Document:

exv10w18

Exhibit
10.18

NATURAL GAS PIPELINE

TRANSPORTATION AGREEMENT

BETWEEN

BAMAGAS COMPANY

AND

CALPINE ENERGY SERVICES, L.P.

 

 

TABLE OF CONTENTS

	 	 	 	 	 

	ARTICLE I DEFINITIONS
	 	 	1	 
	 
	 	 	 	 
	ARTICLE II CONSTRUCTION AND OPERATION OF PIPELINE;
TRANSPORTATION AND DELIVERIES
	 	 	5	 
	 
	 	 	 	 
	Section 2.1 Development of Pipeline
	 	 	5	 
	Section 2.2 Construction of Pipeline
	 	 	5	 
	Section 2.3 Milestone Schedule
	 	 	5	 
	Section 2.4 Notice to Proceed
	 	 	5	 
	Section 2.5 BAMAGAS Lateral(s)
	 	 	5	 
	Section 2.6 Operation of Pipeline
	 	 	6	 
	Section 2.7 Transportation and Delivery
	 	 	6	 
	Section 2.8 Curtailment
	 	 	6	 
	Section 2.9 Scheduling Gas Flow
	 	 	7	 
	Section 2.10 Imbalance Charges
	 	 	7	 
	Section 2.11 Gas Delivery Rates
	 	 	7	 
	 
	 	 	 	 
	ARTICLE III TERM OF AGREEMENT
	 	 	8	 
	 
	 	 	 	 
	ARTICLE IV QUALITY AND PRESSURE
	 	 	8	 
	 
	 	 	 	 
	Section 4.1 Quality
	 	 	8	 
	Section 4.2 Pressure
	 	 	8	 
	 
	 	 	 	 
	ARTICLE V MEASUREMENTS AND MEASURING EQUIPMENT
	 	 	9	 
	 
	 	 	 	 
	Section 5.1 Transportation Units
	 	 	9	 
	Section 5.2 Measuring Station
	 	 	9	 
	 
	 	 	 	 
	ARTICLE VI CHARGES TO BE PAID BY DEC
	 	 	10	 
	 
	 	 	 	 
	Section 6.1 Transportation Charges
	 	 	10	 
	Section 6.2 Taxes
	 	 	11	 
	Section 6.3 Other Charges
	 	 	11	 
	Section 6.4 Price Reduction
	 	 	11	 
	 
	 	 	 	 
	ARTICLE VII BILLING AND PAYMENTS
	 	 	12	 
	 
	 	 	 	 
	Section 7.1 Billing Dates
	 	 	12	 
	Section 7.2 Payment Date
	 	 	12	 
	Section 7.3 Right of Examination
	 	 	12	 
	Section 7.4 Adjustment of Errors in Billing
	 	 	12	 
	Section 7.5 Interest on Past Due Payments
	 	 	12	 
	 
	 	 	 	 
	ARTICLE VIII POSSESSION OF NATURAL GAS
	 	 	12	 
	 
	 	 	 	 
	ARTICLE IX REPRESENTATIONS AND WARRANTIES AND COVENANTS
	 	 	13	 
	 
	 	 	 	 
	Section 9.1 Warranty of Title
	 	 	13	 
	Section 9.2 Warranty Regarding Intrastate Pipeline
	 	 	13	 
	Section 9.3 Corporate Representations and Warranties
	 	 	13	 
	Section 9.4 BAMAGAS Covenants
	 	 	14	 

ii

 

	 	 	 	 	 

	ARTICLE X INDEMNIFICATION
	 	 	14	 
	 
	 	 	 	 
	Section 10.1 BAMAGAS Indemnity
	 	 	14	 
	Section 10.2 CES Indemnity
	 	 	15	 
	Section 10.3 Scope
	 	 	15	 
	Section 10.4 Notice and Opportunity to Defend
	 	 	15	 
	 
	 	 	 	 
	ARTICLE XI FORCE MAJEURE
	 	 	15	 
	 
	 	 	 	 
	Section 11.1 Force Majeure Defined
	 	 	15	 
	Section 11.2 Effect of Force Majeure
	 	 	16	 
	 
	 	 	 	 
	ARTICLE XII EVENTS OF DEFAULT
	 	 	16	 
	 
	 	 	 	 
	Section 12.1 Definition
	 	 	16	 
	Section 12.2 Right of Termination for Default
	 	 	17	 
	Section 12.3 CES Purchase Rights
	 	 	17	 
	Section 12.4 Remedies Not Exclusive
	 	 	18	 
	Section 12.5 Limitation of Liability
	 	 	18	 
	Section 12.6 Non-Recourse
	 	 	18	 
	 
	 	 	 	 
	ARTICLE XIII TRANSFER AND ASSIGNMENT
	 	 	18	 
	 
	 	 	 	 
	Section 13.1 Assignment
	 	 	18	 
	Section 13.2 Right of First Refusal
	 	 	19	 
	 
	 	 	 	 
	ARTICLE XIV REGULATION
	 	 	20	 
	 
	 	 	 	 
	ARTICLE XV DECATUR ENERGY CENTER
	 	 	20	 
	 
	 	 	 	 
	ARTICLE XVI DISPUTE RESOLUTION; GOVERNING LAW
	 	 	20	 
	 
	 	 	 	 
	Section 16.1 Procedure
	 	 	20	 
	Section 16.2 Initial Resolution Attempts
	 	 	20	 
	Section 16.3 Arbitration
	 	 	20	 
	Section 16.4 General Rules and Provisions
	 	 	21	 
	Section 16.5 Governing Law
	 	 	21	 
	 
	 	 	 	 
	ARTICLE XVII NOTICES
	 	 	21	 
	 
	 	 	 	 
	Section 17.1 Writing
	 	 	21	 
	Section 17.2 Timing of Receipt
	 	 	22	 
	 
	 	 	 	 
	ARTICLE XVIII MISCELLANEOUS
	 	 	22	 
	 
	 	 	 	 
	Section 18.1 Financial Responsibility
	 	 	22	 
	Section 18.2 Captions
	 	 	23	 
	Section 18.3 Non Disclosure
	 	 	23	 
	Section 18.4 Press Release
	 	 	23	 
	Section 18.5 Amendments
	 	 	23	 
	Section 18.6 Severability
	 	 	23	 
	Section 18.7 Entire Agreement
	 	 	23	 
	Section 18.8 No Waiver
	 	 	23	 
	Section 18.9 Further Assurances
	 	 	24	 
	Section 18.10 Counterparts
	 	 	24	 
	Section 18.11 Exhibits, Attachments and Schedules
	 	 	24	 

iii

 

EXHIBIT 1

MILESTONE SCHEDULE

EXHIBIT 2

GAS SPECIFICATIONS

EXHIBIT 3

POINTS OF DELIVERY/RECEIPT

EXHIBIT 4

PIPELINE TERMINNATION VALUE

EXHIBIT 5

MIDCOAST GUARANTEE

EXHIBIT 6

CES GUARANTY

EXHIBIT 7

PROPERTY RIGHTS ASSIGNABLE TO BAMAGAS

EXHIBIT 8

OPERATIONAL BALANCING AGREEMENT

EXHIBIT 9

USE RESTRICTIONS

EXHIBIT 10

HYDRAULIC MODEL

EXHIBIT 11

TRANSPORTATION RIGHTS

iv

 

NATURAL GAS PIPELINE TRANSPORTATION AGREEMENT

(MORGAN ENERGY CENTER)

     This Natural Gas Pipeline Transportation Agreement for the Morgan Energy Center (this
“Agreement”) entered into effective as of the 28th day of June, 2000 (“Effective Date”) by and between
BAMAGAS Company, a Delaware corporation (together with its successors and permitted assigns,
“BAMAGAS”), and Calpine Energy Services, L.P. (“CES”), a Delaware limited partnership (together
with its successors and permitted assigns, “CES”). BAMAGAS, CES may also be referred to herein
individually as “Party” or jointly as “Parties.”

Recitals

     WHEREAS, Morgan Energy Center, LLC (together with its successors and permitted assigns, “MEC”)
is constructing a power generation facility in Morgan County, Alabama (“Morgan Energy Center”, as
more fully described below) and an affiliate of it, Decatur Energy Center, LLC, a Delaware limited
liability company (together with its successors and permitted assigns, “DEC”), is constructing
another power generation facility in Morgan County, Alabama (“Decatur Energy Center”); and

     WHEREAS, MEC and CES have agreed that CES will provide fuel management services for natural
gas to be used at the Morgan Energy Center; and

     WHEREAS, contemporaneously with the execution of this Agreement by the Parties, BAMAGAS is
entering into a Natural Gas Pipeline Construction and Transportation Agreement with CES to
construct, own, operate and maintain a new intrastate pipeline and related facilities (whether
existing or new) to be located wholly within the State of Alabama (the “Pipeline”, as more fully
described below) to receive and transport on a firm basis natural gas; and

     WHEREAS, upon BAMAGAS construction of the Pipeline, BAMAGAS is willing to receive and
transport on a firm basis natural gas for the Morgan Energy Center, and to make available
Equivalent Quantities of natural gas at the Point(s) of Delivery and CES desires for BAMAGAS to do
so;

     NOW, THEREFORE, in consideration of the premises and of the mutual agreements herein
contained, the Parties hereto agree as follows:

ARTICLE I

DEFINITIONS

     Except where the context expressly states another meaning the following terms when used in
this Agreement and in the Exhibits to this Agreement shall be construed to have the following
meanings:

     “AAA” shall have the meaning set forth in Section 16.3.

     “Affiliate” shall mean any Person that directly or indirectly Controls or is Controlled by or
is under common Control with, the Person in question. “Person” means an individual, partnership,
limited partnership, corporation, limited liability company, association, trust, unincorporated
organization, or a government authority or agency or political subdivision thereof. “Control”
means the possession, directly or indirectly, through one or more intermediaries, of either of the
following: (a) (i) in the case of a corporation, 50% or more of the outstanding voting securities
thereof; (ii) in the case of a limited liability company, partnership, limited partnership or
venture, the right to 50% or more of the distributions therefrom (including liquidating
distributions); (iii) in the case of a trust or estate, 50% or more of the beneficial interest
therein; or (iv) in the case of any other entity, 50% or more of the economic or beneficial
interest therein; or (b) in the case of any entity, the power or authority, through the ownership
of voting securities, by contract or otherwise, to direct the management, activities or policies
of the entity.

 

 

     “Affiliated Transportation Parties” shall have the meaning set forth in
Exhibit 11.

     “Agreement” shall have the meaning set forth in the opening paragraph.

     “Applicable Law” shall mean any federal, state, local or other constitution, charter, act,
statute, law, ordinance, code, rule, regulation or order or other legislative or administrative
action of the United States of America or the State of Alabama, or any agency, department,
authority, political subdivision or other instrumentality or either of them, or a final decree,
judgment or order of a court applicable to the Pipeline, the Lateral(s), the Morgan Energy Center,
the Parties or this Agreement.

     “BAMAGAS” shall have the meaning set forth in the opening paragraph hereof.

     “BAMAGAS Activities” shall have the meaning set forth in Section 9.4(a).

     “BAMAGAS Group” shall have the meaning set forth in Section 10.3(b).

     “BAMAGAS Lateral(s)” shall mean the non FERC jurisdictional pipeline(s) to be constructed by
BAMAGAS for the purpose of transporting Natural Gas from the pipeline facilities of Midcoast
Interstate Transmission, Inc. to the Primary Point(s) of Delivery and the points of delivery
specified under the Natural Gas Construction and Transportation Agreement for Decatur Energy
Center, which pipeline(s) shall be used for the testing of the Morgan Energy Center and for Gas
transportation service during time periods that the Pipeline is unavailable to transport the Firm
Transportation Quantity as provided for herein.

     “Beneficial Rate(s)” shall have the meaning set forth in Section 6.4.

     “British Thermal Unit” or “Btu” shall mean the amount of heat required to raise the
temperature of one (1) pound of water from fifty-nine (59) degrees Fahrenheit to sixty (60)
degrees Fahrenheit at a constant pressure of 14.73 psia.

     “Business Day” shall mean any Day that is not a Saturday, Sunday or day on which banks are
permitted or required to be closed in Houston, Texas.

     “Calpine” shall mean Calpine Corporation, a Delaware corporation, together with its
successors and assigns.

     “Calpine Corporation Guaranty” shall mean the guaranty furnished by Calpine pursuant to
Section 18.1.

     “Competing Use” shall have the meaning set forth in Section 6.4.

     “CCT” or “Central Clock Time” shall mean Central Standard Time except when Daylight Savings
Time is in effect, when it shall mean one hour in advance of Central Standard Time.

     “CES” shall have the meaning set forth in the opening paragraph hereof.

     “Day” shall mean a period beginning at 9:00 a.m. CCT on one calendar day and ending at 9:00
a.m. CCT on the next succeeding calendar day. The date of a Day shall be that of its beginning.

     “DEC” shall have the meaning set forth in the first paragraph of the “Recitals” hereof.

     “Decatur Energy Center” shall mean a power generation facility to be constructed in Morgan
County, Alabama by DEC.

     “Effective Date” shall have the meaning set forth in the opening
paragraph.

     “Enbridge” shall mean Enbridge (U.S.) Inc.

2

 

     “Equivalent Quantity(ies)” shall mean a thermally equivalent quantity of Natural Gas
(i.e., an equal number of MMBtu), as received by BAMAGAS at the Point(s) of Receipt less the
quantity of Natural Gas lost and unaccounted for in the transmission of such Natural Gas. For
purposes of determining the Equivalent Quantity: Natural Gas lost and unaccounted for after
receipt by BAMAGAS shall not exceed 1.5%, in each case of the total quantity (in MMBtu) received
by BAMAGAS at the Point(s) of Receipt in any given Month. BAMAGAS shall provide any quantities of
Natural Gas lost and unaccounted for in excess of 1.5%, at no cost to CES, to ensure delivery of
the Equivalent Quantity to CES at the Point(s) of Delivery.

     “Event of Default” shall mean any of the events or circumstances set forth in Section 12.1.

     “Excusable Events” shall have the meaning set forth in Section 2.8.

     “Existing Shippers” shall have the meaning set for in Section 6.4.

     “Extension Period” shall have the meaning set forth in Section 11.2.

     “Exercise Period” shall have the meaning set forth in Section 13.2.

     “Favorable Rate(s)” shall have the meaning set forth in Section 6.4.

     “FERC” shall have the meaning set forth in Section 9.2.

     “Firm” or “Firm Transportation” shall mean that the receipt, delivery and transportation of
Natural Gas shall not be subject to interruption or curtailment, other than by reason of express
written consent of CES, Force Majeure, Applicable Law or an Excusable Event, or as otherwise
provided in this Agreement.

     “Firm Transportation Quantity” shall mean 138,000 MMBtu of Natural Gas per Day.

     “First Delivery Date” shall mean February 1, 2002.

     “Force Majeure” shall have the meaning set forth in Section 11.1.

     “Gas” or “Natural Gas” shall mean the effluent vapor stream in its natural state produced
from wells, including all hydrocarbon and nonhydrocarbon constituents, if any, and including
casinghead Gas produced with crude oil and residue Gas resulting from the processing of Gas well
or casinghead Gas.

     “Governmental Approvals” shall mean all permits, licenses or other authorizations required to
be obtained with respect to the construction, ownership and operation of the Pipeline and the
BAMAGAS Lateral(s).

     “Governmental Authority” shall mean any federal, state or local governmental entity,
authority or agency, court, tribunal, regulatory commission or other body, whether legislative,
judicial or executive, having authority over this Agreement or the Parties hereto.

     “Hydraulic Model” shall mean the hydraulic simulation model described in Exhibit 10.

     “Imbalance(s)” shall mean the difference between scheduled and actual receipt quantities of
Natural Gas at Point(s) of Receipt.

     “Indemnitee” shall have the meaning set forth in Section 10.4.

     “Indemnitor” shall have the meaning set forth in Section 10.4.

     “Initial Term” shall have the meaning set forth in Article III.

     “Initial Term Demand Charge” shall have the meaning set forth in Section 6.1.

3

 

     “Initial Term Transportation Rate” shall have the meaning set forth in Section 6.1.

     “MEC” shall have the meaning set forth in the first paragraph of the Recitals hereof.

     “MEC’s Lateral Supply Cost” shall have the meaning set forth in Section 4.1.

     “MEC’s Pipeline Supply Cost” shall have the meaning set forth in Section 4.1.

     “MIT Lateral” shall mean the existing lateral pipeline that ties into the Midcoast Interstate
Transmission Company 8” and 12” systems that currently deliver Natural Gas directly into Amoco.

     “MMBtu” or ‘Dekatherm” or “dth” shall mean one million (1,000,000) Btu.

     “Month” shall mean a period beginning at 9:00 a.m. CCT on the first day of the calendar month
and ending at 9:00 a.m. CCT on the first day of the next succeeding calendar month.

     “Morgan Energy Center” shall have the meaning set forth in the first paragraph of the
“Recitals” hereof.

     “New Taxes” shall have the meaning set forth in Section 6.2.

     “Notice” shall have the meaning set forth in Section 12.2.

     “Notice Period” shall have the meaning set forth in Section 12.2.

     “Offer Notice” shall have the meaning set forth in Section 12.2.

     “Party” or “Parties” shall have the meaning set forth in the opening paragraph hereof.

     “Pipeline” shall mean a contiguous, new pipeline and related facilities (whether
existing or new) for the transmission of Natural Gas, including all of the necessary pipe,
fittings, valves, measuring equipment and regulators to be constructed or acquired, owned
and operated by BAMAGAS beginning at Tennessee Gas Pipeline Company’s 500 leg near Barton in
Colbert County, Alabama, and ending at the Primary Point(s) of Delivery as described in
Exhibit 3, including the pipeline interconnections between Tennessee Gas Pipeline Company
and BAMAGAS, Texas Eastern Transmission Company and BAMAGAS, and Midcoast Interstate
Transmission Company and BAMAGAS, respectively.

     “Point(s) of Delivery” shall mean any or all of the Primary Point(s) of Delivery and
Secondary Point(s) of Delivery.

     “Point(s) of Receipt” shall mean the point(s) of interconnection between the Pipeline
and CES’ upstream suppliers or transporters, as identified on Exhibit 3, and such other
point(s) of interconnection, if any, which BAMAGAS and CES shall mutually agree upon to be
made between the Pipeline and other pipelines or which may be unilaterally added or deleted
by CES provided that no additional facilities are required to be added by BAMAGAS to the
Pipeline at BAMAGAS expense.

