Document:

EX-10.2

 

Exhibt 10.2

EPC Agreement No. 1002

between

Allegheny Energy Supply Company, LLC

and

Washington Group International

covering

Balance of Plant for

Flue Gas Desulfurization Project

at

Hatfield’s Ferry Units 1, 2 and 3

 

 

TABLE OF CONTENTS

Principal Document

	 	 	 	 	 	 	 
	ARTICLE	 	TITLE	 	PAGE	 
	 
	ARTICLE 1 -
	 	AGREEMENT SCOPE	 	 	1	 
	ARTICLE 2 -
	 	TERM AND SURVIVORSHIP	 	 	1	 
	ARTICLE 3 -
	 	DEFINITIONS	 	 	1	 
	ARTICLE 4 -
	 	CONTRATOR'S GENERAL OBLIGATIONS	 	 	3	 
	ARTICLE 5 -
	 	COST AND SCHEDULE PERFORMANCE	 	 	4	 
	ARTICLE 6 -
	 	WARRANTIES	 	 	4	 
	ARTICLE 7 -
	 	PROCUREMENT AND SUBCONTRACTING	 	 	6	 
	ARTICLE 8 -
	 	ALLEGHENY	 	 	6	 
	ARTICLE 9 -
	 	CHANGE ORDER	 	 	8	 
	ARTICLE 10 -
	 	INDEPENDENT CONTRACTOR	 	 	9	 
	ARTICLE 11 -
	 	PAYMENT AND INVOICING	 	 	9	 
	ARTICLE 12 -
	 	CLAIMS AND LIENS	 	 	11	 
	ARTICLE 13
	 	TAXES AND DUTIES	 	 	12	 
	ARTICLE 14 -
	 	INSPECTION OF WORK	 	 	14	 
	ARTICLE 15 -
	 	DEFICIENT WORK	 	 	14	 
	ARTICLE 16 -
	 	SUSPENSION	 	 	15	 
	ARTICLE 17 -
	 	TERMINATION	 	 	15	 
	ARTICLE 18 -
	 	COMPLETION AND ACCEPTANCE	 	 	16	 
	ARTICLE 19 -
	 	TITLE	 	 	16	 
	ARTICLE 20 -
	 	DISTRIBUTION OF RISK, RELEASE AND INDEMNITY	 	 	16	 
	ARTICLE 21 -
	 	INSURANCE	 	 	17	 
	ARTICLE 22 -
	 	TOOLS AND EQUIPMENT	 	 	19	 
	ARTICLE 23 -
	 	RESPONSIBILITY FOR CONSEQUENTIAL DAMAGES	 	 	19	 
	ARTICLE 24 -
	 	GOVERNING LAW AND DISPUTE RESOLUTION	 	 	20	 
	ARTICLE 25 -
	 	OWNERSHIP OF INVENTIONS AND DOCUMENTS	 	 	20	 
	ARTICLE 26 -
	 	CONFIDENTIAL INFORMATION	 	 	22	 
	ARTICLE 27 -
	 	USE OF TRADEMARK AND PUBLICITY	 	 	22	 
	ARTICLE 28 -
	 	AUDIT	 	 	23	 
	ARTICLE 29 -
	 	BUSINESS STANDARDS	 	 	23	 
	ARTICLE 30 -
	 	NO INFORMATION BROKERING	 	 	24	 
	ARTICLE 31 -
	 	MANAGEMENT OF WASTE AND HAZARDOUS MATERIALS	 	 	25	 
	ARTICLE 32 -
	 	ASSIGNMENT OF AGREEMENT	 	 	25	 
	ARTICLE 33 -
	 	DESIGNATED REPRESENTATIVE AND NOTICES	 	 	26	 
	ARTICLE 34 -
	 	ALCOHOL AND DRUGS	 	 	26	 
	ARTICLE 35 -
	 	HEALTH AND SAFETY	 	 	26	 
	ARTICLE 36 -
	 	RIGHT OF REMOVAL	 	 	26	 
	ARTICLE 37 -
	 	FORCE MAJEURE	 	 	27	 
	ARTICLE 38 -
	 	AMENDMENTS	 	 	27	 
	ARTICLE 39 -
	 	PRECEDENCE	 	 	27	 
	ARTICLE 40 -
	 	MISCELLANEOUS	 	 	28	 
	ARTICLE 41 -
	 	SURVIVING OBLIGATIONS	 	 	28	 
	ARTICLE 42 -
	 	ENTIRE AGREEMENT	 	 	28	 
	 
