and standards necessary to
operate such equipment in accordance with applicable Law (taking into account
the written recommendations of manufacturers of equipment) as at such time (as
opposed to optimum practice, method, technique or standard).

 

“Review Committee” shall have the meaning
set forth in Section 4.2(b).

 

“Routine Maintenance” shall mean
maintenance, excluding Scheduled and Unscheduled Maintenance, of a regular or
minor nature that reasonably should be performed periodically to 

 

6

 

keep the Facility
in working order including lubrication, repacking of valves, minor leak repair,
adjustments, preventive maintenance, calibrations, replacement of Consumables
and similar services, outage repairs and general housekeeping.

 

“Scheduled Maintenance” shall mean the
planned periodic inspection, overhaul and repair of the Equipment included in a
Budget approved by Owner or as otherwise documented and approved by Owner.

 

“Services” shall have the meaning set forth
in Section 3.1(a).

 

“Site” shall mean the parcel of land located
in Hinds County, Mississippi, described on Exhibit B, as well as
easements, rights of way and other lands along which railroads, steam, water
and gas pipelines, wastewater discharge lines and other utilities that serve
the Facility are located.

 

“Subcontractor” shall mean any party with
whom Operator enters into an agreement for the performance of Services or for
the supply of Equipment to Operator, including parties at any level with whom
any Subcontractor has further subcontracted any part of the Services, and the
representatives, successors, and assigns of such party.

 

“Unscheduled Maintenance” shall mean
unplanned maintenance, replacement and repair of the Equipment (other than
Routine Maintenance or Scheduled Maintenance) that has not been scheduled and
budgeted for in the Budget and such repair, replacement or maintenance being
limited to unforeseen circumstances (including a change of Law) that would not
reasonably be expected to be scheduled and budgeted for in the Budget.

 

Section 1.2      Construction.

 

(a)           All article, section, subsection,
schedules and exhibit references used in this Agreement are to articles,
sections, subsections, schedules and exhibits to this Agreement unless
otherwise specified. The exhibits and schedules attached to this Agreement
constitute a part of this Agreement and are incorporated herein for all
purposes.

 

(b)           If a term is defined as one part of
speech (such as a noun), it shall have a corresponding meaning when used as
another part of speech (such as a verb). Unless the context of this Agreement
clearly requires otherwise words importing the masculine gender shall include
the feminine and neutral genders and vice versa. The words “includes” or “
including” shall mean “including without limitation,” the words “hereof,” “hereby,”
“herein,” “hereunder” and similar terms in this Agreement shall refer to this
Agreement as a whole and not any particular section or article in which such
words appear and any reference to a Law shall include any amendment thereof or
any successor thereto and any rules and regulations promulgated thereunder. Currency
amounts referenced herein are in currency of the United States.

 

(c)           Whenever this Agreement refers to a
number of days, such number shall refer to calendar day(s), not Business
Day(s).

 

(d)           All accounting terms used herein and
not expressly defined herein shall have the meanings given to them under GAAP.

 

7

 

(e)           Each party hereto acknowledges that
it and its attorneys have been given an equal opportunity to negotiate the
terms and conditions of this Agreement and that any rule of construction to the
effect that ambiguities are to be resolved against the drafting party or any
similar rule operating against the drafter of an agreement shall not be
applicable to the construction or interpretation of this Agreement.

 

ARTICLE
II

RELATIONSHIP OF OWNER, OPERATOR AND SUBCONTRACTORS

 

Section 2.1      Status
of Operator.  Operator shall perform and execute its obligations
under this Agreement as an independent contractor to Owner and shall not be an
employee or, except as expressly provided in this Agreement, an agent of Owner.

 

Section 2.2      Subcontractors
and Affiliates.  Operator may have all or any part of the
Services accomplished by Subcontractors pursuant to written agreements between
Operator and such Subcontractors. The creation of any subcontract relationship
shall not (a) relieve Operator of any of its obligations under this Agreement,
(b) relieve Operator of its responsibility for the performance of Services
rendered by any such Subcontractor or (c) create any relationship between Owner
and any Subcontractor. Owner shall communicate with any Subcontractor only
through Operator. No Subcontractor is intended to be or shall be deemed a
third-party beneficiary of this Agreement. Operator shall purchase goods and
services at competitive rates comparable to those generally available for
similar contracts in the market to the maximum extent feasible.

 

Without limiting
the preceding paragraph, Operator may have Services performed by its
Affiliates, but in such case Operator shall be responsible for such Services in
accordance with the terms of this Agreement and Owner shall look solely to
Operator as if the Services were performed by Operator.

 

ARTICLE
III

OPERATOR RIGHTS AND RESPONSIBILITIES

 

Section 3.1      General.  During
the term of this Agreement, Operator shall manage the operation and maintenance
of the Facility and do all things necessary for the proper operation and
maintenance of the Facility in accordance with the provisions of this
Agreement, including the standards set forth in Section 3.3 (collectively, the “Services”). In performance of the Services,
Operator will follow the reasonable requests of Owner not otherwise prohibited
by Section 4.1(b). Operator
shall promptly notify Owner if it becomes aware of a request or direction by
Owner to Operator that violates Section 4.1(b).

 

Section 3.2      Site
Procedures.  Owner shall provide to Operator any site procedures
being used at the Facility on the Commencement Date. Thereafter, Operator shall
review and modify such site procedures as Operator deems appropriate based on
the obligations of Operator under this Agreement, and shall provide Owner with
copies of any and all site procedures adopted from time to time by Operator in
connection with performing the Services at the Facility. Operator shall
promptly notify Owner of any amendment or modification to such site procedures.
Any such site procedures shall (a) be in compliance with all Governmental 

 

8

 

Requirements and Laws; (b) be in accordance with Prudent Industry
Practices; and (c) otherwise be consistent with the terms of this Agreement. Any
such site procedures provided by Operator to Owner are hereby designated by
Operator as confidential information and shall be delivered to Owner subject to
the restrictions set forth in Section 12.1.

 

Section 3.3      Operation
and Performance of Services.  Operator shall perform the Services
in accordance in all material respects with this Agreement, the Annual
Management Plan (other than variances in items contained therein (including the
Budget) to the extent permitted by this Agreement but including requirements of Material
Project Agreements included therein), Prudent Industry Practices, Laws
and Governmental Requirements and shall use its reasonable efforts to minimize
Facility Outages and downtime and maximize the operating efficiency and
availability of the Facility. Operator acknowledges that Owner is party to or
beneficiary of certain Material Project Agreements, and that certain terms thereof pertain to the operation and
maintenance of the Facility. The parties agree to identify such provisions and
to include them as requirements for Operator in the Annual Management Plan.

 

Section 3.4      Annual
Management Plan.

 

(a)           On or before the Commencement Date,
Owner shall provide Operator with the operating plan currently in place for the
Facility (the “Transition Plan”), which Transition
Plan will be utilized for a period of not to exceed sixty days. Owner and
Operator shall develop promptly after the Commencement Date the Annual
Management Plan (the “Annual Management Plan”)
for the initial Operation Year which shall replace the Transition Plan. The
initial Annual Management Plan shall adapt the Transition Plan and in addition
shall include (i) Operator’s annual goals and objectives in respect of
operations, maintenance and management of the Facility, (ii) major maintenance schedule
for the 24 month period after the beginning of the Operation Year, (iii)
capital investment plan, (iv) technical support plan, (v) environmental, health
and safety operating plan, (vi) if requested by Owner, supplies and materials
inventory recommendations, (vii) Budget, (viii)
operational requirements of Material Project Agreements with which Operator
shall comply, and (ix) PPA and Energy Management Agreement dispatch
requirements plan. Owner shall provide Operator with such information as shall
be necessary for the completion of the initial Annual Management Plan.

 

(b)           No later than one hundred twenty
(120) days before the beginning of each successive Operation Year, Operator
shall submit to Owner a proposed Annual management Plan for the Operating Year
succeeding the then current Operating Year. Within forty-five (45) days after
the Owner received such proposed Annual Management Plan, Owner shall advise
Operator of any required changes to such Annual Management Plan as Owner may
deem necessary (except to the extent that such changes are inconsistent with
the PPA, Prudent Industry Practice, Laws or Governmental Requirements). Owner
shall provide Operator with such information as shall be necessary for the
completion of the Annual Management Plan. Not more than ten (10) days following
Operator’s receipt of Owner’s comments on such proposed Annual Management Plan,
Owner and Operator shall meet to discuss the terms of such Annual Management
Plan and Owner’s requested changes thereto. Owner and Operator shall use
reasonable efforts to reach agreement thereon at least sixty (60) days prior to
the beginning of such Operation Year. If such revised Annual Management Plan is
not timely approved, Operator shall continue to operate in accordance with the
Annual management Plan then currently in use 

 

9

 

(provided
the Budget contained therein shall be adjusted pursuant to the Inflation Index
and any Budget overrun proposals previously approved or deemed approved by Owner
with respect to such Budget) and the approval of such proposed Annual
Management Plan shall be subject to dispute resolution pursuant to Section
13.15 of this Agreement.

 

(c)           In the event Operator determines that
(i) the finalized Budget for any Operation Year or (ii) any Major Line Item in
such Budget, likely will be exceeded by more than 10%, Operator promptly shall
give Owner notice of such fact and Operator shall promptly develop and deliver
to Owner a Budget overrun proposal for the remainder of such Operation Year. Such
Budget overrun proposal shall be prepared in the same form as the Budget and
shall be subject to Owner’s approval; provided, however, such Budget overrun
proposal shall be deemed approved to the extent such Budget overruns are due to
operating schedules in excess of the schedules contemplated in the current
Budget and requested by Owner subsequent to the approval of the current Budget,
and amounts incurred by Operator pursuant to Sections 3.12, 3.14,
5.1(b)(x) and (xi), 5.7 and 11.5 shall not be included in any such 10%
calculation.

 

Section 3.5      Management/Meetings
and Third Parties.

 

(a)           Pursuant to Section 3.4, Operator
shall develop management systems, policies, procedures and programs as set
forth in the Annual Management Plan to manage the technical and business
operations of the Facility, which management systems shall be developed in
conjunction with Owner’s management system. At Owner’s invitation, or, in
Operator’s sole discretion, as necessary for the daily operations of the
Facility (with prompt notice by Operator to Owner), Operator shall attend and
participate in any meetings and committees regarding the management, operations
and maintenance of the Facility, including (i) the Review Committee as provided
in Section 4.2(b), (ii) meetings with federal, state, county, or local
government entities (including in respect of environmental, health and safety
issues), and major suppliers and customers, and (iii) meetings with PPA
counterparties.

 

(b)           Operator shall provide input to Owner
as to the current and future planned operations of the Facility as determined
by the energy manager in place for the Facility and any impact thereof on the
Annual Management Plan and Facility operation.