     “Pressure Variance” shall have the meaning set forth in Section 4.2.

     “Pressure Variance Event” shall have the meaning set forth in Section 4.2.

     “Primary Point(s) of Delivery” shall mean the point of interconnection between the
Pipeline and/or the BAMAGAS Lateral(s) and the facilities, for delivery of Natural Gas to
the Morgan Energy Center as identified on Exhibit 3.

     “Procurement Deadline” shall have the meaning set forth in Article XV.

4

 

     “Purchase Price” shall have the meaning set forth in Section 12.3.

     “Renewal Term” shall have the meaning set forth in Article III.

     “Renewal Term Demand Charge” shall have the meaning set forth in Section 6.1.

     “Renewal Term Transportation Rate” shall have the meaning set forth in Section 6.1.

     “ROW” shall mean all rights-of-way, land use rights, sites and easements acquired and/or
utilized by BAMAGAS for the purpose of the Pipeline and the BAMAGAS Lateral(s) and their
interconnections with Morgan Energy Center.

     “Secondary Point(s) of Delivery” shall mean the point(s) of interconnection between the
Pipeline and the pipelines of CES’ upstream suppliers or transporters, as identified on Exhibit 3,
and such other point(s) of interconnection, if any, which BAMAGAS and CES shall mutually agree upon
to be made between the Pipeline and other interstate pipelines or which may be unilaterally added
by CES for redelivery of Natural Gas to interstate pipelines provided that no additional facilities
are required to be added by BAMAGAS to the Pipeline at BAMAGAS’ expense.

     “Second Owner” shall have the meaning set forth in Section 13.1.

     “Shipper Group” shall have the meaning set forth in Section 10.3.b.

     “Supply Notice” shall have the meaning set forth in Section 2.8.

     “Term” shall mean the Initial Term and any Renewal Term(s).

     “Termination Value” shall have the meaning set within Section 12.3.

     “Third Party Transportation Contract” shall have the meaning set forth in
Section 6.4.

     “Third Party Offer” shall have the meaning set forth in Section 13.2.

     “Third Party Sales Contract” shall have the meaning set forth in Section 6.4.

     “Transportation Capacity” shall mean the design capacity of the Pipeline as determined in
accordance with the Hydraulic Model.

     “Transportation Rights” shall have the meaning set forth in Section 12.3.

     “Unexcused Curtailment” shall have the meaning set forth in Section 12.1.c.

     “Use Restrictions” shall have the meaning set forth in Section 12.3.

ARTICLE II

TRANSPORTATION AND DELIVERIES

     2.1 OMITTED.

     2.2 OMITTED.

     2.3 OMITTED.

     2.4 OMITTED.

     2.5 OMITTED.

5

 

     2.6 Operation of Pipeline. During the Term hereof, BAMAGAS shall operate and maintain
the Pipeline and the BAMAGAS Lateral(s) in a prudent manner and in accordance with all applicable
Governmental Approvals. Except in cases when prior scheduling is not reasonable, any maintenance
(including but not limited to repair and replacement) of the Pipeline and/or the BAMAGAS
Lateral(s) that causes or is likely to cause curtailment of transportation on the Pipeline and/or
the BAMAGAS Lateral(s) shall be conducted by BAMAGAS only after prior scheduling with CES.

     2.7 Transportation and Delivery. From the First Delivery Date until the end of the Term,
BAMAGAS agrees: (a) on a Firm basis, to accept and receive collectively at the Point(s) of Receipt
such quantities of Natural Gas as CES or its agent delivers or makes available for delivery into
the Pipeline or the BAMAGAS Lateral(s) each Day up to an amount that will enable BAMAGAS to deliver
the Equivalent Quantity of the Firm Transportation Quantity during each Day at the specified Point
of Delivery and (b) on an interruptible basis, and subject to interruption, curtailment and
available pipeline capacity, to accept and receive collectively at the Point(s) of Receipt such
quantities of Natural Gas in excess of the Firm Transportation Quantity which CES or its agent
delivers or makes available for delivery into the Pipeline or the BAMAGAS Lateral(s) each Day.
BAMAGAS shall have the right to transport and deliver Equivalent Quantities of the Gas to the
Point(s) of Delivery via the Pipeline, the BAMAGAS Lateral(s), the MIT Lateral or any other
available pipeline, and if transported and delivered by any such means or any combination thereof,
BAMAGAS shall be deemed to be in compliance with this Agreement. The Point of Delivery shall be a
Primary Point of Delivery unless a Secondary Point of Delivery is specified by CES to BAMAGAS upon
not less than one (1) hour prior notice to BAMAGAS. By written notice to BAMAGAS, CES shall have
the right to add or delete Point(s) of Receipt and Secondary Point(s) of Delivery from time to time
at no incremental cost to CES, subject to the availability of Firm Capacity and provided that the
addition of a Point of Receipt (which may be located on an intrastate or interstate pipeline) or
Secondary Point of Delivery (which shall be limited to interstate pipelines) does not require
BAMAGAS to add any facilities to the Pipeline or the BAMAGAS Lateral(s) at BAMAGAS’ expense. Each
such notice shall be deemed to amend Exhibit 3 of this Agreement. CES shall have the right to
resell any or all of the quantities of Gas received by it at Point(s) of Delivery; provided,
however (a) CES shall endeavor to purchase only those quantities of Gas necessary for internal uses
at the Morgan Energy Center and (b) CES covenants and shall cause MEC not to resell any Gas
transported on the Pipeline other than at the Secondary Point(s) of Delivery.

     2.8 Curtailment. All quantities of Natural Gas delivered by or for the account of CES to
BAMAGAS at the Point(s) of Receipt each Day, up to the Firm Transportation Quantity, shall be
transported and delivered each Day, by BAMAGAS to the Points of Delivery without curtailment or
interruption, except for curtailments or interruptions by reason of the express consent of CES,
Force Majeure, Applicable Law, or any of the following events: (i) failure on any Day by CES
to deliver or cause to be delivered at the Point(s) of Receipt sufficient Gas quantities to enable
BAMAGAS to redeliver Equivalent Quantities at the Point(s) of Delivery; (ii) failure by CES to
transport and redeliver the Equivalent Quantities at a pressure sufficient for BAMAGAS to deliver
the Gas quantities at the Point(s) of Delivery at a pressure of no less than 500 psig; (iii)
failure by CES to deliver Gas quantities at the Point(s) of Receipt that meet the quality
specifications set forth in Exhibit 2; and (iv) failure by CES to deliver Gas quantities at the
Point(s) of Receipt at a rate of flow that will enable BAMAGAS to comply with the requirements of
the Hydraulic Model for delivery of Gas at the Point(s) of Delivery. (The events described in the
preceding sentence under (i), (ii), (iii) and (iv) shall be collectively referred to in this
Agreement as “Excusable Events”). In the event a Force Majeure event or any other event other
than an Excusable Event(s) causes BAMAGAS to curtail or interrupt transportation service on the
Pipeline, BAMAGAS shall deliver, as directed by CES the Equivalent Quantity delivered by or for the
account of CES into the Pipeline, up to the Firm Transportation Quantity, to the Point(s) of
Delivery prior to making deliveries pursuant to BAMAGAS obligations under any other firm or
interruptible transportation contracts with third parties and/or BAMAGAS and/or its affiliated
companies transporting Natural Gas on the Pipeline. BAMAGAS warrants that it shall include in any
transportation agreement it may enter into with its Affiliates and/or third parties a covenant that
states that the transportation rights on the Pipeline and/or the BAMAGAS Lateral(s) shall be
subject to interruption or curtailment prior to interruption or curtailment of all quantities up to
the Firm Transportation Quantity for CES regardless of the level of service retained by such
parties. BAMAGAS shall not enter into transportation contracts for itself or its Affiliates’
account and/or with any third parties that have as a matter of law or regulation, a right to a
higher priority of service than CES other than with respect to quantities of Natural Gas that can
be transported on the Pipeline in excess of the Firm Transportation Quantity, and shall not enter
into transportation contracts for itself or its

6

 

Affiliates’ account and/or with any third parties for an equivalent priority of service,
if the quantities of Gas under those contracts, in addition to the Firm Transportation Quantity
hereunder, will exceed the Transportation Capacity of the Pipeline in accordance with the
Hydraulic Model. In the event that BAMAGAS curtails or interrupts transportation service on the
Pipeline due to reasons other than express written consent of CES, Force Majeure, Applicable Law
or an Excusable Event, CES shall have the right to transport Gas on the BAMAGAS Lateral(s) at no
cost to CES, provided that CES has made and continues to make all payments to BAMAGAS required
under Article VI of this Agreement. If the cost to CES for the delivery of Gas supplies from its
upstream transporters or suppliers to the BAMAGAS Lateral point(s) of receipt is greater than the
cost CES would have incurred for the delivery of such Gas to the Pipeline Point(s) of Receipt,
BAMAGAS shall pay CES such excess cost, if such curtailment or interruption is due to cause(s)
other than express written consent of CES, Force Majeure, Applicable Law or an Excusable Event;
provided however BAMAGAS or its designee shall have the right (but not the obligation) to provide
alternate Gas supplies to CES (at CES’ cost) no later than thirty (30) minutes after notice by
telephone from CES in connection with an event of curtailment (“Supply Notice”) at a cost equal to
that which CES would otherwise pay to its upstream transporters or suppliers for delivery to the
BAMAGAS Lateral(s) during all such periods. If, after receipt of the Supply Notice, BAMAGAS or its
designee fails or declines to supply the Gas quantities curtailed or interrupted, CES has the
right to enter into alternate supply agreements with third parties provided such agreements do not
exceed a term of twenty-four (24) hours. BAMAGAS or its designee shall have a continuing right to
provide Gas supplies to CES for the price hereinbefore specified during any period of continuation
of such curtailment or interruption beyond such twenty-four (24) hour period and, to that end,
BAMAGAS and CES shall fully cooperate with each other.

     2.9 Scheduling Gas Flow. At least two (2) Days prior to the beginning of each Month, CES shall
furnish BAMAGAS with a schedule showing the estimated quantities of Natural Gas each Day during
such Month it desires BAMAGAS to receive, transport and deliver during such Month to each Point of
Delivery with the quantities specified for each of the Points of Receipt and each of the Points of
Delivery. CES shall use reasonable efforts to inform BAMAGAS promptly and confirm in writing all
changes in the quantity of Natural Gas, which it desires BAMAGAS to transport hereunder from the
quantity of Natural Gas then being transported by BAMAGAS hereunder. All such schedules are
provided by CES to BAMAGAS for planning purposes, and CES shall have the right to alter without
prior notice the quantities to be furnished at a Point of Receipt or a Point of Delivery at any
time, up to the Firm Transportation Quantity. Notwithstanding the immediately preceding
sentence, CES shall use reasonable efforts to notify BAMAGAS by telephone or other
timely means of any known or anticipated swings in previously scheduled quantities of Gas.

     2.10 Imbalance Charges. CES shall have the right but not the obligation to enter into
balancing service agreements with upstream pipelines and suppliers as are necessary to provide for
balancing of the quantities of Natural Gas received at the Point(s) of Receipt. All Imbalance
charges and any other payments due in accordance with such agreements or otherwise for CES’ Gas
shall be the responsibility of and shall be paid by CES unless an Imbalance is caused by BAMAGAS,
in which case BAMAGAS shall be liable for any such Imbalance charges. BAMAGAS and CES shall
endeavor to keep Imbalances to a minimum and shall make adjustments in receipts and deliveries as
promptly as is consistent with their operating conditions in order to balance any excess or
deficiency so shown. The provisions of this Section 2.10 shall survive the termination of this
Agreement until such time as complete balancing can be attained. BAMAGAS and CES shall enter into
an operational balancing agreement in a form substantially similar to Exhibit 8, which will govern
the rights and obligations of each Party regarding Imbalances.

     2.11 Gas Delivery Rates. CES shall have the right to deliver or cause to be delivered to
BAMAGAS for transportation hereunder any quantities of Gas from zero to the Firm Transportation
Quantity and shall not be required to cause such deliveries to be maintained at a uniform or dairy
rate of flow. Nothing in this Agreement shall prevent BAMAGAS from taking such action as it deems
necessary to adjust such hourly and daily rates of flow to meet operating constraints or capacity
limitations as determined in accordance with the Hydraulic Model referenced in Exhibit 10 and to
protect the operational integrity of the Pipeline. BAMAGAS shall maintain the linepack (i.e., the
total amount of Gas contained in the Pipeline) on the Pipeline at all times during the Term of this
Agreement at the quantities required by the Hydraulic Model except by reason of express written
consent of CES, Force Majeure, Applicable Law, or an Excusable Event.

7

 

ARTICLE III

TERM OF AGREEMENT

     The Term of this Agreement shall commence on the Effective Date and, unless earlier terminated
in accordance herewith, shall remain in full force and effect until the expiration of twenty (20)
years from the First Delivery Date (the “Initial Term”) and shall thereafter continue in full force
and effect for consecutive periods of one (1) year each (each, a “Renewal Term”) unless CES gives
written notice of termination of this Agreement to BAMAGAS at least ninety (90) Days prior to the
end of the Initial Term or the then current Renewal Term. Provided, however, BAMAGAS shall have the
right, exercisable within thirty (30) Days of the beginning of each Renewal Term, to terminate this
Agreement as of the expiration of the Initial Term or the then Renewal Term, as applicable, by
written notice delivered to CES, in which case CES or its designee shall have the right to purchase
the Pipeline and/or the BAMAGAS Lateral(s) in accordance with the terms of Section 12.3.

ARTICLE IV

QUALITY AND PRESSURE

     4.1 Quality. CES shall endeavor to ensure that all Natural Gas delivered by it or for its
account to BAMAGAS hereunder shall meet the quality specifications set forth in Exhibit 2 to this
Agreement. The Parties agree that Exhibit 2 sets forth the quality specifications required by
transporters immediately upstream from the Pipeline and that Exhibit 2 will be amended from time to
time as necessary to reflect any changes to those requirements. All Natural Gas delivered by
BAMAGAS at the Points of Delivery shall be at least of the same quality as that received by BAMAGAS
for CES’ account at the Point(s) of Receipt. BAMAGAS shall perform chromatograph analyses of all
Natural Gas delivered hereunder and shall furnish such analyses to CES on a “real-time” basis
(i.e., through a direct communication link to the Morgan Energy Center). In the event that either
Party receives nonconforming Gas from or on behalf of the other Party, it shall promptly notify the
other Party of such nonconformance and shall not be required to accept such nonconforming Gas. In
the event that BAMAGAS delivers nonconforming Gas to CES that is rejected by CES and such
nonconformance was not caused by CES’ upstream suppliers, CES shall have the right, until such time
as BAMAGAS causes the Gas in the Pipeline to meet the quality specifications set forth in Exhibit
2, to transport Gas on the BAMAGAS Lateral(s) at no cost to CES for all quantities per Day up to
the Firm Transportation Quantity (provided that CES shall continue to pay to BAMAGAS the Initial
Term Demand Charge or the Renewal Term Demand Charge, as applicable), but shall pay for all
quantities per Day in excess of the Firm Transportation Quantity at the rates specified in Section
6.1 hereof. If the third party cost to CES for the delivery of Gas from its upstream
transporters or suppliers to the BAMAGAS Lateral point(s) of receipt (“CES’ Lateral Supply Cost”)
is greater than the third party cost CES would have incurred for the delivery of such Gas to the
Pipeline Point(s) of Receipt (“CES’ Pipeline Supply Cost”), BAMAGAS shall reimburse CES for the
positive difference between CES’ Lateral Supply Cost and CES’ Pipeline Supply Cost; provided,
however, if BAMAGAS notifies CES that it is able to provide or cause to be provided (and does so
provide or cause to provide if timely authorized by CES) Gas to CES (at CES’ expense) at the
BAMAGAS Lateral points or receipt at a cost which is less than that incurred or to be incurred by
CES from its upstream Gas suppliers, then BAMAGAS shall reimburse CES only for the positive
difference, if any, between CES’ Lateral Supply Cost and CES’ Pipeline Supply Cost. CES
shall reimburse BAMAGAS for all its costs incurred in connection with the purging of nonconforming
Gas delivered by or for the account of CES into the Pipeline or the BAMAGAS Lateral(s) or in
otherwise causing such nonconforming Gas to meet the quality specifications set forth in Exhibit 2
provided such non conformance was caused by CES or its upstream Gas suppliers. The Parties agree
that BAMAGAS has no obligation to odorize CES’ Natural Gas received by BAMAGAS at the Point(s) of
Receipt, unless BAMAGAS is required to do so pursuant to Applicable Law.

     4.2 Pressure. BAMAGAS shall deliver Natural Gas to CES at prevailing line pressure as it may
vary from time to time. CES will endeavor to have the Gas delivered by the upstream transporters
at the Point(s) of Receipt at a pressure equal to or greater than 675 psig. If the Gas is
delivered by the upstream transporters at the Point(s) of Receipt at a pressure equal to or greater
than 675 psig, then the variance between the pressure at the Point(s) of Receipt and the Point(s)
of Delivery (the “Pressure Variance”) shall be such that the pressure at the Point(s) of Delivery
is not less than 500 psig. If the Gas is delivered by the upstream transporters at the Point(s)
of Receipt at a pressure of less than 675 psig, then the Pressure

8

 

Variance shall not exceed that provided for in accordance with the Hydraulic Model. Other
than by reason of the express written consent of CES, Force Majeure, Applicable Law, or an
Excusable Event, if the Pressure Variance exceeds that allowed under the following provisions of
this Section 4.2 on more than three (3) occasions for a duration of one (1) hour or more after
notice thereof has been received by BAMAGAS (“Pressure Variance Event”), BAMAGAS shall be required
to remedy the problem by adding compression and/or performing other pipeline improvements. If
BAMAGAS is successful in remedying the problem as determined by both Parties in accordance with
the requirements of the Hydraulic Model, then no Pressure Variance Event shall be deemed to have
occurred.

ARTICLE V

MEASUREMENTS AND MEASURING EQUIPMENT

     5.1 Transportation Units. The transportation unit of the Natural Gas received and delivered by
BAMAGAS hereunder shall be one (1) MMBtu.

