Document:

EX-10.31

 

Exhibit 10.31

	***	 	Indicates materials have been omitted pursuant to a Confidential Treatment Request filed
with the Securities and Exchange Commission. A complete copy of this Agreement has been filed
with the Securities and Exchange Commission.

 

EXECUTION COPY

MASTER POWER PURCHASE AND SALE AGREEMENT

COVER SHEET

This Master Power Purchase and Sale Agreement (“Master Agreement”) first was entered into as
of July 21, 2004 (“Effective Date”) and was amended and restated in its entirety on February 2,
2006 (“Restatement Date”). The Master Agreement, together with the exhibits, schedules and any
written supplements hereto, the Party A Tariff, if any, the Party B Tariff, if any, any designated
collateral, credit support or margin agreement or similar arrangement between the Parties and all
Transactions (including any confirmations accepted in accordance with Section 2.3 hereto) shall be
referred to as the “Agreement.” The Parties to this Master Agreement are the following:

	 	 	 
	Name (“J. ARON & COMPANY” or “Party A”)

All Notices: J. ARON & COMPANY

Street:          85 Broad Street

City:
            New York, N.Y. Zip: 10004

Attn: Commodity Operations

Phone: (212) 902-8986

Facsimile: (212) 344-3457

Duns: 06-698-0312

Federal Tax ID Number: 133092284

Invoices: J. Aron & Company

      Attn: Contract Execution Dept.

      Phone: (212) 357-5110

      Facsimile: (212) 428-1991

Scheduling: J. Aron & Company

      Attn: Power Scheduling

      Phone: (212) 902-1454

      Facsimile: (917) 454-2595

Payments: J. Aron & Company

      Attn: Contract Execution Dept.

      Phone: (212) 357-5110

      Facsimile: (212) 428-9571

Wire Transfer: J. Aron & Company

      BNK: CITIBANK, NA

           399 Park Avenue

           New York, N.Y.

           A/C J. ARON & CO.

           NEW YORK

           ABA: 021000089

           ACCT: 09292521

Credit and Collections: J. Aron & Company

      Attn: Credit Risk Management — Power

      Phone: (212) 855-0990

      Facsimile: (212) 493-0821

	 	Name (“Texas Genco II, LP, “Counterparty” or “Party B”)

All Notices: Texas Genco II, LP

Street:          1301 McKinney, Suite 2300

City:             Houston, TX  Zip: 77010

Attn: Contract Administration

Phone: (713) 795-6074

Facsimile: (713) 795-7482

Duns: 16-845-6049

Federal Tax ID Number: 34-2019301

Invoices: Texas Genco II, LP

      Attn: Settlements

      Phone: (713) 795-6144

      Facsimile: (713) 795-7482

Scheduling: Texas Genco II, LP

      Attn: Day Ahead Desk

      Phone: (713) 795-6314

      Facsimile: (713) 795-7488

Payments: Texas Genco II, LP

      Attn: Settlements

      Phone: (713) 795-6144

      Facsimile: (713) 795-7482

Wire Transfer: Texas Genco II, LP

      BNK: JP Morgan Chase

      ABA: 113 000 609

      ACCT: 000 000 113 290 523

Credit and Collections: Texas Genco II, LP

      Attn: Credit Department

      Phone: (713) 795-6200

      Facsimile: (713) 795-7441

	 	 	 
	With additional Notices of an Event of Default or

	 	With additional Notices of an Event of Default or

 

2

* * *

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Potential Event of Default to:	 	 	 	Potential Event of Default to:	 	 
	 	 	Attn: Credit Department	 	 	 	 	 	Attn: Credit Department
	 	 	Phone: (212) 902-1800	 	 	 	 	 	Phone: (212) 902-1800
	 

	 	Facsimile:
	 	 	 	 	 	 	 	Facsimile:	 	 	 	 
	 

	 	 	 	 
	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	and to:	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	J. Aron & Company	 	 	 	 	 	 	 	 	 	 
	 	 	One New York Plaza	 	 	 	 	 	 	 	 	 	 
	 	 	New York, NY 10004	 	 	 	 	 	 	 	 	 	 
	 	 	Attn: Steven M. Bunkin, Esq.	 	 	 	 	 	 	 	 	 	 
	 	 	Phone: (212) 902-0952	 	 	 	 	 	 	 	 	 	 
	 	 	Facsimile: (212) 428-3675	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Confirmations:	 	 	 	Confirmations:	 	 
	 	 	Attn:	 	 	 	 	 	Attn:
	 

	 	 	 	 
	 	 	 	 	 	 	 	 	 	 
	 	 	Phone:	 	 	 	 	 	Phone:
	 

	 	 	 	 
	 	 	 	 	 	 	 	 	 	 
	 	 	Facsimile:	 	 	 	 	 	Facsimile:
	 

	 	 	 	 
	 	 	 	 	 	 	 	 	 	 

 

3

* * *

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

Party A Tariff                Tariff: None                Dated   Docket Number

Party B
Tariff               
Tariff: None                Dated    Number

 

	Article Two	 	 
	 
	Transaction Terms and Conditions 	 	[ ]      Optional provision in Section 2.4. If not checked, inapplicable.
	 
	 
	Article Four	 	 
	 
	Remedies for Failure
 to Deliver or Receive 	 	[ ]       Accelerated Payment of Damages. If not
checked, inapplicable.
	 
	 
	Article Five	 	[ ] Cross Default for Party A:
	 
	Events of Default; Remedies	 	 
	 
	 	 	[ ] Party A: Applicable            Cross Default Amount
	 
	 	 	 [ ] Other Entity:                       Cross Default Amount
	 
	 	 	[ ] Cross Default for Party B:
	 
	 	 	[ ] Party B: ____________Cross Default Amount $ ____________
	 
	 	 	[ ] Other Entity: ____________ Cross Default Amount $ _________________
	 
	 	 	5.6 Closeout Setoff

	 	 	 	[ ] Option A (Applicable if no other selection is made.)
	 
	 	 	 	[ ] Option B — Affiliates shall have the meaning set forth in the
Agreement unless otherwise specified as follows: ____________________________
	 
	 	 	 	[ ] Option C (No Setoff)
	 
	 

	Article 8 	 	 8.1 Party A Credit
Protection:

	Credit and Collateral Requirements 	(a) 	 	Financial Information:

	 	 	 	[ ] Option A
	 
	 	 	 	[ ] Option B            Specify:
	 
	 	 	 	[ ] Option C            Specify: _________
	 
	 	(b)	 	Credit Assurances:
	 
	 	 	 	[ ] Not Applicable
	 
	 	 	 	[ ] Applicable
	 
	 	(c)	 	Collateral Threshold:
	 
	 	 	 	[ ] Not Applicable
	 
	 	 	 	[ ] Applicable

 

4

* * *

	 	(d)	 	Downgrade Event:
	 
	 	 	 	[ ] Not Applicable
	 
	 	 	 	[ ] Applicable
	 
	 	(e)	 	Guarantor for Party B:
	 
	 	 	 	Guarantee Amount:

		 	8.2 Party B Credit Protection:

	 	(a)	 	Financial Information:
	 
	 	 	 	[ ] Option A
	 
	 	 	 	[ ] Option B Specify: _________
	 
	 	 	 	[ ] Option C Specify: _________
	 
	 	(b)	 	Credit Assurances:
	 
	 	 	 	[ ] Not Applicable
	 
	 	 	 	[ ] Applicable
	 
	 	(c)	 	Collateral Threshold:
	 
	 	 	 	[ ] Not Applicable
	 
	 	 	 	[ ] Applicable
	 
	 	(d)	 	Downgrade Event:
	 
	 	 	 	[ ] Not Applicable
	 
	 	 	 	[ ] Applicable
	 
	 	(e)	 	Guarantor for Party A:
	 
	 	 	 	Guarantee Amount:

	 
	Article 10
Confidentiality 	 	[x] Confidentiality
Applicable   If not checked, inapplicable.
	 
	 
	Schedule M 	 	[ ] Party A is a Governmental Entity or Public Power System
	 
	 	 	[ ] Party B is a Governmental Entity or Public Power System
	 
	 	 	[ ] Add Section 3.6. If not checked, inapplicable
	 
	 	 	[ ] Add Section 8.6. If not checked, inapplicable
	 
	Other Changes  	 	Specify, if any: See Part 1 below

 

5

* * *

Part 1. General Terms and Conditions

(1) Article One shall be amended as follows:

(i) The following definitions shall be revised or inserted in alphabetical order:

          “Baseload Capacity” means electric power generation capacity of NRG Energy and its
Subsidiaries (including NRG Energy’s and its Subsidiaries’ pro rata share of the capacity
represented by minority investments in units) normally operated by NRG Energy and/or any of its
Subsidiaries to serve loads on an around-the-clock basis.

          “Capacity Commodity Hedging Agreement” has the meaning specified in the NRG Collateral Trust
Agreement.

          “Collateral” has the meaning specified in the NRG Collateral Trust Agreement.

          “Credit Agreement” has the meaning specified in the NRG Collateral Trust Agreement.

          “Definitions” means the 1993 ISDA Commodity Derivatives Definitions as supplemented by the
2000 Supplement to the 1993 ISDA Commodity Derivatives Definitions, each as published by the
International Swaps and Derivatives Association, Inc.

          “Derivative Transaction” means (i) any transaction that provides solely for cash settlement
and not physical settlement and (ii) that is (a) a commodity swap transaction, cross-commodity swap
transaction, commodity cap transaction, commodity floor transaction, commodity collar transaction,
commodity option transaction or any other similar transaction (including any Option with respect to
any of these transactions), (b) any combination of these transactions or (c) any other transaction
identified as a Derivative Transaction in the related Confirmation.

          “ERCOT” means the Electric Reliability Council of Texas, Inc.

          “ERCOT Protocols” means the document adopted, published and amended from time to time by
ERCOT, and approved by the PUCT, to govern electric transmission in ERCOT, including any
attachments, exhibits or publications referenced in the document, that contains the scheduling,
operating, planning, reliability, and settlement policies, rules, guidelines, procedures,
standards, and criteria of ERCOT.

          “Fixed LOC” has the meaning ascribed thereto in Section 8.1(c)(I).

          “Guarantee and Collateral Agreement” has the meaning specified in the NRG Collateral Trust
Agreement.

          ***

          ***

 

6

* * *

          ***

          “Measurement Date” means, in the case of a Sale, the date of the closing of such Sale and, in
the case of a Forecast Loss, the date on which such Forecast Loss is first forecast.

          “MW” has the meaning specified in the NRG Collateral Trust Agreement.

          “Non-Baseload Capacity” means an amount of electric power generation capacity equal to (i) all
electric power generation capacity of NRG Energy and its Subsidiaries (including NRG Energy’s and
its Subsidiaries’ pro rata share of the capacity represented by minority investments in units)
minus (ii) all Baseload Capacity.

          “NRG Collateral Trust Agreement” means the Collateral Trust Agreement dated as of February 2,
2006 (as amended, restated, supplemented, replaced or otherwise modified from time to time), by and
among NRG Energy, Inc., the guarantors from time to time party thereto, Morgan Stanley Senior
Funding, Inc., as administrative agent, J. Aron & Company, as counterparty under the GS Commodity
Hedging Agreement (as defined therein), and Morgan Stanley & Co. Inc., as collateral trustee.

          “Obligations” has the meaning specified in the NRG Collateral Trust Agreement.

          ***

          ***

          “Party” means each of Party A and Party B and “Parties” means Party A and Party B
collectively.

          ***

          ***

          “PUCT” means the Public Utility Commission of Texas.

          ***

          “Specified Transaction” means any transaction (other than a Transaction) now existing or
hereafter entered into between one Party to this Agreement and the other Party to this Agreement
that is a spot, forward, option or swap transaction in or with respect to one or more currencies,
commodities, securities, rates, indices or other measures of financial or economic risk or any
other similar transaction (or any combination thereof).

          “Subsidiary” has the meaning specified in the NRG Collateral Trust Agreement.

          “Texas Genco Collateral Trust Agreement” has the meaning specified in the NRG Collateral Trust
Agreement.

 

7

* * *

(ii) Section 1.11 is amended by adding the following to the end thereof: “and in entering into new
arrangements which replace a Terminated Transaction.”

(iii) Section 1.50 is amended to delete the reference to section “2.4” and replacing it with “2.5”.

(iv) Section 1.51 is amended by (a) adding the phrase “for delivery” immediately before the phrase
“at the Delivery Point” in the second line thereof and (b) deleting the phrase “at Buyer’s option”
from the fifth line thereof and replacing it with the following: “absent a purchase”.

(v) Section 1.53 is amended by (a) deleting the phrase “at the Delivery Point” from the second line
thereof and (b) deleting the phrase “at Seller’s option” from the fifth line thereof and replacing
it with the following: “absent a sale.”

(vi) The definition of “Transaction” in Section 1.60 is hereby deleted in its entirety and replaced
with the following new definition:

          “Transaction” means (a) a particular transaction agreed to by the Parties relating to the sale
and purchase of a Product pursuant to this Master Agreement or (b) a particular Derivative
Transaction agreed to by the Parties pursuant to this Master Agreement.

(2) Article Two shall be amended as follows:

(i) In Section 2.2, insert “The Definitions are hereby incorporated by reference with respect to
any Transaction entered into by the Parties pursuant to this Master Agreement that is a Derivative
Transaction, except as otherwise provided in any Confirmation or as agreed to by the Parties. In
the event of any inconsistency between the provisions of the Master Agreement and the Definitions,
the Master Agreement will prevail. In the event of any inconsistency between the terms of any
Transaction that is a Derivative Transaction and the Definitions, the terms of such Transaction
will prevail.” after the last sentence.

(ii) In Section 2.3, insert “or any other means of electronic messaging for which a written record
can be retrieved” after “facsimile” in the first sentence.

(iii) Article Two shall be amended to add a new Section 2.6 as follows:

     2.6 Existing Transactions and Confirmations. For the avoidance of doubt, all
Transactions and Confirmations outstanding under the Master Agreement on or prior to the
Restatement Date shall remain in effect under the Master Agreement following the Restatement Date;
provided, however, that if the terms set forth in such prior Transactions and
Confirmations are inconsistent with the terms set forth in the Master Agreement (as restated on the
Restatement Date), then the terms in the Master Agreement shall govern.

(3) Article Three shall be amended as follows:

(i) In Section 3.1, insert “set forth in (a) of the definition thereof,” after “Transaction” in the
first sentence.