 

Section 3.6      Maintenance
and Technical Services.

 

(a)           Operator shall provide and perform
all Maintenance and technical services for the Facility in accordance with
Section 3.3, including planning, outage management, technical supervision
(including technical oversight of turbines and overall plant operation and
performance, and boiler water and wastewater chemistries), maintenance of
computer systems and programs at the Facility, labor, tooling and equipment,
inspection reports and recommendations for Maintenance and investigations of
service disruptions, mechanical breakdowns and failures and substandard
performance. In the event Owner enters into any long term service agreement for
any maintenance services for the Facility, Operator shall manage, monitor and
oversee such agreement and the services provided thereunder as agent for Owner.

 

10

 

(b)           Operator shall provide procurement,
accounting, legal, environmental and human resources support necessary for the
performance of the Services under this Agreement. The rates for such additional
services are set forth in Exhibit G.

 

(c)           In the event Operator determines any
material Unscheduled Maintenance is advisable or necessary (other than in
connection with an event described in Section 3.12 (i) Operator shall
immediately inform Owner of the need, extent and approximate cost of such
Unscheduled Maintenance by contacting the Asset Manager, or in the absence of
the Asset Manager, his designee, by phone or in person, (ii) Operator shall, at
Owner’s expense, follow any direction provided by Owner as a result of such
contact (to the extent consistent with Prudent Industry Practice, Laws,
Governmental Requirements and this Agreement) and (iii) in the event Operator,
after reasonably diligent efforts (including that provided for in subsection
(i) of this sentence), is unable to reach and receive direction from Owner for
a  3 hour period (12 hour period for
Unscheduled Maintenance to the combustion turbine and the steam turbine),
Operator shall, at Owner’s expense, perform Unscheduled Maintenance in a manner
consistent with Section 3.3.

 

(d)           Operator shall advise Owner of any
Forced Outage as soon as possible, but in no event later than twenty-four (24)
hours after its commencement. Within fifteen (15) days after the conclusion of
any Forced Outage, Operator shall deliver a report to Owner describing the
nature of the Forced Outage and detailing any remedial measures undertaken to
correct such Forced Outage and to minimize future Forced Outages.

 

Section 3.7      Equipment,
Spare Parts, Consumables, Tools and Materials.

 

(a)           Operator shall provide to Owner as
set forth in the Annual Management Plan detailed recommendations for inventory
of Equipment, Consumables, spare parts, tools and any other supplies and materials
necessary to perform the Services and operate the Facility and arrange for
Owner’s account for prompt delivery of such supplies and materials; provided,
however, that the initial inventory of Spare Parts and small tools,
including appropriate storage spaces or buildings therefore, shall be provided
by Owner.

 

(b)           Operator, for Owner’s account, shall
purchase, maintain, manage and care for an inventory of Equipment, Consumables,
spare parts, tools and any other materials adequate to support the operation of
the Facility. Operator shall implement and manage any agreements for the
purchase of such Equipment, Consumables, spare parts, tools and any other
materials on Owner’s behalf. Operator may enter into such agreements as
principal or as agent for Owner. Operator shall exercise the same degree of
care and diligence with respect to such agreements and the materials purchased
thereunder and implement such agreements as Operator would if it were
contracting with the vendor as principal. On any agreement directly between
Owner  (or Operator as agent for
Owner)  and vendor, Owner and vendor
shall be obligated directly to each other under such agreements and Operator
shall have no liability for the performance of such vendors, provided, however,
that the foregoing shall not relieve Operator of any liability it may have for
failure to perform its Services with respect to such agreements. Operator shall
at the request of Owner evaluate the terms of and participate in negotiation of
any agreements pertaining to the Facility

 

11

 

Section 3.8      Operator’s
Personnel.

 

(a)           Operator’s Facility Work Force
organization structure and staffing plan as of the Commencement Date is set
forth in Exhibit A. The Operator shall not change the organizational
structure or staffing plan of the Facility Work Force without the consent of
Owner, which consent shall not be unreasonably withheld or delayed.

 

(b)           Operator shall designate a Plant
Manager authorized to direct the day-to-day performance of the Services at the
Facility. Operator’s designation of the Plant Manager, or any successor Plant
Manager, shall be subject to Owner’s approval, which approval shall not be
unreasonably withheld. Owner shall be entitled to rely on the authority of the
Plant Manager to act on behalf of Operator with regard to the day-to-day
performance of the Services at the Facility.

 

(c)           Operator shall designate a Contract
Manager to represent and act on behalf of Operator and receive communications
from Owner. Notification of changes of Contract Manager shall be provided to
Owner in a timely manner. The Contract Manager shall be responsible for
representing Operator’s interests with respect to this Agreement, other than
the day-to-day performance of the Services at the Facility directed by the
Plant Manager. Owner shall be entitled to rely on the authority of the Contract
Manager to act on behalf of and commit Operator in regard to all matters under
this Agreement. Any notices given to the Contract Manager pursuant to this
Agreement shall be deemed to have been given to Operator. The initial Contract
Manager is Dave Ledonne, who is acceptable to Owner.

 

(d)           From and after the Commencement Date,
Operator shall provide and employ in connection with the performance of
Services under this Agreement:  (i)
professional and technically competent management personnel for the execution
of the Services; and (ii) other qualified, skilled and experienced labor, in
each case as necessary for the proper and timely execution of the Services;
provided, however, that Owner recognizes that Operator may hire personnel (“Duke Personnel”) from the prior operator of
the Facility in connection with the acquisition of the Facility by Owner, and
Operator will have no prior experience with such personnel and therefore cannot
warrant that they meet the standards set forth above. Operator will determine
as promptly as practical whether such Duke personnel meet the standards set
forth above, and if it determines that such personnel do not meet such
standards, then Operator will terminate the employment of such personnel.
Operator may provide certain professional or technical support services using
off-Site employees and consultants. Operator shall comply with all Laws and
Governmental Requirements regarding licensing of personnel performing the
Services at the Facility.

 

(e)           The personnel provided and employed
by Operator pursuant to (d) above shall include the operating personnel
employed by the previous operator, subject to customary drug screening and
background checks to be administered by Operator.

 

Section 3.9      Reports
by Operator.  Operator shall provide the following reports to
Owner in a form and content as reasonably requested by Owner:

 

(a)           Annual
Management Plan in accordance with Section 3.4;

 

12

 

(b)           Monthly Management Reports;

 

(c)           Weekly summary reports of
(i) production, availability and fuel usage, showing all production
commodities such as fuel, electricity and water produced, consumed or on hand
for each day, (ii) significant operations and major maintenance events
during such week and planned for subsequent periods, and
(iii) operational, safety, community and environmental events during such
week; and

 

(d)           Such other reports reasonably
requested by Owner, including periodic detailed reports to support Owner’s
accounting and early warning reports on any required availability percentage
levels and/or operational defaults specified in any PPA.

 

Section 3.10      Taxes
and Employee Costs.  Operator shall be responsible for the payment of
actual wages and salaries of the Facility Work Force for the performance of the
Services, including compensation, payroll taxes, benefits, insurance and other
terms and conditions of employment and shall be reimbursed by Owner therefor
pursuant to Article V. The benefits, incentive pay and insurance provided for
the Facility Work Force shall be commensurate with the benefits of other
non-union employees of Operator and its Affiliates. Owner shall have no
obligation for any income tax incurred by Operator on its net income.

 

Section 3.11      Environmental,
Health and Safety Plan, Security and Hazardous Materials Management.

 

(a)           Operator shall provide comprehensive
environmental, health and safety operating plan for the Facility as set forth
in the Annual Management Plan pursuant to Section 3.4 and shall designate a
representative for the purpose of managing such plan.

 

(b)   Operator shall be responsible for
maintaining security at the Site in accordance with Prudent Industry Practices,
Laws and Governmental Requirements, and any requirements of Owner provided in
writing to Operator. Operator shall provide a plan for security of the Facility
in the Annual Management Plan,

 

(c)           Operator shall be responsible for the
on-Site management of, and shall act as Owner’s agent with respect to the
off-Site transportation, treatment, storage and disposal of, all Hazardous
Materials generated on or brought onto the Site in connection with the
provision of the Services, all in compliance in all material respects with
applicable Laws. Owner and not Operator shall have title to any Hazardous
Materials generated on or brought onto the Site. In addition, Operator shall
use reasonable efforts to not allow any Hazardous Materials to adversely
affect, in any material manner, the operation of the Facility or threaten, in
any material manner, the health or safety of any person. Operator shall
promptly notify Owner should any Hazardous Materials problem arise and shall
work to remedy such situation. Operator shall give any notice required to be
made by Governmental Requirements or Laws with respect to a release of
Hazardous Materials, and in any such event, Operator shall, where possible,
provide Owner with advance notice of any such notice required to be made by
Operator. Owner shall maintain in place agreements for the off-Site
transportation, treatment, storage and disposal of Hazardous Materials.
Operator shall notify Owner promptly upon its discovery of the actual or
suspected presence of any such Hazardous Materials.

 

13

 

Section 3.12      Emergencies.  In
the event of any event or emergency involving the Facility and materially
endangering personnel or property, Operator shall, at Owner’s expense, take
such action as is necessary and reasonable to prevent, avoid, or mitigate
injury, damage or loss and shall, as soon as practicable, contact the Asset
Manager after any such material incident and provide a written report to Owner
of any such material incident and Operator’s response within 48 hours. Whenever,
in the opinion of Owner, Operator has not taken sufficient precautions for the
safety of the public or persons at the Facility or the protection of the
Facility or the structures or property on or adjacent to the Facility, creating
in the opinion of Owner an emergency or material event or probability of an
emergency or material event requiring immediate action, then Owner may direct
Operator to take such corrective action as Owner deems appropriate, and
Operator shall promptly execute, at Owner’s expense, such corrective measures
as directed by Owner. Any costs incurred by Operator in handling any such event
or emergency shall be reimbursed or paid by Owner pursuant to Article V and
shall not be included in the amount spent for purposes of determining, pursuant
to Section 3.4, 5.1(b), 5.1(c) or 5.1(d), whether expenditures are more than
10% in excess of the aggregate amount of the Budget or the relevant Major Line
Item, if applicable.

 

Section 3.13      Notice
of Non-Compliance With Laws and Governmental Requirements.  Operator
shall promptly notify Owner of any known non-compliance or potential
non-compliance with any Governmental Requirements or Laws.

 

Section 3.14      Permits,
Reporting and Liens.