     5.2 Measuring Station. BAMAGAS or the appropriate upstream transporter will install, own and
operate, at the Point(s) of Receipt and the Point(s) of Delivery, a measuring station properly
equipped with meters and other necessary measuring equipment by which the quantity of Natural Gas
delivered under this Agreement shall be measured. Orifice meters or other AGA approved measurement
devices, which include turbine or ultrasonic meters, shall be installed, operated and equipped with
electronic flow measurement equipment in accordance with the latest applicable Measurement
Committee Report of the American Gas Association. Nothing hereinabove shall preclude BAMAGAS or
CES, at such Party’s sole cost, risk and expense, from installing, owning, operating and
maintaining measuring equipment at or near the Point(s) of Receipt or Point(s) of Delivery to
measure Natural Gas delivered under this Agreement. Each BAMAGAS and CES agree to grant each other
a right to enter onto such Party’s property for the purpose of installing, reading and maintaining
measuring equipment as provided for herein.

	 	a.	 	Check Measuring Equipment: CES may install, own, maintain and operate, at its
sole cost, risk and expense, such check measuring equipment as desired, provided that
such equipment shall be so installed as not to interfere with the operation of
BAMAGAS measuring equipment at or near a Point of Receipt or Point of Delivery.
	 
	 	b.	 	Right To Be Present: BAMAGAS and CES shall have the right to have
representatives present at the time of any installing, reading, cleaning, changing,
repairing, inspecting, testing, calibrating, or adjusting done in connection with the
other’s measuring equipment used in measuring or checking the measurement of
deliveries of Natural Gas under this Agreement. The records from such measuring
equipment shall remain the property of their owner, but upon request each will submit
to the other its records and charts, together with calculations therefrom, for the
inspection and verification, subject to return within thirty (30) Days after receipt
thereof.
	 
	 	c.	 	Care Required: All installations of measuring equipment applying to or
affecting deliveries of Natural Gas shall be made in accordance with standard
industry practices and such manner as to permit accurate determination of the
quantity of Natural Gas delivered and ready verification of the accuracy of
measurement. Care shall be exercised by both Parties in the installation,
maintenance and operation of pressure regulating equipment so as to prevent any
inaccuracy in the determination of the quantity of Natural Gas delivered under this
Agreement.
	 
	 	d.	 	Calibration and Test of Meters: The accuracy of BAMAGAS measuring equipment
shall be verified by BAMAGAS at reasonable intervals, and, if requested, in the
presence of representatives of CES, but BAMAGAS shall not be required to verify the
accuracy of such equipment more frequently than once in any thirty (30) day period.
In the event either Party shall notify the other that it desires a special test of
any measuring equipment, the Parties shall cooperate to secure a prompt verification
of the accuracy of such equipment. The expense of any such special test, if called
for by CES, shall be borne by CES if the measuring equipment tested is found not to
be in error or to be in error not more than two percent (2%).

9

 

	 	(i)	 	If, upon test, any measuring equipment, including recording
calorimeters, is found to be in error by not more than two percent (2%),
previous recordings of such equipment shall be considered accurate in
computing deliveries of Natural Gas, but such equipment shall be adjusted at
once to record accurately.
	 
	 	(ii)	 	If, upon test, any measuring equipment shall be found to be
inaccurate by an amount exceeding two percent (2%) at a recording
corresponding to the average hourly rate of flow for the period since the last
preceding test, then any previous recordings of such equipment shall be
corrected to zero error for any period which is known definitely but in case
the period is not known or agreed upon, such correction shall be for a period
extending over one-half (1/2) of the time elapsed since the date of the last
test, not exceeding a correction period of sixteen (16) Days.

	 	e.	 	Correction of Metering Errors — Failure of Meters: In the event a meter is
out of service, or registering inaccurately, the quantity of Natural Gas delivered
hereunder shall be adjusted for purposes of calculating CES’ monthly bill according
to the following procedures:

	 	(i)	 	by using the registration of any check meter or meters, if
installed and accurately registering; or
	 
	 	(ii)	 	in the absence of (i), by correcting the error if the
percentage is ascertainable by calibration; tests or mathematical
calculation; or
	 
	 	(iii)	 	in the absence of both (i) and (ii), by estimating the
quantity of delivery by utilizing a mathematical computation of subtracting
accurately recording delivery meters from the receipt meters for the
appropriate time period; or
	 
	 	(iv)	 	in the absence of (i), (ii) and (iii), by estimating the
quantity of delivery by deliveries during periods under similar conditions
when the meter was registering accurately.

	 	f.	 	Preservation of Metering Records: BAMAGAS and CES shall each preserve for a
period of at least one (1) year all test data, charts and other similar records.

ARTICLE VI

CHARGES TO BE PAID BY CES

     6.1 Transportation Charges. In consideration of BAMAGAS’ agreement to make the capacity of
the Pipeline up to the Firm Transportation Quantity available to CES for transportation of CES’
Gas on a Firm basis during the Initial Term, CES shall pay to BAMAGAS on a monthly basis during
the Initial Term, commencing as of the First Delivery Date (whether or not CES commences the
shipping of Gas on such date or any later date and whether or not on any Day CES causes any Gas,
up to the Firm Transportation Quantity, to be scheduled for delivery or be delivered) a fixed
demand charge (the “Initial Term Demand Charge”) equal to the product of (a) seven cents ($0.07)
per MMBtu of Gas (the “Initial Term Transportation Rate”) times (b) 100,000 MMBtu of Gas and times
(c) the number of Days in such Month. BAMAGAS shall not charge the Initial Term Transportation
Rate for the actual quantities of CES’ Gas collectively received each Day at the Points of Receipt
during the Initial Term as long as those quantities are not in excess of the Firm Transportation
Quantity. In the event that BAMAGAS transports Gas for CES in excess of the Firm Transportation
Quantity to the Points of Receipt on any Day during the Initial Term, CES shall pay BAMAGAS for
all MMBtu of Gas delivered in excess of the Firm Transportation Quantity per Day an amount equal
to (a) the Initial Term Transportation Rate times (b) all MMBtu of Gas in excess of the Firm
Transportation Quantity per Day.

     In consideration of BAMAGAS’ agreement to make the capacity of the Pipeline up to the Firm
Transportation Quantity available to CES for the transportation of CES’ Gas on a Firm basis during
each Renewal Term, CES shall pay to BAMAGAS on a Monthly basis during each Renewal Term commencing
as of the first Day of such Renewal Term (and whether or not on any Day CES causes any Gas up to
the Firm Transportation Quantity to be scheduled for delivery or be delivered), a fixed demand
charge (the “Renewal Term Demand Charge”) equal to the product of (a) four cents ($0.04) per
MMBtu of Gas (the

10

 

“Renewal Term Transportation Rate”) times (b) 100,000 MMBtu, and times (c) the number of
Days in such Month. BAMAGAS shall not charge the Renewal Term Transportation Rate for the actual
quantities of Gas collectively received each Day at the Point(s) of Receipt during any Renewal
Term as long as those quantities are not in excess of the Firm Transportation Quantity. In the
event that BAMAGAS transports for CES Gas in excess of the Firm Transportation Quantity to the
Points of Receipt on any Day during a Renewal Term, CES shall pay BAMAGAS for all MMBtu of Gas
delivered in excess of the Firm Transportation Quantity per Day an amount equal to (a) the Renewal
Term Transportation Rate times (b) all MMBtu of Gas in excess of the Firm Transportation Quantity
per Day.

     In the event CES delivers or causes to be delivered or tendered Gas quantities from the
Point(s) of Receipt to the Point(s) of Delivery in excess of the Firm Transportation Quantity on
any given Day to be transported hereunder during the Initial Term or any Renewal Term, such daily
quantities in excess of the Firm Transportation Quantity may be interrupted or curtailed by BAMAGAS
and BAMAGAS shall not be in breach of this Agreement. No event of Force Majeure, Applicable Law or
an Excusable Event shall relieve CES of the obligation to pay the full amount of the Initial Term
Demand Charge and the Renewal Term Demand Charge, as applicable, each Month during the Term of this
Agreement, except as otherwise expressly provided in Section 11.2. CES shall have no right to make
up the difference, if any, between the actual quantities of Gas transported on any given Day during
the Initial Term or any Renewal Term and the Firm Transportation Quantity, nor shall CES be
entitled to any credit or allowance for any such differences. The Parties shall settle Imbalances
in accordance with the provisions of the operational balancing agreement attached as Exhibit 8.

     6.2 Taxes. In addition to any other payments due hereunder, CES shall be liable to reimburse
BAMAGAS for all taxes, including but not limited to sales (wholesale or retail), transaction,
occupation, privilege, license, franchise, service, production, severance, gathering, transmission,
gross receipts, export or excise, or other exaction, (but not including income, excess profits,
capital stock, state franchise or general property taxes) hereafter levied, assessed or fixed by
any Governmental Authority (and whether any such tax is currently collected), measured by, in
respect of or applicable to the Natural Gas to be received, transported or delivered by BAMAGAS
under this Agreement and to the extent actually paid by BAMAGAS. All such taxes shall be
separately stated and identified on invoices issued by BAMAGAS hereunder. In the event any
taxes, assessments, impositions, or other charges are imposed by any Governmental Authority on the
receipt, transportation or delivery of Natural Gas hereunder that are not in effect as of the date
hereof (“New Taxes”), such New Taxes shall be allocated pro rata between CES and BAMAGAS based upon
the respective use (including reserved capacity for firm transportation) of the capacity of the
Pipeline by CES and all other parties during each tax period applicable to such New Taxes.

     6.3 Other Charges. CES shall promptly reimburse BAMAGAS for any surcharges and all other costs
charged to or levied upon BAMAGAS by Natural Gas producers, suppliers, transporters or regulatory
agencies related to the receipt, transportation or delivery of Natural Gas under this Agreement,
provided that such charges are not caused by actions or omissions of BAMAGAS in material breach of
an obligation to CES under this Agreement.

     6.4 Price Reduction. In the event that at any time during the Term hereof, BAMAGAS contracts
with any other shipper (“Third Party Transportation Contract”), for any level of transportation
service of Gas on the Pipeline at a rate more favorable than the rate then being charged CES
hereunder for any level of transportation service (“Favorable Rate”), and the transported Gas is
used by the shipper or any Affiliate of it for a Competing Use, BAMAGAS shall credit to the
transportation charges under this Agreement, during the term of the Third Party Transportation
Contract, a sum equal to the positive difference, if any, between the Favorable Rate and CES’ rate
for that quantity of CES’ Gas, up to (but not exceeding) the daily quantity transported on the
Pipeline at the Favorable Rate; provided, however, that CES shall pay the Initial Term Demand
Charge, the Renewal Term Demand Charge, the Initial Term Transportation Rate and the Renewal Term
Transportation Rate subject to offset by the credits provided for hereunder. The foregoing credits
shall not be applicable if there is a price readjustment pursuant to the provisions of the second
to the last paragraph of Article XV. This obligation of BAMAGAS shall apply to any Favorable Rate
in any transportation service agreement entered into between BAMAGAS and Existing Shippers after
the execution of this Agreement.

11

 

     Similarly, if BAMAGAS, Enbridge or any Affiliate of either of them enters into any
Natural Gas sales agreements for delivery of Gas off of the Pipeline with any third party, (“Third
Party Sales Contract”) used by such third party or any Affiliate of it for a Competing Use, and
the net effect of the sale is that the transportation service of Gas on the Pipeline is at a rate
more favorable than the rate charged CES hereunder for the same level of transportation service
(“Beneficial Rate”), and if the transported Gas is used by the third party purchaser or any
Affiliate of it for a Competing Use, BAMAGAS shall credit to the transportation charges under this
Agreement during the term of the Third Party Sales Contract a sum equal to the difference between
the Beneficial Rate and CES’ rate for that quantity of CES’ Gas, up to (but not exceeding) the
daily quantity sold off of the Pipeline to the third party purchaser at the Beneficial Rate;
provided, however that CES shall pay the Initial Term Demand Charge, the Renewal Term Demand
Charge, the Initial Term Transportation Rate or the Renewal Term Transportation Rate subject to
offset by the credits provided for hereunder. For the purposes hereof, “Competing Use” shall mean
Natural Gas that is utilized for the purpose of the generation of electricity and/or steam
delivered by the Pipeline and/or BAMAGAS Lateral(s). CES shall have the right at all reasonable
times to examine records and relevant data to the extent necessary to verify the accuracy of any
supporting information regarding Favorable and Beneficial Rates.

ARTICLE VII

BILLING AND PAYMENTS

     7.1 Billing Dates. On or about the fifth (5th) Business Day of each Month, BAMAGAS shall issue
(by facsimile or other means) to CES an invoice setting forth the quantity of Gas received and
delivered for CES’ account during the preceding Month, any lost or unaccounted for Gas based on the
calculations of electronic flow measurement equipment and all applicable fees and charges due in
accordance with Article VI hereof.

     7.2 Payment Date. Payment by CES shall be made to BAMAGAS, at its address designated herein,
in immediately available funds, on or before the Day that is thirty (30) Days after receipt of any
invoice from BAMAGAS hereunder. If CES, in good faith, disputes any portion of any such invoice or
billing by BAMAGAS, CES shall nonetheless pay any undisputed portion of such invoice within the
prescribed time frame. Wire transfers of payment shall be made to such accounts or accounts as
BAMAGAS may designate in writing to CES.

     7.3 Right to Examination. Each of BAMAGAS and CES shall have the right to examine at any
reasonable time, upon not less than five (5) Business Days written notice to the other, the books,
records and charts of the other to the extent necessary to verify the accuracy of any invoice,
charge or computation made under or pursuant to the provisions of this Agreement. Each Party
shall retain all such records for a period of two (2) years after the creation thereof.

     7.4 Adjustment of Errors in Billing. If it shall be found that at any time or times CES has
been overcharged or undercharged in any form whatsoever under the provisions of this Agreement, and
CES shall have actually paid the bill containing such overcharge or undercharge, then, within
thirty (30) Days after the final determination thereof BAMAGAS shall refund the amount of any such
overcharge or CES shall pay the amount of any such undercharge with interest thereon at a rate per
annum equal to the prime rate of interest published in the Wall Street Journal, from the time such
overcharge or undercharge was paid to the date of refund or payment, as the case may be.

     7.5 Interest on Past Due Payments. Interest on any past due payment hereunder shall accrue
at a rate per annum equal to the prime rate of interest published in the Wall Street Journal, plus
two percent (2%), from the due date until the date of payment, but in no event in excess of the
maximum legal rate of interest.

ARTICLE VIII

POSSESSION OF NATURAL GAS

     BAMAGAS shall be deemed to be in control and possession of the Natural Gas being transported
hereunder from the time it is received at the upstream flange of a receipt meter at a Point of
Receipt until it shall have been delivered to the downstream flange of a delivery meter at a
Point of Delivery. As between

12

 

the Parties hereto, CES shall be deemed to be in control and possession of such Natural Gas
before it is received by BAMAGAS as described in the prior sentence at a Point of Receipt and after
it has been delivered to CES as described in the prior sentence at a Point of Delivery. Possession
of and risk of loss of Gas received by BAMAGAS at the Points(s) of Receipt shall pass from BAMAGAS
to CES at the Point(s) of Delivery.

ARTICLE IX

REPRESENTATIONS AND WARRANTIES AND COVENANTS

     9.1 Warranty of Title. CES warrants that it will have, at the time of delivery of Gas at a
Point of Receipt for transportation hereunder, good title to and/or the full right and authority to
deliver such Gas to BAMAGAS for transportation hereunder. Subject only to the accuracy of CES’
foregoing warranty, BAMAGAS warrants that it will at the time of delivery of the Gas transported
hereunder have the full right and authority to deliver such Gas to CES. BAMAGAS further warrants
that such Gas will be free and clear of all liens, encumbrances or claims created by or through
BAMAGAS.

     9.2 Warranty Regarding Intrastate Pipeline. Subject only to any changes in Applicable Law
subsequent to the date of this Agreement which affects the status or determination of status of
interstate and intrastate pipelines and of regulation by Governmental Authorities, BAMAGAS
represents and warrants that the Pipeline will qualify as an intrastate pipeline upon completion
hereof and that this Agreement shall not then be subject to the jurisdiction of the Federal Energy
Regulatory Commission (“FERC”) or any successor thereto. BAMAGAS further represents and warrants
that it will not take any affirmative act which would cause the Pipeline to be classified as an
interstate pipeline or otherwise be subject to the jurisdiction of FERC or any successor thereto
under or pursuant to the Applicable Law currently in effect as of the date of this Agreement.

     9.3 Corporate Representations and Warranties. Each Party hereby represents and warrants to the
other Party that, as of the date hereof:

	 	a.	 	Such Party is duly organized, validly existing and in good standing under
the laws of the jurisdiction of its organization, is in good standing and is
qualified to do business in the State of Alabama and in all other jurisdictions in
which the nature of the business conducted by it makes such qualification necessary
and where failure to so qualify would have a material adverse effect on its financial
condition, operations, prospects or business.
	 
	 	b.	 	Such Party is not in violation of any applicable law promulgated or judgment
entered by any Governmental Authority which violation(s), individually or in the
aggregate, would adversely affect its performance of any obligations under this
Agreement. There are no legal or arbitration proceedings or any proceeding by or
before any governmental or regulatory authority or agency now pending or (to its best
knowledge) threatened against it which, if adversely determined, could have a
material adverse effect upon its financial condition, operations, prospects or
business, as a whole, or its ability to perform under this Agreement.
	 
	 	c.	 	Except for such Governmental Approvals to be obtained by BAMAGAS for the
construction and operation of the Pipeline and Governmental Approvals to be obtained
by CES with respect to the Morgan Energy Center, such Party is the holder of all
permits, licenses or other authorizations required to permit it to operate
or conduct its business now and as contemplated by this Agreement, and, no
authorization, consent or approval of, notice to or filing with any other Person is
required for the execution, delivery or performance by such Party of this Agreement.
	 
	 	d.	 	The execution, delivery and performance by such Party of this Agreement, the
compliance with the terms and provisions hereof, and the carrying out of the
transactions contemplated hereby, does not conflict or will not conflict with or
result in a breach or violation of any of the terms, conditions or provisions of the
charter documents, as amended, or bylaws, as

13

 

	 	 	 	amended, of such Party or any order, writ, injunction, judgment or decree of any
court or Governmental Authority against such Party or by which it or any of its
properties is bound, or any loan agreement, indenture, mortgage, note, resolution,
bond, or contract or other agreement or instrument to which such Party is a party or
by which it or any of its properties is bound, or constitutes or will constitute a
default thereunder or will result in the imposition of any lien upon any of its
properties.
	 
	 	e.	 	Such Party has all necessary power and authority to execute, deliver and
perform this Agreement and its obligations hereunder; the execution, delivery and
performance of this Agreement have been duly authorized by all necessary action on its
part; it has duly and validly executed and delivered this Agreement; and the
Agreement constitutes a legal, valid and binding obligation of such Party, enforceable
against such Party in accordance with the terms hereof, except as the enforceability
thereof may be limited by bankruptcy, insolvency, reorganization or moratorium or
other similar laws relating to the enforcement of creditors’ rights generally and by
general equitable principles.