 

8

* * *

(ii) In Section 3.1, insert “With respect to each Derivative Transaction, the Fixed Price Payer (as
specified in the related Confirmation) or the Floating Price Payer (as specified in the related
Confirmation), as applicable shall pay to the other party any amounts due in accordance with the
section entitled “Settlements” in the related Confirmation.” as a new paragraph.

(iii) Section 3.2 is hereby deemed inoperative with respect to all Derivative Transactions.

(iv) Section 3.3 is hereby deemed inoperative with respect to all Derivative

Transactions.

(4) Article Four shall be amended as follows:

(i) Section 4.1 is hereby deemed inoperative with respect to all Derivative Transactions.

(ii) Section 4.2 is hereby deemed inoperative with respect to all Derivative Transactions.

(5) Article Five shall be amended as follows:

(i) In Section 5.1(c), add “, in the case of Transaction set forth in (a) of the definition
thereof,” after “except” the second time it appears in such Section and before “for” the first time
it appears in such Section.

(ii) In Section 5.1(e), delete “agreed to pursuant to” and add “as and when due as specified in” in
its place.

(iii) Section 5.1(g) is amended as follows: in clause (i), delete “, or becoming capable at such
time of being declared,”.

(iv) Section 5.1 shall be amended to add a new Section 5.1(i) and Section 5.1(j) as follows:

	 	(i)	 	with respect to Party B only, the acceleration of any
Specified Indebtedness. ***. For purposes hereof, “acceleration” means the
occurrence and continuation of a default, event of default or other similar
condition or event relating to the relevant indebtedness, which results in
such indebtedness becoming immediately due and payable, or the failure to pay
any such indebtedness at maturity.
	 
	 	(j)	 	either Party (i) defaults under a Specified Transaction and,
after giving effect to any applicable notice requirement or grace period, such
default results in a liquidation of, an acceleration of obligations under, or
an early termination of, that Specified Transaction, (ii) defaults, after
giving effect to any applicable notice requirement or grace period, in making
any payment or delivery due on the last payment date or delivery date of a
Specified Transaction; or (iii) disaffirms, disclaims or repudiates any
Specified Transaction.

 

9

* * *

(v) Section 5.2 is amended to delete the following phrase from the last two lines thereof: “under
applicable law on the Early Termination Date, as soon as thereafter as is reasonably practicable)”
and to add the following to the end of Section 5.2:

“under applicable law on the Early Termination Date, then each such Transaction
(individually, an “Excluded Transaction” and collectively, the “Excluded Transactions”)
shall be terminated as soon thereafter as reasonably practicable, and upon termination
shall be deemed to be a Terminated Transaction and the Termination Payment payable in
connection with all such Transactions shall be calculated in accordance with Section 5.3
below). The Non-Defaulting Party (or its agent) may determine its Gains and Losses by
reference to information either available to it internally or supplied by one or more third
parties including, without limitation, quotations (either firm or indicative) of relevant
rates, prices, yields, yield curves, volatilities, spreads or other relevant market data in
the relevant markets. Third parties supplying such information may include, without
limitation, dealers in the relevant markets, end-users of the relevant product, information
vendors and other sources of market information.”

	(vi)	 	In Section 5.3(a), insert the word “liquid” immediately after the phrase “any cash or other
form of” in the third line thereof.
	 
	(vii)	 	In Section 5.3(b), insert “plus, at the option of the Non-Defaulting Party, any cash or
other form of liquid security then available to the Defaulting Party or its agent pursuant to
Article Eight,” after the phrase “Non-Defaulting Party,” in the sixth line thereof.
	 
	(viii)	 	The following is added to the end of Section 5.4:

	 	 	 	Notwithstanding any provision to the contrary contained in this Agreement, the
Non-Defaulting Party shall not be required to pay to the Defaulting Party any
amount under Article 5 until the Non-Defaulting Party receives confirmation
satisfactory to it in its reasonable discretion (which may include an opinion of
its counsel) that all other obligations of any kind whatsoever of the Defaulting
Party to make any payments to the Non-Defaulting Party under this Agreement or
otherwise have been fully and finally performed.

	(ix)	 	Option A of Section 5.6 shall be deleted in its entirety and replaced with the following
provision:

	 	 	 	“Option A: After calculation of a Termination Payment in accordance with Section
5.3, if the Defaulting Party would be owed the Termination Payment, the
Non-Defaulting Party shall be entitled, at its option and in its discretion, to (i)
set off against such Termination Payment any amounts payable (whether or not then
due) by the Defaulting Party to the Non-Defaulting Party under any other
agreements, instruments or undertakings between the Defaulting Party and the
Non-Defaulting Party and/or (ii) to the extent the Transactions are not yet
liquidated in accordance with Section 5.2, withhold payment of the Termination
Payment to the Defaulting Party. The remedy provided for in this

 

10

* * *

	 	 	 	Section shall be without prejudice and in addition to any right of setoff,
combination of accounts, lien or other right to which any Party is at any time
otherwise entitled (whether by operation of law, contract or otherwise).
	 
	 	 	 	If any obligation is unascertained, the Non-Defaulting Party may in good faith
estimate that obligation and set-off in respect of the estimate, subject to the
Non-Defaulting Party accounting to the other when the obligation is ascertained.”

	(x)	 	Section 5.7 is amended as follows:

	 	(a)	 	after “(i)” insert the following words: “to withhold any payment due to the
Defaulting Party under this Agreement and/or”; and
	 
	 	(b)	 	insert the words “withholding or” after “any such”.
	 
	 	(c)	 	at the end of Section 5.7, insert “The proviso in subsection (i) of this
Section is inoperative with respect to all Derivative Transactions.”

	(xi)	 	The following shall be added as new Sections 5.8 and 5.9:

               5.8 Certain Regulatory Matters.

               (a) In the event Buyer is regulated by a federal, state or local regulatory body, and such
body shall disallow all or any portion of any costs incurred or yet to be incurred by Buyer under
any provision of this Agreement or in respect of any Transaction, such action shall not operate to
excuse Buyer from performance of any obligation hereunder nor shall such action give rise to any
right of Buyer to any refund or retroactive adjustment of the price of any Transaction.

               (b) If, after giving effect to any applicable provision or remedy specified in, or pursuant
to, this Agreement, due to an event or circumstance (other than any action taken or omission by a
Party) occurring after a Transaction is entered into, it becomes unlawful under any applicable law
for a Party (an “Affected Party”) to perform any material obligation to make a payment or delivery
in respect of such Transaction (an “Affected Transaction”), to receive a payment or take delivery
in respect of such Transaction or to comply with any other material provision of this Agreement
relating to such Transaction (in each case, other than as a result of a breach by such Party of
Section 5.8(c)), then either Party may, by notice to the other Party, terminate and liquidate all
Affected Transactions in the manner contemplated by Section 5.2, which notice shall specify the
basis for declaring such Early Termination Date and identify which Transactions are Affected
Transactions. If the Affected Transactions constitute all Transactions then in effect under this
Agreement, both Parties shall calculate their respective Gains, Losses or Costs in respect of
Terminated Transactions as provided in Sections 5.2, 5.3 and 5.4, and endeavor in good faith to
agree upon the Termination Payment payable by either Party. If the Affected Transactions constitute
some but less than all of the Transactions then in effect under this Agreement, only the Party that
is not the Affected Party shall calculate its Gains, Losses and Costs in respect of all Affected
Transactions and notify the Affected Party

 

11

* * *

of the Termination Payment, as provided in Sections 5.2, 5.3 and 5.4. Only the Affected
Transactions shall be terminated on the Early Termination Date under the circumstances described in
the preceding sentence and all other Transactions shall remain unaffected as if no Early
Termination Date had been declared.

          (c) Each Party agrees that it will use all reasonable efforts to maintain in full force and
effect all consents, approvals, permits or other authorizations of any governmental or other
authority (including ERCOT) that are required to be obtained by it with respect to this Agreement
and will use all reasonable efforts to obtain any that may become necessary in the future.

          5.9 ***

(6) Article Six shall be amended as follows:

(i) In Section 6.7, the second sentence is hereby deemed inoperative with respect to all Derivative
Transactions.

(7) Article Seven shall be amended as follows:

	 	(i)	 	Section 7.1 is amended by: (a) deleting “EXCEPT AS SET FORTH
HEREIN” from the first sentence thereof, (b) deleting “UNLESS EXPRESSLY HEREIN
PROVIDED” from the fifth sentence thereof and substituting in lieu thereof,
“NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY” and (c) adding
“SET FORTH IN THIS AGREEMENT” after the phrase “INDEMNITY PROVISION” in the
fifth sentence thereof.

(8) ***

(9) Article Nine shall be amended as follows:

(i) Section 9.2 is hereby deemed inoperative with respect to all Derivative Transactions.

(10) Article Ten shall be amended as follows:

(i) Section 10.2 (viii) is amended by adding at the end thereof: “, and acknowledges that the other
Party is not acting as a fiduciary for or advisor to it in respect of any Transaction.”

(ii) The reference to “forward contract merchant” in Section 10.2 (ix) is hereby replaced with
“swap participant” with respect to all Derivative Transactions.

(iii) Section 10.3 is hereby deemed inoperative with respect to all Derivative Transactions.

(iv) Section 10.4 is hereby deemed inoperative with respect to all Derivative Transactions.

(v) Section 10.5 is amended as follows:

 

12

* * *

	 	(a)	 	in the second and third lines thereof, delete the words “may be withheld in
the exercise of its sole discretion” and replace them with the following: “will not be
arbitrarily withheld or delayed”;
	 
	 	(b)	 	in the fourth line thereof, delete “(and without relieving itself from
liability hereunder)”;
	 
	 	(c)	 	in Clause (iii) delete “whose creditworthiness is equal or higher than that”
and insert “or pursuant to any consolidation or amalgamation with, or merger with or
into another entity or the reorganization, incorporation, reincorporation or
reconstitution into or as another entity” after “such Party”;
	 
	 	(d)	 	insert the following at the end of Section 10.5:
	 
	 	 	 	“No transfer or assignment by either Party shall affect the non-transferring
Party’s rights and obligations or the transferring Party’s obligations hereunder,
including the obligation to provide and maintain Performance Assurance (including
any liens) or a guaranty required to be provided under this Agreement.
Notwithstanding the foregoing, Party B shall have the right to assign, with full
novation and release, pursuant to Section 10.16.”

	(vi)	 	In Section 10.6:

	 	(a)	 	designate the existing text of the Section as Clause (a) and delete the words
“AND THE RIGHTS AND DUTIES OF THE PARTIES HEREUNDER” and replace them with “, EACH
TRANSACTION ENTERED INTO HEREUNDER, AND ALL MATTERS ARISING IN CONNECTION WITH THIS
AGREEMENT”, and
	 
	 	(b)	 	insert the following new Clauses (b) and (c):

	 	(b)	 	With respect to any suit, action or proceedings relating to this
Agreement (“Proceedings”), each Party irrevocably:

	 	(i)	 	submits to the non-exclusive
jurisdiction of the courts of the State of New York and the
United States District Court located in the Borough of
Manhattan in New York City; and
	 
	 	(ii)	 	waives any objection which it
may have at any time to the laying of venue of any Proceedings
brought in any such court, waives any claim that such
Proceedings have been brought in an inconvenient forum and
further waives the right to object, with respect to such
Proceedings, that such court does not have any jurisdiction
over such party.

	 	 	 	Nothing in this Agreement precludes either Party from bringing Proceedings
in any other jurisdiction in order to enforce any judgment

 

13

* * *

	 	 	 	obtained in any Proceedings referred to in the preceding sentence, nor will
the bringing of such enforcement Proceedings in any one or more
jurisdictions preclude the bringing of enforcement Proceedings in any other
jurisdiction.

	 	(c)	 	Each Party hereby irrevocably waives any and all right to trial by jury in
any Proceeding.”;

	(vii)	 	The third and fourth sentences of Section 10.7 are replaced with the following:
	 
	 	 	“Notices shall be effective upon receipt by the Party to which it was addressed, which in
the case of a facsimile shall be deemed to occur by the close of business on the Business
Day on which the same is transmitted (or if not transmitted on a Business Day, then the
next Business Day) or such earlier time as is confirmed by the receiving Party.”

(viii) The second sentence of Section 10.9 is hereby deemed inoperative with respect to all
Derivative Transactions.

(ix) The reference to “forward contracts” in Section 10.10 is hereby replaced with “swap
agreements” with respect to all Derivative Transactions.

	(x)	 	Section 10.11 shall be deleted in its entirety and replaced with the following:
	 
	 	 	“10.11 Confidentiality. If the Parties have elected on the Cover Sheet to make this
Section 10.11 applicable to this Agreement, neither Party shall disclose the terms or
conditions of a Transaction under this Agreement, during the term of such Transaction, to a
third party (other than the Party’s and the Party’s Affiliates’ employees, rating agencies,
lenders, potential investors or buyers, counsel, accountants or advisors who have agreed to
keep such terms confidential) except (i) in order to comply with any applicable law
(including the rules and regulations of the Securities and Exchange Commission),
regulation, or any exchange, control area or independent system operator rule or in
connection with any court, regulatory or self-regulatory proceeding or request, (ii) to the
extent such information is delivered to such third party for the sole purpose of
calculating a published index or other published price source, and (iii) as may be required
to be disclosed to the PUCT or in any proceedings of such commission or of any other
governmental or regulatory agency having jurisdiction over any Party or such Party’s
Affiliates. Each Party shall notify the other Party of any proceeding of which it is aware
which may result in disclosure of the terms of any transaction (other than as permitted
hereunder) and use reasonable efforts to prevent or limit the disclosure, provided,
however, that such reasonable efforts do not cause a Party to be in violation of
any law, regulation, subpoena, order or request. The Parties shall be entitled to all
remedies available at law or in equity to enforce, or seek relief in connection with, this
confidentiality obligation.”
	 
	(xi)	 	The following will be added as a new Section 10.12, 10.13, 10.14, 10.15 and 10.16,
respectively:

 

14

* * *

          10.12 Scope of Agreement. Notwithstanding anything contained in this Agreement to the
contrary, any transaction for the purchase and sale of electric capacity, energy or other products
related thereto which has been or will be entered into between Party A and Party B shall constitute
a “Transaction” which is subject to, governed by, and construed in accordance with the terms of
this Agreement. This Section is inoperative with respect to all Derivative Transactions.