 

(a)           Operator shall be responsible for
obtaining, renewing and maintaining all Operator Permits. Upon Owner’s
reasonable request, Operator shall (i) participate in obtaining and maintaining
the Owner Permits, (ii) participate in meetings with Governmental Authorities
regarding regulatory or compliance matters affecting the Facility, and (iii)
cooperate and provide information in preparing ordinary course notices, reports
and communications required under any Governmental Requirement, Law or any
power, sale, tolling, fuel supply, water supply, regional transmission
operator, independent system operator, transmission services or other agreement
relating to the Facility. Any costs incurred by Operator in responding to such
requests shall be reimbursed or paid by Owner pursuant to Article V and shall
not be included in the amount spent for purposes of determining, pursuant to
Section 3.4, 5.1(b), 5.1(c) or 5.1(d), whether expenditures are more than 10%
in excess of the aggregate amount of the Budget or the relevant Major Line
Item, if applicable. Operator shall provide prompt notice to Owner of any known
(A) investigation or inquiry by any Governmental Authority, and
(B) request by any Governmental Authority for non-ordinary course notices,
reports or communications.

 

(b)           Operator shall immediately notify
Owner in writing of any liens or encumbrances on the Facility or Site, other
than Project Company Permitted Liens, known to Operator and shall provide Owner
with copies of same.

 

Section 3.15      Owner’s
Access.  Subject to Article 12, upon reasonable notice Operator
shall provide Owner or its representatives with unrestricted access to the Site
and Operator’s records concerning the Facility and this Agreement subject to
Owner’s observance of safety measures reasonably deemed by Operator to be
necessary or appropriate; provided,  however,
that (a) Operator shall have no obligation to provide confidential records
regarding the Facility Work 

 

14

 

Force, including human resource files, personnel records, or Operator’s
internal financial records, (b) such access shall not unreasonably interfere
with the operation of the Facility and (c) such access shall not violate any
Governmental Requirement or Law. Operator shall also afford Site access to
others as may be necessary or appropriate to the servicing, maintaining,
modifying or upgrading of the land or facilities located thereon or as
otherwise directed by Owner, subject to such Person’s observance of safety
measures reasonably deemed by Operator to be necessary or appropriate.

 

Section 3.16      Records.  Operator
shall maintain in good order in all material respects all books, records and
accounts with respect to the Services (including all records of Facility
operation costs other than Operator’s internal financial records), required
pursuant to any Governmental Requirements or Laws or, to the extent known by
Operator, required pursuant to any agreement relating to the Facility, and
shall retain such records during the term of this Agreement. Upon expiration or
earlier termination of this Agreement, Operator shall deliver to Owner all
records referred to in this Section 3.16.

 

Section 3.17      Title
to Goods, Documents and Data.  Owner shall have full title and
all rights in and to any goods and other property paid for directly or
indirectly by Owner immediately when such amounts are paid and all reports and
other documents provided by or on behalf of Operator to Owner as part of the
Services. Owner agrees that all programs, procedures, inventions, processes and
other intellectual property developed by Operator, including for use on or at
the Facility, shall remain the property of Operator. Owner shall be granted,
during the term of this Agreement and solely as may be necessary for the
provision of the Services hereunder, a non-transferable, non-exclusive limited
license to the use of such intellectual property of Operator used on or at the
Facility.

 

Section 3.18      Operator
Guaranty.  On the Commencement Date and for the term of this
Agreement, Operator shall provide and cause to be maintained a guaranty by
Cinergy Corp. (“Operator Guarantor”)
of the obligations of Operator under this Agreement in the form attached as
Exhibit H

 

ARTICLE
IV

OWNER RIGHTS AND RESPONSIBILITIES

 

Section 4.1      Management,
Strategic Decisions and Owner Directions.

 

(a)           Owner shall be responsible for making
such business, management and strategic decisions as may be required from time
to time in connection with the operation and maintenance of the Facility. To
this end, Owner shall be obligated to:

 

(i)            Provide written direction necessary
to allow Operator to comply with the Annual Management Plan;

 

(ii)           Provide information reasonably
requested by Operator to facilitate Operator’s incorporation and utilization of
existing management systems, policies, procedures and programs in place as of
the Commencement Date to manage the technical and business operations of the
Facility or performance of the Services, including estimated run hours, starts,
duration of run hours and other Owner operating criteria (such 

 

15

 

estimated
operating information as it relates to the Annual Management Plan to be
delivered not later than 90 days prior to the required delivery date of each
Annual Management Plan under Section 3.4 as such information may be
supplemented by mutual agreement of the parties);

 

(iii)          Participate in the Review Committee
with Operator;

 

(iv)          Provide prompt notice to Operator if Owner
receives any notice from a Governmental Authority, PPA counterparty or, in the
event such notice would impact the ability of Operator or Owner to perform its
obligations under this Agreement, the PPA, or otherwise materially affect Owner
or a significant contractual counterparty of Owner related to the Facility; and

 

(vi)          Direct and coordinate fuel and water
supplies, electric transmission services and dispatch at the Facility as
provided in Section 4.3.

 

(b)           Owner may request Operator to carry
out the reasonable directions of Owner with respect to the operation and
maintenance of the Facility; provided, however, Owner shall not
request Operator, or require Operator by the refusal of Owner to give an
approval or consent which Operator is required to obtain pursuant to this
Agreement (including any approval under Section 3.4(b)), to act in a way that
conflicts with the requirements of this Agreement.

 

Section 4.2      Owner’s
Representatives and Review Committee.

 

(a)           Asset Manager.  Owner
shall designate an Asset Manager to represent and act on behalf of Owner and
receive communications from Operator. Notification of changes of Asset Manager
shall be provided to Operator in a timely manner. The Asset Manager shall be
responsible for representing Owner’s interests in the day-to-day affairs of the
Facility. The Asset Manager shall also be responsible for specifying Owner’s
instructions to Operator as to the desired operating schedule and other
operating objectives within the Facility’s capabilities. The Asset Manager
shall act on behalf of Owner as the principal interface with the Operator. Operator
shall be entitled to rely on the authority of the Asset Manager, or any other
person expressly designated by Asset Manager to act as his designee from time
to time, to act on behalf of and commit Owner in regard to all matters under
this Agreement. Any notices given to the Asset Manager shall be deemed to have
been given to Owner.

 

(b)           Review Committee.  Operator
and Owner will establish an oversight committee (the “Review Committee”), which shall meet
quarterly for the purpose of coordinating major operations at the Facility,
including (i) interaction with and major operational decisions that relate to
PPA counterparties, Governmental Authorities, and major suppliers and
customers, (ii) planning major maintenance events, and (iii) other
significant operational matters deemed appropriate by Owner and Operator; provided,
however, that there shall at all times be an equal number of
representatives serving on the Review Committee that have been appointed by
Owner and Operator, respectively. Operator and Owner shall appoint to the
Review Committee the Asset Manager, Contract Manager and Plant Manager and such
other individuals mutually agreed upon by Owner and Operator. Owner and
Operator, as the case may be, shall provide 

 

16

 

written notice of
such appointments to the other party. Such appointments may be changed at any
time by similar written notice. The members of the Review Committee shall meet
as necessary, at a mutually agreeable time and place. Each party shall
cooperate in providing the Review Committee with all information reasonably
requested by the members of the Review Committee, as a group, for the
performance of their duties. All recommendations, decisions and agreements made
by the Review Committee shall be evidenced in writing; provided, however,
that the Review Committee shall not have the authority to modify or amend the
terms of this Agreement.

 

Section 4.3      Commodity
Procurement, Scheduling and Trading.  Owner or its designee shall
market and arrange for the supply, sale, shipment or transmission of gas or
electricity, shall procure fuel and water supplies and electric transmission
rights at the times and in the volumes that Owner determines in its sole
discretion to be appropriate, shall arrange for communications at the Facility
and shall direct dispatch of electricity at the Facility.

 

Section 4.4      Reports
and Plans.  Owner shall make available to Operator such operation
and maintenance instructions and manuals, as-built drawings, specifications,
warranties, diagrams, test results, accounting systems and reports, books and
records, recommended inventories of Spare Parts, all Material Project Agreements
and all other documents and information relating to the Facility to the extent
available to Owner and reasonably requested by Operator to facilitate the
creation of reports and plans to be delivered by Operator or to facilitate the
performance of the Services.

 

Section 4.5      Taxes.  Owner
shall pay any duty or tax as may arise out of or relate to the operation of the
Facility, except for duties or taxes for which Operator is responsible under
Section 3.10 or which arise out of or relate to Operator’s net income. All
payments to Operator shall be without reduction for any duties or taxes. If
Owner is exempt from the payment of any applicable sales and or use taxes or
has a direct payment permit with respect to such taxes, Owner shall provide
Operator with a copy of the certificate or permit, duly executed and issued by
the appropriate Governmental Authority. Owner shall indemnify Operator from and
against any taxes (and any interest or penalties related thereto) that are the
responsibility of Owner under this Agreement, provided that such
indemnification obligation shall not arise with respect to taxes for which
Operator has the responsibility of making payment under Section 3.10.

 

Section 4.6      Accounting.  Owner
shall perform standard accounting services and recordkeeping for Owner’s
business.

 

Section 4.7      Permits
and Reporting.  Owner shall be responsible for (a) obtaining,
renewing and maintaining all Owner Permits, (b) participating in all meetings
with Governmental Authorities regarding regulatory or compliance matters
affecting the Facility and (c) preparing and submitting in a timely manner, all
ordinary course notices, reports and communications required under any
Governmental Requirement, Law or any power, sale, tolling, fuel supply, water
supply, regional transmission operator, independent system operator,
transmission services or other agreement relating to the Facility. Upon
Operator’s reasonable request, Owner shall cooperate and assist in obtaining
and maintaining the Operator Permits.

 

17

 

Section 4.8      Operator’s
Access.  Subject to any existing restrictions on Owner’s access
rights, Owner shall provide Operator and its representatives with unrestricted
access to the Site.

 

Section 4.9      Other
Facilities and Services.  Owner shall provide office space,
restroom and locker facilities, parking, potable water, sanitary services,
telephones and network services, and inventory storage for Operator to be able
to perform the Services.

 

ARTICLE
V

PAYMENTS

 

Section 5.1      Payments
for Services.

 

(a)           Monthly Management Fee.  For
Services provided to Owner by Operator, in addition to the other payments
specified in this Article V, Owner shall pay to Operator a fee of ***** per
month (the “Monthly Management Fee”)
payable monthly ***** beginning on the Commencement Date and on the first
Business Day of each month thereafter *****.