     9.4 BAMAGAS covenants. BAMAGAS hereby covenants that during the Term of this Agreement,
without the prior written consent of CES:

	 	a.	 	It shall not engage in any business other than the development, construction
of up to a thirty inch (30”) pipeline during the initial construction period,
operation, and maintenance (including repair or replacement) of the Pipeline and the
BAMAGAS Lateral(s) and the sale, delivery and transportation of Natural Gas
thereon (collectively, the “BAMAGAS Activities”);
	 
	 	b.	 	It shall not incur, create, assume or otherwise become liable for any
indebtedness other than indebtedness associated with the BAMAGAS Activities;
	 
	 	c.	 	It shall not create, incur, assume or suffer to exist on any of its
property any lien, encumbrance, security interest, mortgage, pledge, hypothecation or
assignment other than such a lien or other interest arising out of indebtedness
associated with the BAMAGAS Activities;
	 
	 	d.	 	It shall preserve and maintain its existence as a corporation and its
qualification and good standing in the State of Alabama;
	 
	 	e.	 	It shall pay or cause to be paid, when due and payable, all taxes, charges,
levies and assessments and other charges required to be paid by it or levied against
the Pipeline and the BAMAGAS Lateral(s), except for taxes contested in good faith and
with respect to which proper reserves have been established;
	 
	 	f.	 	It shall maintain all Governmental Approvals required for the ownership and
operation of the Pipeline and the BAMAGAS Lateral(s) and for the conduct of its
business;
	 
	 	g.	 	It shall maintain appropriate liability insurance on the Pipeline
and the BAMAGAS Lateral(s).

ARTICLE X

INDEMNIFICATION

     10.1 BAMAGAS INDEMNITY. BAMAGAS SHALL PROTECT, DEFEND, INDEMNIFY, AND HOLD HARMLESS THE
SHIPPER GROUP FROM AND AGAINST ALL SUITS, ACTIONS, DEBTS, ACCOUNTS, DAMAGES, COSTS, LOSSES AND
EXPENSES, INCLUDING, WITHOUT LIMITATION, INJURY TO OR DEATH OF PERSONS AND DAMAGE TO OR
DESTRUCTION OF PROPERTY, ARISING FROM ANY ACT OR OMISSION OR ACCIDENT IN CONNECTION WITH (A)
BAMAGAS’ CONTROL OR POSSESSION OF THE GAS IN THE PIPELINE OR THE BAMAGAS LATERALS, AND (B)
BAMAGAS’ CONSTRUCTION, OWNERSHIP OR OPERATION OF THE PIPELINE AND THE BAMAGAS LATERALS.

14

 

     10.2 CES INDEMNITY. CES AGREES TO PROTECT, DEFEND, INDEMNIFY AND HOLD HARMLESS THE BAMAGAS
GROUP FROM ALL SUITS, ACTIONS, DEBTS, ACCOUNTS, DAMAGES, COSTS, LOSSES AND EXPENSES,
INCLUDING, WITHOUT LIMITATION, INJURY TO OR DEATH OF PERSONS AND DESTRUCTION OF PROPERTY ARISING
FROM ANY ACT OR OMISSION OR ACCIDENT IN CONNECTION WITH (A) THE SHIPPER GROUP’S OR THEIR AGENT’S
OWNERSHIP, POSSESSION OR CONTROL OF THE GAS PRIOR TO ITS DELIVERY INTO THE PIPELINE OR THE
BAMAGAS LATERALS AND AFTER REDELIVERY AT THE POINTS OF DELIVERY OR SECONDARY POINTS OF
DELIVERY, AND (B) THE SHIPPER GROUP’S CONSTRUCTION, OWNERSHIP AND OPERATION OF THE
MORGAN ENERGY CENTER.

     10.3 Scope. For the purposes of this indemnity:

	 	a.	 	The agreement to “defend” includes the responsibility to pay the costs and
expenses of defense (including reasonable attorneys’ fees) of the person entitled to
indemnity;
	 
	 	b.	 	“Shipper Group” means CES, its officers, directors, subsidiaries,
affiliates, members, partners, successors and assigns. “BAMAGAS Group” means
BAMAGAS, its officers, directors, subsidiaries, affiliates, members, partners,
successors and assigns;

     10.4 Notice and Opportunity to Defend. Any person claiming indemnification hereunder (an
“Indemnitee”) must give prompt and timely notice to the Party against which it is claiming
indemnity hereunder (the “Indemnitor”) and shall have the right to participate fully in the defense
at its sole expense if the Indemnitor undertakes to provide the actual defense. The Indemnitor shall
determine within thirty (30) Days after the receipt of such notice whether it will pay the costs
and expenses of the Indemnitee’s defense or undertake to provide the actual defense. If the
Indemnitor elects to undertake the actual defense, then the Indemnitee shall give the Indemnitor
the opportunity to direct the defense of such claim through counsel of its own choosing; provided,
however, that (i) if there are differing interests which require separate counsel for the
Indemnitee, then the Indemnitee shall defend the claim with separate counsel selected or approved
by the Indemnitor, and the Indemnitor shall pay the costs and expenses of the Indemnitee’s separate
defense; and (ii) the Indemnitee shall nonetheless have the right to participate, solely as an
observer, through counsel or otherwise, in meetings and proceedings with adverse parties.

ARTICLE XI

FORCE MAJEURE

     11.1 Force Majeure Defined. Except as expressly provided in this Section 11.1, neither
BAMAGAS nor CES shall be required to perform any act required by this Agreement, other than the
making of payment of monies due hereunder (including, without limitation, the Initial Term Demand
Charge and the Renewal Term Demand Charge), during such period as such Party is unable to perform
in whole or in part due to Force Majeure. The term “Force Majeure” as used in this Agreement shall
mean any acts of God, strikes, lockouts, embargoes, acts of the public enemy, wars, blockades,
insurrections, riots, epidemics, landslides, lightning, earthquakes, fires, storms, floods,
washouts, arrests and restraints of rulers and peoples, civil disturbances, explosions, breakage
or failure of or accident to machinery and equipment or lines of pipe caused by events or actions
beyond the affected Party’s reasonable control, unanticipated repairs to or replacements of
equipment, machinery, lines of pipe, pumps, compressors, valves, gauges, and metering equipment,
line freeze-ups, the binding order of any court or Governmental Authority which has been resisted
in good faith by all reasonable legal means, and any other cause, of the kind herein enumerated,
not within the control of the Party claiming suspension and which by the exercise of due diligence
such Party is unable to prevent or overcome. A failure to settle or prevent any strike or other
controversy with employees or with anyone purporting or seeking to represent employees shall not
be considered to be a matter within the control of the Party claiming suspension; however, in the
event of a Force Majeure due to a strike or similar labor dispute, CES shall have the right to
utilize its own employees or contract workers to operate the Pipeline during such event; provided,
however, that BAMAGAS shall not be liable under this Agreement or otherwise for the acts or
omissions of CES’ employees or its contractors in connection with their operation of the Pipeline
and/or the BAMAGAS Lateral(s), nor shall BAMAGAS be held in breach of any covenant or other
obligation to CES under this Agreement by reason

15

 

of any acts or omissions of CES’ employees or its contractors in connection with their operation
of the Pipeline and/or the BAMAGAS Lateral(s). Except as provided in the immediately preceding
sentence, such operation of the Pipeline by CES’ employees or its contractors shall not impair any
rights that CES may have under this Agreement. Routine maintenance which will result in the
curtailment or interruption of transportation of Gas to the Point(s) of Delivery if scheduled by
mutual consent of the Parties, which consent shall not be unreasonably withheld by the affected
Party, shall be deemed to operate as a Force Majeure event except for the payment of the Initial
Term Demand Charge or the Renewal Term Demand Charge. Causes or contingencies affecting the
performance of this Agreement by either Party if deemed to be Force Majeure within the meaning of
this Agreement, however, shall not relieve the affected Party of its obligation to perform in the
event of such Party’s failure to use due diligence to remedy the situation and remove the cause in
an adequate manner and with all reasonable dispatch, nor shall such causes or contingencies
relieve either Party of its obligation to perform unless such Party gives notice and full
particulars of the same in writing to the other Party as soon as practicable after the initial
occurrence relied on. Except as expressly provided in this Section 11.1 or elsewhere in this
Agreement, neither Party shall be liable to the other for damages, direct or indirect, immediate
or remote, by reason of, caused by or arising out of the obligation or obligations of either Party
when such suspension results from an event of Force Majeure.

     11.2 Effect of Force Majeure. In the event that BAMAGAS is unable to transport Gas or CES is
unable to receive Gas hereunder as the result of an event of Force Majeure, a period of time equal
to the duration of such inability (the “Extension Period”) shall be added to the Initial Term if
occurring during the Initial Term) or the Renewal Term (if occurring during the Renewal Term), as
applicable, and during such extended period the Transportation Rate for all quantities of Gas
transported each Day up to, but not in excess of, the Firm Transportation Quantity shall be zero
cents ($0.00), except as otherwise provided in this Section 11.2. In the event that as the result
of an event of Force Majeure the Morgan Energy Center is substantially damaged or destroyed and
CES decides not to rebuild such facility, CES shall have the right to terminate this Agreement and
to have no prospective obligations under this Agreement to BAMAGAS except as provided in the next
sentence. In the event of termination of this Agreement in accordance with the foregoing, CES
shall pay BAMAGAS the relevant Termination Value as determined in accordance with Exhibit 4. CES
shall have the right during the continuance of any event of Force Majeure that affects its ability
to receive Gas hereunder to sell its capacity on the Pipeline to a third party, other than a then
existing customer of BAMAGAS, Enbridge or any Affiliate of either of them, unless BAMAGAS elects
to delay the payment of the Initial Term Demand Charge or the Renewal Term Demand Charge which
would otherwise be due BAMAGAS during the period of the Force Majeure for payment during any
Extension Period.

ARTICLE XII

EVENTS OF DEFAULT

     12.1 Definition. An “Event of Default” under this Agreement shall be deemed to exist with
respect to a Party upon the occurrence of any one or more of the following events:

	 	a.	 	Failure by a Party to timely make payment of any amount due to the other
Party under this Agreement (other than an amount subject to a good faith dispute),
which failure continues for a period of twenty (20) Days after receipt of written
notice of such nonpayment;
	 
	 	b.	 	Curtailment or interruption, other than by reason of Pressure Variance, at
any time subsequent to sixty (60) Days following BAMAGAS’ initial deliveries on the
Pipeline of transportation by BAMAGAS to a Primary Point of Delivery for more than
fifteen (15) minutes of the greater of 3,000 MMBtus or five percent (5%) or more of
those Gas quantities which are required at any given time, not to exceed the Firm
Transportation Quantity, for the operational requirement of the Morgan Energy
Centers, other than by reason of express written consent of CES, Force Majeure,
Applicable Law, an Excusable Event, or as otherwise permitted under this Agreement
(an “Unexcused Curtailment”), on more than three (3) occasions on separate Days in
any consecutive four (4) year period or on more than eight (8) occasions on separate
Days in the aggregate over any consecutive twenty (20) year period; provided,
however, an Unexcused Curtailment shall be conclusively deemed not to

16

 

	 	 	 	have occurred unless written notice thereof, together with the known facts surrounding
such curtailment or interruption, is given in writing by CES to BAMAGAS within ten (10)
Days following such curtailment or interruption. BAMAGAS shall have the right to
deliver to the Point(s) of Delivery those quantities of Gas which would otherwise be
curtailed or interrupted under this provision via any of the Pipeline, the BAMAGAS
Lateral(s), the MIT Lateral or any other pipeline, and if delivered by any such means
to the Point(s) of Delivery, no curtailment or interruption shall be deemed to have
occurred.
	 
	 	c.	 	Failure by a Party hereunder subsequent to the completion of both the Pipeline
and the BAMAGAS Lateral(s) to substantially perform any other material obligation under
this Agreement (i) which is not separately listed in this Section 12.1, and (ii) for
which no exclusive remedy is provided for elsewhere in this Agreement, within twelve
(12) months after a Party’s receipt of written notice from the other Party that a
material obligation has not been performed.
	 
	 	d.	 	If by order of a court of competent jurisdiction, a receiver or liquidator or
trustee of a Party or of any of the property of a Party shall be appointed, and such
receiver or liquidator or trustee shall not have been discharged within a period of
ninety (90) Days; or if by decree of such a court, a Party shall be adjudicated
bankrupt or insolvent or any substantial part of the property of such Party shall have
been sequestered, and such decree shall have continued undischarged and unstayed for a
period of ninety (90) Days after the entry thereof; or if a petition to declare
bankruptcy or to reorganize a Party pursuant to any of the provisions of the federal
Bankruptcy Code, as it now exists or as it may hereafter be amended, or pursuant to any
other similar state statute applicable to such Party, as now or hereafter in effect,
shall be filed against such Party and shall not be dismissed within ninety (90) Days
after such filing; or
	 
	 	e.	 	If a Party shall file a voluntary petition in bankruptcy under any provision of
any federal or state bankruptcy law or shall consent to the filing of any bankruptcy or
reorganization petition against it under any similar law; or, without limitation of the
generality of the foregoing, if a Party shall file a petition or answer or consent
seeking relief or assisting in seeking relief in a proceeding under any of the
provisions of the federal Bankruptcy Code, as it now exists or as it may hereafter be
amended, or pursuant to any other similar state statute applicable to such Party, as
now or hereafter in effect, or an answer admitting the material allegations of a
petition filed against it in such a proceeding; or if a Party shall make an assignment
for the benefit of its creditors; or if a Party shall admit in writing its inability to
pay its debts generally as they become due; or if a Party shall consent to the
appointment of a receiver or receivers, or trustee or trustees, or liquidator or,
liquidators of it or of all or any part of its property.

     12.2 Right of Termination for Default. Upon the occurrence and during the continuation of an
Event of Default, the Party not in default shall have the right to terminate this Agreement upon
written notice to the other Party (the “Notice”) if the default is not cured or remedied within the
thirty (30) day period following the other Party’s receipt of such written notice (the “Notice
Period”); provided, however, if the Party claimed to be in default disputes at any time prior to
the expiration of the Notice Period that an Event of Default occurred, then the dispute shall be
arbitrated under the provisions of Sections 16.3, 16.4 and 16.5. Failure by the Party alleged to be
in default to dispute the occurrence or continuance of an Event of Default after Notice has been
received and within the Notice Period shall operate to waive any rights the Party alleged to be in
default may have to dispute same. Any measures taken by the Party alleged to be in default shall
not in any way prejudice such Party’s dispute as to the occurrence of an Event of Default noticed
by the other Party, whether such measures are taken before or after notice of the Event of Default
is given. Furthermore, no evidence taken at any time to remedy any Event of Default (whether or
not notice is given to the Party claimed to be in default) shall be admissible by the Party
alleging the Event of Default in any arbitration proceeding or other legal proceeding between the
Parties.

     12.3 CES Purchase Rights. In the event of termination of this Agreement by CES following a
BAMAGAS Event of Default and BAMAGAS’ failure to timely cure or remedy such Event of Default, or in
the event that CES desires a Renewal Term but BAMAGAS does not, as provided in Article III, or if
CES terminates this Agreement under Section 12.2, CES shall, subject to the purchase rights of CES
under

17

 

the Natural Gas Construction and Transportation Agreement for the Decatur Energy Center, have the
right to purchase the Pipeline and the BAMAGAS Lateral(s), subject to the right of BAMAGAS to
transport Gas on the Pipeline and the BAMAGAS Laterals to Morgan Energy Center pursuant to the
Natural Gas Construction and Transportation Agreement for the Decatur Energy Center and the
transportation rights of BAMAGAS and/or any marketing Affiliate(s) of BAMAGAS or Enbridge on the
Pipeline and the BAMAGAS Lateral(s) as set forth on Exhibit 11 (collectively, the “Transportation
Rights”), for a price (the “Purchase Price”) equal to the amount (the “Termination Value”) as
determined in accordance with Exhibit 4. Concurrent with payment of the Purchase Price, BAMAGAS
shall execute and deliver to CES such instruments of transfer as are reasonably requested by CES
subject to the Transportation Rights and those certain covenants, use restrictions and other
obligations specified in Exhibit 9 (the “Use Restrictions”), and CES shall execute and deliver to
BAMAGAS such instruments binding the Pipeline and the BAMAGAS Lateral(s) to such Transportation
Rights and Use Restrictions as are reasonably requested by BAMAGAS; provided, however, that no
representations shall be required to be provided by BAMAGAS other than representations that BAMAGAS
has the right, power and authority to convey the Pipeline and the BAMAGAS Lateral(s) and that they
are assigned free and clear of all liens and/or any other claims and liabilities. At CES’ request,
upon execution of this Agreement, BAMAGAS shall grant to CES a first priority security interest
(which shall be of equal priority with the first priority security interest also granted by BAMAGAS
to CES pursuant to the Natural Gas Construction and Transportation Agreement for the Decatur Energy
Center) in the Pipeline and/or the BAMAGAS Lateral(s) to secure CES’ purchase rights under this
Section 12.3.

     12.4 Remedies Not Exclusive. Except as otherwise expressly provided to the contrary herein,
the rights and remedies herein provided in case of an Event of Default shall not be exclusive but
shall, to the extent permitted by law, be cumulative and in addition to all other rights and
remedies existing at law, in equity or otherwise (including the right to specific performance),
except those rights and remedies which have been waived or relinquished hereunder by the Parties
pursuant to the provisions hereof. No delay or omission of a Party to exercise any right or remedy
occurring upon any Event of Default shall impair any such right or remedy or constitute a waiver of
such default or an acquiescence therein. Every right and remedy given by this Agreement or by law
to a Party may be exercised from time to time, and as often as may be deemed expedient, by such
Party. A Party shall have the obligation to mitigate any damages it incurs as a result of the
other Party’s breach.

     12.5 Limitation of Liability. EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED HEREIN,
IN NO EVENT SHALL ANY PARTY BE LIABLE TO ANY OTHER PARTY FOR INDIRECT, SPECIAL,
INCIDENTAL, CONTINGENT OR CONSEQUENTIAL DAMAGES, WHETHER SUCH DAMAGES ARISE IN
CONTRACT, TORT, STRICT LIABILITY OR OTHERWISE, UNDER OR IN CONNECTION WITH THIS AGREEMENT, AND ANY
DAMAGES SHALL BE LIMITED TO COMPENSATORY DAMAGES.