          10.13 Binding Rates and Terms.

	 	(a)	 	Each Party irrevocably waives its rights, including its
rights under §§ 205-206 of the Federal Power Act, unilaterally to seek or
support a change in the rate(s), charges, classifications, terms or conditions
of this Agreement or any other agreements entered into in connection with this
Agreement or any Transaction thereunder, including any credit, security,
margin, guaranty or similar agreement (collectively with this Agreement, the
“Covered Agreements”). By this provision, each Party expressly waives
its right to seek or support: (i) an order from FERC finding that the
market-based rate(s), charges, classifications, terms or conditions agreed to
by the Parties in the Covered Agreements are unjust and unreasonable; or (ii)
any refund with respect thereto. Each Party agrees not to make or support such
a filing or request, and that these covenants and waivers shall be binding
notwithstanding any regulatory or market changes that may occur hereafter.
	 
	 	(b)	 	Absent the agreement of all parties to the proposed change,
the standard of review for changes to any section of any Covered Agreement
proposed by a Party (to the extent that any waiver in Section 10.13(a) above
is unenforceable or ineffective as to such Party), a non-Party or FERC acting
sua sponte, shall be the “public interest” standard of review set forth in
United Gas Pipe Line Co. v. Mobile Gas Service Corp., 350 U.S. 332 (1956) and
Federal Power Commission v. Sierra Pacific Power Co., 350 U.S. 348 (1956) (the
“Mobile-Sierra” doctrine).
	 
	 	(c)	 	The Parties agree that, if and to the extent that FERC adopts
a final Mobile-Sierra policy statement in Docket No. PL02-7-000 (“Policy
Statement”) or issues a final rule (“Final Rule”) that requires
that, in order to exclude application of the just and reasonable standard
under the Mobile-Sierra doctrine, the Parties must agree to language which
varies from that set forth in Section 10.13(a) or (b) above, then, without
further action of either Party (unless the Parties mutually agree otherwise),
such Section(s) shall be deemed amended to incorporate the specific language
in the Policy Statement or the Final Rule (as applicable) that requires the
public interest standard of review.
	 
	 	(d)	 	The foregoing is not intended to subject this Agreement or
either Party to the jurisdiction of FERC.

 

15

* * *

          10.14 ERCOT Protocols. The Parties shall comply with the ERCOT Protocols and shall
reasonably cooperate with each other in their efforts to comply with the ERCOT Protocols;
provided, however, this Section 10.14 is not intended to impose liability on either
Party for the failure to do so.

Section 10.15 ***

(11) Additional Provisions. The following provisions shall be added to Schedule P: Products and
Related Definitions:

	(i)	 	Other Products and Service Levels. If the Parties agree to a service level defined by a
different agreement (i.e., the WSPP agreement, the ERCOT agreement, etc.) for a particular
Transaction, then, unless the Parties expressly state and agree that all the terms and
conditions of such other agreement will apply, such reference to a service level/product
defined by such other agreement means that the service level for that Transaction is subject
to the applicable regional reliability requirements and guidelines as well as the excuses for
performance, Force Majeure, Uncontrollable Forces, or other such excuses applicable to
performance under such other agreement, to the extent inconsistent with the terms of this
Agreement, but all other terms and conditions of this Agreement remain applicable including,
without limitation, Section 2.2.
	 
	(ii)	 	Index Transactions. The terms and provisions of this Section shall be applicable only to
transactions which stipulate prices that must be determined by reference to a published index
or other publicly available price reference:

	 	(a)	 	Market Disruption. If a Market Disruption Event has
occurred and is continuing during the Determination Period, the Floating Price
for the affected Trading Day shall be determined pursuant to the index
specified in the Transaction for the first Trading Day thereafter on which no
Market Disruption Event exists; provided, however, if the
Floating Price is not so determined within three (3) Business Days after the
first Trading Day on which the Market Disruption Event occurred or existed,
then the Parties shall negotiate in good faith to agree on a Floating Price
(or a method for determining a Floating Price), and if the Parties have not so
agreed on or before the twelfth (12th) Business Day following the first
Trading Day on which the Market Disruption Event occurred or existed, then the
Floating Price shall be determined with each party obtaining in good faith a
quote from a leading dealer in the relevant market and averaging the two
quotes.
	 
	 	 	 	“Determination Period” means each calendar month during the term of
the relevant Transaction, provided that if the term of the Transaction is
less than one calendar month the Determination Period shall be the term of
the Transaction.

 

16

* * *

	 	 	 	“Floating Price” means the price specified in the Transaction as
being based upon a specified index or other publicly available price
reference (“index”).
	 
	 	 	 	“Market Disruption Event” means, with respect to an index, any of
the following events: (a) the failure of the index to announce or publish
information necessary for determining the Floating Price; (b) the failure
of trading to commence or the permanent discontinuation or material
suspension of trading in the relevant options contract or commodity on the
exchange or market acting as the index; (c) the temporary (for a period in
excess of three (3) business days) or permanent discontinuance or
unavailability of the index; (d) the temporary (for a period in excess of
three (3) business days) or permanent closing of any exchange acting as the
index; or (e) a material change in the formula for or the method of
determining the Floating Price.
	 
	 	 	 	“Trading Day” means a day in respect of which the relevant price
source published the relevant price.
	 
	 	(b)	 	Corrections to Published Prices. For purposes of
determining the relevant prices for any day, if the price published or
announced on a given day and used or to be used to determine a relevant price
is subsequently corrected and the correction is published or announced by the
person responsible for that publication or announcement, either Party may
notify the other Party of (i) that correction and (ii) the amount (if any)
that is payable as a result of that correction. If a Party gives notice that
an amount is so payable, the Party that originally either received or retained
such amount will, not later than three (3) Business Days after the
effectiveness of that notice, pay, subject to any applicable conditions
precedent, to the other Party that amount, together with interest at the
Interest Rate for the period from and including the day on which payment
originally was (or was not) made to but excluding the day of payment of the
refund or payment resulting from that correction.
	 
	 	(c)	 	Calculation of Floating Price. For the purposes of
the calculation of a Floating Price, all numbers shall be rounded to three (3)
decimal places. If the fourth (4th) decimal number is five (5) or greater,
then the third (3rd) decimal number shall be increased by one (1), and if the
fourth (4th) decimal number is less than five (5), then the third (3rd)
decimal number shall remain unchanged.

               10.16. Assignment and Release. (a) At any time, so long as no Early Termination Date
has occurred or been designated as a result of an Event of Default with respect to Texas Genco II,
LP (“TGN”), (i) TGN shall be permitted to assign (the “Assignment”) all of its rights and
obligations under this Agreement to NRG Power Marketing, Inc. (“NRG Power”) pursuant to a written
instrument in which NRG Power agrees to assume such rights and obligations and (ii) Party A shall
consent to Assignment, provided that NRG

 

17

* * *

Power has provided Party A with a new or amended Fixed LOC having a face value in the amount
required under Section 8.1(c)(I) on the date of the Assignment and any new or amended Additional
LOCs required under then outstanding Transactions, each such Additional LOC having a face amount in
the amount required under the terms of the relevant Transaction and Section 8.1(c)(III) on the date
of the Assignment. Upon the effectiveness of the Assignment all the rights, liabilities, duties and
obligations of TGN under and in respect of one or more Transactions entered into between Party A
and TGN (each, an “Old Transaction”) as evidenced by a confirmation (each, an “Old
Confirmation”) shall be assigned to NRG Power, with the effect that Party A and NRG Power will
be deemed to have entered into a new transaction (each, a “New Transaction”) between them
having terms identical to those of each Old Transaction, with the understanding that Party A and
NRG Power shall each undertake liabilities and obligations towards the other and acquire rights
against each other identical in their terms to each corresponding Old Transaction (and, for the
avoidance of doubt, as if NRG Power were TGN and with Party A remaining Party A, save for any
rights, liabilities or obligations of Party A or TGN with respect to payments or other obligations
due and payable or due to be performed on or prior to date of the Assignment). Upon the
effectiveness of the Assignment, the guarantee provided by the Goldman Group to TGN (the
“Guarantee”) will be terminated, and Party A shall cause such Guarantee to be replaced by a
guarantee by Goldman Group (which guarantee shall be identical in all material respects to the
Guarantee) in favor of NRG Power.

(b) Subject to the occurrence of the events detailed in Section 10.16(a) and upon written notice to
Party A, and following (i) the consolidation of the Texas Genco Collateral Trust Agreement and the
NRG Collateral Trust Agreement into a single collateral trust agreement and (ii) NRG Power
performing such other actions as Party A may reasonably request, Party A and TGN each shall be
released and discharged from further obligations to the other party with respect to each Old
Transaction and their respective rights against each other thereunder shall be canceled (the
“Release”), provided that such release and discharge shall not affect any rights,
liabilities or obligations of Party A or TGN with respect to payments or other obligations due and
payable or due to be performed on or prior to the date of the Release, and all such payments and
obligations shall be paid or performed by Party A or TGN in accordance with the terms of the Old
Transaction. Nothing contained herein shall affect TGN’s obligations as a Guarantor of the
obligations arising under this Agreement so long as TGN is required to be a Guarantor hereunder.

Schedule P is hereby deemed inoperative with respect to all Derivative Transactions.

 

18

* * *

IN WITNESS WHEREOF, the Parties have caused this Master Agreement to be duly executed in one or
more counterparts (each of which shall be deemed an original, and all of which, taken together,
shall constitute one and the same agreement) as of the date first above written. The Parties
expressly acknowledge the validity of facsimile counterparts of the executed Master Agreement, if
any, which may be transmitted in advance of, or in lieu of, executed original documents.

J. ARON & COMPANY

	 	 	 	 	 
	By:

	 	 	 	 
	 

	 	 	 	 
	 

	 	Name:	 	 
	 

	 	Title:	 	 

TEXAS GENCO II, LP

	 	 	 
	By:

	New Genco GP, LLC,
	 

	its general partner
	Name:
	 	 
	Title:
	 	 

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

 

Schedule B to Master Power Purchase

and Sale Agreement Cover Sheet

Form of Letter of Credit

WE HEREBY ESTABLISH OUR IRREVOCABLE STAND-BY LETTER OF CREDIT

NO. _______________

IN FAVOR OF:

[BENEFICIARY]

[ADDRESS]

[ADDRESS]

Attn : [ _________ ]

Telex : [ _________ ]

BY ORDER AND FOR THE ACCOUNT OF:

(insert full style and address)

FOR AN AMOUNT OF:

US DOLLARS _________

(UNITED STATES DOLLARS _________)

AVAILABLE FOR PAYMENT AT SIGHT UPON PRESENTATION AT OUR COUNTERS IN (insert city and country where
documents are to be presented) OF THE FOLLOWING DOCUMENT:

STATEMENT SIGNED BY A PURPORTEDLY AUTHORIZED REPRESENTATIVE OF [BENEFICIARY] CERTIFYING THAT
(insert your company name) HAS NOT PERFORMED IN ACCORDANCE WITH THE TERMS OF THE MASTER POWER
PURCHASE & SALE AGREEMENT, DATED AS OF JULY 21, 2004, AS AMENDED AND RESTATED AS OF FEBRUARY 2,
2006, BETWEEN [BENEFICIARY] AND (insert your company name), AND THE AMOUNT BEING DRAWN OF USD
_________ DOES NOT EXCEED THAT AMOUNT WHICH [BENEFICIARY] IS ENTITLED TO DRAW PURSUANT TO THE
TERMS AND CONDITIONS OF SUCH AGREEMENT.

SPECIAL CONDITIONS:

1. PARTIAL AND MULTIPLE DRAWINGS ARE PERMITTED.

2. ALL CHARGES RELATED TO THIS LETTER OF CREDIT ARE FOR THE ACCOUNT PARTY’S ACCOUNT.

3. DOCUMENTS MUST BE PRESENTED NOT LATER THAN (insert expiry date) OR IN THE EVENT OF FORCE
MAJEURE INTERRUPTING OUR BUSINESS, WITHIN THIRTY (30) DAYS AFTER RESUMPTION OF OUR BUSINESS,
WHICHEVER IS LATER.

 

UPON RECEIPT OF DOCUMENTS ISSUED IN COMPLIANCE WITH THE TERMS OF THIS CREDIT, WE HEREBY IRREVOCABLY
UNDERTAKE TO COVER YOU AS PER YOUR INSTRUCTIONS WITH VALUE ONE BANK WORKING DAY.

      THIS STANDBY CREDIT IS SUBJECT TO THE UNIFORM CUSTOMS AND PRACTICE FOR DOCUMENTARY CREDITS
1993 REVISION), I.C.C. PUBLICATION 500.

 

TABLE
OF CONTENTS

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page	 
	ARTICLE ONE GENERAL DEFINITIONS	 	 	1	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE TWO TRANSACTION TERMS AND CONDITIONS	 	 	6	 
	 	 	 	 	 
	 	 	 	 
	 	2.1	 	 	Transactions
	 	 	6	 
	 	2.2	 	 	Governing Terms
	 	 	6	 
	 	2.3	 	 	Confirmation
	 	 	6	 
	 	2.4	 	 	Additional Confirmation Terms
	 	 	7	 
	 	2.5	 	 	Recording
	 	 	7	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE THREE OBLIGATIONS AND DELIVERIES	 	 	7	 
	 	 	 	 	 
	 	 	 	 
	 	3.1	 	 	Seller’s and Buyer’s Obligations
	 	 	7	 
	 	3.2	 	 	Transmission and Scheduling
	 	 	8	 
	 	3.3	 	 	Force Majeure
	 	 	8	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE FOUR REMEDIES FOR FAILURE TO DELIVER/RECEIVE	 	 	8	 
	 	 	 	 	 
	 	 	 	 
	 	4.1	 	 	Seller Failure
	 	 	8	 
	 	4.2	 	 	Buyer Failure
	 	 	8	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE FIVE EVENTS OF DEFAULT; REMEDIES	 	 	8	 
	 	 	 	 	 
	 	 	 	 
	 	5.1	 	 	Events of Default
	 	 	8	 
	 	5.2	 	 	Declaration of an Early Termination
Date and Calculation of Settlement
Amounts
	 	 	10	 
	 	5.3	 	 	Net Out of Settlement Amounts
	 	 	10	 
	 	5.4	 	 	Notice of Payment of Termination Payment
	 	 	10	 
	 	5.5	 	 	Disputes With Respect to Termination Payment
	 	 	11	 
	 	5.6	 	 	Closeout Setoffs
	 	 	11	 
	 	5.7	 	 	Suspension of Performance
	 	 	11	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE SIX PAYMENT AND NETTING	 	 	12	 
	 	 	 	 	 
	 	 	 	 
	 	6.1	 	 	Billing Period
	 	 	12	 
	 	6.2	 	 	Timeliness of Payment
	 	 	12	 
	 	6.3	 	 	Disputes and Adjustments of Invoices
	 	 	12	 
	 	6.4	 	 	Netting of Payments
	 	 	12	 
	 	6.5	 	 	Payment Obligation Absent Netting
	 	 	13	 
	 	6.6	 	 	Security
	 	 	13	 
	 	6.7	 	 	Payment for Options
	 	 	13	 
	 	6.8	 	 	Transaction Netting
	 	 	13	 

i

 

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page	 
	ARTICLE SEVEN LIMITATIONS	 	 	13	 
	 	 	 	 	 
	 	 	 	 
	 	7.1	 	 	Limitation of Remedies, Liability and Damages
	 	 	13	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE EIGHT CREDIT AND COLLATERAL REQUIREMENTS	 	 	14	 
	 	 	 	 	 
	 	 	 	 
	 	8.1	 	 	Party A Credit Protection
	 	 	14	 
	 	8.2	 	 	Party B Credit Protection
	 	 	16	 
	 	8.3	 	 	Grant of Security Interest/Remedies
	 	 	18	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE NINE GOVERNMENTAL CHARGES	 	 	19	 
	 	 	 	 	 
	 	 	 	 
	 	9.1	 	 	Cooperation
	 	 	19	 
	 	9.2	 	 	Governmental Charges
	 	 	19	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE TEN MISCELLANEOUS	 	 	19	 
	 	 	 	 	 
	 	 	 	 
	 	10.1	 	 	Term of Master Agreement
	 	 	19	 
	 	10.2	 	 	Representations and Warranties
	 	 	19	 
	 	10.3	 	 	Title and Risk of Loss
	 	 	21	 
	 	10.4	 	 	Indemnity
	 	 	21	 
	 	10.5	 	 	Assignment
	 	 	21	 
	 	10.6	 	 	Governing Law
	 	 	21	 
	 	10.7	 	 	Notices
	 	 	21	 
	 	10.8	 	 	General
	 	 	22	 
	 	10.9	 	 	Audit
	 	 	22	 
	 	10.10	 	Forward Contract
	 	 	22	 
	 	10.11	 	Confidentiality
	 	 	23	 

ii

 

GENERAL TERMS AND CONDITIONS

ARTICLE ONE

GENERAL DEFINITIONS

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

     1.2 “Agreement” has the meaning set forth in the Cover Sheet.