	 	 	 	 	 	 
	EXHIBIT
	 	 	 	 	 	 
	 

A            REIMBURSABLE COSTS

B            FIXED RATES

C            FEE

D            CONTRACTOR’S PERSONNEL POLICIES

E            WGI 5-YEAR ACCOUNTING PERIOD CUT-OFF CALENDAR

F            FORM of LETTER OF CREDIT

 

 

G            OWNER’S CONTROLLED INSURANCE PROGRAM (OCIP)

H            DISPUTE RESOLUTION PROCEDURE

I              LIST OF KEY WGI PERSONNEL

J             TRUST ACCOUNT AGREEMENT

K            AUDIT DATA FIELD REQUIREMENTS

 

 

This Agreement is effective as of this 13th day of July, 2006, and made between Allegheny
Energy Supply Company, LLC, a limited liability company organized under the laws of Delaware with
offices at 800 Cabin Hill Drive, Greensburg, Pennsylvania 15601-1689 (hereinafter Allegheny) and
Washington Group International, Inc., a corporation organized under the laws of Ohio with a place
of business, at 510 Carnegie Center, Princeton, NJ 08540 (hereinafter Contractor).

Allegheny and Contractor, each in consideration of the undertakings, promises and agreements of the
other as set forth herein, hereby agree as follows:

ARTICLE 1 — AGREEMENT SCOPE

	 	 	 	The purpose of this Agreement is to define the terms and conditions for the provision
of the Work as specifically set out in the Job Specification. Work is generally
described as the engineering, procurement and construction of the balance of plant work
for the flue gas desulfurization project at the Hatfield’s Ferry Units 1, 2 and 3 in
Monongahela Township, Greene County, Pennsylvania, as well as certain site management of
the entire flue gas desulfurization project. Prior to the effective date of this
Agreement, Contractor performed Work under Allegheny purchase order C-06-06864, issued
on May 12, 2006 and change orders thereto. This Agreement supercedes said purchase
order in all respects, except as to the Ft. Martin facility, and any Work performed
thereunder shall be deemed to have been performed under this Agreement.

ARTICLE 2 — TERM AND SURVIVORSHIP

	2.1	 	Term. The Term of this Agreement begins and is effective from the date first written
above and shall terminate upon final acceptance pursuant to Article 18, unless terminated
earlier as permitted by this Agreement.
	 
	2.2	 	Survivorship. The provisions of this Agreement as stipulated in Article 41 shall survive
any expiration or termination of this Agreement.

ARTICLE 3 — DEFINITIONS

	 	 	 	For the purpose of this Agreement, the following words and phrases shall have the
meaning stated below:

	3.1	 	“Agreement” means Principal Document, Job Specification, and the Exhibits listed in the Table
of Contents.

	 	a)	 	“Principal Document” means this document, executed by Allegheny and Contractor
and comprising Articles 1 through 42.
	 
	 	b)	 	“Job Specification” means the documents issued by Allegheny to Contractor which
contain the detailed description of the Work, including technical and other requirements
pertaining thereto. The Parties agree that the following documents are for information
only in the Job Specification and are not part of this Agreement: Flue Gas
Desulfurization (FGD) Phase I Study Report, dated

 

 

	 	 	 	December 2005, prepared by Black & Veatch; and Technical Specification for Wet Flue Gas
Desulfurization System, prepared by Sargent & Lundy.

	3.2	 	“Agreement Price” means the total of Costs and Fee relating to compensation as specified in
Exhibits A,B &C to be paid by Allegheny to Contractor.

	 	(a)	 	“Costs” means the sum of Reimbursable Costs and costs resulting from application
of Fixed Rates.
	 
	 	(b)	 	“Reimbursable Costs” means costs set forth in Exhibit A for which Contractor is
compensated at actual costs incurred and paid.
	 