     12.6 Non-Recourse. The obligations of the Parties under this Agreement are intended to be
recourse only to the assets of the Parties, and neither the partners thereof nor any shareholder,
officer, director, employee or agent of the Parties or any partners or Affiliates of such Party
shall have any personal responsibility or liability for any breach in performance or observance of
the covenants, representations, or obligations thereunder. The provisions of this Section 12.6
shall not limit any of the obligations of Calpine Corporation under the absolute and unconditional
guaranty of payment to be provided to BAMAGAS with respect to all obligations of CES hereunder, as
provided under Section 18.1 (the “Calpine Corporation Guaranty”).

ARTICLE XIII

TRANSFER AND ASSIGNMENT

     13.1 Assignment. This Agreement shall be binding upon and inure to the benefit of the Parties
hereto and their respective successors and permitted assigns. No assignment or transfer permitted
hereunder shall relieve the assigning Party of its respective obligations under this Agreement
unless the other Party agrees to such release; provided, however, that in the event of an
assignment by CES to an Affiliate (and provided that the Calpine Corporation Guaranty remains in
effect), CES shall be released

18

 

from its obligations hereunder. This Agreement, including any of the rights or obligations
hereunder, may not be assigned or transferred without the prior written consent of the other
Party, which consent shall not be unreasonably withheld, conditioned or delayed. Notwithstanding
the foregoing (but subject to Section 13.2 below), any Party may, without the need for consent
from the other Party (and without relieving itself from liability hereunder), (a) transfer or
assign this Agreement to an Affiliate of such Party (provided that in the case of BAMAGAS, the
assignment to such Affiliate will not jeopardize the status of the Pipeline or the BAMAGAS
Lateral(s) as non-FERC jurisdictional assets), or (b) transfer or assign this Agreement to any
Person succeeding to all or substantially all of the assets of such Party. In the event that MEC
sells the Morgan Energy Center to a third party (a “Second Owner”), BAMAGAS agrees that if
requested by MEC it will enter into a new agreement with the Second Owner on the same terms and
conditions as this Agreement. Upon the sale of the Morgan Energy Center, BAMAGAS shall release
Calpine from all of its prospective obligations under the Calpine Corporation Guaranty provided
that the successor owner has substantially the same or better creditworthiness as Calpine and
executes and delivers a guaranty to BAMAGAS with respect to the Morgan Energy Center substantially
in the same form and content as the Calpine Corporation Guaranty. In addition, CES and BAMAGAS
each shall have the right without the consent of the other Party to assign this Agreement as
collateral security for loans made, in the case of CES, with respect to the construction of the
Morgan Energy Center or, in the case of BAMAGAS, with respect to the construction of the Pipeline
and the BAMAGAS Lateral(s). Each of MEC and BAMAGAS agree to provide reasonable cooperation to the
other Party with respect to obtaining such financing, including the execution of written consents
to assignment reasonably requested by such lenders.

     13.2 Right of First Refusal. In the event that BAMAGAS receives a bona fide offer from a third
party (including an Affiliate of BAMAGAS) for the purchase of the Pipeline and/or the BAMAGAS
Lateral(s) and/or BAMAGAS (“Third Party Offer”) and BAMAGAS intends to accept such offer, prior to
accepting such offer it must notify CES of the offer (the “Offer Notice”), which Offer Notice shall
set forth the purchase price and all of the other terms offered by the third party. Subject to the
same first refusal rights of CES pursuant to the Natural Gas Construction and Transportation
Contract for the Morgan Energy Center, CES shall have thirty (30) Days (the “Exercise Period”) from
the date of the Offer Notice within which to elect to purchase all (and not less than all of the
property covered by the Offer Notice) for the same purchase price and upon the same other terms
(including the closing date) set forth in the Offer Notice. If the Third Party Offer includes
assets other than the Pipeline and the BAMAGAS Lateral(s), BAMAGAS shall notify CES of the offer
price for the Pipeline and the BAMAGAS Lateral(s) in order for CES to exercise its right of first
refusal exclusively in connection with those assets. In the event that CES elects to purchase the
Pipeline and the BAMAGAS Lateral(s), it shall notify BAMAGAS in writing within the Exercise Period;
provided, however, if the Third Party Offer is conditioned upon the ability to purchase the
Pipeline and the BAMAGAS Lateral(s) with other assets or BAMAGAS with other assets and/or another
entity and CES elects to purchase the Pipeline and the BAMAGAS Lateral(s), then BAMAGAS, at its
option, may rescind the Offer Notice, in which event BAMAGAS shall not sell the Pipeline and/or the
BAMAGAS Lateral(s) or BAMAGAS, as applicable, to either CES or the third party pursuant to the
Third Party Offer. If a Third Party Offer encompasses both the Pipeline and the BAMAGAS Lateral(s),
CES may only exercise its right of first refusal as specified herein in connection with both assets
or it shall be deemed to have waived its rights. In the event CES does not give such a notice to
BAMAGAS or does not respond within the Exercise Period, BAMAGAS shall be free to accept the offer
of the third party for the same purchase price and on the same terms set forth in the Offer Notice.
In the event the terms of the transaction with the third party change after CES has declined to
exercise its right of first refusal, BAMAGAS must provide a new Offer Notice to CES. In the event
that CES decides to purchase on the terms set forth in an Offer Notice, it shall notify BAMAGAS in
writing prior to the end of the Exercise Period and the sale to CES shall be closed within thirty
(30) Days thereof. Upon a sale to CES hereunder, this Agreement shall automatically terminate as to
all prospective obligations. Upon a sale to a third party hereunder, the third party as a successor
in interest to BAMAGAS shall be bound by this Agreement, which shall remain in effect under the
terms of Article III.

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ARTICLE XIV

REGULATION

     Each Party shall, in the course of its undertakings hereunder and as a part thereof, endeavor
to obtain all required Governmental Approvals and shall comply otherwise with all applicable
federal, state and local laws and regulations thereof. CES shall cooperate with BAMAGAS and, if
requested by BAMAGAS, shall provide reasonable assistance to BAMAGAS in connection with BAMAGAS’
actions to obtain such Governmental Approvals. Each Party waives any right to contest or to seek
to amend the rates provided for herein before any Governmental Authority.

ARTICLE XVI

DISPUTE RESOLUTION; GOVERNING LAW

     16.1 Procedure. In the event a dispute arises between BAMAGAS and CES regarding this
Agreement or the transaction covered hereby, including, without limitation, (a) the application or
interpretation of this Agreement, (b) whether or not an Unexcused Curtailment has occurred, (c)
whether or not an Event of Default has occurred or continued without having been cured or
remedied, and (d) the actions or measures which may be taken to cure or otherwise remedy an Event
of Default, the Parties agree to use the procedures in this Article XVI to resolve any such
disputes.

     16.2 Initial Resolution Attempts. Either Party may initiate dispute resolution procedures by
sending written notice to the other Party specifically stating the complaining Party’s claim and
requesting dispute resolution in accordance with this Article XVI. The receiving Party shall reply
with the designation of a person authorized to settle the dispute and shall list two (2)
alternative dates (both of which must be within ten (10) Business Days after receipt of the
complaint) for meeting at a mutually agreeable location. If the matter has not been resolved
within ten (10) Days of such meeting, each Party shall refer the dispute to a senior executive of
its organization who shall meet at a mutually agreeable location within fourteen (14) Days to
resolve the dispute.

     16.3. Arbitration. If the matter has not been resolved within fourteen (14) Days of the
meeting of the senior executives, the Parties shall submit the dispute to arbitration under the
terms and conditions set forth herein. Any dispute or need of interpretation arising out of this
Agreement or which is disputed shall be submitted to binding arbitration by one arbitrator with
knowledge of and over five years of professional experience in connection with similar transactions
who has not previously been employed by either Party, and does not have a direct or indirect
interest in either Party or the subject matter of the arbitration. Such arbitrator shall either be
as mutually agreed by the Parties within ten (10) Days after written notice from either Party
requesting arbitration, or failing agreement, shall be selected under the expedited rules of the
American Arbitration Association (the “AAA”). The rules of the AAA shall apply to the extent not
inconsistent with the rules herein specified. Either Party may initiate arbitration by written
notice to the

20

 

other Party and the arbitration shall be conducted according to the following: (a) the arbitration
hearing shall commence no later than thirty (30) Days of the selection of the arbitrator, (b) not
later than seven (7) Days prior to the hearing date set by the arbitrator each Party shall submit a
brief detailing its factual and legal position and a final offer for the settlement of the dispute,
including a dollar amount, if applicable, (c) the hearing shall be conducted on a confidential
basis without continuance or adjournment, (d) the Parties shall divide equally the cost of the
arbitrator and the hearing and each Party shall be responsible for its own expenses and those of
its counsel and representatives and (e) evidence concerning any offer made or the details of any
negotiation prior to arbitration and the cost to the Parties of their representatives and counsel
shall not be permissible. The arbitrator shall include in his report/award a list of findings, with
supporting evidentiary references, upon which he has relied in making his decision. The award
rendered by the arbitrator shall be final and binding upon the Parties, and judgment upon the award
rendered by the arbitrator may be entered by any court having jurisdiction thereof. The place of
arbitration shall be Houston, Texas. Each Party understands that this Agreement contains an
agreement to arbitrate with respect to any dispute. After signing this Agreement, each Party
understands that it will not be able to bring a lawsuit concerning any dispute that may arise that
is covered by this arbitration provision. Instead, each Party agrees to submit any such dispute to
an impartial arbitrator. Any monetary award of the arbitrator may be enforced by the Party in whose
favor such monetary award is made in any court of competent jurisdiction.

     16.4. General Rules and Provisions. Notwithstanding anything to the contrary contained
herein, and regardless of any procedures or rules of the AAA, it is expressly agreed that the
following shall apply and control over any other provision in this Article XVI.

	 	a.	 	The arbitrator shall have no authority to award punitive damages or attorneys’ fees.
	 
	 	b.	 	The fees and expenses of the mediator and arbitrator shall be shared equally
by the Parties, and each Party shall bear its own costs and expenses.
	 
	 	c.	 	The Parties may, by written agreement signed by both Parties, alter any
time deadline, location(s) for meeting(s), or procedure outlined in this Article XVI
or in the AAA rules.
	 
	 	d.	 	Time is of the essence for purposes of the provisions of this Article XVI.
	 
	 	e.	 	Either Party may seek a restraining order, temporary injunction, or other
provisional judicial relief if the Party in its sole judgment believes that such
action is necessary to avoid irreparable injury or to preserve the status quo. The
Parties will continue to participate in good faith in the procedures despite any
request for provisional relief.
	 
	 	f.	 	The arbitrator shall have no authority, power or right to alter, change,
amend, modify, waive, add to or delete from any of the provisions of this Agreement,
and any award rendered by the arbitrator shall be consistent with the terms and
conditions of this Agreement.

     16.5. Governing Law. This Agreement shall be governed by and construed in accordance with the
laws of the State of Texas, exclusive of any conflict of laws provisions thereof that would refer
jurisdiction to the laws of another state.

ARTICLE XVII

NOTICES

     17.1 Writing. Any notice, demand, offer or other written instrument required or permitted to
be given pursuant to this Agreement shall be in writing signed by the Party giving such notice,
demand or offer, and shall be sent by telefax (confirmed by a mailed or courier copy received
within five (5) Days), then by hand delivery, overnight courier, telegram or registered or
certified mail, return receipt requested, to the other Party at such address as set forth below.

21

 

If delivered to BAMAGAS:

BAMAGAS Company 
1100
Louisiana, Suite 2900

Houston, Texas 77002
 Attn:
President 
Tel.: (713)
650-8900 
Fax: (713)
653-6711

With a copy to:

Enbridge (U.S.) Inc.

1100 Louisiana, Suite 2900

Houston, Texas 77001

Attn: President

Tel.: (713) 650-8900

Fax: (713) 653-6711

If delivered to CES:

Calpine Energy Services, L.P.

700 Louisiana, Suite 2700

Houston, Texas 77002

Attention: Jeff Rawls, Vice President — Producer Services

Tel.: (713) 830-8636

Fax: (713) 830-8712

With a copy to:

Calpine Corporation 
50 West
San Fernando Street
 San
Jose, California 95113

Attention: General Counsel

Tel.: (408) 995-5115 

Fax: (408) 975-4648

     Each Party shall have the right to change the place to which notice shall be sent or
delivered or to specify one additional address to which copies of notices may be sent, in either
case by similar notice sent or delivered in like manner to the other Party.

     17.2 Timing of Receipt. Without limiting any other means by which a Party may be able to
prove that a notice has been received by the other Party, a notice shall be deemed to be duly
received:

	 	a.	 	If delivered by hand, overnight courier or telegram, on the date when
received at the address of the recipient;
	 
	 	b.	 	If sent by registered or certified mail, on the date of the return receipt; or
	 
	 	c.	 	If sent by telefax, upon receipt by the sender of acknowledgment or
transmission report generated by the machine from which the telefax was sent
indicating that the telefax was sent in its entirety and received at the recipient’s
telefax number.

ARTICLE XVIII

MISCELLANEOUS

     18.1 Financial Responsibility. Within two (2) Business Days following execution hereof BAMAGAS
shall furnish to CES an absolute and unconditional guaranty from Enbridge (U.S.) Inc. to CES (which
guaranty will terminate prospectively upon CES’ exercise of its purchase rights under Section 12.3

22

 

or a sale of the Pipeline to an unaffiliated third party after compliance with the provisions of
Section 13.2) in the form and content of Exhibit 5. Contemporaneously with the execution and
delivery of this Agreement, CES shall furnish to BAMAGAS an absolute, unconditional guaranty from
Calpine to BAMAGAS in the form and content of Exhibit 6 (the “Calpine Corporation Guaranty”).

     18.2 Captions. Captions of the Articles and Sections of this Agreement are for convenience and
reference only, and the words contained therein shall in no way be held to explain, modify,
amplify, or aid in the interpretation, construction or meaning of the provisions of this Agreement.

     18.3 Non Disclosure. Any information disclosed by a Party that is described herein or that is
marked or identified as confidential or proprietary will be treated as confidential information and
shall not be used or disclosed by the receiving Party (other than to its Affiliates) without the
prior consent of the disclosing Party, except when required to be disclosed by Applicable Law or in
connection with regulatory filings. In addition, no Party shall disclose any of the terms of this
Agreement (other than to its Affiliates, its lenders or potential lenders, and any other parties
now or hereafter owning an equity interest in the Pipeline, the BAMAGAS Lateral(s), the Morgan
Energy Center, or any of the Parties to this Agreement) without the prior written consent of the
other Party. The foregoing notwithstanding, the steam hosts for Morgan Energy Center shall have
the right to review BAMAGAS’ invoices to CES for transportation service.

     Confidential information does not include information that: (i) is or becomes a part of the
public domain through no fault of the receiving Party and without breach of this Agreement or
other confidentiality agreement; (ii) is received from a third party in good faith where such
third party is not obligated to a Party to keep such information confidential; (iii) was in the
receiving Party’s possession prior to receipt from the other Party; or (iv) was independently
developed by the receiving Party without reference to any such confidential information. To the
extent that either Party is required by (i) an applicable federal or state securities law, order,
rule or regulation; or (ii) an applicable federal or state law, order, rule or regulation relating
to obtaining necessary or desirable permits; to make disclosure of such information or of the
terms of the transactions contemplated and the transactions themselves, then such Party shall be
permitted to make only those disclosures as are reasonably necessary to be compliant with such
applicable law, order, rule or regulation and shall furnish a copy of such disclosure to the other
Party as far in advance of such disclosure as is reasonably practicable.

     18.4 Press Releases and Public Announcements. The Parties may issue press releases upon the
execution of this Agreement, provided that each Party shall submit to the other Party a copy of its
intended press release not less than two (2) Business Days prior to the time of release, for such
other Party’s approval. Any Party may make any public disclosure it believes in good faith is
required by applicable law or any listing or trading agreement concerning its publicly traded
securities (in which case the disclosing Party will use its reasonable best efforts to advise the
other Party before making the disclosure).

     18.5 Amendments. No change, amendment or modification of this Agreement, and no further
agreement to be made pursuant to this Agreement, shall be valid or binding upon the Parties unless
such change, amendment or modification shall be in writing and duly executed by both Parties.

     18.6 Severability. The invalidity of one or more phrases, sentences, clauses or Sections
contained in this Agreement shall not affect the validity of the remaining portions of this
Agreement so long as the material purposes of this Agreement can be determined and effectuated.

     18.7 Entire Agreement. This Agreement sets forth all of the promises, agreements, conditions
and understandings between the Parties relating to the subject matter hereof and supersedes any
and all negotiations, other agreements and representations made prior to the date hereof with
respect to the same subject matter.

     18.8 No Waiver. Any failure of either Party to enforce any of the provisions of this
Agreement or to require compliance with any of its terms at any time during the pendency of this
Agreement, shall in no way affect the validity of this Agreement, or any part hereof, and shall
not be deemed a waiver of the right of such Party thereafter to enforce any and each such
provision. Any consent or approval given pursuant to this Agreement shall be limited to its
express terms and shall not otherwise

23

 

increase the obligations of the Party giving such consent or approval or otherwise reduce the
obligations of the Party receiving such consent or approval.

     18.9 Further Assurances. Each Party agrees to execute and deliver all further instruments and
documents, and take any further action that may be reasonably necessary, to effectuate the purposes
and intent of this Agreement.

     18.10 Counterparts. This Agreement may be executed in counterparts, each of which shall be
deemed to be an original and both of which together shall be deemed to constitute one and the same
agreement.

     18.11 Exhibits, Attachments and Schedules. All references in the Agreement to Exhibits,
Attachments and Schedules shall be deemed to be references to the Exhibits, Attachments and
Schedules attached hereto as the same may be amended and supplemented pursuant to the terms of this
Agreement or otherwise by mutual written agreement of the Parties.

     IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date first
hereinabove written.

BAMAGAS Company

	 	 	 	 	 

	By:

	 	/s/ I.J. Berthelot II
	 	 
	 

	 	Name: I.J. Berthelot II	 	 
	 

	 	Title: Vice President	 	 

	 	 	 	 	 

	CALPINE ENERGY SERVICES, L.P.	 	 
	By Its General Partner,	 	 
	CPN Energy Services GP, Inc.	 	 
	 