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

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

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

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

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

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

     1.9 “Confirmation” has the meaning set forth in Section 2.3.

1

 

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

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

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

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

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

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

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

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

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

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

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

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

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

     1.23 “Force Majeure” means an event or circumstance which prevents one Party from performing
its obligations under one or more Transactions, which event or circumstance was not anticipated as
of the date the Transaction was agreed to, which is not within the reasonable control of, or the
result of the negligence of, the Claiming Party, and which, by the exercise of due diligence, the
Claiming Party is unable to overcome or avoid or cause to be avoided. Force Majeure shall not be
based on (i) the loss of Buyer’s markets; (ii) Buyer’s inability economically

2

 

to use or resell the Product purchased hereunder; (iii) the loss or failure of Seller’s
supply; or (iv) Seller’s ability to sell the Product at a price greater than the Contract Price.
Neither Party may raise a claim of Force Majeure based in whole or in part on curtailment by a
Transmission Provider unless (i) such Party has contracted for firm transmission with a
Transmission Provider for the Product to be delivered to or received at the Delivery Point and (ii)
such curtailment is due to “force majeure” or “uncontrollable force” or a similar term as defined
under the Transmission Provider’s tariff; provided, however, that existence of the foregoing
factors shall not be sufficient to conclusively or presumptively prove the existence of a Force
Majeure absent a showing of other facts and circumstances which in the aggregate with such factors
establish that a Force Majeure as defined in the first sentence hereof has occurred. The
applicability of Force Majeure to the Transaction is governed by the terms of the Products and
Related Definitions contained in Schedule P.

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

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

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

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

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

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

     1.30 “Moody’s” means Moody’s Investor Services, Inc. or its successor.

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

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

3

 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

     1.48 “Put Option” means an Option entitling, but not obligating, the Option Buyer to sell and
deliver the Product to the Option Seller at a price equal to the Strike Price for the

4

 

Delivery Period for which the option may be exercised, all as specified in a Transaction.
Upon proper exercise of the Option by the Option Buyer, the Option Seller will be obligated to
purchase and receive the Product.

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

     1.50 “Recording” has the meaning set forth in Section 2.4.

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

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

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

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

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

5

 

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

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

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

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

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

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

ARTICLE TWO

TRANSACTION TERMS AND CONDITIONS

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

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

     2.3 Confirmation. Seller may confirm a Transaction by forwarding to Buyer by facsimile
within three (3) Business Days after the Transaction is entered into a confirmation
(“Confirmation”) substantially in the form of Exhibit A. If Buyer objects to any term(s) of such
Confirmation, Buyer shall notify Seller in writing of such objections within two (2) Business Days
of Buyer’s receipt thereof, failing which Buyer shall be deemed to have accepted the terms as sent.
If Seller fails to send a Confirmation within three (3) Business Days after the Transaction is
entered into, a Confirmation substantially in the form of Exhibit A, may be forwarded by Buyer to
Seller. If Seller objects to any term(s) of such Confirmation, Seller shall notify Buyer of such
objections within two (2) Business Days of Seller’s receipt thereof, failing which Seller shall be
deemed to have accepted the terms as sent. If Seller and Buyer each send a

6

 

Confirmation and neither Party objects to the other Party’s Confirmation within two (2) Business
Days of receipt, Seller’s Confirmation shall be deemed to be accepted and shall be the controlling
Confirmation, unless (i) Seller’s Confirmation was sent more than three (3) Business Days after the
Transaction was entered into and (ii) Buyer’s Confirmation was sent prior to Seller’s Confirmation,
in which case Buyer’s Confirmation shall be deemed to be accepted and shall be the controlling
Confirmation. Failure by either Party to send or either Party to return an executed Confirmation
or any objection by either Party shall not invalidate the Transaction agreed to by the Parties.

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

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

ARTICLE THREE

OBLIGATIONS AND DELIVERIES

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

7

 

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

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

ARTICLE FOUR

REMEDIES FOR FAILURE TO DELIVER/RECEIVE

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

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

ARTICLE FIVE

EVENTS OF DEFAULT; REMEDIES

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

8

 

	 	(a)	 	the failure to make, when due, any payment required pursuant to
this Agreement if such failure is not remedied within three (3) Business Days
after written notice;
	 
	 	(b)	 	any representation or warranty made by such Party herein is
false or misleading in any material respect when made or when deemed made or
repeated;
	 
	 	(c)	 	the failure to perform any material covenant or obligation set
forth in this Agreement (except to the extent constituting a separate Event of
Default, and except for such Party’s obligations to deliver or receive the
Product, the exclusive remedy for which is provided in Article Four) if such
failure is not remedied within three (3) Business Days after written notice;
	 
	 	(d)	 	such Party becomes Bankrupt;
	 
	 	(e)	 	the failure of such Party to satisfy the
creditworthiness/collateral requirements agreed to pursuant to Article Eight
hereof;
	 
	 	(f)	 	such Party consolidates or amalgamates with, or merges with or
into, or transfers all or substantially all of its assets to, another entity
and, at the time of such consolidation, amalgamation, merger or transfer, the
resulting, surviving or transferee entity fails to assume all the obligations
of such Party under this Agreement to which it or its predecessor was a party
by operation of law or pursuant to an agreement reasonably satisfactory to the
other Party;
	 
	 	(g)	 	if the applicable cross default section in the Cover Sheet is
indicated for such Party, the occurrence and continuation of (i) a default,
event of default or other similar condition or event in respect of such Party
or any other party specified in the Cover Sheet for such Party under one or
more agreements or instruments, individually or collectively, relating to
indebtedness for borrowed money in an aggregate amount of not less than the
applicable Cross Default Amount (as specified in the Cover Sheet), which
results in such indebtedness becoming, or becoming capable at such time of
being declared, immediately due and payable or (ii) a default by such Party or
any other party specified in the Cover Sheet for such Party in making on the
due date therefor one or more payments, individually or collectively, in an
aggregate amount of not less than the applicable Cross Default Amount (as
specified in the Cover Sheet);
	 
	 	(h)	 	with respect to such Party’s Guarantor, if any:

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

9

 

	 	(ii)	 	the failure of a Guarantor to make any payment
required or to perform any other material covenant or obligation in any
guaranty made in connection with this Agreement and such failure shall
not be remedied within three (3) Business Days after written notice;
	 
	 	(iii)	 	a Guarantor becomes Bankrupt;
	 
	 	(iv)	 	the failure of a Guarantor’s guaranty to be in
full force and effect for purposes of this Agreement (other than in
accordance with its terms) prior to the satisfaction of all obligations
of such Party under each Transaction to which such guaranty shall
relate without the written consent of the other Party; or
	 
	 	(v)	 	a Guarantor shall repudiate, disaffirm,
disclaim, or reject, in whole or in part, or challenge the validity of
any guaranty.

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

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

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

10

 

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

     5.6 Closeout Setoffs.

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

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

     Option C: Neither Option A nor B shall apply.

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

11

 

ARTICLE SIX

PAYMENT AND NETTING

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

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

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

     6.4 Netting of Payments. The Parties hereby agree that they shall discharge mutual debts
and payment obligations due and owing to each other on the same date pursuant to all Transactions
through netting, in which case all amounts owed by each Party to the other Party for the purchase
and sale of Products during the monthly billing period under this Master Agreement, including any
related damages calculated pursuant to Article Four (unless one of the

12

 

Parties elects to accelerate payment of such amounts as permitted by Article Four), interest, and
payments or credits, shall be netted so that only the excess amount remaining due shall be paid by
the Party who owes it.

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

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

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

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

	 	(a)	 	the Party obligated to deliver the greater amount of Energy
will deliver the difference between the total amount it is obligated to deliver
and the total amount to be delivered to it under the Offsetting Transactions,
and
	 
	 	(b)	 	the Party owing the greater aggregate payment will pay the net
difference owed between the Parties.

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

ARTICLE SEVEN

LIMITATIONS

     7.1 Limitation of Remedies, Liability and Damages. EXCEPT AS SET FORTH HEREIN, THERE IS NO
WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, AND ANY AND ALL IMPLIED WARRANTIES
ARE DISCLAIMED. THE PARTIES CONFIRM THAT THE EXPRESS REMEDIES AND MEASURES OF DAMAGES PROVIDED IN
THIS AGREEMENT SATISFY THE ESSENTIAL PURPOSES HEREOF. FOR BREACH OF ANY PROVISION FOR WHICH AN
EXPRESS REMEDY OR MEASURE OF DAMAGES IS PROVIDED, SUCH EXPRESS REMEDY OR MEASURE OF DAMAGES SHALL
BE THE SOLE AND EXCLUSIVE

13

 

REMEDY, THE OBLIGOR’S LIABILITY SHALL BE LIMITED AS SET FORTH IN SUCH PROVISION AND ALL OTHER
REMEDIES OR DAMAGES AT LAW OR IN EQUITY ARE WAIVED. IF NO REMEDY OR MEASURE OF DAMAGES IS
EXPRESSLY PROVIDED HEREIN OR IN A TRANSACTION, THE OBLIGOR’S LIABILITY SHALL BE LIMITED TO DIRECT
ACTUAL DAMAGES ONLY, SUCH DIRECT ACTUAL DAMAGES SHALL BE THE SOLE AND EXCLUSIVE REMEDY AND ALL
OTHER REMEDIES OR DAMAGES AT LAW OR IN EQUITY ARE WAIVED. UNLESS EXPRESSLY HEREIN PROVIDED,
NEITHER PARTY SHALL BE LIABLE FOR CONSEQUENTIAL, INCIDENTAL, PUNITIVE, EXEMPLARY OR INDIRECT
DAMAGES, LOST PROFITS OR OTHER BUSINESS INTERRUPTION DAMAGES, BY STATUTE, IN TORT OR CONTRACT,
UNDER ANY INDEMNITY PROVISION OR OTHERWISE. IT IS THE INTENT OF THE PARTIES THAT THE LIMITATIONS
HEREIN IMPOSED ON REMEDIES AND THE MEASURE OF DAMAGES BE WITHOUT REGARD TO THE CAUSE OR CAUSES
RELATED THERETO, INCLUDING THE NEGLIGENCE OF ANY PARTY, WHETHER SUCH NEGLIGENCE BE SOLE, JOINT OR
CONCURRENT, OR ACTIVE OR PASSIVE. TO THE EXTENT ANY DAMAGES REQUIRED TO BE PAID HEREUNDER ARE
LIQUIDATED, THE PARTIES ACKNOWLEDGE THAT THE DAMAGES ARE DIFFICULT OR IMPOSSIBLE TO DETERMINE, OR
OTHERWISE OBTAINING AN ADEQUATE REMEDY IS INCONVENIENT AND THE DAMAGES CALCULATED HEREUNDER
CONSTITUTE A REASONABLE APPROXIMATION OF THE HARM OR LOSS.

ARTICLE EIGHT

CREDIT AND COLLATERAL REQUIREMENTS

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

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

     Option B: If requested by Party A, Party B shall deliver (i) within 120 days following the
end of each fiscal year, a copy of the annual report containing audited consolidated financial

14

 

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

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

	 	(b)	 	Credit Assurances. If Party A has reasonable grounds
to believe that Party B’s creditworthiness or performance under this Agreement
has become unsatisfactory, Party A will provide Party B with written notice
requesting Performance Assurance in an amount determined by Party A in a
commercially reasonable manner. Upon receipt of such notice Party B shall have
three (3) Business Days to remedy the situation by providing such Performance
Assurance to Party A. In the event that Party B fails to provide such
Performance Assurance, or a guaranty or other credit assurance acceptable to
Party A within three (3) Business Days of receipt of notice, then an Event of
Default under Article Five will be deemed to have occurred and Party A will be
entitled to the remedies set forth in Article Five of this Master Agreement.
	 
	 	(c)	 	Collateral Threshold. If at any time and from time to
time during the term of this Agreement (and notwithstanding whether an Event of
Default has occurred), the Termination Payment that would be owed to Party A
plus Party B’s Independent Amount, if any, exceeds the Party B Collateral
Threshold, then Party A, on any Business Day, may request that Party B provide
Performance Assurance in an amount equal to the amount by which the Termination
Payment plus Party B’s Independent Amount, if any, exceeds the Party B
Collateral Threshold (rounding upwards for any fractional amount to the next
Party B Rounding Amount) (“Party B Performance Assurance”), less any Party B
Performance Assurance already posted with Party A. Such Party B Performance
Assurance shall be delivered to Party A within three (3) Business Days of the
date of such request. On any Business Day (but no more frequently than weekly
with respect to Letters of Credit and daily with respect to cash), Party B, at
its sole cost, may request that such Party B Performance Assurance be reduced
correspondingly to the amount of such excess Termination Payment plus Party B’s
Independent Amount, if any, (rounding upwards for any fractional amount to the
next Party B Rounding Amount). In the event that Party B fails to provide
Party B Performance Assurance pursuant to the terms of this Article Eight
within three (3) Business Days, then an Event of Default under Article Five
shall be deemed to have

15

 

	 		 	occurred and Party A will be entitled to the remedies set forth in Article
Five of this Master Agreement.