	 	(c)	 	“Fixed Rates” means unit prices listed in Exhibit B.
	 
	 	(d)	 	“Fee” means the part of Agreement Price as provided in Exhibit C by which
Contractor is compensated for: (i) its profit related to the Work; and (ii) expenses not
recovered by Contractor in Costs.

	3.3	 	“Agreement Price Budget” means the budget for the Work prepared by Contractor and approved by
Allegheny, which may be modified or adjusted by Change Orders. The Agreement Price Budget
shall be agreed to by the parties within four (4) months of the effective date of this
Agreement.
	 
	3.4	 	“Change Order” means the document issued by Allegheny, which sets forth adjustments to the
Agreement Price Budget and/or the Scheduled Completion Date.
	 
	3.5	 	“Competence” means the expertise, experience, capability and specialized knowledge to perform
the Work in a good and workmanlike manner and within all accepted standards for the
engineering and construction industry serving the utility industry.
	 
	3.6	 	“Completion Notice” means the document issued by Allegheny upon agreeing that Contractor has
substantially met the criteria set forth in the Job Specification for completion of the Work,
for each flue gas desulfurization unit and/or the common systems.
	 
	3.7	 	“Consequential Damages” means any loss or anticipated loss of profit, loss or anticipated
loss of revenue, business interruption, loss of use of any equipment, loss of any Agreement or
other business opportunity and any other indirect damage of a similar nature as further
defined in Article 23.
	 
	3.8	 	“Contractor” means: (1) the legal entity identified in the Principal Document and, where the
context so permits; (2) any company in which that legal entity now or hereafter (a) owns
directly or indirectly or (b) controls, directly or indirectly, more than fifty percent (50%)
of the stock having the right to vote or appoint its directors; and (3) Contractor’s
representatives that are responsible for supplying services or performing the Work in
accordance with the terms of this Agreement.
	 
	3.9	 	“Facility” means the existing power generation facility and all property at Hatfield’s Ferry
in Monongahela Township, Greene County, Pennsylvania.
	 
	3.10	 	“Law” means all applicable laws of the jurisdiction in its broadest sense including without
limitation the following: constitutional law, civil law, common law, international law,
equity, treaties, statutes, decrees, edicts, codes, orders, rules,

 

 

	 	 	ordinances and regulations of any federal, state, local, municipal or any other duly
constituted governmental authority or agency.

	3.11	 	“Safety and Health Manual” means the documents, dated May 16, 2006 and issued by Allegheny to
Contractor detailing the minimum safety and health policies and procedures to be adopted by
Contractor, Subcontractors and Vendors at the Work Site. As further detailed in the Job
Specification, Contractor shall be responsible for overall administration of safety and health
matters at the Work Site, and report data relating to safety and health matters for the entire
flue gas desulfurization project.
	 
	3.12	 	“Scheduled Completion Date” means the date or dates set forth in the Job Specification for
completion of the Work, which may be modified or adjusted by Change Orders. The Schedule
Completion Date shall be finalized within four (4) months of the effective date of this
Agreement.
	 
	3.13	 	“Subcontractor” means any subcontractor, supplier, agent or materialman providing services or
work to Contractor for the purpose of performing the Work under this Agreement.
	 
	3.14	 	“Vendor” means any supplier, agent or materialman providing equipment, materials, and/or
specialty services to Contractor pursuant to the Work under this Agreement.
	 
	3.15	 	“Work” means the engineering, procurement and construction of the balance of plant work for
flue gas desulfurization systems, by Contractor under this Agreement, including providing as
necessary therefor supervision, construction work, consultations, any specified materials,
labor, construction tools, equipment, and supplies at the Work Site, as well as certain site
management of the entire flue gas desulfurization project pursuant to the Job Specification.
	 
	3.16	 	“Work Site” means the site indicated in the Job Specification at the Hatfield’s Ferry
Facility in Monongahela Township, Greene County, Pennsylvania and the fabrication area at the
Ft. Martin facility in Maidsville, West Virginia.