	 	 	 	 
	By:

	 	/s/ Diana Knox
 

	 	 
	 

	 	Name: Diana Knox	 	 
	 

	 	Title: Sr. Vice President	 	 

24

 

EXHIBIT 1

Omitted

 

 

EXHIBIT 2

GAS QUALITY SPECIFICATIONS

	1.	 	Natural or Artificial Gas:
	 
	 	 	The gas received or delivered by the Pipeline shall be a combustible gas consisting wholly
of, or a mixture of:

	 	(A)	 	Natural gas of the quality and composition produced in its natural state
except that the pipeline may extract or permit the extraction of any of the
constituents thereof except methane.
	 
	 	(B)	 	Gas generated by vaporization of Liquefied Natural Gas (LNG).
	 
	 	(C)	 	Manufactured, reformed, or mixed gas consisting essentially of hydrocarbons
of the quality and character produced by nature in the petroleum, oil and gas fields
with physical properties such that when the artificial pipeline gas is commingled with
natural gas, the two become indistinguishable.

	2.	 	Total Heating Value:

	 	(A)	 	No gas delivered hereunder shall have a total heating value at the Point of
Receipt either below Nine Hundred Sixty Seven (967) or above one thousand one hundred
(1100) Btu per cubic foot of dry gas at a temperature of sixty degrees (60°)
Fahrenheit and under a pressure of 14.73 psia.
	 
	 	(B)	 	The total heating value shall be determined by gas chromatographic analysis
using AGA 3-1990 factors or any revision thereof, or by other methods mutually agreed
upon by Customer and Pipeline.
	 
	 	(C)	 	The average total heating value of the gas shall be determined for any
billing period by method or methods mutually agreed upon by Customer and Pipeline.

	3.	 	Composition:

	 	(A)	 	Solids:
	 
	 	 	 	The gas shall be commercially free, under continuous gas flow conditions, from
objectionable odors, solid matter, dust, gums, and gum-forming constituents which
might interfere with its merchantability or cause injury to or interference with
proper operations of the pipelines, compressor stations, meters, regulators or
other appliances through which it flows.
	 
	 	(B)	 	Oxygen:
	 
	 	 	 	The gas shall not have an uncombined oxygen content in excess of two-tenths
(0.2) of one percent (1%) by volume, and both parties shall make every reasonable
effort to keep the gas free from oxygen.
	 
	 	(C)	 	Carbon Dioxide and Nitrogen:

 

 

	 	 	 	The gas shall not contain more than four percent (4%) by volume, of a combined total of
carbon dioxide and nitrogen; it being understood, however, that the total carbon dioxide
content shall not exceed three percent (3%) by volume.
	 
	 	(D)	 	Liquids:
	 
	 	 	 	The gas shall be free of water and hydrocarbons in liquid form at the temperature and
pressure at which the gas is received and delivered.
	 
	 	(E)	 	Hydrogen Sulfide:
	 
	 	 	 	The gas shall not contain more than one-quarter (0.25) grain (4 ppm) of hydrogen sulfide per
one-hundred (100) cubic feet.
	 
	 	(F)	 	Total Sulphur:
	 
	 	 	 	The gas shall not contain more than ten (10) grains of total sulphur, excluding any
mercaptan sulphur, per one-hundred (100) cubic feet.
	 
	 	(G)	 	Temperature:
	 
	 	 	 	The gas shall not have a temperature of more than one-hundred twenty degrees (120°)
Fahrenheit.
	 
	 	(H)	 	Water Vapor:
	 
	 	 	 	The gas shall not contain in excess of seven (7) pounds of water vapor per million cubic
feet.
	 
	 	(I)	 	Liquefiable Hydrocarbons:
	 
	 	 	 	The gas shall not contain more than two-tenths (0.2) gallon per thousand cubic feet, of
those certain liquefiable hydrocarbons commonly referred to as natural gasoline, as
determined by gas chromatographic analysis.
	 
	 	(J)	 	Microbiological Agents:
	 
	 	 	 	     The gas shall not contain, either in the gas or in any liquids with the gas, any
microbiological organism, active bacteria or bacterial agent capable of contributing to or
causing corrosion and/or operational and/or other problems.
	 
	 	 	 	     Microbiological organisms, bacteria or bacterial agents include, but are not limited
to, sulfate reducing bacteria (SRB) and acid producing bacteria (APB). Tests for bacteria
or bacterial agents shall be conducted on samples taken from the meter run or the
appurtenant piping using American Petroleum Institute (API) test method API-RP38 or any
other test method acceptable to Pipeline and Customer which is currently available or may
become available at any time.

This Exhibit may be amended from time to time by mutual consent of the parties, such consent not
to be unreasonably withheld to conform to stricter requirements imposed by either the upstream
suppliers or transporters at the point(s) of receipt.

 

 

EXHIBIT 3

POINTS OF RECEIPT/DELIVERY

Points of Receipt

The proposed interconnection between the BAMAGAS Pipeline and Tennessee Gas Pipeline Company
located in or near Section 2, Township 4 South, Range 13 West, of Colbert County, Alabama.

The proposed interconnection between the BAMAGAS Pipeline and Texas Eastern Transmission Company
located in or near Section 8, Township 4 South, Range 12 West, of Colbert County, Alabama.

The proposed interconnection between the BAMAGAS Pipeline and Midcoast Interstate Transmission
Company located at a mutually agreeable location in Morgan County, Alabama.

Points of Delivery

The proposed interconnection between the BAMAGAS Pipeline and Morgan Energy Center located either
in or near Section 4, Township 5 South, Range 5 West or Section 11, Township 5 South, Range 5 West,
of Morgan County, Alabama (as designated pursuant to the Natural Gas Pipeline Transportation
Agreement). More specifically, near the corner of 10th Street and Red Hat Road.

 

 

EXHIBIT 4

PIPELINE TERMINATION VALUE

	 	 	 	 	 
	YEAR OF    	 	 
	TERMINATION OF 	 	 
	CONSTRUCTION AND    	 	 
	TRANSPORTATION    	 	TERMINATION VALUE MORGAN
	AGREEMENT    	 	ENERGY CENTER
	1
	 	$	33,500,000	 
	2
	 	$	32,755,556	 
	3
	 	$	32,011,111	 
	4
	 	$	31,266,667	 
	5
	 	$	30,522,222	 
	6
	 	$	29,777,778	 
	7
	 	$	29,033,333	 
	8
	 	$	28,288,889	 
	9
	 	$	27,544,444	 
	10
	 	$	26,800,000	 
	11
	 	$	26,055,556	 
	12
	 	$	25,311,111	 
	13
	 	$	24,566,667	 
	14
	 	$	23,822,222	 
	15
	 	$	23,077,778	 
	16
	 	$	22,333,333	 
	17
	 	$	21,588,889	 
	18
	 	$	20,844,444	 
	19
	 	$	20,100,000	 
	20
	 	$	19,355,556	 
	21
	 	$	18,611,111	 
	22
	 	$	17,866,667	 
	23
	 	$	17,122,222	 
	24
	 	$	16,377,778	 
	25
	 	$	15,633,333	 
	26
	 	$	14,888,889	 
	27
	 	$	14,144,444	 
	28
	 	$	13,400,000	 
	29
	 	$	12,655,556	 
	30
	 	$	11,911,111	 
	31
	 	$	11,166,667	 
	32
	 	$	10,422,222	 
	33
	 	$	9,677,778	 
	34
	 	$	8,933,333	 
	35
	 	$	8,188,889	 
	36
	 	$	7,444,444	 
	37
	 	$	6,700,000	 
	38
	 	$	5,955,556	 
	39
	 	$	5,211,111	 
	40
	 	$	4,466,667	 
	41
	 	$	3,722,222	 
	42
	 	$	2,977,778	 
	43
	 	$	2,233,333	 
	44
	 	$	1,488,889	 
	45
	 	$	744,444	 

Year 1 begins on the “First Delivery Date” and ends 364 days later (365 days if February of
that year contains 29 days).

Year 2, (and/or subsequent years(s)) begin on the ending date of year 1 (and/or subsequent
years(s)) and ends 364 days later (365 days later if February of that year contains 29 days).

 

 

EXHIBIT 5

GUARANTY

     This GUARANTY dated as of June 28, 2000, is made by Enbridge (U.S.), Inc. (“Enbridge”),
a _______ corporation for the benefit of Calpine Energy Services, L.P. (“CES”)

     WHEREAS, BAMAGAS Company (“BAMAGAS”), a Delaware corporation, and CES , a Delaware limited
partnership have entered into that certain “Natural Gas Pipeline Construction Agreement” dated as
of June 28, 2000 and that certain Natural Gas Pipeline Construction and Transportation Agreements
of even date (collectively “Agreements”);

     WHEREAS, pursuant to Section 18.1 of the Agreements, BAMAGAS agreed to furnish CES an
absolute, unconditional guaranty from Enbridge to CES of BAMAGAS’s payment obligations to CES  under the Agreements;

     NOW, THEREFORE, in consideration of the foregoing and for good and sufficient consideration
in hand received by Enbridge, Enbridge agrees as follows:

     1. Guaranty. Enbridge irrevocably and unconditionally guarantees to CES the prompt and
complete payment when due, by acceleration or otherwise, of all amounts payable or becoming payable
by BAMAGAS to CES and the payment of all present and future liabilities of all kinds of BAMAGAS to
CES under or pursuant to the Agreements, including, without limitation, damages suffered by CES by
reason of BAMAGAS’ breach of any of its representations, warranties, indemnities, covenants and
other obligations to CES under the Agreement and any amendments thereto (collectively the
“Obligations”) . This is a guaranty of payment and not of collection. If BAMAGAS fails to pay or
perform any of the Obligations, for any reason, Enbridge will pay or cause to be paid such
Obligations directly for CES’ benefit promptly upon CES’ demand therefor and without CES having to
make prior demand on BAMAGAS. This Guaranty is a primary obligation of Enbridge and all payments
hereunder shall be made without reduction, whether by offset, payment in escrow, or otherwise,
except to the extent of any defenses to payment or performance which BAMAGAS may have under the
Agreement. Notwithstanding anything to the contrary herein, this Guaranty shall continue to be
effective or reinstated, as the case may be, if at any time payment of the Obligations, or any part
thereof, is rescinded or must otherwise be returned by CES upon the insolvency, bankruptcy or
reorganization of BAMAGAS or otherwise, all as though the payment of such Obligations had not been
made.

     2. Enbridge’s Obligations. Subject to paragraph 3 below, Enbridge’s obligations
under this Guaranty are absolute and unconditional, shall remain in force until all Obligations
have been paid and performed and shall not be released or discharged for any reason whatsoever
prior to such payment and performance, including without limitation:

     (i) the extension of time for payment or performance of any Obligation or the amendment,
extension or renewal of the Agreements or any Obligation, except that any such extension,
amendment or renewal shall not enlarge Enbridge’s obligations under this Guaranty and Enbridge
shall have the benefit of any such extension, amendment or renewal to the same extent as BAMAGAS
(e.g., if BAMAGAS’ time for payment of an Obligation has been extended, Enbridge shall have no
obligation under this Guaranty to make payment of such Obligation until such time as BAMAGAS is
required under the extension to make payment);

          (ii) any delay or failure by CES to enforce or exercise any right or remedy under the
Agreement, or waiver by CES of any such right or remedy;

          (iii) the release or discharge of BAMAGAS from the performance or observance of any
Obligations by operation of law or otherwise, but only if and to the extent BAMAGAS would
otherwise have incurred such Obligations in the absence of such release or discharge;

          (iv) any transfer, assignment or mortgaging by CES of any interest in the
Agreements or this Guaranty;

 

 

          (v) the voluntary or involuntary liquidation, dissolution, sale or other
disposition of
all or substantially all the assets and liabilities, or the voluntary or involuntary
receivership, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization or
other similar proceeding affecting BAMAGAS, or the disaffirmance of the Agreements in any such
proceeding; or

          (vi) any merger, consolidation or other reorganization to which BAMAGAS, Enbridge or any
related entity is a party, or any direct or indirect sale or disposition of Enbridge’s or
Enbridge’s assets or Enbridge’s direct or indirect ownership interest in CES.

     Furthermore, Enbridge’s obligations under this Guaranty to CES shall not be limited or
impaired in any respect by reason of CES having recourse only to certain assets of BAMAGAS in
connection with BAMAGAS’ obligations to CES  under the Agreement.

     3. Assignment. Enbridge may not assign this Guaranty or its obligations thereunder except as
expressly provided in Section 13.1 of the Agreements.

     4. Waivers by Enbridge. Enbridge waives notice of the acceptance of this Guaranty,
demand or presentment for payment to BAMAGAS or the making of any protest, notice of the amount of
the Obligations outstanding at any time, notice of nonpayment or failure to perform on the part of
BAMAGAS, notice of any amendment, modification or waiver of or under the Agreements, and all other
notices or demands not specifically required hereunder.

     5. Representations and Warranties. Enbridge hereby represents and warrants that (i)
it has all necessary and appropriate powers and authority to execute and perform under this
Guaranty, (ii) that such Guaranty constitutes its legal, valid and binding obligations enforceable
against it in accordance with its terms (except as enforceability may be limited by bankruptcy,
insolvency, moratorium and other similar laws affecting enforcement of creditors’ rights in general
and general principles of equity), and (iii) it expects to derive benefits from each and every
extension of credit to BAMAGAS.

     6. Miscellaneous. No provision of this Guaranty may be amended or waived except by a written
instrument executed by Enbridge and CES. This Guaranty shall not be deemed to benefit any person
except BAMAGAS and CES. This Guaranty shall inure to the benefit of CES and its successors and
assigns. This Guaranty shall be governed by the laws of the State of Texas (excluding any choice
of laws rules which would require the application of the law of another jurisdiction).

     7. Attorneys’ Fees. Enbridge agrees to pay all attorneys’ fees, court costs and other expenses
of collection paid or incurred by CES in enforcing Enbridge’s obligations to CES under this
Agreement.

     IN WITNESS WHEREOF, Enbridge has executed this Guaranty as of the date first above written.

	 	 	 	 	 

	ENBRIDGE (U.S.) INC.	 	 
	 
	 	 	 	 
	By:
	 	 	 	 
	Name:

	 	 

	 	 
	Title:

	 	 

	 	 
	Date:

	 	 

	 	 
	 

	 	 

	 	 

 

 

EXHIBIT 6

GUARANTY

     This GUARANTY dated as of June 28, 2000, is made by Calpine Corporation (“Calpine”), a
Delaware corporation for the benefit of BAMAGAS Company (“BAMAGAS”).

     WHEREAS, BAMAGAS, a Delaware corporation, Calpine Energy Services, L.P. (“CES”), a Delaware
limited partnership, have entered into that certain “Natural Gas Pipeline Transportation
Agreement” dated as of June 28, 2000, and that certain Natural Gas Pipeline Construction and
Transportation Agreement of even date (collectively “Agreements”);

     WHEREAS, pursuant to Section 18.1 of the Agreements, CES agreed to furnish BAMAGAS an
absolute, unconditional guaranty from Calpine to BAMAGAS of CES’ payment obligations to BAMAGAS
under the Agreements;

     NOW, THEREFORE, in consideration of the foregoing and for good and sufficient consideration
in hand received by Calpine, Calpine agrees as follows:

     1. Guaranty. Calpine irrevocably and unconditionally guarantees to BAMAGAS the
prompt and complete payment when due, by acceleration or otherwise, of all amounts payable
or becoming payable by CES to BAMAGAS and the payment of all present and future liabilities
of all kinds of CES to BAMAGAS under or pursuant to the Agreement, including, without
limitation, damages suffered by BAMAGAS by reason of CES’ breach of any of its
representations, warranties, indemnities, covenants and other obligations to BAMAGAS under
the Agreement and any amendments thereto (collectively the “Obligations”) . This is a
guaranty of payment and not of collection. If CES fails to pay or perform any of the
Obligations, for any reason, Calpine will pay or cause to be paid such Obligations directly
for BAMAGAS’ benefit promptly upon BAMAGAS’ demand therefor and without BAMAGAS having to
make prior demand on CES. This Guaranty is a primary obligation of Calpine and all payments
hereunder shall be made without reduction, whether by offset, payment in escrow, or
otherwise, except to the extent of any defenses to payment or performance which CES may
have under the Agreement. Notwithstanding anything to the contrary herein, this Guaranty
shall continue to be effective or reinstated, as the case may be, if at any time payment of
the Obligations, or any part thereof, is rescinded or must otherwise be returned by BAMAGAS
upon the insolvency, bankruptcy or reorganization of CES or otherwise, all as though the
payment of such Obligations had not been made.

     2. Calpine’s Obligations. Subject to paragraph 3 below, Calpine’s obligations under this
Guaranty are absolute and unconditional, shall remain in force until all Obligations have been paid
and performed and shall not be released or discharged for any reason whatsoever prior to such
payment and performance, including without limitation:

     (i) the extension of time for payment or performance of any Obligation or the amendment,
extension or renewal of the Agreements or any Obligation, except that any such extension, amendment
or renewal shall not enlarge Calpine’s obligations under this Guaranty and Calpine shall have the
benefit of any such extension, amendment or renewal to the same extent as CES (e.g., if CES’ time
for payment of an Obligation has been extended, Calpine shall have no obligation under this
Guaranty to make payment of such Obligation until such time as CES is required under the extension
to make payment);

     (ii) any delay or failure by BAMAGAS to enforce or exercise any right or remedy under the
Agreement, or waiver by BAMAGAS of any such right or remedy;

     (iii) the release or discharge of CES from the performance or observance of any Obligations
by operation of law or otherwise, but only if and to the extent CES would otherwise have incurred
such Obligations in the absence of such release or discharge;

     (iv) any transfer, assignment or mortgaging by BAMAGAS of any interest in the Agreements or
this Guaranty;

 

 

     (v) the voluntary or involuntary liquidation, dissolution, sale or other disposition
of all or substantially all the assets and liabilities, or the voluntary or involuntary
receivership, insolvency, bankruptcy, assignment for the benefit of creditors,
reorganization or other similar proceeding affecting CES, or the disaffirmance of the
Agreements in any such proceeding; or

     (vi) any merger, consolidation or other reorganization to which CES, Calpine or any related
entity is a party, or any direct or indirect sale or disposition of Calpine’s or CES’s assets or
Calpine’s direct or indirect ownership interest in CES.