 

(b)           O&M Costs.  Owner
shall advance funds for the payment of, or reimbursement to Operator for, the
below-enumerated costs to the extent actually incurred (such costs being the “O&M Costs”); provided that Owner
shall not have any obligation to pay or reimburse any such amount to the extent
such amount, when taken together with other amounts not approved by Owner hereunder,
is more than ***** in excess (in the aggregate for the one year period
following the Commencement Date) of the aggregate amount of the Budget or the
relevant Major Line Item, if applicable (other than additional amounts approved
by Owner in a Budget overrun proposal or amounts otherwise specifically
excluded from this calculation under this Agreement, including those in Section
5.1(e)):

 

(i)            Facility Work Force Wages and
Salaries:  The actual wages, salaries
and employee incentives determined in accordance with Section 5.7 for such
time as is devoted to the Services at a rate equal to such actual wages,
salaries and employee incentives (including overhead and benefits) performed by
the Facility Work Force;

 

(ii)           Maintenance Costs. The actual
cost to Operator of costs associated with daily ongoing and required
Maintenance of the Facility, including labor costs associated with the advisory
oversight by Operator of original equipment manufacturers for Maintenance,
repair and inspection of major Equipment;

 

(iii)          Communication Expense. The
actual cost of postage, long distance telephone, cellular phone, and teletype
expense incurred in the direct performance of the Services;

 

(iv)          Prints and Reproductions. The
actual cost of prints and reproductions expenses incurred in the direct
performance of the Services;

 

(v)           Computer Services. The actual
cost of computer services expenses incurred in the direct performance of the
Services;

 

 

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

 

18

 

(vi)          Materials and Equipment. The
actual cost of Equipment, Consumables, materials, supplies, spare parts (to the
extent not directly provided by Owner pursuant to Section 3.7, tools and
miscellaneous supplies procured for the Facility and the Facility Work Force;

 

(vii)         Transportation of Materials and
Equipment. The actual cost of transportation expenses related to materials
and Equipment for the Facility, including the cost of loading, hauling,
unloading, and insurance;

 

(viii)        Subcontracts. The actual invoice
costs attributable to third party subcontractors to perform the Services;

 

(ix)           Utilities. The actual cost of
all water, sewer, telephone, waste disposal and other utilities for the
Facility;

 

(x)            Legal Expenses. The actual
cost of attorneys’ fees and costs incurred in connection with any labor or
commercial matter related to the performance of the Services (except for such
matters solely between Owner and Operator) incurred on behalf of or as
instructed by Owner that is not covered under Section 5.1(b)(xii), except
those legal expenses incurred by Operator as a result of (A) Operator’s breach
of its obligations under this Agreement or negligent acts or omissions in each
case in an amount not to exceed (when added with the amount of all other
damages subject to Section 7.4) the limitation of liability set forth in
Section 7.4 or (B) gross negligence or willful misconduct (done with an intent
to harm). Costs enumerated in this Section 5.1(b)(xi) shall be reimbursed or
paid by Owner pursuant to this Article V and shall not be included for purposes
of determining whether expenditures are more than 10% in excess of the
aggregate amount of the Budget or the relevant Major Line Item, if applicable;

 

(xi)           Claims and Judgments. The
actual cost of attorneys’ fees, costs, settlements, and/or judgments incurred
in connection with any litigation, claims or disputes (except for such matters
solely between Owner and Operator) arising out of or in connection with the
performance of this Agreement, (including the performance of the Services on
real property of or to which Owner does not have sole right, title and
possession), except (A) those expenses, fines and penalties resulting from
Operator’s negligent acts or omissions or its operation of the Facility or
performance of the Services in a manner in violation of this Agreement or any
Law or Governmental Requirement in each case in an amount not to exceed (when
added with the amount of all other damages subject to Section 7.4) the
limitation of liability set forth in Section 7.4, (B) those expenses, fines and
penalties resulting from Operator’s gross negligence or willful misconduct
(done with an intent to harm) and (C) fees, costs, settlements, and/or
judgments for which Operator is reimbursed by proceeds of insurance provided
pursuant to Section 11.1 of this Agreement. Costs enumerated in this Section
5.1(b)(xii) shall be reimbursed or paid by Owner pursuant to this Article V and
shall not be included for purposes of determining whether expenditures are more
than ***** in excess of the aggregate amount of the Budget or the relevant
Major Line Item, if applicable;

 

 

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

 

19

 

(xii)          Insurance Expenses. The
premiums and other costs incurred by Operator to maintain the insurance
coverages described in Article 11; and

 

(xiii)         Other. All other actual direct
costs incurred in connection with the Services, including travel costs and
additional Services.

 

(c)           If Owner (i) rejects a request by
Operator for approval of a cost or expense that when taken together with other
amounts not approved by Owner hereunder is more than ***** in excess (in the
aggregate for the one year period following the Commencement Date) of the
aggregate amount of the Budget or the relevant Major Line Item, if applicable
(other than additional amounts approved by Owner in a Budget overrun proposal
or amounts otherwise specifically excluded from this calculation under this
Agreement), and such cost or expense if incurred would be an O&M Cost if it
were within the Budget, or (ii) rejects a request by Operator for approval of
an increase to the Budget, then, notwithstanding anything in this Agreement to
the contrary, (A) Operator shall not be required to take the action or incur
the cost or expense that is the subject of the rejected Budget increase or the
rejected cost or expense, (B) Operator’s failure to take such action or incur
such cost or expense and the consequences thereof shall not be a breach of this
Agreement, and (C) Operator shall be relieved of any liability which it would
otherwise have under this Agreement as a result of its failure to take such
action or incur such cost or expense and the consequences thereof provided
that Operator’s performance of its Services are otherwise in compliance with
this Agreement.

 

(d)           Owner shall not unreasonably withhold
approval of a request by Operator for approval of a cost or expense for
preservation or protection of property, health or safety that would exceed by
more than ***** (in the aggregate for the one year period following the
Commencement Date) the aggregate amount of the Budget for such period or the
relevant Major Line Item, if applicable (in each case, as modified by any
relevant Owner-approved Budget overrun proposal).

 

(e)           Notwithstanding anything to contrary
in this Agreement, amounts incurred by Operator pursuant to Sections
3.1(b)(iii), 3.12, 3.14, 5.1(b)(xi) and (xii), and 5.8 or to comply with
changes in Law since the date of the then current Budget shall not be included
in any such ***** calculation under this Section 5.1 or ***** calculation under
Section 3.4(b).

 

 

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

 

20

 

Section 5.2      O&M
Account.  Owner will provide for payments from the O&M
Account for all O&M Costs, the Monthly Management Fee or for any other
amounts payable by or on behalf of Owner to or on behalf of Operator hereunder
in accordance with the Depositary Agreement. The parties may agree on a payment
procedure whereby Owner advances funds to Operator for all O&M Costs
(including Advance O&M Cost Estimates) for Operator to pay such O&M
Costs from such funds advanced by Owner. With respect to O&M Costs for
goods and services provided by third-parties to Owner or Operator in connection
herewith and costs incurred directly by Operator that are not covered by Section 5.3,
Operator promptly shall review invoices received for such goods and services
and, if Operator determines such invoices are properly payable, promptly shall
forward such invoices to Owner for payment. Owner shall use commercially
reasonable efforts to pay on or before the due date therefor, for Owner’s
account (except to the extent Operator has, in its sole discretion, directly
incurred an O&M Cost, in which case for Operator’s account), such invoices,
except for any portion that Owner in good faith disputes, directly to the
third-party payee. Operator shall endeavor to resolve any dispute with a
third-party payee under a contract between Operator and such third party, and
will support Owner in any dispute with a third-party payee in a contract between
Owner and such third party.

 

Section 5.3      Advance
O&M Cost Estimate; Progress Report.  With respect to O&M
Costs that are estimatable, on or about the tenth day of each month Operator
shall furnish Owner with a billing covering the estimated amount of such
O&M Costs for the following month (each, an “Advance O&M Cost Estimate”). Each Advance O&M Cost
Estimate shall (a) itemize requested payments by type, (b) provide reasonable
substantiation and documentation supporting such request, (c) be generated,
where applicable, using Owner’s billing system, and (d) otherwise be in the
form reasonably requested by Owner. Owner shall pay each Advance O&M Cost
Estimate within twenty (20) days after receipt. Together with the Advance
O&M Cost Estimate, Operator shall furnish Owner with a detailed progress
report of all O&M Costs for the preceding month and, for such preceding
month, shall compare O&M Costs not paid directly by Owner to third-parties
with the Advance O&M Cost Estimate, and shall set forth any credits
received from third-party vendors. Any net deficiencies or excesses against the
Advance O&M Cost Estimate (after taking into account any third-party
credits) for any month shall be reflected as a credit or debit, as appropriate,
in the Advance O&M Cost Estimate for the following month. Each progress
report will be supported by documentation substantiating all O&M Costs
actually incurred in such month and otherwise shall be in form reasonably
acceptable to Owner. Each progress report also shall compare the month’s
O&M Costs and year-to-date O&M Costs incurred against the Budget on a
line-item basis as set forth in the Budget.

 

Section 5.4      Final
Billing.  If requested by Owner, after the end of each Operation
Year, Operator shall submit a statement summarizing O&M Costs incurred and
payments and credits received during such Operation Year.

 

Section 5.5      Invoice
or Payment Disputes or Errors.  If either party discovers an
error in the amount of any Operator or Owner invoice or payment made pursuant
to this Article V or disputes a payment requested pursuant to this
Article V, such party shall notify the other party within sixty (60) days
of discovery of such dispute or error; provided that neither party shall
be entitled to correction of any such error if notice of such error is not
delivered in writing to the other party within one year of the applicable
invoice or payment. If the correct amount of any Operator or Owner invoice is
disputed in good faith, the party with the payment obligation shall 

 

21

 

pay any amount not
in dispute, and failure to pay the amount in dispute shall not be deemed to be
a default hereunder.

 

Section 5.6      Employee
Incentive Plan.  Operator may develop and deliver to Owner an
Employee Incentive Plan for such Operation Year, which plan shall be generally
consistent with similar plans established by Operator or its Affiliates at the
Facility or at other facilities owned by Operator’s Affiliates.

 

Section 5.7      Interest
on Late Payments.  Any amounts (a) disputed and subsequently
found to have been correctly invoiced or owed, or (b) not timely paid in
accordance with this Agreement shall accrue interest at the lesser of (i) the
maximum rate of interest permitted by applicable Law and (ii) with respect
to amounts less than sixty (60) days past due, a rate equal to 5% over the Base
Rate or with respect to amounts that are sixty (60) or more days past due, a
rate equal to 2% over the interest rate set forth in the Reimbursement
Agreement; provided if such overdue amounts are being contested in good
faith and adequate reserves have been deposited into a segregated account in
which the Operator has a perfected security interest then the interest rate
with respect to amounts less than sixty (60) days past due shall apply to such
amounts.