 

 

ARTICLE 4 — CONTRACTOR’S GENERAL OBLIGATIONS

	4.1	 	Contractor shall engineer, procure and construct flue gas desulfurization systems and
shall perform the Work in accordance with the terms and conditions of this Agreement.
	 
	4.2	 	No documentation, including Contractor’s proposal and bid clarification correspondence, shall
constitute a part of this Agreement unless included in Exhibit E — Supplemental Documentation.
	 
	4.3	 	Contractor represents that it knows:

	 	(a)	 	the nature, requirements and scope of the Work,

	 
	 	(b)	 	the location and peculiarities of the Work Site,
	 
	 	(c)	 	the type and magnitude of detailed engineering, procurement, construction and
construction management services and labor required,
	 
	 	(d)	 	the character of equipment, materials and facilities required, and
	 
	 	(e)	 	the general and local conditions and other matters which could affect the Work.

	 	 	 	Contractor’s failure to become knowledgeable about or to discover matters, which affect the
Work, shall not relieve Contractor from its obligations under this Agreement.
	 
	 	 	 	Contractor accepts the Work Site as found subject to modifications set forth in the Job
Specification. If subsurface conditions differ materially from those indicated in the
Job Specification, Contractor shall not disturb said conditions but shall promptly
notify Allegheny and proceed with the Work affected only upon Allegheny’s written
authorization. If Allegheny determines that such conditions materially differ from
those indicated in the Job Specification, and that such difference causes an increase or
decrease in the cost or time of performance, Allegheny shall issue a Change Order with
respect thereto if appropriate under the criteria of Sub-Article 9.2. If Contractor
proceeds with the Work affected without Allegheny’s authorization, any additional costs
incurred shall not be allowed as Costs and no Change Order shall be allowed therefor.

	4.4	 	After entering into this Agreement, Contractor shall commence the Work promptly upon being
notified by Allegheny, and shall perform the Work in a professional manner to the satisfaction
of Allegheny: (i) with diligence until its obligations pursuant to this Agreement have been
completed; and (ii) meeting or exceeding the standards prevailing in the industry pertaining
to such Work including standards of the appropriate construction code and revisions thereto
applicable to the jurisdiction, where the Work is to be performed, in effect as of the
effective date of this Agreement, as well as such other requirements as set forth in this
Agreement. Allegheny shall have the right to reject any deficient Work performed by
Contractor in accordance with the provisions of Article 15.
	 
	4.5	 	Contractor shall provide sufficient supervisory and other personnel to perform the Work and
Contractor shall continuously furnish such personnel and control the progress of the Work
until Contractor’s performance under this Agreement has been completed. Contractor’s project
manager and other key personnel as approved by Allegheny and identified in Exhibit I shall not
be reassigned or

 

 

	 	 	removed from the Work by Contractor without the approval of Allegheny, except to the extent
there are circumstances beyond Contractor’s control, such as but not limited to, death,
incapacity due to disease or injury, or the employee leaving the Contractor’s employment.
Contractor may use third party agency personnel for any position with Allegheny’s prior
approval, and Contractor shall maintain a list of such approved personnel. Contractor
further agrees that Allegheny shall have the right to direct Contractor to remove any member
of Contractor’s project team from those performing Work under this Agreement.

	4.6	 	Contractor shall perform the Work under the National Maintenance Agreement, providing for a
wage modifier at ninety percent (90%) and one hundred percent (100%) of the fringe benefits
found in the local collective bargaining agreement. Contractor shall take all necessary steps
to minimize and/or eliminate labor disputes with respect to this Agreement.
	 
	4.7	 	Contractor shall develop with governmental authorities customs procedures for: (i) importing
to the Work Site equipment, materials, supplies and construction tools required for the Work;
and (ii) exporting Contractor-owned or rented construction tools and construction equipment.
Contractor shall be responsible for obtaining and maintaining all licenses, visas, clearances,
certifications and governmental or administrative authorizations, necessary for the
performance of its obligations hereunder, including entry visas, residence and work permits
and any applicable licenses for its employees, agents and representatives. Allegheny shall
have no liability whatsoever in respect thereof.
	 