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

	 	(d)	 	Downgrade Event. If at any time there shall occur a
Downgrade Event in respect of Party B, then Party A may require Party B to
provide Performance Assurance in an amount determined by Party A in a
commercially reasonable manner. In the event Party B shall fail to provide
such Performance Assurance or a guaranty or other credit assurance acceptable
to Party A within three (3) Business Days of receipt of notice, then an Event
of Default shall be deemed to have occurred and Party A will be entitled to the
remedies set forth in Article Five of this Master Agreement.
	 
	 	(e)	 	If specified on the Cover Sheet, Party B shall deliver to Party
A, prior to or concurrently with the execution and delivery of this Master
Agreement a guarantee in an amount not less than the Guarantee Amount specified
on the Cover Sheet and in a form reasonably acceptable to Party A.

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

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

     Option B: If requested by Party B, Party A shall deliver (i) within 120 days following the
end of each fiscal year, a copy of the annual report containing audited consolidated financial
statements for such fiscal year for the party(s) specified on the Cover Sheet and (ii) within 60
days after the end of each of its first three fiscal quarters of each fiscal year, a copy of
quarterly

16

 

report containing unaudited consolidated financial statements for such fiscal quarter for the
party(s) specified on the Cover Sheet. In all cases the statements shall be for the most recent
accounting period and shall be prepared in accordance with generally accepted accounting
principles; provided, however, that should any such statements not be available on a timely basis
due to a delay in preparation or certification, such delay shall not be an Event of Default so long
as the relevant entity diligently pursues the preparation, certification and delivery of the
statements.

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

	 	(b)	 	Credit Assurances. If Party B has reasonable grounds
to believe that Party A’s creditworthiness or performance under this Agreement
has become unsatisfactory, Party B will provide Party A with written notice
requesting Performance Assurance in an amount determined by Party B in a
commercially reasonable manner. Upon receipt of such notice Party A shall have
three (3) Business Days to remedy the situation by providing such Performance
Assurance to Party B. In the event that Party A fails to provide such
Performance Assurance, or a guaranty or other credit assurance acceptable to
Party B within three (3) Business Days of receipt of notice, then an Event of
Default under Article Five will be deemed to have occurred and Party B will be
entitled to the remedies set forth in Article Five of this Master Agreement.
	 
	 	(c)	 	Collateral Threshold. If at any time and from time to
time during the term of this Agreement (and notwithstanding whether an Event of
Default has occurred), the Termination Payment that would be owed to Party B
plus Party A’s Independent Amount, if any, exceeds the Party A Collateral
Threshold, then Party B, on any Business Day, may request that Party A provide
Performance Assurance in an amount equal to the amount by which the Termination
Payment plus Party A’s Independent Amount, if any, exceeds the Party A
Collateral Threshold (rounding upwards for any fractional amount to the next
Party A Rounding Amount) (“Party A Performance Assurance”), less any Party A
Performance Assurance already posted with Party B. Such Party A Performance
Assurance shall be delivered to Party B within three (3) Business Days of the
date of such request. On any Business Day (but no more frequently than weekly
with respect to Letters of Credit and daily with respect to cash), Party A, at
its sole cost, may request that such Party A Performance Assurance be reduced
correspondingly to the amount of such excess Termination Payment plus Party A’s
Independent Amount, if any, (rounding upwards for any fractional amount to the
next Party A Rounding Amount). In the event that Party A fails to provide
Party A Performance Assurance pursuant to the terms of this Article Eight
within three (3) Business Days, then an Event of Default under Article Five
shall be deemed to have occurred and Party B will be entitled to the remedies
set forth in Article Five of this Master Agreement.

17

 

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

	 	(d)	 	Downgrade Event. If at any time there shall occur a
Downgrade Event in respect of Party A, then Party B may require Party A to
provide Performance Assurance in an amount determined by Party B in a
commercially reasonable manner. In the event Party A shall fail to provide
such Performance Assurance or a guaranty or other credit assurance acceptable
to Party B within three (3) Business Days of receipt of notice, then an Event
of Default shall be deemed to have occurred and Party B will be entitled to the
remedies set forth in Article Five of this Master Agreement.
	 
	 	(e)	 	If specified on the Cover Sheet, Party A shall deliver to Party
B, prior to or concurrently with the execution and delivery of this Master
Agreement a guarantee in an amount not less than the Guarantee Amount specified
on the Cover Sheet and in a form reasonably acceptable to Party B.

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

18

 

ARTICLE NINE

GOVERNMENTAL CHARGES

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

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

ARTICLE TEN

MISCELLANEOUS

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

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

	 	(a)	 	it is duly organized, validly existing and in good standing
under the laws of the jurisdiction of its formation;
	 
	 	(b)	 	it has all regulatory authorizations necessary for it to
legally perform its obligations under this Master Agreement and each
Transaction (including any Confirmation accepted in accordance with Section
2.3);
	 
	 	(c)	 	the execution, delivery and performance of this Master
Agreement and each Transaction (including any Confirmation accepted in
accordance with Section 2.3) are within its powers, have been duly authorized
by all

19

 

	 	 	 	necessary action and do not violate any of the terms and conditions in its
governing documents, any contracts to which it is a party or any law, rule,
regulation, order or the like applicable to it;

	 	(d)	 	this Master Agreement, each Transaction (including any
Confirmation accepted in accordance with Section 2.3), and each other document
executed and delivered in accordance with this Master Agreement constitutes its
legally valid and binding obligation enforceable against it in accordance with
its terms; subject to any Equitable Defenses.
	 
	 	(e)	 	it is not Bankrupt and there are no proceedings pending or
being contemplated by it or, to its knowledge, threatened against it which
would result in it being or becoming Bankrupt;
	 
	 	(f)	 	there is not pending or, to its knowledge, threatened against
it or any of its Affiliates any legal proceedings that could materially
adversely affect its ability to perform its obligations under this Master
Agreement and each Transaction (including any Confirmation accepted in
accordance with Section 2.3);
	 
	 	(g)	 	no Event of Default or Potential Event of Default with respect
to it has occurred and is continuing and no such event or circumstance would
occur as a result of its entering into or performing its obligations under this
Master Agreement and each Transaction (including any Confirmation accepted in
accordance with Section 2.3);
	 
	 	(h)	 	it is acting for its own account, has made its own independent
decision to enter into this Master Agreement and each Transaction (including
any Confirmation accepted in accordance with Section 2.3) and as to whether
this Master Agreement and each such Transaction (including any Confirmation
accepted in accordance with Section 2.3) is appropriate or proper for it based
upon its own judgment, is not relying upon the advice or recommendations of the
other Party in so doing, and is capable of assessing the merits of and
understanding, and understands and accepts, the terms, conditions and risks of
this Master Agreement and each Transaction (including any Confirmation accepted
in accordance with Section 2.3);
	 
	 	(i)	 	it is a “forward contract merchant” within the meaning of the
United States Bankruptcy Code;
	 
	 	(j)	 	it has entered into this Master Agreement and each Transaction
(including any Confirmation accepted in accordance with Section 2.3) in
connection with the conduct of its business and it has the capacity or ability
to make or take delivery of all Products referred to in the Transaction to
which it is a Party;

20

 

	 	(k)	 	with respect to each Transaction (including any Confirmation
accepted in accordance with Section 2.3) involving the purchase or sale of a
Product or an Option, it is a producer, processor, commercial user or merchant
handling the Product, and it is entering into such Transaction for purposes
related to its business as such; and
	 
	 	(l)	 	the material economic terms of each Transaction are subject to
individual negotiation by the Parties.

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

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

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

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

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

21

 

overnight United States mail or courier shall be effective on the next Business Day after it was
sent. A Party may change its addresses by providing notice of same in accordance herewith.

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

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

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

22

 

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

23

 

CONFIRMATION LETTER

	 	 	 
	From:

	 	J. Aron & Company
	 

	 	85 Broad Street
	 

	 	New York, NY 10004
	 
	 	 
	To:

	 	Texas Genco, LP
	 

	 	1111 Louisiana Street, 10th Floor
	 

	 	P.O. Box 2846, 20th Floor
	 

	 	Houston, TX 77002 (77252-2846)
	 
	 	 
	Attention:

	 	David G. Tees

The purpose of this letter agreement (this “Confirmation”) is to confirm the terms and
conditions of the following transaction (the “Transaction”) entered into on the Trade Date
specified below between J. Aron & Company (“Buyer”) and Texas Genco, LP (“Seller”).

This confirmation letter is being provided pursuant to and in accordance with the Master Power
Purchase and Sale Agreement dated as of July 21, 2004 (the “Master Agreement”) between
Buyer and Seller and constitutes part of and is subject to the terms and provisions of such Master
Agreement. Terms used but not defined herein shall have the meanings ascribed to them in the Master
Agreement.

The commercial terms of this Transaction are as follows:

	 	 	 
	Trade Date:

	 	July 21, 2004
	 
	 	 
	Contract Reference:

	 	To be advised by Buyer
	 
	 	 
	Buyer:

	 	J. Aron & Company
	 
	 	 
	Seller:

	 	Texas Genco, LP
	 
	 	 
	Scheduling:

	 	Buyer must Schedule the Product at the
contracted quantity with ERCOT by 11:00 Central
prevailing time each day.
	 
	 	 
	Product:

	 	Firm (LD) Energy
	 
	 	 
	Delivery Period:

	 	From hour ending 0100 on January 1, 2005 to
hour ending 2400 on December 31, 2008,
including North American Electricity
Reliability Council (“NERC”) holidays
	 
	 	 
	Monthly Quantities:

	 	See Schedule 1 to this Confirmation.

 

 

	 	 	 
	Contract Prices:

	 	See Schedule 1 to this Confirmation.
	 
	 	 
	Delivery Points:

	 	Subject to the section entitled “Alternate
Delivery Points” below, (i) while ERCOT
operates on a zonal congestion basis, the
“Primary Delivery Point” for each ERCOT zone
specified in Schedule 1 shall be any delivery
point in such ERCOT zone, and (ii) if and when
ERCOT switches to a nodal congestion
methodology, the “Primary Delivery Point” for
each of the Parish facility, the South Texas
Project facility and the Limestone facility, as
specified in Schedule 1, shall be the node that
consists of the 345 kV interconnection at the
busbar for such facility.
	 
	 	 
	Alternate Delivery Points:

	 	Seller may specify an alternate delivery point
(an “Alternate Delivery Point”) in accordance
with the following for any Product delivered
under this Transaction:
	 
	 	 
	 

	 	(1) If and when ERCOT switches to a nodal
congestion methodology, upon notice by Seller
to Buyer delivered no later than 08:30 Central
prevailing time of the Day prior to the Day on
which a Product is to be delivered, Seller may
specify any other delivery point in the ERCOT
zone (or equivalent designation) in which the
Primary Delivery Point for such Product is
located as the Delivery Point for such Product.
In the event Seller elects an Alternate
Delivery Point pursuant to this clause (1), (a)
Seller shall pay Buyer the amount by which the
market price at the Primary Delivery Point
exceeded the market price at the Alternate
Delivery Point, and (b) Buyer shall pay to
Seller the amount by which the market price at
the Alternate Delivery Point exceeded the
market price at the Primary Delivery Point, in
each case with respect to the Product delivered
at such Alternate Delivery Point.
	 
	 	 
	 

	 	(2) In the event of an Unplanned (Forced)
Outage or an Unplanned (Forced) Derating at
either the Limestone facility or the South
Texas Project facility (each, an “Affected
Facility”), Seller may, upon notice by Seller
to Buyer delivered no later than 08:30 Central
prevailing time of the Day prior to the Day on
which a Product is to be delivered, elect a
Parish Zone Delivery Point as the delivery
point for the Product that would otherwise have
been delivered at the Primary Delivery Point
associated with such Affected Facility. Seller
shall not reduce

 

 

	 	 	 
	 

	 	Buyer’s receipts at the
Primary Delivery Point at either Affected
Facility more than pro rata with other parties
buying power at such facilities for which
Seller has the right to designate an alternate
delivery point.
	 
	 	 
	 

	 	For purposes of the foregoing, (i) a “Parish
Zone Delivery Point” is any delivery point in
the ERCOT zone (or equivalent designation) in
which the Primary Delivery Point for the Parish
facility is located and (ii) “Unplanned
(Forced) Outage” and “Unplanned (Forced)
Derating” each have the meanings specified in
the NERC Generating Unit Availability Data
System (GADS) event reporting guidelines.
	 
	 	 
	 

	 	The provisions related to Alternate Delivery
Points shall not affect Seller’s obligation to
deliver Firm (LD) Energy.
	 
	 	 
	Force Majeure

	 	Revise the third sentence of Section 1.23 of
the Master Agreement to read as follows:
	 
	 	 
	 

	 	Neither Party may raise a claim of Force
Majeure based in whole or in part on
curtailment by a Transmission Provider unless
(i) such Party has either (A) contracted for
firm transmission with a Transmission Provider
for the Product to be delivered to or received
at the Delivery Point or (B) scheduled such
Product into (in the case of Seller) or out of
(in the case of Buyer) a Delivery Point and
(ii) such curtailment is due to “force majeure”
or “uncontrollable force” or a similar term as
defined under the ERCOT Protocols. For the
avoidance of doubt, Seller is not a
Transmission Provider for purposes of this
provision.
	 
	 	 
	Buyer Operations Contacts:

	 	Fintan Whitty — Operations Manager: (212)
902-7311 Kathy Benini — Scheduling Manager
(212) 902-1454

[SIGNATURE PAGE FOLLOWS]

 

 

Please confirm that the terms stated herein accurately reflect the agreement reached between

Texas
Genco, LP and J. Aron & Company by executing where indicated below.