 

Section 5.8      Audit.  Subject
to Article 12, upon reasonable prior notice (a) Owner, its representatives or
any agent on behalf of the Owner’s financing parties may inspect, copy and
audit Operator’s books, records, accounts, ledgers, time cards, estimates,
schedules, correspondence and other documents related to Operator’s performance
of its obligations hereunder and amounts due to Operator hereunder and amounts
for which Operator is reimbursed hereunder and (b) Operator agrees to provide
copies of such information to Owner upon request, at Owner’s expense; provided,  however,
that (i) Operator shall have no obligation to provide access to or copies of
confidential records regarding the Facility Work Force, including human
resource files, personnel records, or Operator’s internal financial records,
(ii) such inspection shall not unreasonably interfere with the operation of the
Facility and (iii) such inspection shall not result in the Operator being in
violation of any Governmental Requirement or Law. Owner shall reimburse
Operator for its actual and reasonable costs incurred by Operator for such
audits to the extent such audit assistance is not otherwise reimbursed by Owner
pursuant to this Agreement. Any such costs incurred by Operator shall be reimbursed
or paid by Owner pursuant to Article V and shall not be included in the amount
spent for purposes of determining, pursuant to Section 3.4, 5.1(b), 5.1(c) or
5.1(d) whether expenditures are more than 10% in excess of the aggregate amount
of the Budget or the relevant Major Line Item, if applicable. Owner’s
acceptance or approval or payment of Operator’s charges shall not operate as a
waiver of Owner’s right to audit the Operator in accordance with this
Section 5.8.

 

ARTICLE VI

TERM OF AGREEMENT; TERMINATION

 

Section 6.1      Initial
Term.  This Agreement shall become effective upon full execution
and delivery of this Agreement. The term of this Agreement shall commence on
the Commencement Date and, unless earlier terminated in accordance with the
terms and conditions of this Article 6, shall continue through one year
following the Commencement Date and shall be 

 

22

 

automatically
renewed for additional periods of one (1) year (subject to termination pursuant
to Section 6.2 through 6.5).

 

Section 6.2      Termination
Upon Insolvency.  If Operator (or Operator Guarantor) or Owner
makes a general assignment for the benefit of its creditors, or institutes a
proceeding in bankruptcy, or if a receiver, trustee, custodian or assignee is
appointed on account of its insolvency and not dismissed within sixty (60)
days, or if a proceeding in bankruptcy is instituted against Operator (or
Operator Guarantor) or Owner and not dismissed within sixty (60) days, or if Operator
(or Operator Guarantor) or Owner dissolves or is dissolved or its legal
existence is otherwise terminated, then the other party may, without prejudice
to any right or remedy available to it under this Agreement, terminate this
Agreement.

 

Section 6.3      Termination
by Owner for Material Default; Right to Cure.  If (a) Operator
violates a material provision of this Agreement (or Operator Guarantor violates
a material provision of its guaranty) and fails to cure or to commence and
continue good faith remedial efforts to cure such default within sixty (60)
days of receipt of notice thereof from Owner; or (b) a default, event of
default or other similar condition or event in respect of Operator or Operator
Guarantor under one or more agreements or instruments, individually or
collectively, relating to any obligation (whether present or future, contingent
or otherwise, as principal or surety or otherwise) for the payment or repayment
of any money in an aggregate amount of not less than $50 million, which results
in such indebtedness becoming, or becoming capable at such time of being
declared, immediately due and payable; or (c) a default, event of default or
other similar condition or event in respect of Operator or any Affiliate of
Operator under any one or more agreements for operations and maintenance or
energy management services with Owner or any Affiliate of Owner which results
in such agreement being terminated or becoming capable at such time of being
terminated as a result of such event, then Owner may, without prejudice to any
right or remedy available to it under this Agreement, terminate this Agreement.
Owner, at its option, shall have the right to cure such default on behalf of
Operator without terminating the Agreement. Owner shall also have the right to
perform such defaulted obligation upon termination.

 

Section 6.4      Termination
for Convenience.  Following the one year anniversary of the
Commencement Date, Operator and Owner shall have the right to terminate this
Agreement for convenience upon sixty (60) days written notice.

 

Section 6.5      Termination
by Operator for Material Default.  If (a) Owner violates a
material provision of this Agreement (including a payment default) and fails to
cure or to commence and continue good faith remedial efforts to cure such
default within thirty (30) days (or, with respect to a payment default, five
(5) days) of receipt of notice thereof from Operator, or (b) a default, event
of default or other similar condition or event in respect of Owner under one or
more agreements or instruments, individually or collectively, relating to any
obligation (whether present or future, contingent or otherwise, as principal or
surety or otherwise) for the payment or repayment of any money in an aggregate
amount of not less than $1 million, which results in such indebtedness
becoming, or becoming capable at such time of being declared, immediately due
and payable; or (c) a default, event of default or other similar condition or
event in respect of Owner or any Affiliate of Owner under any one or more
agreements for operations and maintenance or energy management services with
Operator or any Affiliate of Operator 

 

23

 

which results in
such agreement being terminated or becoming capable at such time of being
terminated as a result of such event, then Operator may, without prejudice to
any right or remedy available to it under this Agreement, terminate this
Agreement.

 

Section 6.6      Rights
and Obligations Upon Termination.

 

(a)           Upon
the expiration or termination of this Agreement, Operator shall have no further
rights under this Agreement (except as set forth in Section 13.14) and
shall not be entitled to receive any further payments under this Agreement
except as set forth in this Section 6.6.

 

(b)           Upon
the termination of this Agreement pursuant to Sections 6.4 or 6.5, Owner shall
pay a termination fee of (i) ***** if such termination takes place within the
first ***** following the Commencement Date, (ii) ***** if such termination
takes place between ***** and ***** following the Commencement Date, (iii) *****
if such termination takes place between ***** and ***** following the
Commencement Date and (iv) ***** if such termination takes place after ***** following
the Commencement Date.

 

(c)           Upon
the expiration or termination of this Agreement Owner shall pay Operator its
reasonable and duly documented costs to demobilize from the Facility; provided,
however that the Operator shall only be obligated to pay demobilization
costs for Legacy
Employees that continue to be employed by Operator, which demobilization
costs shall not exceed $60,000 per person.

 

(d)           In
the event this Agreement is terminated or expires by its terms:

 

(i)            Owner
shall have the right to take possession of all of the Equipment, Consumables,
fuel, tools, spare parts, and other supplies located at the Site for the
purpose of performing the Services that were paid for by Owner and may employ
any other Person to perform the Services by whatever method Owner may deem
expedient;

 

(ii)           Owner
and Operator shall continue to be bound by such provisions of this Agreement
that survive the date of termination as set forth in Section 13.14;

 

(iii)          Operator
shall, at Owner’s expense, perform (for a period not to exceed thirty (30) days
following termination) the following relative to the Services affected by
termination action to the extent reasonably requested by Owner:  (A) discontinue the Services as of the
date of termination of this Agreement or such earlier date specified by Owner;
(B) place no further orders or subcontracts for Equipment or Services as
of the date of termination of this Agreement or such earlier date specified by
Owner; (C) as of the termination date or such earlier date designated by
Owner, assign to Owner or its designee all orders, subcontracts and other
contractual agreements related solely to the Services or Facility as may be
designated by Owner, provided that (I) Owner or its designee shall
assume Operator’s obligations under such agreements from and after the date of
such assignment, (II) such assignment is permitted under the applicable
agreement and (III) Operator shall be entitled to retain such rights under
such agreements as are necessary to prosecute at Owner’s expense a claim
against the counterparty for amounts owing Operator for which Owner has not
reimbursed Operator and to enforce 

 

 

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

 

24

 

rights with respect to
liabilities that Operator may have to Owner after such assignment, provided
that Operator shall keep Owner informed about and cooperate with Owner with
respect to any such action against a counterparty so as to minimize any adverse
effect on the relationship between Owner and counterparty; (D) promptly
make every reasonable effort to procure cancellations of all such orders and
agreements not so assigned upon terms reasonably satisfactory to Owner;
(E) assist Owner in preparing an inventory of all Equipment, tools,
Consumables, spare parts and other supplies in use or in storage at the Site;
(F) assist Owner in training Operator’s successor and in otherwise transitioning
Operator’s successor; and (G) remove from the Site goods, equipment, material
and the like belonging to Operator;

 

(iv)          Operator
will make the Facility Work Force available to Owner, its Affiliate or designee
(the “Subsequent Operator”) to
discuss potential employment with such Subsequent Operator. Such Subsequent
Operator may make offers of employment to such employees and such employees
that are hired shall become the employees of the Subsequent Operator. Owner
shall be responsible for termination issues and/or severance costs associated
with any employees of Operator who were not Legacy Employees and who are
terminated by Operator and not hired by the Subsequent Operator. “Legacy
Employees” are persons who were employees of Operator or its Affiliates on the
date of this Agreement or who were employed thereafter by Operator or its
Affiliates for facilities other than the Facility (or any other facility owned
by Owner or an Affiliate of Owner) and were subsequently moved to the Facility.

 

ARTICLE VII

INDEMNITY AND LIMITATIONS ON LIABILITY

 

Section 7.1      General
Indemnity.

 

(a)           Except
as set forth in Section 7.2, Operator hereby irrevocably indemnifies, and
agrees to defend and hold harmless Owner, its Affiliates and subcontractors,
and its and their respective officers, directors, employees and agents from and
against any claims, demands, damages, liabilities, interest, attorneys’ fees,
costs (including settlement costs) and expenses for bodily injury, property
damage or fines or penalties from violation of applicable Laws or Governmental
Requirements (“Claims and Damages”),
arising from third-party claims, demands, suits, causes of action, proceedings,
investigations, judgments or liabilities to the extent caused by or arising out
of any breach by Operator of this Agreement (including the failure to handle
properly Hazardous Materials pursuant to Section 3.11) or any negligent acts or
omissions or willful misconduct (done with an intent to harm) of Operator or
its Affiliates, employees, agents or Subcontractors (other than Owner’s
subcontractors) or anyone acting under Operator’s direction or control or on
Operator’s behalf in connection with or incident to the performance of this
Agreement. Operator’s total liability under the above indemnity with respect to
the term of this Agreement shall be subject to the limitation of liability set
forth in Section 7.4.

 

(b)           Owner
hereby irrevocably indemnifies, and agrees to defend and hold harmless
Operator, its Affiliates and Subcontractors, and its and their respective
officers, directors, employees and agents from and against Claims and Damages,
arising from third party claims, demands, suits, causes of action, proceedings,
investigations, judgments or liabilities to the 

 

25

 

extent caused by or arising out of any breach by Owner
of this Agreement, the existence of any Hazardous Materials on the Site at the
commencement of this Agreement or arising thereafter (other than as a result of
Operator’s negligence or breach of this Agreement) or any negligent acts or
omissions or willful misconduct of Owner or its Affiliates, employees, agents
or subcontractors (other than Operator and its Subcontractors) or anyone acting
under Owner’s direction or control or on Owner’s behalf (which in no event
shall include Operator) in
connection with or incident to the performance of this Agreement. Owner further
agrees that, if any former Duke Energy employee hired by Operator in accordance
with Section 6.9 of that certain Purchase and Sale Agreement dated May
3, 2004, asserts any claim for which Duke Energy has agreed to indemnify Owner
pursuant to the Purchase and Sale Agreement, Owner shall assert such claims for
indemnity against Duke Energy.