	4.8	 	Except for the permits and licenses that Allegheny is required to obtain pursuant to the Job
Specification, Contractor shall procure all necessary permits and licenses required to be in
Contractor’s name, including licenses or registrations issued by any professional boards
pursuant to Law, and shall obtain approval of plans and specifications, and observe and abide
by all applicable Law relating to the Work. Without releasing Contractor from its obligation
hereunder, if any drawings or specifications are known by Contractor to be at variance with
any applicable Law, Contractor shall give notice to Allegheny thereof before performing such
Work. Applications for such permits, licenses or approvals shall be submitted to Allegheny
for approval prior to being filed with any relevant authority involved. Contractor shall give
a copy of each permit to Allegheny promptly after receipt thereof by Contractor.

 

 

	4.9	 	Contractor shall have custody and control of: equipment, materials and supplies for
performing the Work furnished by it or delivered to it by Allegheny; parts of the Work Site
under construction or completed; temporary structures; and construction facilities, except
for: (i) partially completed parts of the Work for which Allegheny has taken temporary
possession by Change Order, (ii) parts (units, systems or areas of equipment) of the Work for
which Allegheny has accepted custody and control pursuant to Completion Notices, and (iii)
parts of the Work included in any part of the Work which has been terminated pursuant to
Article 17. Contractor shall protect and care for items and parts of the Facility in its
custody and control.
	 
	4.10	 	Contractor’s proposed schedule for work hours shall be submitted to Allegheny for its
approval prior to Contractor beginning any Work at the Work Site. Once approved, such work
schedule shall not be revised without further approval by Allegheny. Contractor shall not
permit its employees or Subcontractors’ employees to work overtime or more than the approved
work schedule, unless approved in advance by Allegheny.
	 
	4.11	 	Contractor shall schedule, report, forecast and control progress of the Work, anduse best
efforts to achieve completion of the Work on or before the Scheduled Completion Date, as set
forth in the Job Specification.
	 
	4.12	 	Contractor shall furnish to Allegheny for its review and comment copies required by the Job
Specification of detail and working drawings, specifications, engineering calculations,
purchase orders, subcontracts and other documents prepared by Contractor, Subcontractors or
Vendors in the course of performing the Work, and shall give Allegheny access at reasonable
times to Contractor’s design and engineering methods, calculations, and data used in
performing the Work. Notwithstanding the foregoing, this provision shall not require
Contractor to disclose its identified proprietary methods, software, calculations and data,
provided, however, Contractor shall cooperate with Allegheny in its understanding of the
methodology or derivation of any calculation or design developed by Contractor for the Work
short of Contractor disclosing its proprietary methods. Unless otherwise advised by
Allegheny, Contractor shall continue to proceed with its Work subsequent to providing
information under this Sub-Article.
	 
	4.13	 	Contractor shall maintain all Project records and financial records in accordance with the
requirements of Allegheny and the Federal Energy Regulatory Commission and of the state and
regulatory agencies in the state where the work is being performed, and upon request, shall
provide Allegheny with sufficient information relating to prices of materials and services to
similarly enable its compliance.
	 
	4.14	 	Contractor agrees, unless exempt, to comply with the Federal Acquisition Regulations System
(FAR) including, but not limited to, solicitation provisions and contract clauses in the
following implementation provisions which are hereby incorporated by reference: Equal
Employment Opportunity (48 C.F.R. §22.8), Special Disabled and Vietnam Era Veterans (48 C.F.R.
§22.13, 41 C.F.R. 60-250.4(m)), Employment of the Handicapped (48 C.F.R. §22.14, 41 C.F.R.
60-741.4(f)), Small Business and Small Disadvantaged Business Concerns (48 C.F.R.
§19.000-19.902). Pollution Control and Clean Air and Water (48 C.F.R. §23.1).

 

 

	 	 	Contractor further shall make certifications and periodic reports required by the FAR, the
laws and Executive Orders implemented by those regulations, and as otherwise requested by
Allegheny.

	4.15	 	Contractor’s project manager named in the Job Specification shall have the authority to act
for Contractor with respect to all matters pertaining to the Work and Contractor’s
performance. Communications concerning these matters received by Contractor’s project manager
from Allegheny shall be deemed to have been received by Contractor.
	 