Signed on behalf of J. Aron & Company

	 	 	 	 	 
	By:

	 	/s/ Peter O’Hagan	 	 
	 

	 	 	 	 
	 

	 	Peter O’Hagan	 	 
	 

	 	Managing Director
J. Aron & Company	 	 
	 
	 	 	 	 
	Signed on behalf of Texas Genco, LP

By Texas Genco GP, LLC, its general partner	 	 
	 
	 	 	 	 
	By:

	 	/s/ David G. Tees	 	 
	 

	 	 	 	 
	 

	 	Name: David G. Tees	 	 
	 

	 	Title: President
	 	 

 

 

Schedule 1 to Confirmation Letter

CONTRACT PRICES, MONTHLY VOLUMES AND DELIVERY POINTS

***EX-10.32

 

Exhibit 10.32

*** Indicates materials have been omitted pursuant to a Confidential Treatment Request filed with
the Securities and Exchange Commission. A complete copy of this Agreement has been filed with the
Securities and Exchange Commission.

 

 

March 4, 2005

Mr. Paul R. Brown, CPM

Staff Sourcing Specialist

Texas Genco, LP

12301 Kurland Drive

Houston, TX 77034

	 	 	 
	Subject:

	 	*** Aluminum BethGon® II Railcars for Texas Genco, LP.
	 

	 	FreightCar America Inc. Proposal No. 04153 Revision A

Dear Mr. Brown:

In response to your inquiry, FreightCar America, Inc. (“FreightCar”) would be pleased to sell ***
new Aluminum BethGon® II Railcars (the “Railcars”) to Texas Genco, LP (“Purchaser”), per the
details listed below:

	 	 	 	 	 	 	 
	Quantity	 	Car Type	 	Specification / Date	 	Price Per Railcar
	***

	 	Aluminum BethGon® II

Railcars
	 	X-04153 / February 14, 2005
	 	$***
	***

	 	Aluminum BethGon® II

Railcars
	 	X-04153 / February 14, 2005
	 	$***
	***

	 	Aluminum BethGon® II

Railcars
	 	X-04153 / February 14, 2005
	 	$***
	***

	 	Aluminum BethGon® II

Railcars
	 	X-04153 / February 14, 2005
	 	$***

The above price is FOB FreightCar’s Plant. Switching and transportation charges are not included
in the price, but can be prepaid by FreightCar and added to your invoice at your request.

The requirements of the Association of American Railroads (AAR) and the United States Department of
Transportation (DOT) are incorporated in the Specification for the Railcars. Should these
requirements be changed, or should any other regulatory requirements be imposed prior to delivery
of the Railcars, the above price will be adjusted upward or downward accordingly.

FRA 49 CFR 224 Reflectorization of Rail Freight Rolling Stock is scheduled to go into effect for
all Railcars delivered after May 31, 2005. As of the date of this letter, the Railcar design
offered herein complies with 49 CFR 224 as currently defined by the FRA. Any additional costs
associated with the ongoing interpretation of 49 CFR 224 are for the account of the Purchaser.

The above proposal price is based upon our ability to obtain certain aluminum, steel, specialties
and other components used in the construction of the Railcars at the costs included in our
estimate. In the unforeseen instance that a supplier is unable to provide the specified material,
specialties and
other components at the costs included in our estimate, and substitute material, specialties and
other

 

 

Mr. Paul R. Brown, CPM

March 4, 2005

Page 2

components are supplied the Price per Railcar will be adjusted accordingly. The material, and
casting and steel surcharge costs shown on Exhibit A are included in the Price per Railcar and
reflect our current estimate of the cost of these items. The Price per Railcar will be adjusted
upward or downward to reflect the actual cost of the items shown on Exhibit A used to manufacture
the Railcars. Texas Genco, LP will be provided the documentation necessary to verify the actual
cost of these items.

DELIVERY: Subject to receipt of prior orders FreightCar can begin delivery of the first ***
Aluminum
BethGon®
II Railcars during the first week of *** 2006. Subject to receipt of prior
orders FreightCar can begin delivery of the remaining *** Aluminum BethGon® II Railcars during the
last week of *** 2006. The cars are scheduled to be produced at *** .

This schedule is subject to the availability of castings and other components. Given the tightness
in the availability of castings and other components, there is reason to be concerned that
suppliers may not be able to maintain delivery schedules.

TERMS: Net due upon receipt of invoice.

This proposal is valid for 70 calendar days and is subject to all respects to the attached Terms
and Conditions of Sale.

Please confirm your acceptance of this proposal by having an authorized officer of Texas Genco, LP
execute this letter agreement and the attached Terms and Conditions of Sale and returning a copy to
my attention within 70 calendar days from the date of this letter.

FreightCar America, Inc. very much appreciates the opportunity to build these Railcars for Texas
Genco, LP. Should you have any questions concerning this transaction, please contact me at
312-928-0874.

Very truly yours,

JOHNSTOWN AMERICA CORPORATION

/s/   Tim
Johnson

By: Tim Johnson

Its: Vice President Sales — Western Region

 

 

ACCEPTANCE BY PURCHASER:

Texas Genco, LP hereby acknowledges its acceptance of the offer to acquire the Railcars described
above, at the price and upon the terms and conditions set forth herein and in the attached Terms
and Conditions of Sale.

Texas Genco, LP

	 	 	 	 	 
	By:
	 	 	 	 
	 

	 	 

	 	 
	 
	 	 	 	 
	Its:
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	Date:
	 	 	 	 
	 

	 	 	 	 

Quantity of Railcars:

	 	 	 
	Attachments:

	 	EXHIBIT A
	 

	 	Texas Genco, LP RFQ
	 

	 	Specification X-04153
	 

	 	Terms and Conditions
	 

	 	Specialty Component List
	 

	 	Colin Gibb
	 

	 	EJW, WCH, plm, file

 

 

EXHIBIT A

BethGon® II

Material Cost Subject to Adjustment Included in Per Car Price

	 	 	 	 	 	 	 	 	 	 	 
	Item	 	Weight/lbs.	 	$/lbs.	 	 	Cost	 
	COST OF RAW MATERIALS	 	 	 	 
	Steel	 	***
	 	$	***	 	 	$	***	 
	Aluminum	 	***
	 	$	***	 	 	$	***	 
	 	 	 
	 	 	 	 	 	 	 
	Estimated Cost of Raw Materials at Time of Delivery	 	$	***	 
	 	 	 
	 	 	 	 	 	 	 	 
	MAJOR SPECIALTIES	 	 	 	 
	Castings	 	 
	 	 	 	 	 	$	***	 
	Forgings	 	 
	 	 	 	 	 	$	***	 
	Airbrake (Includes Hoses)	 	$	***	 
	Miscellaneous Specialties	 	$	***	 
	Polymers	 	 
	 	 	 	 	 	$	***	 
	Coatings	 	 
	 	 	 	 	 	$	***	 
	Fasteners	 	 
	 	 	 	 	 	$	***	 
	*Wheel Sets	 	 
	 	 	 	 	 	$	***	 
	 	 	 
	 	 	 	 	 	 	 
	Estimated Cost of Major Specialties on Date of Proposal	 	$	***	 
	 	 	 
	 	 	 	 	 	 	 	 
	SURCHARGES ON RAW MATERIALS	 	 	 	 
	Steel	 	 
	 	 	 	 	 	$	***	 
	Aluminum	 	 
	 	 	 	 	 	$	***	 
	Estimated Surcharges on Raw Material at Time of Delivery	 	$	 	 
	 	 	 
	 	 	 	 	 	 	 	 
	SURCHARGES ON MAJOR SPECIALTIES	 	 	 	 
	Castings	 	 
	 	 	 	 	 	$	***	 
	Wheels	 	 
	 	 	 	 	 	$	***	 
	Axles	 	 
	 	 	 	 	 	$	***	 
	Roller Bearings	 	$	***	 
	Springs	 	 
	 	 	 	 	 	$	***	 
	Brake System	 	 
	 	 	 	 	 	$	***	 
	Forgings	 	 
	 	 	 	 	 	$	***	 
	Brake Beams	 	 
	 	 	 	 	 	$	***	 
	Fasteners	 	 
	 	 	 	 	 	$	***	 
	Miscellaneous	 	 	 	 
	Estimated Surcharges on Major Specialties at Time of Delivery	 	$	***	 
	Estimated Component and Surcharge Cost Included in Per Car Price	 	$	***	 
	 	 	 
	 	 	 	 	 	 	 

 

			
	*	 	Wheel Set Complete Includes Wheels, Axle, Bearings & Mounting

*** 

 

 

FREIGHTCAR AMERICA, INC.

TERMS AND CONDITIONS OF SALE

FOR PROPOSAL NO.: 04153 Revision A

These Terms and Conditions of Sale are incorporated into and made a part of the Proposal Letter
dated March 4, 2005 (the “Proposal Letter”) from FreightCar America, Inc. (“FreightCar”) to Texas
Genco II, LP (“Purchaser”). These Terms and Conditions of Sale, the Proposal Letter and the
Specifications and Specialty Component List (such Specifications and Specialty Component List being
collectively referred to as the “Specifications”) described therein are hereinafter referred to as
this “Agreement.”

Inspection and Acceptance: FreightCar shall give Purchaser, and/or its designated agent, reasonable
opportunity to inspect FreightCar’s manufacturing procedures prior to commencement of the start of
production of the first Railcar and during production and the Railcars during the construction
process at FreightCar’s manufacturing facility in Danville, Illinois ( “FreightCar’s Plant”) during
normal operating hours or at such other time as may be mutually agreed. Purchaser shall have its
representative present for inspection of the Railcars at FreightCar’s Plant prior to the start of
production of the first Railcar. Upon completion of each Railcar, Purchaser shall use its best
efforts to arrange to conduct a final inspection of such Railcar prior to the time such Railcar is
removed from the Final QA Acceptance Building at FreightCar’s Plant. Such inspection will comply
with the safety and inspection procedures specified by FreightCar and will be conducted so as not
to interfere unreasonably with FreightCar’s operations, and acceptance of the Railcars by Purchaser
will be made before removal of such Railcars from the Final QA Acceptance Building at FreightCar’s
Plant. All storage, transportation and other costs incurred by FreightCar as a result of any delay
by Purchaser in inspecting or accepting the Railcars shall be for Purchaser’s account. Purchaser,
or its designated agent, shall execute a certificate of inspection and acceptance (“Certificate of
Acceptance”) in the form of Exhibit A hereto covering all Railcars found to be completed in
accordance with the Specifications and shall deliver the executed Certificate(s) of Acceptance to
FreightCar. If, upon inspection of the Railcars by Purchaser, the Railcars appear not to conform
to the Specifications, Purchaser will immediately notify FreightCar in writing of the condition and
give FreightCar a reasonable opportunity to correct the condition. Such correction shall not
relieve FreightCar of its obligation to adhere to the production schedule agreed upon by the
parties. Each designated agent and representative selected by Purchaser to inspect the Railcars
must be reasonably acceptable to FreightCar. Prior to the inspection described herein, Purchaser
shall notify FreightCar of the name and company of the designated agent and representative selected
by Purchaser, and if such person(s) are not reasonably acceptable to FreightCar, FreightCar shall
promptly notify Purchaser. FreightCar shall pre-register the Railcars in UMLER and shall, at the
reasonable request of Purchaser (and at no cost to FreightCar), make any other required initial
filings and registrations of the Railcars.

Price: The purchase price to be paid by Purchaser to FreightCar for each Railcar purchased by
Purchaser pursuant to this Agreement is set forth in the Proposal Letter and is based upon
FreightCar’s ability to obtain certain aluminum, steel, specialties and other components used in
the construction of the Railcars. In the unforeseen instance that a supplier is unable to provide
the specified material, specialties and other components and substitute material, specialties and
other components are supplied the price per Railcar will be adjusted accordingly. The material and
casting and steel surcharge costs shown on Exhibit A to the Proposal Letter are included in the
price per Railcar and reflect FreightCar’s current estimate of these items. The price per Railcar
will be adjusted upward or downward to reflect the actual cost of the items shown on Exhibit A to
the Proposal Letter used to manufacture the Railcar. Upon Purchaser’s request from time to time,
FreightCar shall provide to Purchaser any updated price information relating to the Railcars. If
the purchase price of the Railcars exceeds by more than ***% the purchase price for such Railcars
contained in the Proposal Letter, Purchaser shall, upon

 

 

notice to FreightCar, within ten (10) days
of being notified of such purchase price increase, have the right to
cancel this Agreement with respect to the Railcars subject to such price adjustment, without cost
or penalty to Purchaser or FreightCar.

If the final purchase price (after application of the aforementioned adjustment) is different than
the price set forth in the Proposal Letter, upon Purchaser’s request, the final purchase price is
subject to confirmation by an independent auditor acceptable to both parties (“Auditor”). Such
confirmation will take place at a mutually acceptable time. The parties agree that information
used to determine the final purchase price (“Information”) is the confidential and proprietary
property of FreightCar and such Information shall be made available only to the Auditor, subject to
the Auditor’s execution of a confidentiality agreement acceptable to FreightCar, solely for the
purpose of confirming such final purchase price. The Auditor shall not disclose any Information to
Purchaser, but shall confirm its agreement with FreightCar’s calculation of the final purchase
price, or in the event it disagrees with such calculation, shall provide to both parties a revised
final purchase price with such revised final purchase price being binding on both parties. The
cost of the Auditor shall be borne by Purchaser unless the final
purchase price is more than
***  lower than the adjusted purchase price originally submitted by
FreightCar, in which case the cost of the Auditor will be borne by FreightCar.