 

Section 7.2      Owner’s
Property.  Owner assumes responsibility for and waives its rights
of recovery against Operator with respect to all loss of or damage to the
Facility and other property of Owner, however such loss or damage shall occur.

 

Section 7.3      Third
Party Claims.

 

(a)           If
Operator receives any claim or demand of a third party relating to Services or
the Facility, Operator shall promptly notify the Owner in writing of the basis
for such claim or demand setting forth the nature of the claim or demand in
reasonable detail.

 

(b)           If
any legal proceeding or action is brought by a third party against Operator in
connection with the Services or the Facility, and Owner reasonably anticipates
that it shall be required by this Agreement to indemnify or reimburse Operator
for such claim or for litigation expenses connected therewith, Owner will be
entitled to participate in such proceeding and, to the extent that it wishes,
to assume the defense of such proceeding if (i) Owner provides prompt
written notice to Operator after receipt of Operator’s notice of such
proceeding pursuant to Section 7.3(a) of Owner’s intention to assume
control of such defense and to indemnify Operator with respect thereto, (ii)
Operator approves such assumption of control, which such approval shall not
unreasonably be withheld, and (iii) Owner conducts the defense of the
third party claim actively and diligently with counsel reasonably satisfactory
to Operator. Operator shall, in its sole discretion, have the right to employ
separate counsel (who may be selected by Operator in its sole discretion) in
any such action and to participate in the defense thereof, and the fees and
expenses of such counsel shall be paid by Operator and shall not be reimbursed
hereunder by Owner. If Owner has acknowledged in writing its obligation to
indemnify Operator with respect to such claim, Operator shall fully cooperate
with Owner and its counsel in the defense or compromise of such claim or
demand, provided that all reasonable out-of-pocket expenses incurred
thereby by Operator shall be paid by the Owner (except as otherwise set forth
in Section 5.1(b)(xii)(B).

 

(c)           If
(i) notice is given to the Owner of the commencement of any proceeding and
the Owner does not promptly give notice to Operator of its election to assume
the defense of such proceeding, (ii) the condition set forth in
Section 7.3(b)(iii) above becomes unsatisfied, or (iii) Operator
determines in good faith that there is a reasonable probability that a
proceeding will adversely affect it other than as a result of monetary damages
for which it would be entitled to reimbursement under this Agreement, Operator
will (upon further notice to Owner) without 

 

26

 

prejudice of its right to be indemnified with respect
thereto have the right to undertake the defense, compromise or settlement of
such claim.

 

(d)           Whenever
any claim arises for indemnification under this Agreement, the party to be
indemnified (“Indemnitee”) shall
notify the party to provide such indemnification (“Indemnitor”) in writing as soon as practicable after the
Indemnitee has knowledge of the facts constituting the basis for such claim
(the “Notice of Claim”); provided,
however, that in the event of any failure or delay by Indemnitee in
delivering the Notice of Claim, the Indemnitor shall not be released from its
indemnification obligations hereunder except to the extent such failure or
delay by Indemnitee results in actual prejudice to Indemnitor. Such Notice of
Claim shall specify, in reasonable detail, the facts known to Indemnitee giving
rise to such indemnification right and the amount or an assessment of the
amount of the liability arising therefrom. The parties shall cooperate in the
defense or prosecution of claims giving rise to indemnification hereunder and
shall furnish such records, information and testimony and attend such
conferences and discovery as reasonably requested in connection therewith.

 

(e)           Neither
party shall consent to the entry of any judgment or enter into any settlement
with respect to a claim for indemnification (or for which Owner is required
under this Agreement to reimburse Operator) without the prior written consent
of the other party to this Agreement (not to be unreasonably withheld) provided
that after agreeing in writing to indemnify the Operator, as set forth in
Section 7.3(b)(i) above, the Owner may settle or compromise any claim
without the approval of the Operator so long as such claim is solely for
monetary damages that are paid in full by the Owner and so long as the Operator
is fully released from liability by the claimant.

 

Section 7.4      Limitation
of Liability.  Except to the extent such damages relate solely to
the gross negligence or willful misconduct (done with an intent to harm) of
Operator or its Affiliates, employees or Subcontractors or anyone acting under
Operator’s direction or control or on Operator’s behalf, notwithstanding
anything to the contrary contained in this Agreement, the annual aggregate
liability of Operator for damages arising out of or relating in any manner to
the performance or nonperformance of obligations in connection with this
Agreement or the performance or nonperformance of the Services (including
pursuant to Section 8.1), whether based on contract, warranty, indemnity,
tort (including negligence), strict liability, or otherwise, shall be capped at
***** not including any amounts Owner received as insurance proceeds.

 

Section 7.5      Co-Owners.  If,
at any time while this Agreement is in effect, Owner does not have the sole
right, title and possession of and to the Facility and all property for which
Operator has responsibility hereunder to provide Services, Owner shall obtain
an undertaking from all the other entities who have any such right, title
and/or possession, that is sufficient to provide Operator with the same
releases from, limitations of and protections from liability, including the
protection from Liability set forth in Sections 7.2 and 7.4 and the
insurance coverage set forth in Section 11.2, as would be afforded to Operator
in this Agreement if Owner had such sole right, title and possession. If Owner
fails to obtain such an undertaking, then, unless Operator agrees otherwise,
Owner shall indemnify Operator against all liability Operator incurs as a
result of such failure by Owner.

 

 

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

 

27

 

ARTICLE VIII

WARRANTIES

 

Section 8.1      Operator’s
Warranty.  Operator warrants that its Services (as opposed to
those provided by a third party vendors) shall be performed in accordance with
the requirements set forth in this Agreement. If Operator fails to so perform
any Services and during the twelve month period following completion of the
Services at issue and Owner notifies Operator thereof, Operator shall perform
such remedial Services within the original scope of Services as is necessary to
make its Services conform with this warranty. Owner will not be obligated to
pay the costs of correcting or re-performing such Services, except to the
extent that such costs would have been incurred had such error or defect not
occurred; provided, however, that the aggregate amount of such
costs to be borne by Operator (together with all other damages subject to
Section 7.4) is subject to the limitation of liability set forth in
Section 7.4.

 

Section 8.2      Third
Party Warranties.  Operator shall, for the protection of Owner,
use reasonable efforts to obtain customary warranties from all vendors,
contractors, Subcontractors and suppliers from which Operator procures
Equipment, spare parts or other goods and services for the Facility which shall
be assignable to Owner to the full extent of the terms thereof. Operator shall
be responsible for enforcing all such third-party warranties during the term of
this Agreement. Operator shall ensure that, to the extent feasible, any
third-party warranties that are still in existence at the termination of this
Agreement shall be assigned on such date to Owner, and Operator hereby assigns,
effective as of the date of termination of this Agreement, all of its rights
with respect to such warranties to Owner, provided, that Operator shall
retain such rights as are necessary to prosecute any claims against the
third-parties for amounts owing Operator, for which Owner has not reimbursed
Operator, and to enforce rights with respect to liabilities that Operator may
have to Owner after such assignment, provided that Operator shall keep
Owner informed about and cooperate with Owner with respect to any such action
against a third-party so as to minimize any adverse effect on the relationship
between Owner and the third-party. Operator’s obligations with respect to
Equipment, spare parts or other goods purchased by Operator from third parties
shall be limited to those set forth in this Section 8.2, provided, however,
that nothing in this sentence shall release Operator from any obligation under
this Agreement with respect to services performed by or on behalf of Operator
in connection with any such goods.

 

Section 8.3      Warranties
Limited.  All warranties made by Operator in connection with the
Services are limited to those set forth in this Article VIII. Operator makes no
other warranties or guarantees, express or implied, other than those expressly
set forth herein. OPERATOR EXPRESSLY DISCLAIMS ALL IMPLIED GUARANTEES OR
WARRANTIES OF ANY NATURE WHATSOEVER IN CONNECTION WITH THE SERVICES AND
OBLIGATIONS UNDERTAKEN AND/OR PERFORMED HEREUNDER, WHETHER STATUTORY, ORAL,
WRITTEN, EXPRESS OR IMPLIED, INCLUDING ANY IMPLIED CONDITIONS OR WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.

 

28

 

ARTICLE IX

REPRESENTATIONS

 

Section 9.1      Operator
Representations.  Operator represents and warrants to Owner as
follows:

 

(a)           Standing.  Operator
is a limited liability company duly organized, validly existing and in good
standing under the laws of the State of Delaware. Operator has the power and
authority to execute and deliver this Agreement and perform its obligations
hereunder. Operator is, to the extent required by Law, qualified to do business
in the State of Mississippi. Operator’s execution, delivery and performance of
this Agreement have been duly authorized all by requisite corporate or other
action of Operator and do not violate any provision of Operator’s charter,
by-laws, articles of organization or operating agreement or any indenture,
agreement or instrument to which Operator is a party, or by which Operator or
its property is bound or affected. This Agreement has been duly and validly
executed and delivered by Operator and constitutes the valid, legal and binding
obligation of Operator enforceable in accordance with its terms, except as
enforceability may be limited by equitable principles or by bankruptcy,
fraudulent conveyance or insolvency laws affecting the enforcement of creditor’s
rights generally.

 

(b)           No
Violation of Law.  Operator is not in violation of any applicable
laws or any judgment entered by any Governmental Authority, which violations or
judgments, individually or in the aggregate, would affect Operator’s ability to
perform its obligations under this Agreement. Neither the execution, delivery
and performance by the Operator of its obligations under this Agreement, nor
the consummation of the transactions contemplated hereby, violates any Laws or
Governmental Requirements.

 

(c)           Licenses.  Operator
is the holder of all federal, state, local and other governmental consents,
licenses, permits or other authorizations required to be held by Operator on
the date hereof to conduct its business now and as contemplated by this
Agreement.

 

(d)           Litigation.  Operator
is not a party to or, to the best of Operator’s knowledge, threatened with any
legal or administrative proceeding, arbitration, investigation, or other
proceeding or controversy that would materially and adversely affect Operator’s
ability to perform its obligations under this Agreement.

 

Section 9.2             Owner
Representations.  Owner represents and warrants to Operator as
follows:

 

(a)           Standing.
Owner is a limited liability company duly organized, validly existing and in
good standing under the laws of the State of Delaware. Owner has the power and
authority to execute and deliver this Agreement and perform its obligations
hereunder. Owner is, to the extent required by Law, qualified to do business in
the State of Mississippi. Owner’s execution, delivery and performance of this
Agreement have been duly authorized by all requisite corporate or other action
of Owner and do not violate any provision of Owner’s charter, by-laws, articles
of incorporation or operating 

 

29

 

agreement or any indenture, agreement or instrument to
which Owner is a party, or by which Owner or its property is bound or affected.
This Agreement has been duly and validly executed and delivered by Owner and
constitutes the valid, legal and binding obligation of Owner enforceable in
accordance with its terms, except as enforceability may be limited by equitable
principles or by bankruptcy, fraudulent conveyance or insolvency laws affecting
the enforcement of creditor’s rights generally.