     Furthermore, Calpine’s obligations under this Guaranty to BAMAGAS shall not be limited or
impaired in any respect by reason of BAMAGAS having recourse only to certain assets of CES in
connection with CES’ obligations to BAMAGAS under the Agreement.

     3. Assignment. Calpine may not assign this Guaranty or its obligations thereunder except as
expressly provided in Section 13.1 of the Agreements.

     4. Waivers by Calpine. Calpine waives notice of the acceptance of this Guaranty,
demand or presentment for payment to CES or the making of any protest, notice of the amount of the
Obligations outstanding at any time, notice of nonpayment or failure to perform on the part of
CES, notice of any amendment, modification or waiver of or under the Agreement, and all other
notices or demands not specifically required hereunder.

     5. Representations and Warranties. Calpine hereby represents and warrants that (i) it
has all necessary and appropriate powers and authority to execute and perform under this Guaranty,
(ii) that such Guaranty constitutes its legal, valid and binding obligations enforceable against it
in accordance with its terms (except as enforceability may be limited by bankruptcy, insolvency,
moratorium and other similar laws affecting enforcement of creditors’ rights in general and general
principles of equity), and (iii) it expects to derive benefits from each and every extension of
credit to CES or CES.

     6. Miscellaneous. No provision of this Guaranty may be amended or waived except by a written
instrument executed by Calpine and BAMAGAS. This Guaranty shall not be deemed to benefit any
person except CES and BAMAGAS. This Guaranty shall inure to the benefit of BAMAGAS and its
successors and assigns. This Guaranty shall be governed by the laws of the State of Texas
(excluding any choice of laws rules which would require the application of the law of another
jurisdiction).

     7. Attorneys’ Fees. Calpine agrees to pay all attorneys’ fees, court costs and other expenses
of collection paid or incurred by BAMAGAS in enforcing Calpine’s obligations to BAMAGAS
under this Agreement.

     IN WITNESS WHEREOF, Calpine has executed this Guaranty as of the date first above written.

	 	 	 	 	 

	CALPINE CORPORATION	 	 
	 
	 	 	 	 
	By:
	 	 	 	 
	Name:

	 	 

	 	 
	Title:

	 	 

	 	 
	Date:

	 	 

	 	 
	 

	 	 

	 	 

 

 

EXHIBIT 7

PROPERTY RIGHTS ASSIGNABLE TO BAMAGAS

None. CES will supplement this Exhibit over the term of the Agreement upon acquisition or
assignment of any property rights.

 

 

EXHIBIT 8

OPERATIONAL BALANCING AGREEMENT

BETWEEN

BAMAGAS COMPANY 

AND

CALPINE ENERGY SERVICES, L.P.

     This Operational Balancing Agreement
 (this “Agreement”) is entered into as of the
________________
between BAMAGAS Company a Delaware corporation
(“BAMAGAS”), and Calpine Energy Services, L.P. a Delaware limited
partnership (“CES”) (individually a “Party” or collectively “Parties”).

     WHEREAS, BAMAGAS CES entered into that certain Natural Gas Pipeline Transportation Agreement
dated June 28, 2000, (“Transportation Agreement”), under which BAMAGAS will construct, own,
operate and maintain a new intrastate pipeline and related facilities (whether existing or new) in
the State of Alabama (“Pipeline”) and will transport on a firm basis on the Pipeline, certain
quantities of natural gas (“Gas”) to the Morgan Energy Center (as said term is defined in the
Transportation Agreement);

     WHEREAS, the Pipeline interconnects at the Interconnection Point(s) specified on Attachment 2
attached hereto;

     WHEREAS, pursuant to the Natural Gas Pipeline Transportation Agreement CES, will cause Gas to
be delivered to BAMAGAS at the Interconnection Point(s) for transportation and redelivery by
BAMAGAS at the Morgan Energy Center;

     WHEREAS, from time to time, the quantities of Gas actually delivered to BAMAGAS at the
Interconnection Point(s) will be either greater than or less than the quantities of Gas nominated,
confirmed and scheduled by the Parties, resulting in inadvertent over
- or underdeliveries of CES’
scheduled quantities;

     WHEREAS,
the Parties desire to provide for the elimination of such over - and under -
deliveries by adjusting deliveries and receipts of Gas at the Interconnection Point(s);

     NOW,
THEREFORE the Parties agree that such over - or underdeliveries of Gas at the
Interconnection Point(s) shall be eliminated in the following manner:

ARTICLE I

CORRECTION OF OPERATIONAL IMBALANCES

	1.1	 	Operational Imbalance(s) - The Parties intend that the MMBtu of Gas actually delivered and
received each day at each Interconnection Point will equal the confirmed scheduled
nominations of the Parties to be delivered or received therefrom. Any variance between the
actual physical flow of Gas at an Interconnection Point each day and the confirmed scheduled
nominations of receipts and deliveries for that Interconnection Point for such day is an
“Operational Imbalance”, which Operational Imbalance is the responsibility of the Parties to
eliminate pursuant to this Agreement.

 

 

	1.2	 	Corrections During the Month - BAMAGAS shall provide to CES on a daily basis
electronically or
in writing the estimated daily metered Gas quantities, or actual daily metered Gas
quantities, if
applicable, for purposes of adjustments to determine the estimated or actual Operational
Imbalance
at each Interconnection Point, as applicable. BAMAGAS shall also make available to CES the
monthly Operational Imbalance at each delivery or receipt meter. Subject to CES’ available
capacity on the Pipeline (CES’ available capacity being the difference between actual
deliveries for
the account of CES and the Firm Transportation Quantity as said term is defined in the
Natural Gas
Pipeline Transportation Agreement), CES may correct the Operational Imbalance in kind by
nominating make up Gas quantities on any day during the same month in which the Operational
Imbalance occurs in accordance with BAMAGAS’ nomination deadline procedures.
	 
	1.3	 	Corrections in Subsequent Periods — The cumulative Operational Imbalance at each
Interconnection
Point each month will be determined and communicated by BAMAGAS to CES electronically or
in writing as soon as possible, but no later than the first business day after the last day of each
month. To the extent that BAMAGAS has the right to balance in kind pursuant to the respective
operational balancing agreements it enters into with CES’ upstream suppliers or transporters, as
identified on Exhibit 3 to the Natural Gas Pipeline Transportation Agreement (collectively, the
“BAMAGAS Balancing Agreements”), CES shall have the right to balance in kind the cumulative
Operational Imbalance(s) during the month subsequent to the month in which the Operational
Imbalance(s) were created (“Subsequent Month”) by nominating additional Gas quantities in
accordance with the procedures of the applicable BAMAGAS Balancing Agreements. To the
extent BAMAGAS does not have the right to balance in kind under any of the BAMAGAS
Balancing Agreements any or all of the cumulative Operational Imbalance at each Interconnection
Point during any given month or, if BAMAGAS has such right but CES fails to correct the monthly
Operational Imbalance on or before the last day of the Subsequent Month, then BAMAGAS shall
be entitled to cash out the remaining Operational Imbalance quantities for the same price and on the
same terms and provisions as provided in the applicable BAMAGAS Balancing Agreements; it
being the express intent of the Parties that BAMAGAS shall at all times be kept whole by CES and
CES with respect to any differences in the price or method of balancing Operational Imbalances at
each Interconnection Point each month between this Agreement and the applicable BAMAGAS
Balancing Agreement(s) then in effect. Measurement of Gas under this Agreement shall be made
in accordance with the applicable provisions in the FERC Gas Tariffs of the interstate pipelines
interconnecting with BAMAGAS at the respective Interconnection Point(s).
	 
	1.4	 	BAMAGAS shall endeavor to negotiate the terms and provisions of the BAMAGAS Balancing
Agreements so that balancing may be had by BAMAGAS in kind during the month subsequent to
the month in which the imbalances were created; however, if BAMAGAS is unable to negotiate
such terms and provisions, but CES is able to do so, then BAMAGAS, at its election, may
utilize
those operation balancing agreement(s) of CES with CES’ upstream suppliers or transporters
containing such provisions.
	 
	1.5	 	In the event that a capacity constraint occurs on BAMAGAS’ Pipeline which results in
curtailment of Gas quantities at an Interconnection Point, BAMAGAS shall determine the
reallocation of Gas quantities to shippers on the Pipeline in accordance with Section 2.8 of
the Transportation Agreement.

 

 

ARTICLE II

TERM

	 	 	Duration of Agreement - This Agreement shall be effective from the date hereof and shall
remain in effect until such time as the Natural Gas Pipeline Transportation Agreement
between BAMAGAS and CES terminates.

ARTICLE III

MISCELLANEOUS

	3.1	 	Disputes - If a dispute arise as a result of the provisions of this Agreement, the Parties
will enter
into good faith negotiations to resolve the dispute and amend this Agreement, if
appropriate. If the
Parties are unable to resolve such problems as a result of such negotiations the dispute
shall be
submitted to arbitration in accordance with Article XVII of the Transportation Agreement.
	 
	3.2	 	Governing Bodies - This Agreement shall be subject to all applicable laws, Federal or State
and to
all applicable rules and regulations of any duly authorized Federal, State or other
government
agency having jurisdiction over the transactions described herein. The
interpretation and
performance of this Agreement shall be in accordance with and controlled by the laws of the
State
of Texas, without regard to principles of conflicts of law.
	 
	3.3	 	Waivers - No waiver by either Party of any one or more defaults by the other in the
performance of
this Agreement shall operate or be construed as a waiver of any future default or defaults,
whether
of a like or different character.
	 
	3.4	 	Notices - Any notice under this Agreement shall be in writing and mailed to the post office
address
of the party intended to receive the same, as follows:

NOTICES:

BAMAGAS Company 
1100
Louisiana, Suite 2900

Houston, Texas 77002

Attn: President

Tel.: (713) 650-8900

Fax: (713) 653-6711

Calpine Energy Services, L.P.

700 Louisiana, Suite 2700

Houston, Texas 77002

Attention: Jeff Rawls, Vice President – Producer

Services

Tel.: (713) 830-8636

Fax: (713) 830-8712

	 	 	With regard to operational matters, the Parties shall have the right to designate different
personnel or locations to receive notices.
	 
	3.5	 	Conflicts - If there is any conflict or discrepancy between this Agreement and a BAMAGAS
Balancing Agreement with regard to allocations at any Interconnection Point, the terms of the
applicable BAMAGAS Balancing Agreement shall govern and control.

 

 

The Parties’ signature below will evidence their agreement to this Operational Balancing
Agreement.

	 	 	 	 	 

	 	 	BAMAGAS COMPANY
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
 
	 
	 	 	 	 
	 

	 	Title:	 	 
	 

	 	 	 	 
 
	 
	 	 	 	 
	 

	 	Date:	 	 
	 

	 	 	 	 
 
	 
	 	 	 	 
	 	 	CALPINE ENERGY SERVICES, L.P.
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
 
	 
	 	 	 	 
	 

	 	Title:	 	 
	 

	 	 	 	 
 
	 
	 	 	 	 
	 

	 	Date:	 	 
	 

	 	 	 	 
 

 

 

ATTACHMENT 2

BAMAGAS COMPANY

AND

CALPINE ENERGY SERVICES, L.P.

Interconnection
Point(s) between
                                         and                                  .

Meter Name(s)

 

 

EXHIBIT 9

USE RESTRICTIONS

     The Pipeline and the BAMAGAS Lateral(s), including, without limitation, the
rights-of-way and easements pertaining thereto, which may be acquired by CES, its successors or
assigns, pursuant to the exercise of CES’ purchase rights under Section 13.2 of the Natural Gas
Transportation Agreement to which this Exhibit 9 is attached and made a part thereof (the
“Agreement”), shall be assigned and conveyed to CES, its successors or assigns, limited to the
following uses (the “Use Restrictions”), and CES represents, warrants and covenants, on behalf of
itself and its successors and assigns, to BAMAGAS, Enbridge (in consideration for Enbridge’s
guaranty of the performance of BAMAGAS’ obligations to CES under this Agreement), and the
Affiliates of both of them, that the Pipeline and the BAMAGAS Lateral(s), including, without
limitation, the rights-of-way and easements pertaining thereto, shall not be utilized in violation
of the Use Restrictions, to-wit: for the transportation of Gas to the Morgan Energy Center and to
any other parties except for transportation to then existing shippers or Gas end users with which
the Affiliated Transportation Parties have entered into either transportation service agreements
on the Pipeline and/or the BAMAGAS Lateral(s) or Gas sales agreements utilizing transportation
service, in whole or in part, on the Pipeline and/or the BAMAGAS Lateral(s), until such time as
the transportation rights of the Affiliated Transportation Parties on the Pipeline and the BAMAGAS
Lateral(s) expire, as set forth in Exhibit 11 of this Agreement. The foregoing notwithstanding, if
(i) CES exercises its step in rights under Section 2.3 of the Natural Gas Pipeline Construction
and Transportation Agreement and completes construction of the
Pipeline and the BAMAGAS Lateral(s), and/or (ii) BAMAGAS elects not to reimburse CES for the expenses incurred by CES in
the exercise of its step in rights under Section 2.3 of the Natural Gas Pipeline Construction and
Transportation Agreement and elects not to complete the construction of the Pipeline and the
BAMAGAS Lateral(s), and/or (iii) an Event of Default occurs under Section 12.1 under the Natural
Gas Pipeline Construction and Transportation Agreement (b) and CES, it successors or assigns
exercise their purchase rights under Section 13.2 of the Agreement, and/or (iv) CES, its
successors or assigns, exercise their right of first refusal under Section 13.2 of the Agreement,
then in any such event CES, its successors or assigns, shall not be subject to any Use
Restrictions and have the right to use the Pipeline, the BAMAGAS Lateral(s) and associated rights
of way and easements for any purpose.

     The foregoing covenants of CES shall be deemed covenants running with the Pipeline and BAMAGAS
Lateral(s), including, without limitation, the rights-of-way and easements pertaining thereto, and
shall be binding upon each subsequent owner of the Pipeline and/or the BAMAGAS Lateral(s), or any
interest therein. Any entity which shall succeed by purchase, merger or consolidation to CES, or
CES’ rights under the Agreement, shall be bound by the foregoing representations, warranties and
covenants of CES.

 

 

EXHIBIT 10

HYDRAULIC MODEL

Part I —  Pipeline Flow Schematic for Decatur Energy Center (“DEC”) only.

Part II — Receipt and Delivery Pressures vs. Volume Trend Plot for DEC only.

Part III — Receipt and Delivery Pressures vs. Volume Trend Plot for DEC only.

Part IV — Receipt and Delivery Pressures vs. Volume Trend Plot for DEC only.

Part V — Receipt and Delivery Volumes and Timing for Part II, Part III, and Part IV.

Part VI — Pipeline Flow Schematic for DEC1 and Morgan Energy Center (“MEC”).

Part VII
— Receipt and Delivery Pressures vs. Volumes Trend Plot for DEC and MEC.

Part VIII
— Receipt and Delivery Pressures vs. Volume Trend Plot for DEC and MEC.

Part IX
— Receipt and Delivery Pressures vs. Volume Trend Plot for DEC and MEC.

Part X — Receipt and Delivery Volumes and Timing for Part VI, Part VII, and Part VIII.

The model that was used is a transient gas network analysis package developed by LICENERGY, Inc.
(LIC). This company is now a part of ENERGY SOLUTIONS INTERNATIONAL. This software is capable of
performing two types of simulations — steady state and transient. The present version of the
software is called Pipeline Studio Version 2.0, capable of running in Windows 95, 98, NT and also
Windows 2000.

 

 

Exhibit 11
- Part I 

Pipeline Flow Schematic for Decatur Energy Center (“DEC”) Only.

 

 

Exhibit 11
- Part II

Receipt and Delivery Pressures vs. Volume Trend Plot for DEC only.

 

 

Exhibit 11
- Part III

Receipt and Delivery Pressures vs. Volume Trend Plot for DEC only.

 

 

Exhibit 11
- Part IV

Receipt and Delivery Pressures vs. Volume Trend Plot for DEC only.