Payment: Following delivery by Purchaser to FreightCar of a Certificate of Acceptance for a
Railcar, title to such Railcar shall pass to Purchaser, and FreightCar shall deliver to Purchaser a
bill of sale for such Railcar which shall retain for FreightCar a security interest in such Railcar
as further described in the following sentence. FreightCar shall retain, and Purchaser does hereby
grant to FreightCar, as security for payment of such accepted Railcars and fulfillment of its
obligations to FreightCar hereunder, a purchase money security interest in such Railcars and the
rentals, earnings, products, proceeds and accessions of and to any of such Railcars, together with
all right, title and interest of Purchaser therein and all rights and remedies which Purchaser
might exercise with respect thereto but for the execution of this Agreement. Purchaser
acknowledges that this Agreement shall constitute a security agreement between the parties and that
FreightCar shall be vested with all of the rights and remedies available to a secured party under
the Uniform Commercial Code in effect in the State in which FreightCar’s Plant is located upon a
default by Purchaser hereunder, including, without limitation, the right to foreclose upon and take
possession of the Railcars pursuant to public or private sale. Prior to delivery of any of such
Railcars to Purchaser, Purchaser will execute and return to FreightCar a Memorandum of Railcar
Security Agreement (“Memorandum”) covering the Railcars in form satisfactory to FreightCar and
suitable for filing with the Surface Transportation Board (“STB”). Following receipt by FreightCar
of payment for a Railcar, FreightCar will file with the STB a termination of the Memorandum with
respect to such Railcar and deliver such other evidence of clear title as Purchaser shall
reasonably request. Not less than five (5) days prior to the completion of the final Railcar in a
trainset, FreightCar shall invoice Purchaser for the Railcars in such trainset and Purchaser shall
pay the purchase price for the Railcars in such trainset, as hereinafter provided, upon acceptance,
by Purchaser at FreightCar’s Plant, of the final Railcar in such trainset. Purchaser shall make
such payment of the purchase price for such Railcars in the form of a wire transfer of immediately
available U.S. funds, in accordance with the instructions from FreightCar, provided that Purchaser
shall make such wire transfer no later than (i) the business day following the day on which
Purchaser receives, before 2:00 p.m. Central Time, the Certificate of Acceptance for the final
Railcar in such trainset (the “Final Certificate”) or (ii) the second business day following the
day on which Purchaser receives, after 2:00 p.m. Central Time, the Final Certificate; provided
further that FreightCar shall have no obligation to deliver such Railcars to the Connection Point
(as hereinafter defined) until FreightCar has confirmed receipt of such wire payment. If all or
any portion of the purchase price for the Railcars is not paid to FreightCar when due, such
nonpayment shall result in the additional obligation on the part of Purchaser to pay interest to
FreightCar
on the unpaid amount, on demand, at the applicable Prime Rate, as reported by The Wall Street
Journal. If Purchaser shall not make payment as aforesaid, Purchaser agrees to execute such
instruments and to take such other action as shall be reasonably requested by FreightCar to vest in
FreightCar or its designee good and

 

 

marketable title to such Railcars, free and clear of all liens,
claims and encumbrances arising by, through or under Purchaser, and, at FreightCar’s option,
possession and control of the Railcars, whereupon FreightCar may, at its election, terminate this
Agreement and sell, lease, retain or otherwise dispose of such Railcars.

Credit Approval: If, subsequent to the date hereof, a material adverse change in Purchaser’s
creditworthiness, financial condition or prospects occurs, as reasonably determined by FreightCar,
FreightCar may cease the ordering or accepting of materials to build the Railcars and cease the
manufacture of the Railcars until FreightCar has received from Purchaser a monetary deposit of up
to ***, as requested by FreightCar, or other assurances of payment satisfactory to FreightCar.

Delivery: Following Purchaser’s delivery of a Certificate of Acceptance, at the request of
Purchaser, FreightCar shall arrange to deliver such accepted Railcars from FreightCar’s Plant to
the railroad connection contiguous to FreightCar’s Plant (the “Connection Point”). The purchase
price set forth in this Agreement is FOB FreightCar’s Plant. All movement of the Railcars,
following their initial delivery by FreightCar to the Connection Point, shall be at the cost and
risk of Purchaser. Delayed delivery of the Railcars due to an event of Force Majeure (as defined
below) shall be without penalty or cost to FreightCar. Notwithstanding any other provision to the
contrary, FreightCar acknowledges that Purchaser is purchasing the Railcars to replace certain
railcars that Purchaser currently leases, and that said lease, and Purchaser’s right to use the
railcars pursuant thereto expires in conjunction with Purchaser’s purchase of the Railcars from
FreightCar. Should FreightCar fail to deliver any Railcar by the thirtieth (30) day after the date
shown on Exhibit B, and such failure is not excused by an event of Force Majeure,
FreightCar shall, at its option, (i) pay any reasonable costs associated with Purchaser securing
temporary replacement railcars or (ii) supply Purchaser with replacement railcars at FreightCar’s
sole expense.

Specifications and Changes: The Railcars shall be constructed in accordance with the
Specifications. The Specifications shall comply with the applicable published requirements of the
Federal Railroad Administration (“FRA”) and the Association of American Railroads (“AAR”) in effect
on the date of manufacture of the Railcars. If it shall become impossible or impracticable for
FreightCar to secure the materials required for the manufacture of the Railcars in exact accordance
with the Specifications, including without limitation by reason of any subsequent interpretation of
or changes to such FRA or AAR requirements, FreightCar may, upon notice to Purchaser, make changes
in the Specifications not materially affecting the strength, size, capacity or efficiency of the
Railcars for railroad use and interchange, provided that FreightCar shall not substitute any of the
materials identified in FreightCar’s Specialty Component List without Purchaser’s consent. If such
change will result in an increase in the cost to FreightCar over the anticipated cost to produce
the Railcar without giving effect to such change, the purchase price for the Railcars shall be
adjusted to reflect such increased cost, provided that FreightCar shall obtain the prior written
consent of Purchaser to such adjustment. If Purchaser fails to consent to such adjustment,
FreightCar shall have the right to cancel this Agreement without penalty to either party. Any
other changes in the Specifications desired by either party must be requested in writing and
specify the amount of any adjustment in the purchase price (as determined by FreightCar), and must
be approved in writing by the other party. Each party agrees that it will not unreasonably
withhold its consent to
any requested change by the other. FreightCar is under no obligation to arrange for shipment and
acceptance of any required materials in advance of FreightCar’s needs.

Permissible Tolerances: Except in the particulars specified by Purchaser and expressly agreed to
in writing by FreightCar, all Railcars will be manufactured in accordance with FreightCar’s
standard practices and will be subject to tolerances and variations consistent with usages of the
trade and regular practices including deviations from tolerances and variations consistent with
practical testing and inspection methods.

 

 

Force Majeure: An event of “Force Majeure” shall include extraordinary and unforeseeable
occurrences such as strikes, lockouts or other labor disturbances, shortages or late delivery of
material (due to no fault of FreightCar); unavailability, interruptions or inadequacy of fuel
supplies; acts of God; war, preparation for war or other acts or interventions of naval or military
personnel or other agencies of government; governmental rules or regulations (or interpretation of
or changes to the existing rules or regulations); priorities given to defense orders; riot,
embargoes, sabotage, act of terrorism, vandalism, malicious mischief, landslides, floods,
hurricanes, earthquakes, collisions, fires or other calamities; delays of carriers (due to no fault
of FreightCar); shortages of labor, non-delivery and/or late delivery of any Purchaser-furnished
supplies, material, equipment or labor, including plans, drawings or engineering; delays due to
changes by Purchaser in drawings or specifications or any circumstance or cause beyond the
reasonable control of FreightCar in the conduct of its business. Notwithstanding the foregoing,
FreightCar shall, during any period of Force Majeure, exercise such diligence as the circumstances
reasonably require.

Risk of Loss: FreightCar shall bear all risks of physical loss of the Railcars at FreightCar’s
Plant and until receipt by FreightCar of the Certificate of Acceptance from Purchaser for such
Railcars (such date of receipt being hereinafter referred to as the “Transfer Date”) and delivery
of Railcars to the Connection Point. From and after the Transfer Date for a Railcar, and after
delivery of a Railcar to the Connection Point, Purchaser shall bear all risk of loss of such
Railcar. Notwithstanding the foregoing, FreightCar shall not be responsible for any loss or
damages to property (including the Railcars) or injury to or death of any person arising out of or
in connection with any Railcar (including, without limitation, any inspection of such Railcar)
prior to the Transfer Date when such loss, damage or death is caused by the actions of Purchaser’s
or any of Purchaser’s affiliated corporation’s officers, managers, directors, employees,
inspectors, representatives or agents. If, for any reason, FreightCar does not receive a
Certificate of Acceptance for a Railcar, then the Transfer Date for such Railcar shall mean the
date on which such Railcar is first delivered by FreightCar to the Connection Point.

Warranty:

     (a) FreightCar warrants that all goods and services sold hereunder or pursuant hereto will be
free of any claims of any nature by any third person (other than claims, liens, security interests
and encumbrances arising by, through or under Purchaser) and that, upon delivery of the Bill of
Sale with respect to a Railcar, FreightCar will convey to Purchaser good and marketable title to
such Railcar, free and clear of all claims, liens, security interests, encumbrances and rights of
others of any nature whatsoever (other than claims, liens, security interests and encumbrances
arising by, through or under Purchaser).

     (b) FreightCar warrants that each Railcar will be free from defects in material and
workmanship under normal use and service for a period of ***  from the Transfer Date of
such Railcar by Purchaser. With respect to parts and materials manufactured by others and
incorporated by FreightCar in the Railcars, such parts
and material shall be covered only by the warranty, if any, of the manufacturer thereof, and
FreightCar shall assign to Purchaser any such warranty, to the extent assignable by FreightCar, and
FreightCar will cooperate with Purchaser to assist in enforcing any such warranty not so assigned
at its own expense. FreightCar shall not provide any other relief or warranty with respect to such
parts and materials. FreightCar’s obligations with respect to any Railcar for breach of this
warranty, whether or not due to FreightCar’s negligent acts or omissions, is limited to either
replacement or repair, which option shall be mutually agreed upon by the parties and which
Purchaser shall not unreasonably withhold agreement, of such non-conforming or defective component
(or Railcar) on Purchaser’s normal route of railcar movement, but at all time subject to
FreightCar’s prior approval of the respective repair shop or facility. FreightCar’s agreement set
forth above to repair or replace defective parts and materials (other than with respect to parts
and materials manufactured by others and incorporated by FreightCar in the Railcars, the remedy for
which is provided for above in this Warranty section) shall be Purchaser’s sole and exclusive
remedy with respect to the Railcars that are defective in any respect or

 

 

that fail to conform to the Specifications or to any express or implied warranty, and
FreightCar will not in any event be liable for the cost of any transportation charges expended on
or in connection with the repair, replacement or return of any component (or Railcar) or for any
special, indirect, incidental or consequential damages. FreightCar’s warranty set forth in this
Warranty section shall be void and of no force and effect if repairs made to the Railcar are not
made in conformity with FreightCar’s Specifications or, if in the process of making repairs to the
Railcar, parts originally manufactured by FreightCar (including, without limitation, all car body
components, such as side stakes, top chords, side sills, end posts, tubs, gate systems, etc.) are
removed and not replaced with like parts manufactured by FreightCar. FreightCar shall provide to
Purchaser copies of the warranties received by FreightCar on parts and materials purchased by
FreightCar from the manufacturers and suppliers listed on Exhibit C hereto and any
manufacturers or suppliers substituted therefore after the date of this Agreement.

THIS WARRANTY IS EXPRESSLY IN LIEU OF ALL OTHER WARRANTIES EXPRESS OR IMPLIED, INCLUDING ANY
WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. PURCHASER ACKNOWLEDGES THAT ITS
SOLE REMEDY FOR BREACH OF THIS WARRANTY BY FREIGHTCAR IS AS PROVIDED ABOVE AND FREIGHTCAR SHALL NOT
BE LIABLE IN TORT, FOR NEGLIGENCE OR STRICT LIABILITY OR FOR LOSS OR INTERRUPTION OF USE, PROFIT OR
BUSINESS OR ANY OTHER INCIDENTAL OR CONSEQUENTIAL INJURY OR DAMAGE, ALL OF WHICH ARE EXPRESSLY
WAIVED AND RELEASED BY PURCHASER.

FREIGHTCAR’S OBLIGATIONS UNDER THIS WARRANTY ARE CONDITIONED UPON COMPLIANCE BY PURCHASER AND ALL
OTHER USERS OF THE RAILCARS WITH OPERATION, LOADING, USE, HANDLING, MAINTENANCE AND STORAGE IN
ACCORDANCE WITH GOOD COMMERCIAL PRACTICES OF THE RAILROAD INDUSTRY. FREIGHTCAR SHALL NOT BE
RESPONSIBLE FOR FAILURES CAUSED BY MISLOADING, OVERLOADING, OVERHEATING, IMPROPER CLEANING,
PHYSICAL ABUSE, ACCIDENT, DERAILMENT OR FOR OTHER DAMAGE CAUSED BY FIRE, FLOOD OR OTHER EXTERNAL
CONDITIONS UNRELATED TO THE MANUFACTURE OF THE RAILCAR OR FOR NORMAL WEAR AND TEAR.

Representations and Warranties:

          (a) FreightCar represents and warrants that the Railcars manufactured pursuant to this
Agreement will meet all published U.S. laws, rules and regulations governing the manufacture of
railcars in effect on the date of manufacture of the Railcars, including, but not limited to, the
applicable published requirements of the Federal Railway Administration and the Association of
American Railroads. FreightCar represents that it is in material compliance with all such laws,
regulations and orders applicable to FreightCar.

          (b) FreightCar and Purchaser each hereby represent and warrant to the other that: (a) it is
incorporated or registered and existing in good standing as a corporation or limited partnership,
as the case may be, under the laws of the state in which it is organized and all states in which it
is authorized to do business, with full corporate power and authority to execute and deliver this
Agreement and to perform its obligations hereunder; (b) neither the execution and delivery of this
Agreement by it, nor the performance of its obligations hereunder, will result in any violation of
its certificate of incorporation or bylaws, or its Certification of Formation on limited
partnership agreement, as applicable; and (c) this Agreement constitutes its legal, valid and
binding obligation, enforceable against it in accordance with its terms, subject to applicable
bankruptcy, insolvency and other similar laws affecting creditors’ rights generally, and to
equitable principals of general applicability.

 

 

          (c) The representations and warranties contained in this Agreement shall survive the
execution, delivery and performance of this Agreement, subject to the applicable statute of
limitations period.

Non-Disclosure: The parties each agree that the provisions of this Agreement shall not be
disclosed to any person other than the parties’ directors, managers, officers, employees,
affiliates, agents (including consultants, auditors and accountants, but excluding any manufacturer
of railcars or components or affiliate thereof) or legal counsel (herein “Purchaser’s or
FreightCar’s representatives”), who shall be subject to the non-disclosure provisions contained
herein; except (i) upon the written consent of the other party, (ii) to any federal, state or local
governmental agency to whose jurisdiction a party is subject pursuant to regulation, regulatory
body policy, order of court or order of administrative judge or hearing examiner (provided,
however, that unless specifically required by law, neither party shall provide the Price for the
Railcars or any other terms of conditions of sale to the STB, including without limitation in any
filing made with the STB), (iii) in response to warrant, subpoena, interrogatory, investigative
demand or other legal process in any legal proceeding, including a proceeding for enforcement of
this Agreement, (iv) to any third party or parties for the purpose of financing the Railcars or the
debt of the Purchaser, provided, that, prior to such disclosure each such party agrees to be bound
by the terms of this agreement of non-disclosure, and provided, further, that any breach by such
third party shall be deemed to be a breach by Purchaser of this Agreement, or (v) in connection
with any filings made to the Securities and Exchange Commission. In situations (ii), (iii)
or (v) above, when disclosure is to be made to any person other than Purchaser’s or FreightCar’s
representatives, the disclosing party shall use reasonable efforts to notify the other party of its
intent to disclose such information so that the other party may, if it so elects, seek an
appropriate protective order or other appropriate relief to avoid or limit such disclosure. In
situation (iv) above, no disclosure by Purchaser shall be made to any manufacturer of railcars or
components or affiliate thereof.