 

(b)           No
Violation of Law.  Owner is not in violation of any applicable
laws or any judgment entered by any Governmental Authority, which violations or
judgments, individually or in the aggregate, would affect Owner’s ability to
perform its obligations under this Agreement. Neither the execution, delivery
and performance by the Owner of its obligations under this Agreement, nor the
consummation of the transactions contemplated hereby, violates any Laws or
Governmental Requirements.

 

(c)           Licenses.  Owner
is the holder of all federal, state, local and other governmental consents,
licenses, permits or other authorizations required to be held by Owner on the
date hereof to own and operate the Facility.

 

(d)           Litigation.  Owner
is not a party to or, to the best of Owner’s knowledge, threatened with any
legal or administrative proceeding, arbitration, investigation, or other
proceeding or controversy that would materially and adversely affect Owner’s
ability to perform its obligations under this Agreement.

 

ARTICLE X

FORCE MAJEURE

 

Section 10.1      Definition
of Force Majeure Event.  For the purposes of this Agreement, a “Force Majeure Event” as to any party means any occurrence,
nonoccurrence or set of circumstances that is beyond the reasonable control of
such party and is not caused by such party’s negligence, lack of due diligence,
or failure to follow Prudent Industry Practices, including flood, ice,
earthquake, windstorm or eruption; fire; explosion; invasion, riot, civil war,
commotion or insurrection; sabotage, terrorism or vandalism; military or
usurped power; act of God or of a public enemy; or failure of equipment (to the
extent not caused by any occurrence, nonoccurrence or set of circumstances that
is beyond the reasonable control of such party and is not caused by such party’s
negligence, lack of due diligence, or failure to follow Prudent Industry
Practices). The term Force Majeure Event shall not include:  (a) the inability to meet a Law or
Governmental Requirement or the change in a Law or Governmental Requirement
after the date of this Agreement which increases the costs of performance by a
Party of its obligations hereunder but which does not preclude or make illegal
such performance; (b) a Site-specific strike, walkout, lockout or other
labor dispute over employment conditions at the Facility, (but not including
any such action or matter as a result of an organizational campaign at the
Facility); (c)  changes in market conditions; and (d) failures
of contractors, suppliers or vendors, unless such failures are caused by an
event which would be a Force Majeure Event, if experienced by a party.

 

Section 10.2      No
Breach or Liability.  Either party shall be excused from
performance of its obligations hereunder other than payment obligations and
shall not be construed to be in 

 

30

 

default in respect
of such obligations to the extent that and for so long as failure to perform
such obligations is due to a Force Majeure Event.

 

Section 10.3      Mitigation.  Following
the occurrence of a Force Majeure Event, the affected party shall:

 

(a)           give
the other party notice thereof, followed by written notice if the first notice
is not written, as promptly as possible after such party becomes aware of such
Force Majeure Event, describing the particulars of such Force Majeure Event,
and furnish periodic reports to the other party regarding the progress in
overcoming the adverse effects of such Force Majeure Event and setting forth
its best, good faith estimate concerning when it will be able to resume the
performance of its obligations under this Agreement;

 

(b)           remedy
its inability to perform as soon as reasonably practicable; provided, however,
that this Section shall not require the settlement of any non-Site specific
strike, walkout, lockout or other general labor dispute on terms which, in the
sole judgment of the party involved in the dispute, are contrary to its
interest; and

 

(c)           resume
performance of its obligations under this Agreement as soon as is reasonably
practicable after the Force Majeure Event is remedied or ceases to exist, and
provide the other party with written notice thereof.

 

Section 10.4      Suspension
of Performance.  The suspension of performance due to a Force Majeure
Event shall be of no greater scope and of no longer duration than is required
by such Force Majeure Event. No Force Majeure Event shall extend this Agreement
beyond its term.

 

ARTICLE XI

INSURANCE

 

Section 11.1      Insurance
to be Provided by Operator.  Operator shall provide the following
insurance coverages and limits, written by an insurance company or companies
with a Best’s rating of no less than “A- VII”, and shall maintain such
insurance in full force and effect during the term of this Agreement:

 

(a)           worker’s
compensation insurance as required by applicable state Laws;

 

(b)           commercial
general liability insurance with limits of not less than $1,000,000 per
occurrence;

 

(c)           business
automobile liability insurance with per accident limits of $1,000,000 covering
owned, hired and non-owned vehicles; and

 

(d)           excess
and/or umbrella liability insurance with a limit of $10,000,000 per occurrence
in excess of the limits of insurance provided in (a)-(c).

 

31

 

The amounts of insurance required by this Section 11.1
may be satisfied by Operator’s purchasing primary coverage in the amounts of
the combined primary and excess and/or umbrella limits specified or by buying a
combination of primary and excess umbrella liability policies. The structure of
the coverage is Operator’s option, so long as the total amount of insurance
meets the overall requirements of this Agreement. Operator shall cause Operator’s
insurance underwriters to waive their rights of subrogation against Owner for
all insurance required by this Section 11.1. Notwithstanding the foregoing
insurance requirements, Operator may self-insure all or any part of the
insurance coverage provided for in this Agreement and all such self-insurance
coverage shall be treated as if it were an insurance policy; provided
that the premiums for such self-insurance are comparable to or more favorable
than the premiums for similar insurance that could be obtained by Operator from
third-party insurers.

 

Section 11.2      Insurance
to be Provided by Owner.  Owner shall provide the following insurance
coverages and limits, written by an insurance company or companies with a Best’s
rating of no less than “A- VII”, and shall maintain such insurance in full
force and effect during the term of this Agreement:

 

(a)           all
risk property damage insurance in an amount sufficient to cover 100% of the
replacement cost of the Facility;

 

(b)           worker’s
compensation insurance as required by applicable state Laws;

 

(c)           commercial
general liability insurance with limits of not less than $1,000,000 per
occurrence;

 

(d)           business
interruption insurance covering at any given time at least 100% of the Owner’s
continuing operating expenses for a period of at least 12 months, including
O&M Costs, Monthly Management Fee and debt service including a 60 day
deductible period; and

 

(e)           excess
and/or umbrella liability insurance with a limit of $10,000,000 per occurrence
in excess of the limits of insurance provided in (a)-(d).

 

The amounts of insurance required by this Section 11.2
may be satisfied by Owner’s purchasing primary coverage in the amounts of the
combined primary and excess and/or umbrella limits specified or by buying a
combination of primary and excess umbrella liability policies. The structure of
the coverage is Owner’s option, so long as the total amount of insurance meets
the overall requirements of this Agreement. Owner shall cause Owner’s insurance
underwriters to waive their rights of subrogation against Operator for all
insurance required by this Section 11.2. Owner shall ensure that Operator is
named as an additional insured on each insurance policy relating to the
ownership, operation and maintenance of the Facility, which Owner is required
to procure and maintain pursuant to any financing or other project agreements.

 

Section 11.3      Evidence
of Insurance.  Operator and Owner shall cause its insurer(s) to
furnish evidence of the insurance required hereunder, including evidence of the
subrogation waiver, in the form of insurance certificates. All such insurance
certificates shall provide that the policies may not be canceled or changed
without thirty (30) days’ prior written notice to the other party to this
Agreement, given by any method that is approved for notices hereunder.

 

32

 

Section 11.4      Subcontractors’
Insurance.  Before permitting any Subcontractor to perform any
Services at the Site, Operator shall obtain a certificate of insurance for such
Subcontractor evidencing that such Subcontractor has obtained insurance in such
amounts and against such risks as is customarily carried by persons engaged in
similar type and size businesses performing similar work in the same geographic
area. All such insurance shall include a waiver of any rights of subrogation of
the insurer as against Owner.

 

Section 11.5      Right
to Insure.  Should Operator fail to provide or maintain any of
the insurance coverage required by Section 11.1 hereof, Owner shall have
the right to provide or maintain such coverage at Owner’s expense. Should Owner
fail to provide or maintain any of the insurance coverage required by Section
11.2 hereof, Operator shall have the right, but not the obligation, to provide
or maintain such coverage on behalf of Owner and at Owner’s expense. The cost
of any such insurance obtained by Operator in accordance with the preceding
sentence shall be reimbursed or paid by Owner pursuant to Article V and shall
not be included in the amount spent for purposes of determining, pursuant to
Section 3.4, 5.1(b), 5.1(c) or 5.1(d) whether expenditures are more than 10% in
excess of the aggregate amount of the Budget or the relevant Major Line Item,
if applicable.

 

ARTICLE XII

CONFIDENTIALITY

 

Section 12.1      Confidential
Information.  Except as hereinafter provided, each of the parties
shall treat as confidential and not disclose to any third party confidential or
proprietary information concerning the Facility or this Agreement and
designated by the other party as confidential (either by specific reference on
the face of a document containing the information or by written communication
regarding a reasonable class of information), unless such confidential
information (a) was already in the possession of such party or its Affiliates
in a non-confidential form at the time such entity obtained such confidential
information hereunder, (b) was or is published or otherwise is or becomes
generally available to the public through no fault of such party, or any of its
Affiliates, (c) was or is made available to such party, or its Affiliates,
without restriction by any Person which is not bound by, and does not impose,
an obligation of confidentiality or use with respect thereto, (d) is
developed independently by employees of such party or its Affiliates who have
not had access to confidential information pursuant to this Agreement, or (e)
is required to be disclosed under any Governmental Requirement or Law. Each of
the parties may use any such confidential information only in connection with
its activities under this Agreement and disclose, reveal, or otherwise make any
such confidential information available to third parties, in either case, only
with the prior written consent of the other party hereto. Each of the parties
shall provide the other party hereto prompt notice of any disclosure required
under any Governmental Requirement or Law so that such other party may seek a
protective order or other appropriate remedy and shall cooperate with such
other party’s efforts to obtain such remedy. Operator agrees that, with respect
to information provided by Owner to Operator for which Owner owes confidential
obligations to third-parties, Operator shall abide by such obligations to the
extent Owner informs Operator in writing of such obligations. Operator shall
establish and enforce reasonable procedures for the protection of confidential
information and shall restrict disclosure of such information to only those
employees, officers, and agents of Operator or its Affiliates who need to know
such information in connection with the performance of this Agreement as set
forth herein. Each of the parties 

 

33

 

shall take such
reasonable and prudent steps and precautionary measures as are required to
assure compliance with this Section 12.1 by such of its employees,
officers, agents, Affiliates and other Persons as shall be given access to such
confidential information and shall be liable for any non-compliance with this
Section 12.1 by itself, its Affiliates’ and their respective employees and
officers.