 

 

EXHIBIT
11 - PART V

Decator Energy Center

COLEBROOK-675PSIG/500PSIG
- 20' P/L

RECIEPT VOLUMES VS DELIVERY VOLUMES USED IN

EXHIBIT
11 PART II. III. &  IV

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
		 	 	 	 	 	 	 	 	 
	Device Type	 	EXHIBIT 11 PART II	 	 	EXHIBIT 11 PART III	 	 	EXHIBIT 11 PART IV	 
	Name	 	Supply	 	 	Delivery	 	 	Supply	 	 	Delivery	 	 	Supply	 	 	Delivery	 
	Setpoint	 	Tenn Barton	 	 	Solutia	 	 	Tenn Barton	 	 	Solutia	 	 	Tenn Barton	 	 	Solutia	 
	Units	 	Flow Maximum	 	 	Flow Maximum	 	 	Flow Maximum	 	 	Flow Maximum	 	 	Flow Maximum	 	 	Flow Maximum	 
	Initial	 	MMCFD	 	 	MMCFD	 	 	MMCFD	 	 	MMCFD	 	 	MMCFD	 	 	MMCFD	 
	Flow  Hour
	 	 	138	 	 	 	138	 	 	 	120	 	 	 	31	 	 	 	138	 	 	 	138	 
	1
	 	 	138	 	 	 	138	 	 	 	45	 	 	 	31	 	 	 	138	 	 	 	0	 
	2
	 	 	138	 	 	 	138	 	 	 	45	 	 	 	31	 	 	 	138	 	 	 	0	 
	3
	 	 	138	 	 	 	138	 	 	 	45	 	 	 	31	 	 	 	138	 	 	 	0	 
	4
	 	 	138	 	 	 	138	 	 	 	45	 	 	 	31	 	 	 	138	 	 	 	0	 
	5
	 	 	138	 	 	 	138	 	 	 	45	 	 	 	31	 	 	 	138	 	 	 	0	 
	6
	 	 	138	 	 	 	138	 	 	 	45	 	 	 	31	 	 	 	138	 	 	 	0	 
	7
	 	 	138	 	 	 	138	 	 	 	75	 	 	 	100	 	 	 	138	 	 	 	138	 
	8
	 	 	138	 	 	 	138	 	 	 	110	 	 	 	124	 	 	 	138	 	 	 	138	 
	9
	 	 	138	 	 	 	138	 	 	 	118	 	 	 	124	 	 	 	138	 	 	 	138	 
	10
	 	 	138	 	 	 	138	 	 	 	118	 	 	 	124	 	 	 	138	 	 	 	138	 
	11
	 	 	138	 	 	 	138	 	 	 	118	 	 	 	124	 	 	 	138	 	 	 	138	 
	12
	 	 	138	 	 	 	138	 	 	 	118	 	 	 	124	 	 	 	138	 	 	 	138	 
	13
	 	 	138	 	 	 	138	 	 	 	118	 	 	 	124	 	 	 	138	 	 	 	138	 
	14
	 	 	138	 	 	 	138	 	 	 	118	 	 	 	124	 	 	 	138	 	 	 	138	 
	15
	 	 	138	 	 	 	138	 	 	 	118	 	 	 	124	 	 	 	138	 	 	 	138	 
	16
	 	 	138	 	 	 	138	 	 	 	118	 	 	 	124	 	 	 	138	 	 	 	138	 
	17
	 	 	138	 	 	 	138	 	 	 	118	 	 	 	124	 	 	 	138	 	 	 	138	 
	18
	 	 	138	 	 	 	138	 	 	 	118	 	 	 	124	 	 	 	138	 	 	 	138	 
	19
	 	 	138	 	 	 	138	 	 	 	118	 	 	 	124	 	 	 	138	 	 	 	138	 
	20
	 	 	138	 	 	 	138	 	 	 	88	 	 	 	100	 	 	 	138	 	 	 	138	 
	21
	 	 	138	 	 	 	138	 	 	 	60	 	 	 	75	 	 	 	138	 	 	 	138	 
	22
	 	 	138	 	 	 	138	 	 	 	45	 	 	 	31	 	 	 	138	 	 	 	138	 
	23
	 	 	138	 	 	 	138	 	 	 	45	 	 	 	31	 	 	 	138	 	 	 	138	 
	24
	 	 	138	 	 	 	138	 	 	 	45	 	 	 	31	 	 	 	138	 	 	 	138	 
	25
	 	 	138	 	 	 	138	 	 	 	45	 	 	 	31	 	 	 	138	 	 	 	138	 
	26
	 	 	138	 	 	 	138	 	 	 	45	 	 	 	31	 	 	 	138	 	 	 	138	 
	27
	 	 	138	 	 	 	138	 	 	 	45	 	 	 	31	 	 	 	138	 	 	 	138	 
	28
	 	 	138	 	 	 	138	 	 	 	45	 	 	 	31 	 	 	 	138	 	 	 	138	 
	29
	 	 	138	 	 	 	138	 	 	 	45	 	 	 	31	 	 	 	138	 	 	 	138	 
	30
	 	 	138	 	 	 	138	 	 	 	45	 	 	 	31	 	 	 	138	 	 	 	138	 
	31
	 	 	138	 	 	 	138	 	 	 	75	 	 	 	100	 	 	 	138	 	 	 	138	 
	32
	 	 	138	 	 	 	138	 	 	 	118	 	 	 	124	 	 	 	138	 	 	 	138	 
	33
	 	 	138	 	 	 	138	 	 	 	118	 	 	 	124	 	 	 	138	 	 	 	138	 
	34
	 	 	138	 	 	 	138	 	 	 	118	 	 	 	124	 	 	 	138	 	 	 	138	 
	35
	 	 	138	 	 	 	138	 	 	 	118	 	 	 	124	 	 	 	138	 	 	 	138	 
	36
	 	 	138	 	 	 	138	 	 	 	118	 	 	 	124	 	 	 	138	 	 	 	138	 
	37
	 	 	138	 	 	 	138	 	 	 	118	 	 	 	124	 	 	 	138	 	 	 	0	 
	38
	 	 	138	 	 	 	138	 	 	 	118	 	 	 	124	 	 	 	138	 	 	 	0	 
	39
	 	 	138	 	 	 	138	 	 	 	118	 	 	 	124	 	 	 	138	 	 	 	0	 
	40
	 	 	138	 	 	 	138	 	 	 	118	 	 	 	124	 	 	 	138	 	 	 	0	 
	41
	 	 	138	 	 	 	138	 	 	 	118	 	 	 	124	 	 	 	138	 	 	 	0	 
	42
	 	 	138	 	 	 	138	 	 	 	118	 	 	 	124	 	 	 	138	 	 	 	0	 
	43
	 	 	138	 	 	 	138	 	 	 	118	 	 	 	124	 	 	 	138	 	 	 	0	 
	44
	 	 	138	 	 	 	138	 	 	 	88	 	 	 	100	 	 	 	138	 	 	 	0	 
	45
	 	 	138	 	 	 	138	 	 	 	60	 	 	 	75	 	 	 	138	 	 	 	138	 
	46
	 	 	138	 	 	 	138	 	 	 	45	 	 	 	31	 	 	 	138	 	 	 	138	 
	47
	 	 	138	 	 	 	138	 	 	 	45	 	 	 	31	 	 	 	138	 	 	 	138	 
	48
	 	 	138	 	 	 	138	 	 	 	45	 	 	 	31	 	 	 	138	 	 	 	138	 
	49
	 	 	138	 	 	 	138	 	 	 	45	 	 	 	31	 	 	 	138	 	 	 	138	 
	50
	 	 	138	 	 	 	138	 	 	 	45	 	 	 	31	 	 	 	138	 	 	 	138	 
	51
	 	 	138	 	 	 	138	 	 	 	45	 	 	 	31	 	 	 	138	 	 	 	138	 
	52
	 	 	138	 	 	 	138	 	 	 	45	 	 	 	31	 	 	 	138	 	 	 	138	 
	53
	 	 	138	 	 	 	138	 	 	 	45	 	 	 	31	 	 	 	138	 	 	 	138	 
	54
	 	 	138	 	 	 	138	 	 	 	45	 	 	 	31	 	 	 	138	 	 	 	138	 
	55
	 	 	138	 	 	 	138	 	 	 	75	 	 	 	100	 	 	 	138	 	 	 	138	 
	56
	 	 	138	 	 	 	138	 	 	 	118	 	 	 	124	 	 	 	138	 	 	 	138	 
	57
	 	 	138	 	 	 	138	 	 	 	118	 	 	 	124	 	 	 	138	 	 	 	138	 
	58
	 	 	138	 	 	 	138	 	 	 	118	 	 	 	124	 	 	 	138	 	 	 	138	 
	59
	 	 	138	 	 	 	138	 	 	 	118	 	 	 	124	 	 	 	138	 	 	 	138	 
	60
	 	 	138	 	 	 	138	 	 	 	118	 	 	 	124	 	 	 	138	 	 	 	138	 

 

 

Exhibit 11
- Part VI

Pipeline Flow Schematic for DEC and MEC

 

 

Part VII

Receipt and Delivery Pressures vs. Volumes Trend Plot for DEC and MEC

 

 

Exhibit 11
- Part VIII

Receipt and Delivery Pressures vs. Volume Trend Plot for DEC and MEC

 

 

Exhibit 11
- Part IX

Receipt and Delivery Pressures vs. Volume Trend Plot for DEC and MEC

 

 

EXHIBIT
11 - PART X

Decatur Energy Center & Morgan ENERGY Center

COLEBROOK-675PSIG/500PSIG
— 26" P/L

RECIEPT
VOLUMES VS DELIVERY VOLUMES USED IN EXHIBIT 11 PART VII. VIII. & IX

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	EXHIBIT 11 PART VII	 	 	EXHIBIT 11 PART VIII	 	 	EXHIBIT 11 PART IX	 	 	 	 
	 
	Device Type	 	 	 	 	 	 	 	 	 	 	 	 
	Name	 	Supply 	 	 	Delivery	 	 	Supply 	 	 	Delivery	 	 	Supply	 	 	Delivery	 	 	Delivery	 
	Setpoint	 	Tenn Barton	 	 	Solutia	 	 	Tenn Barton	 	 	Solutia	 	 	Tenn Barton	 	 	Solutia	 	 	Amoco	 
	Units	 	Flow Maximum	 	 	Flow Maximum	 	 	Flow Maximum	 	 	Flow Maximum	 	 	Flow Maximum	 	 	Flow Maximum	 	 	Flow Maximum	 
	Initial	 	MMCFD	 	 	MMCFD	 	 	MMCFD	 	 	MMCFD	 	 	MMCFD	 	 	MMCFD	 	 	MMCFD	 
	Flow Hour
	 	 	 276 	 	 	 	276	 	 	 	240	 	 	 	62	 	 	 	278	 	 	 	140	 	 	 	138	 
	1
	 	 	 276 	 	 	 	276	 	 	 	90	 	 	 	62	 	 	 	278	 	 	 	0	 	 	 	0	 
	2
	 	 	 276 	 	 	 	276	 	 	 	90	 	 	 	62	 	 	 	278	 	 	 	0	 	 	 	0	 
	3
	 	 	276	 	 	 	276	 	 	 	90	 	 	 	62	 	 	 	278	 	 	 	0	 	 	 	0	 
	4
	 	 	276	 	 	 	276	 	 	 	90	 	 	 	62	 	 	 	278	 	 	 	0	 	 	 	0	 
	 5 
	 	 	276	 	 	 	 276 	 	 	 	90	 	 	 	92	 	 	 	278	 	 	 	0	 	 	 	0	 
	 6 
	 	 	276	 	 	 	276	 	 	 	90	 	 	 	62	 	 	 	278	 	 	 	0	 	 	 	0	 
	 7 
	 	 	276	 	 	 	276	 	 	 	236	 	 	 	200	 	 	 	278	 	 	 	140	 	 	 	138	 
	8
	 	 	 276 	 	 	 	276	 	 	 	236	 	 	 	248	 	 	 	278	 	 	 	140	 	 	 	138	 
	9
	 	 	 276 	 	 	 	276	 	 	 	236	 	 	 	248	 	 	 	278	 	 	 	140	 	 	 	138	 
	10
	 	 	 276 	 	 	 	276	 	 	 	236	 	 	 	248	 	 	 	278	 	 	 	140	 	 	 	138	 
	11
	 	 	 276 	 	 	 	276	 	 	 	236	 	 	 	248	 	 	 	278	 	 	 	140	 	 	 	138	 
	12
	 	 	 276 	 	 	 	276	 	 	 	236	 	 	 	248	 	 	 	278	 	 	 	140	 	 	 	138	 
	13
	 	 	 276 	 	 	 	276	 	 	 	236	 	 	 	248	 	 	 	278	 	 	 	140	 	 	 	138	 
	14
	 	 	 276 	 	 	 	276	 	 	 	236	 	 	 	248	 	 	 	278	 	 	 	140	 	 	 	138	 
	15
	 	 	 276 	 	 	 	276	 	 	 	236	 	 	 	248	 	 	 	278	 	 	 	140	 	 	 	138	 
	16
	 	 	 276 	 	 	 	276	 	 	 	236	 	 	 	248	 	 	 	278	 	 	 	140	 	 	 	138	 
	17
	 	 	 276 	 	 	 	276	 	 	 	236	 	 	 	248	 	 	 	278	 	 	 	140	 	 	 	138	 
	18
	 	 	 276 	 	 	 	276	 	 	 	236	 	 	 	248	 	 	 	278	 	 	 	140	 	 	 	138	 
	19
	 	 	 276 	 	 	 	276	 	 	 	236	 	 	 	248	 	 	 	278	 	 	 	140	 	 	 	138	 
	20
	 	 	 276 	 	 	 	276	 	 	 	175	 	 	 	200	 	 	 	278	 	 	 	140	 	 	 	138	 
	21
	 	 	 276 	 	 	 	276	 	 	 	150	 	 	 	150	 	 	 	278	 	 	 	140	 	 	 	138	 
	22
	 	 	 276 	 	 	 	276	 	 	 	90	 	 	 	62	 	 	 	278	 	 	 	140	 	 	 	138	 
	23
	 	 	 276 	 	 	 	276	 	 	 	90	 	 	 	62	 	 	 	278	 	 	 	140	 	 	 	138	 
	24
	 	 	276	 	 	 	276	 	 	 	90	 	 	 	62	 	 	 	278	 	 	 	140	 	 	 	138	 
	25
	 	 	276	 	 	 	276	 	 	 	90	 	 	 	62	 	 	 	278	 	 	 	140	 	 	 	138	 
	26
	 	 	276	 	 	 	276	 	 	 	90	 	 	 	62	 	 	 	278	 	 	 	140	 	 	 	138	 
	27
	 	 	276	 	 	 	276	 	 	 	90	 	 	 	62	 	 	 	278	 	 	 	140	 	 	 	138	 
	28
	 	 	276	 	 	 	276	 	 	 	90	 	 	 	62	 	 	 	278	 	 	 	140	 	 	 	138	 
	29
	 	 	 276 	 	 	 	276	 	 	 	90	 	 	 	62	 	 	 	278	 	 	 	140	 	 	 	138	 
	30
	 	 	276	 	 	 	276	 	 	 	90	 	 	 	62	 	 	 	278	 	 	 	140	 	 	 	138	 
	31
	 	 	 276 	 	 	 	276	 	 	 	200	 	 	 	200	 	 	 	278	 	 	 	140	 	 	 	138	 
	32
	 	 	276	 	 	 	276	 	 	 	236	 	 	 	248	 	 	 	278	 	 	 	140	 	 	 	138	 
	33
	 	 	276	 	 	 	276	 	 	 	236	 	 	 	248	 	 	 	278	 	 	 	140	 	 	 	138	 
	34
	 	 	276	 	 	 	276	 	 	 	236	 	 	 	248	 	 	 	278	 	 	 	140	 	 	 	138	 
	35
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EXHIBIT 11 

TRANSPORTATION RIGHTS

     Following any acquisition of the Pipeline and/or the BAMAGAS Lateral(s) by CES, its successors
or assigns, pursuant to any of the provisions of the Natural Gas Pipeline Transportation Agreement
to which this Exhibit 11 is attached and made a part thereof, BAMAGAS and the marketing Affiliates
of both BAMAGAS and Enbridge (collectively, the “Affiliated Transportation Parties”) shall have the
right to transport on the Pipeline and the BAMAGAS Lateral(s), on a firm basis as to all pipeline
capacity in excess of the Firm Transportation Quantity, Gas quantities under transportation
agreements then in effect between (i) BAMAGAS and any of the other Affiliated Transportation
Parties, (ii) BAMAGAS and any third parties, and (iii) any of the Affiliated Transportation Parties
and any third parties, for and during the term of each such agreement, not to exceed, however, the
lesser of a period of ten (10) years from the date of acquisition of the Pipeline and the BAMAGAS
Lateral(s) by CES or a period of five (5) years following the expiration of the Initial Term, if
acquired during the Initial Term, or a period of five (5) years from the date of acquisition of the
Pipeline and the BAMAGAS Lateral(s) by CES, if acquired during any Renewal Term. BAMAGAS, its
successors and assigns, shall pay CES, its successors and assigns, for such transportation a
prorata percentage of the operation and maintenance expenses related to the operation of the
Pipeline and the BAMAGAS Lateral(s) based upon the annual Gas throughput of the Affiliated
Transportation Parties as compared to the total annual Gas throughput of all parties shipping on
the Pipeline and the BAMAGAS Lateral(s).exv10w19

Exhibit 10.19

FIRST AMENDMENT

to

NATURAL GAS PIPELINE TRANSPORTATION AGREEMENT

Dated as of June 28, 2000

between

BAMAGAS COMPANY

and

CALPINE ENERGY SERVICES, L.P.

     This FIRST AMENDMENT to the NATURAL GAS PIPELINE TRANSPORTATION AGREEMENT (“Amendment”) is entered
into on this 1st day of September, 2001, between BAMAGAS Company and Calpine Energy Services, L.P.
(collectively the “Parties” and/or individually a “Party”).

     WHEREAS, the Parties desire to modify the Natural Gas Pipeline Transportation Agreement dated as of
June 28, 2000, between BAMAGAS Company and Calpine Energy Services, L.P. (“Agreement”):

     NOW, THEREFORE, in consideration of the premises and the mutual covenants and promises herein
contained, the Parties agree as follows:

1. The definition of “Point(s) of Delivery” in Exhibit 3 of the Agreement is hereby deleted and
replaced with the following definition:

“Point(s) of Delivery” shall mean the proposed interconnection between the BAMAGAS Pipeline and
the upstream side of the most northerly 16” valve located inside a one hundred by one hundred
foot gas metering station located in the southwest quarter of the northwest quarter and the
northwest quarter of the southwest quarter of Section 4, Township 5 South Range 5 West, Morgan
County, Alabama.

2. The definition of “Primary Point(s) of Delivery” in Article I of the Agreement is hereby deleted
and replaced with the following definition:

“Primary Point(s) of Delivery” shall mean the point of interconnection between the BAMAGAS
Pipeline and the upstream side of the most northerly 16” valve located inside a one hundred by
one hundred foot gas metering station located in the southwest quarter of the northwest quarter
and the northwest quarter of the southwest quarter of Section
4, Township 5 South Range 5 West, Morgan County, Alabama.

3. The definition of “ROW” in Article I of the Agreement is hereby deleted.

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4. The definition of “BAMAGAS Lateral(s)” in Article I of the Agreement is hereby deleted and
replaced with the following definition:

“BAMAGAS Lateral(s)” shall mean the non FERC jurisdictional pipeline(s) to be constructed by
BAMAGAS for the purpose of transporting Natural Gas from the pipeline facilities of Midcoast
Interstate Transmission Company to the (a) Primary Point(s) of Delivery and (b) the Primary
Point(s) of Delivery (as defined in the Decatur Energy Center Construction and Transportation
Agreement), which pipeline(s) shall be used for the testing of the Morgan Energy Center and for
Gas transportation service during time periods that the Pipeline is unavailable to transport the
Firm Transportation Quantity as provided for herein.

5. Except as provided in numbered paragraphs 1-4 above, there are no other changes to the Agreement
under which this Amendment is issued and the Agreement remains in full force and effect. To the
extent of any inconsistency between this Amendment and the Agreement, the Agreement shall govern,
except to the extent explicitly modified by this Amendment.

     IN WITNESS WHEREOF, the Parties have caused this Amendment to be executed in their respective names
by duly authorized officers in duplicate originals on the day and year first entered above.

	 	 	 	 	 	 	 	 	 	 	 

	CALPINE ENERGY SERVICES, L.P.	 	 	 	BAMAGAS COMPANY	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:

	 	/s/ Diana Knox 
	 	 	 	By:
	 	/s/ I.J. Berthelot	 	 
	Name:

	 	 
Diana Knox

	 	 	 	Name:
	 	 
I.J. “Chip” Berthelot

	 	 
	Title:

	 	Sr. Vice President
	 	 	 	Title:
	 	Vice President Commercial Activity	 	 

2 of 2

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