Drawings: All drawings and technical material, including specifications, descriptions and
tolerances relating to the Railcars or any components thereof supplied by FreightCar to Purchaser
pursuant to the Specifications (the “Drawings”) are the exclusive property of FreightCar and
contain confidential and proprietary information. By accepting the Drawings from FreightCar,
Purchaser agrees to limit its use of the Drawings solely to matters relating to Purchaser’s use of
the Railcars, including the repair and maintenance of the Railcars. Purchaser further agrees not
to disclose the Drawings, or to disclose any information contained in or derived from the Drawings,
to any person, including, but not limited to, any other manufacturer of railcars or components or
affiliate thereof; provided, however, that Purchaser may provide the Drawings to a car repair shop
for the sole purpose of maintaining and repairing the Railcars, provided that such car repair shop
agrees in advance in writing to be bound by the terms of the confidentiality provisions contained
herein and, provided further, that any breach of such agreement by such car repair shop shall be
deemed a breach by Purchaser of this Agreement.

Sales Tax: Notwithstanding anything herein this Agreement to the contrary, Purchaser shall pay,
and shall indemnify and hold FreightCar harmless against, all state or local sales, use or related
taxes arising out of this transaction which FreightCar may be required to pay or collect with
respect to this Agreement.

Order Cancellation: The Railcars to be manufactured by FreightCar for Purchaser pursuant to this
Agreement are to be built to order and Purchaser’s purchase commitment contained herein is
non-cancellable. Notwithstanding the foregoing, if Purchaser, for whatever reason, cancels its
order, it shall upon demand pay to FreightCar, as liquidated damages and not as a penalty, all
costs theretofore incurred by FreightCar in the manufacture of the Railcars, including, without
limitation, labor costs, and the costs of material, components and supplies ordered by FreightCar
to fulfill this Agreement (net of the fair market salvage value of such material, components or
partially manufactured Railcars), together with FreightCar’s lost profits, if any, attributable to
the cancellation of Purchaser’s purchase commitment (provided, however, that FreightCar shall not
be entitled to any such lost profits if FreightCar sells the Cars to a third party for a purchase
price which

 

 

equals or exceeds the purchase price for the Cars which would have been paid by Purchaser had
Purchaser not cancelled this Agreement), all as reasonably calculated by FreightCar.

Patents: FreightCar will indemnify Purchaser against any judgment for damages and costs which may
be rendered against Purchaser in any suit brought as a result of the alleged infringement of any
United States patent by any Railcar supplied by FreightCar, unless made in accordance with
materials, designs or specifications furnished or designated by Purchaser, in which case Purchaser
will indemnify FreightCar against any judgment for damages and costs which may be rendered against
FreightCar in any suit brought as a result of the alleged infringement of any United States patent
by such Railcar as a consequence of such materials, designs or specifications; provided that prompt
written notice be given to the party from whom indemnity is sought and that an opportunity be given
to that party to settle or defend such action as that party may see fit and that each party render
to the other party every reasonable assistance in settling or defending such action. Neither party
will be liable to the other for special, indirect, incidental or consequential damages arising out
of or resulting from infringement of patents. In the event the Railcars are held to constitute
infringement for which FreightCar has agreed to indemnify Purchaser hereunder and the use of the
Railcars, or any part thereof, is enjoined, FreightCar shall, at its option and expense, either
procure for Purchaser the right to continue using said Railcar, replace same with non-infringing
equipment of like kind and quality, modify said Railcar so that it becomes non-infringing or refund
the purchase price of said Railcar (following the return of such Railcar by Purchaser to
FreightCar’s Plant).

Assignment: Neither FreightCar nor Purchaser may assign all or any portion of its rights or
obligations under this Agreement without the prior written approval of the other party, which shall
not be unreasonably withheld; provided, however, that notwithstanding the foregoing, FreightCar may
assign its right to receive any or all payments due hereunder to a third party without the approval
of Purchaser. In connection with Purchaser’s financing of the Railcars, Purchaser shall provide to
FreightCar sufficient opportunity to review and approve any assignment documents which the
financing source requests be executed by FreightCar. Such assignment documents shall provide that
(i) Purchaser shall remain liable to FreightCar in accordance with this Agreement (including,
without limitation, the obligation to pay the purchase price for the Railcars) to the extent such
obligations are not fully and timely performed by such assignee, and (ii) nothing contained in such
assignment shall be deemed to modify FreightCar’s rights or obligations under this Agreement.

Binding Effect: This Agreement shall be binding upon and inure to the benefit of FreightCar and
Purchaser and to their respective successors and permitted assigns.

Notices: All notices, demands, requests and other communications required or permitted under this
Agreement shall be in writing or by a telecommunications device capable of creating a written
record, and shall become effective: (a) upon personal delivery thereof, including, without
limitation, by overnight mail and courier service, (b) five (5) days after the date on which it
shall have been mailed by United States mail (certified mail, postage prepaid, return receipt
requested), or (c) in the case of a communication by a telecommunications device, when properly
transmitted during normal business hours (or if not, then on the following business day)
addressed to each party at its address or facsimile number set forth on the signature page of the
body of this Agreement or at such other address or facsimile number as such party may have
specified previously by notice delivered in accordance with this section.

Entire Agreement; No Third Party Beneficiaries: This Agreement (which includes these Terms and
Conditions of Sale, the Proposal Letter and the Specifications and the exhibits and attachments
hereto and thereto) contains the entire agreement of FreightCar and Purchaser with respect to the
subject matter hereof and supersedes all prior written or oral agreements of the parties. This
Agreement is not intended to confer upon

 

 

any person other than the parties hereto, any rights or remedies, and shall not be enforceable by
any person or entity who or which is not a party hereto.

Professional Fees and Brokerage Fees: Each party to this Agreement shall be responsible for all
professional fees and brokerage fees, if any, incurred by such party in connection with the
transaction evidenced by this Agreement.

Disclaimer of Special or Punitive Damages: Notwithstanding anything in this Agreement to the
contrary, in no event shall any party to this Agreement be obligated to any other party for any
punitive or special damages arising from any breach or violation of this Agreement.

Severability: Any provision of this Agreement that is inoperative, unenforceable or invalid in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of the operation,
unenforceability or invalidity without affecting the remaining provisions of this Agreement or
affecting the operation, enforceability or validity of that provision in any other jurisdiction.

Amendments, Waiver: None of the terms of this Agreement may be waived or modified except in
writing signed by both FreightCar and Purchaser. Any additional or different terms or conditions
proposed by Purchaser are rejected unless expressly assented to in writing by FreightCar. No
waiver of any of the provisions of this Agreement by either party shall constitute a waiver of any
other provision nor shall any such waiver constitute a continuing waiver.

Miscellaneous: The section headings contained in this Agreement are intended solely for
convenience of reference and shall be given no effect in the construction or interpretation of this
Agreement. This Agreement may be executed in multiple counterpart copies, all of which taken
together shall be deemed one original for all purposes.

Governing Law and Jurisdiction: This Agreement shall be governed by, and construed according to,
the laws of the State of Illinois, without regard to its conflict of laws doctrine. FreightCar and
Purchaser hereby submit to the jurisdiction of, and waive any venue objections against, the United
States District Court for the Northern District of Illinois (or any court of the State of Illinois
located in such district) in any litigation arising out of this Agreement.

Interpretation: To the extent there is a conflict between the provisions of the Proposal Letter
and these Terms and Conditions of Sale, the provisions of the Proposal Letter shall govern.

[SIGNATURE PAGE TO FOLLOW]

 

 

ACCEPTANCE:

FreightCar and Purchaser hereby acknowledge their acceptance of the above described Terms and
Conditions of Sale.

	 	 	 	 	 	 	 	 	 	 	 
	FREIGHTCAR AMERICA, INC.	 	TEXAS GENCO II, LP	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	By:
	 	New Genco GP, LLC, its general partner	 	 
	 
	By:

	 	/s/ Sean Hankinson
	 	 	 	By:
	 	/s/ Jack Fusco	 	 
	Its:

	 	 

Product Line Manager
	 	 	 	Its:
	 	 

Jack Fusco, President
	 	 
	 

	 	 
	 	 	 	 	 	 	 	 
	Date:

	 	October 5, 2005
	 	 	 	Date:
	 	September 30, 2005	 	 
	 

	 	 
	 	 	 	 	 	 	 	 

	 	 	 
	Address:

	 	Address:
	FreightCar America, Inc.

	 	Texas Genco II, LP
	17 Johns Street

	 	1301 McKinney, Suite 2300
	Johnstown, PA 15901

	 	Houston, TX 77010
	Attention: Sean Hankinson, Product Line Manager

	 	Attention: Colin Gibb, Transportation Specialist
	Fax: 814/533-5010

	 	Fax: 713/795-7441

 

 

EXHIBIT A

CERTIFICATE OF ACCEPTANCE

	 	 	 	 	 
	Type of Railcars:
	 	 	 	 
	 
	 	 	 
	Place Accepted:
	 	 	 	 
	 
	 	 	 
	Date Accepted:
	 	 	 	 
	 
	 	 	 
	Number of Railcars:
	 	 	 	 
	 
	 	 	 
	Reporting Marks:
	 	 	 	 
	 
	 	 	 

	 	 	 	 	 	 	 
	Car Numbers	 	Car Weights	 	Car Numbers	 	Car Weights
	 
	 	 	 	 	 	 
	 

	 	 
	 	 
	 	 
	 
	 	 	 	 	 	 
	 

	 	 
	 	 
	 	 
	 
	 	 	 	 	 	 
	 

	 	 
	 	 
	 	 
	 
	 	 	 	 	 	 
	 

	 	 
	 	 
	 	 
	 
	 	 	 	 	 	 

I have been appointed as the duly authorized representative of TEXAS GENCO II, LP (“Purchaser”) for
the purpose of inspecting and accepting the units of railroad equipment described above (the
“Railcars”), which are referred to in the agreement dated as of ___, 2005 (the
“Agreement”), between FREIGHTCAR AMERICA, INC. (“Builder”) and Purchaser.

I hereby certify that with respect to the Railcars:

	 	A.	 	Each Railcar has been inspected and is in good order.
	 
	 	B.	 	Based on my determination that each Railcar is in compliance with all applicable
Specifications (as defined in the Agreement), each Railcar is hereby accepted for all
purposes of the Agreement.

	 	 	 	 	 
	 

	 	 	 	 
	 

	 	Authorized Representative of Purchaser	 	 

 

 

EXHIBIT B

FINAL DELIVERY DATE FOR THE RAILCARS

***

 

 

EXHIBIT C

COMPONENT WARRANTIES

Attached are copies of warranties from the following manufacturers and suppliers:

ASF-Keystone, Inc.

ZefTek, Inc.

Cardwell Westinghouse Co./Universal Railway Devices Co.

A. Stucki Company

New York Air Brake Corporation

Miner Enterprises Inc.

Schaefer Equipment, Inc.

Strato

Klasing Industries, Inc. d/b/a Klasing Hand Brake Company

Union Spring & Manufacturing Corp.

Holland

Brenco

Standard Forged Products, Inc.

Additional warranties may be added from time to time.

 

 

August 31, 2005

FreightCar America Inc.

17 Johns Street

Johnstown, PA 15901

	 	 	 
	Re:

	 	Aluminum BethGon® II Railcars for Texas Genco II, LP.,
	 

	 	FreightCar America Inc. Proposal No. 04153 Revision A

Gentlemen:

     Texas Genco II, LP (“Texas Genco”) hereby confirms that it intends to purchase (the
“Transaction”) from FreightCar America Inc. (“FreightCar America”, and together with Texas Genco,
the “Parties”, and each, a “Party”) an additional *** Aluminum Outside Stake BethGon II® open top
coal railcars conforming to Specification X-04153 dated February 14, 2005 (“Specification”), and
provided by FreightCar America (f/k/a Johnstown America Corporation) to Texas Genco, for a total of
*** railcars. The price per railcar shall be as outlined in your proposal dated March 4, 2005, FOB
FreightCar America’s plant in *** . Delivery shall begin no later than the first week of
*** 2006 for the first *** railcars. An additional delivery of *** railcars shall occur in *** and *** 2006. An additional delivery of *** railcars and a final delivery of *** railcars shall
be completed by *** 2006 and *** 2007, respectively.

     The Transaction is subject to mutual agreement between Texas Genco and FreightCar America on
the terms and conditions of the Transaction, including pricing on, and changes to, the Specialty
Component List. Accordingly, the Parties intend that no legally binding obligations shall arise
between them under this letter. Such obligations shall arise only to the extent set forth in a
purchase agreement duly executed and delivered by each Party. Notwithstanding the foregoing,
unless and until the negotiations required by the following sentence have been had and
discontinued, FreightCar America shall not enter into any agreement that would require it to
deliver railcars to any third party on a schedule that would prevent it from delivering the
railcars contemplated by this letter to Texas Genco on the schedule set forth above.
Notwithstanding the aforementioned required board approval, Texas Genco and FreightCar America
shall use commercially reasonable efforts to negotiate and agree on the terms and conditions within
30 days of the date of this letter. Should the Parties fail to enter into such terms and
conditions within 30 days of the date of this letter, FreightCar America shall not be barred from
entering into an agreement that would require it to deliver railcars to a third party on a schedule
that would prevent it from delivering the railcars according to the schedule contemplated by the
Parties.

1

 

     Please confirm by signing a copy of this letter in the space provided below and returning it
to the undersigned that this letter of intent is sufficient to allow FreightCar America to take all
action required to assure that the railcars that are the subject of the Transaction can be
delivered on the schedule set forth above.

     Please call if you have any questions or would like to discuss the matter.

	 	 	 	 	 	 	 	 	 	 	 
	FREIGHTCAR AMERICA INC.	 	 	 	TEXAS GENCO II, LP	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	By: New Genco GP, LLC, its general partner	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:

	 	/s/Tim Johnson
	 	 	 	By:
	 	/s/Tyler Reeder	 	 
	 

	 	 
	 	 	 	 	 	 	 	 
	Name: Tim Johnson	 	 	 	Name: Tyler Reeder	 	 
	Title: VP — Sales, Western Region	 	 	 	Title: 8/31/05	 	 

2

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00098-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00098-of-00352.parquet"}]]