 

Section 12.2      Agreement
Confidential.  Each of parties shall treat as confidential and
not disclose to any third party the terms of this Agreement without the prior
written consent of the other. Notwithstanding the foregoing, the terms of this
Agreement may be disclosed to (a) any lender or potential lender in
connection with any financing, refinancing, proposed financing, or proposed
refinancing for the Facility, (b) to a prospective purchaser of all or
part of the Facility, or all or part of Owner’s interest in the Facility, or
substantially all of the output of the Facility and (c) to a prospective
purchaser of all or part of an interest in Owner or Operator; provided
in each of (b) and (c) that the recipient executes a confidentiality agreement
similar in substance to Section 12.1 prior to such disclosure.

 

ARTICLE XIII

MISCELLANEOUS

 

Section 13.1      Entire
Agreement.  This Agreement contains the entire agreement of Owner
and Operator with respect to the subject matter hereof and supersedes all prior
agreements and commitments with respect thereto. There are no oral
understandings, terms or conditions between the parties that either party has
relied upon any representation, expressed or implied, not otherwise contained
in this Agreement.

 

Section 13.2      Amendments.  No
change, amendment, or modification of this Agreement shall be valid or binding
upon the parties hereto unless such change, amendment, or modification shall be
in writing and duly executed by the parties hereto.

 

Section 13.3      Captions.  The
captions and subheadings contained in this Agreement are for convenience and
reference only and in no way define, describe, extend, or limit the scope or
intent of this Agreement or the intent of any provision contained herein.

 

Section 13.4      Notices.  Except
as otherwise expressly provided herein, any notice, demand, offer, or other
instrument required or permitted to be given pursuant to this Agreement shall
be in writing, signed by the party giving such notice, demand, offer, or other
instrument and shall be delivered by telecopier, hand delivery, registered or
certified mail, return receipt requested, postage prepaid, or nationally
recognized overnight courier to the other party at the address set forth below:

 

34

 

If to Owner:

 

*****

*****

*****

*****

*****

*****

Attn:*****

Fax*****

 

If to Operator:

 

*****

*****

*****

*****

*****

 

with a
copy to:

 

*****

*****

*****

*****

*****

 

Each party shall have the right to change the place to
which notice, demand, offer, or other instrument shall be sent or delivered by
similar notice sent in like manner to the other party. The effective date of
any notice, demand, offer, or other instrument issued pursuant to this
Agreement shall be the date (a) of delivery, if delivered by telecopier
with answer back confirmation, (b) when delivered, if hand delivered,
(c) if sent by overnight courier, one Business Day after delivery to such
courier, and (d) if sent by registered or certified mail, three (3)
Business Days after being deposited in U.S. mail.

 

Section 13.5      Severability.  The
invalidity of one or more of the provisions or sections contained in this
Agreement shall not affect the validity of the remaining portion of the
Agreement so long as the material purposes of this Agreement can be determined
and effectuated. In the event that any portion or all of this Agreement is held
to be void or unenforceable, the parties agree to negotiate in good faith to
reach an equitable agreement on such portion that is void or unenforceable
which shall effect the intent of the parties as set forth in this Agreement. If
any indemnity and hold harmless obligation (or portions thereof) in this
Agreement are for any reason held to be invalid or unenforceable in any
respect, and if the parties fail to agree on a replacement provision, then such
obligation shall be construed to apply to the fullest extent permitted by Law
but in no event beyond the scope and limits of those original indemnity and
hold harmless obligations determined to be invalid or unenforceable.

 

 

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

 

35

 

Section 13.6      Assignment.  Either
party may assign its rights and obligations hereunder to an Affiliate, provided
that (a) such assignment shall not release such party from its obligations
hereunder and (b) in the case of an assignment by Operator, the guaranty of the
Operator Guarantor shall remain in full force and effect. Except as provided in
the preceding sentence, neither this Agreement nor any right, interest or
obligation hereunder may be assigned by any Party without the prior written
consent of the other Party, and any attempt to do so will be void, except for
assignments and transfers by operation of Law; provided that no consent
shall be required for any transfer that is in connection with a financing. Subject
to this Section 13.6, this Agreement is binding upon, inures to the
benefit of and is enforceable by the Parties and their respective successors
and permitted assigns. If a transferee assumes all or any part of the
transferor’s obligations under this Agreement, then such assignment shall
relieve the transferor of the transferred obligations under this Agreement,
subject to the reasonable approval of the other party to this Agreement based
on evidence of the financial capability of the transferee to undertake the
transferor’s obligations under this Agreement. If an Owner transfers all or any
part of its interest in this Agreement which results in more than one Owner,
then unless all of such Owners appoint one agent to act on their behalf under
this Agreement and notify Operator thereof in writing, transferor Owner shall
act as agent for all such Owners under this Agreement.

 

Section 13.7      No
Waiver.  Any failure of either party to enforce any of the
provisions of this Agreement or to require compliance with any of its
provisions at any time during the pendency of this Agreement shall in no way
affect the validity of this Agreement, or any part hereof, and shall not be
deemed a waiver of the right of either party thereafter to enforce any and each
such provision.

 

Section 13.8      Applicable
Law.  This Agreement shall be governed by the laws of the State
of New York.

 

Section 13.9      Exhibits.  All
exhibits referenced in this Agreement shall be incorporated into this Agreement
by such reference and shall be deemed to be an integral part of this Agreement.
In the event of a conflict or inconsistency between the exhibits and this
Agreement (exclusive of the exhibits), the provisions of this Agreement
(exclusive of the exhibits) shall prevail. In the event of any conflict among
the exhibits, the exhibit of the latest date shall control.

 

Section 13.10      No
Partnership Created.  Nothing contained in this Agreement shall
be construed as constituting a joint venture or partnership between Owner and
Operator.

 

Section 13.11      Consequential
Damages.  Neither party shall in any event be responsible or
liable to the other party for consequential, indirect or punitive damages,
including liability for loss of use of the Facility or existing property, loss
of profits, loss of product or business interruption, however caused, except to
the extent any third-party claims against which a party is entitled to
indemnification are deemed to be consequential damages.

 

Section 13.12      Limitations
Application.  Neither party makes any representations, covenants,
warranties or guarantees, express or implied, other than those expressly set
forth herein. The parties’ rights, liabilities, responsibilities and remedies
with respect to the Services, whether in contract or otherwise, shall be
exclusively those expressly set forth in this Agreement. 

 

36

 

Except as
specifically otherwise provided herein, indemnities against, releases from,
assumptions of, and limitations on liability expressed in this Agreement, as
well as waivers of subrogation rights expressed herein, shall apply even in the
event of the fault, negligence or strict liability of the party indemnified or
released or whose liability is limited or assumed or against whom rights of
subrogation are waived and shall extend to each party, their Affiliates, and
their respective officers, directors, employees, and agents.

 

Section 13.13      Accommodation
of Owner’s Financing.  Operator acknowledges that Owner may at
any time assign, in whole or in part, its rights under this Agreement for
collateral security purposes to any lender providing financing to Owner, and
any such lender (or collateral agent acting on its behalf) may exercise all of
the rights and remedies of Owner hereunder, and Operator agrees to execute and
deliver a consent in favor of such lenders (or collateral agent acting on their
behalf) with respect to the collateral assignment contemplated by this Section
13.13 containing customary and reasonable provisions for similar nonrecourse
financings, provided that such documents do not materially change
Operator’s rights or obligations in connection with this Agreement.

 

Section 13.14      Survival.  The
provisions of Sections 3.16, 4.5, 5.1(b)(x), 5.8, 13.4, 13.5, 13.8, 13.11,
13.12 and this Section 13.14 and Articles VII, VIII and XII and those
provisions which by their nature are intended to survive, including
confidentiality and indemnity obligations, shall survive the termination of
this Agreement without limitation or as otherwise specified.

 

Section 13.15      Dispute
Resolution.  In the event that a controversy, dispute or claim
between the parties cannot be resolved informally, either party may send a
notice of dispute, request a conference for resolution of such dispute and
shall have an arbitrator appointed by the American Arbitration Association (“AAA”) within thirty (30) days of such
notice, which arbitrator shall have experience in the operation of power plants
and power plant operation disputes. Such request must be made no later than the
date when the institution of a civil action based on the dispute would be
barred by the applicable statute of limitations or repose of the State of New
York.

 

(a)           Within
five (5) Business Days after delivery of such notice, each party shall nominate
a senior officer of its management to meet at the Facility, or at any other
mutually agreed location, to resolve the dispute, which conference shall be
convened within ten (10) days after exchange of those nominations unless the
parties mutually agree to another date;

 

(b)           In
the event that the parties are unable to resolve the dispute through the
procedures above, either party shall submit such dispute to arbitration by
delivering to the other a notice demanding expedited arbitration of the dispute
in accordance with the commercial arbitration rules of the AAA then in effect. The
place of arbitration shall be at a site chosen by the parties or, in the
absence of agreement, by the arbitrator and the arbitrator shall determine the
rules of procedure for discovery, which discovery shall be limited in scope
with no depositions, no interrogations or requests for admissions. The
arbitrator shall begin hearing evidence within thirty (30) days of appointment
and shall 

 

37

 

render his or her
decision within thirty (30) days after the close of evidence. Each party shall
have fifteen (15) days in which to present evidence;

 

(c)           If
the arbitrator determines that a default under this Agreement has occurred, the
non-defaulting party may pursue any or all of its rights and remedies under
this Agreement or at law and, where the defaulting party is Operator, remove
Operator. The parties agree to submit to the jurisdiction of the courts of the
State of New York and the courts of the United States for the Southern District
of New York for all purposes of this Agreement, including any action or
proceeding instituted for the enforcement of any right, remedy, obligation or
liability arising hereunder.

 

(d)           Pending
resolution of a dispute pursuant to this Section 13.15, the parties shall continue
to perform their obligations under this Agreement.

 

38

 

IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be executed and delivered by their representatives thereunto
duly authorized as of the date hereof.

 

	
   

  	
  OWNER:

  
	
   

  	
   

  
	
   

  	
  KGEN HINDS
  LLC

  
	
   

  
	
   

  
	
   

  	
  By:

  	
  /s/ GERALD
  K. LINDNER

  
	
   

  	
  Name: Gerald
  K. Lindner

  
	
   

  	
  Title: Chief
  Executive Officer

  

 

1

 

	
   

  	
  OPERATOR:

  
	
   

  	
   

  
	
   

  	
  CINERGY SOLUTIONS O&M LLC

  
	
   

  
	
   

  
	
   

  	
  By:

  	
  /s/ TIMOTHY
  B. FERGUSON

  
	
   

  	
  Name: Timothy
  B. Ferguson

  
	
   

  	
  Title: Vice
  President

  

 

2

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00133-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00133-of-00352.parquet"}]]