	4.16	 	Contractor shall respond promptly to Allegheny’s request for assurances concerning the
financial condition of Contractor and any Subcontractor or Vendor and their respective ability
to perform all of their respective obligations under this Agreement. Upon the request of
Allegheny, Contractor shall submit financial statements for its most recent fiscal quarter, as
well as the most recent three years or the period of existence, if shorter, and will submit
such other documents as are permitted by Law and, in Allegheny’s discretion, necessary to
substantiate Contractor’s financial ability to complete the Work in accordance with the terms
hereof. In the event that Contractor fails to provide such financial information, then a
deficiency will be deemed to have occurred under Sub-Article 15.1. Contractor shall include
in all subcontracts and purchase orders a similar provision requiring all Subcontractors and
Vendors to provide such financial information upon request of either Allegheny or Contractor.
	 
	4.17	 	Without diminishing the importance of other portions of the Job Specification,
Contractor shall ensure satisfactory pursuance of the requirements in the following portions
of that document:

	 	(a)	 	furnishing and maintaining, in an up-to-date condition, the project control
documents and giving notice to Allegheny, if any condition exists that Contractor
forecasts may prevent Contractor from obtaining results that are in full compliance with
this Agreement;
	 
	 	(b)	 	operating a quality assurance system that complies with Allegheny’s requirements
in the Job Specification and allows Allegheny full access to audit the system, and
further undertakes to make such modifications to the system as may be required for the
applicable quality assurance standards to be met; and
	 
	 	(c)	 	during the course of manufacture and fabrication of equipment and materials, the
making of inspections and tests required by the Job Specification, including Allegheny’s
right to attend such inspections and tests and Contractor’s giving Allegheny proper
notice therefore.

	4.18	 	Contractor shall provide as specified in the Job Specification, office space, furnishings,
clerical and secretarial assistance, communication services and other facilities and services
required for Allegheny’s use at Contractor’s home and branch offices and at the Work Site.

 

 

ARTICLE 5 — COST AND SCHEDULE PERFORMANCE

	5.1	 	Contractor shall estimate, budget, report, forecast and control Costs, and shall schedule,
report, forecast and control progress of the Work.
	 
	5.2	 	Contractor shall keep the forecasted Agreement Price for all phases of the Work within the
Agreement Price Budget, complete elements of the Work by the time specified in the agreed upon
detailed work schedule, and use best efforts to achieve completion of the Work and other
deliverables to be provided as part of the Work on or before the Scheduled Completion Date.
	 
	5.3	 	Contractor shall achieve completion of each part of the Work and other deliverables in the
time sequence specified in the Job Specification or as mutually agreed to by the parties. If
the time sequence is revised by Allegheny, a Change Order shall be issued if appropriate
pursuant to the criteria of Sub-Article 9.2. If such revision is required because of
Contractor’s deficient performance, no adjustment to any fixed component of Fee shall be
allowed and no adjustment to the Scheduled Completion Date shall be allowed unless the delay
was excusable under force majeure pursuant to Article 37.
	 
	5.4	 	After issuance of the final Completion Notice, and at Allegheny’s request, Contractor shall
prepare an estimated breakdown of the Agreement Price into accounting classifications
specified by Allegheny.

ARTICLE 6 — WARRANTIES

	6.1	 	Representations and Warranties
	 
	 	 	Contractor represents and warrants that it:

	 	(a)	 	has the Competence to perform the Work;
	 
	 	(b)	 	has or shall obtain and maintain the necessary personnel and supervision
possessing appropriate skills to perform the Work to meet or exceed its obligations
under this Agreement;
	 
	 	(c)	 	shall obtain, maintain and use all tools and equipment in accordance with
manufacturer’s specifications and recommendations and good engineering and operational
practices;
	 
	 	(d)	 	has or shall obtain, at its expense, before performing any work connected with
the Work, all the necessary registrations, certificates, permits, licenses and
authorizations to conduct business and perform the Work;
	 
	 	(e)	 	shall perform all Work in accordance with Law;
	 
	 	(f)	 	shall perform all Work promptly, with due diligence and Competence;
	 
	 	(g)	 	shall conduct itself with ethical and professional standards; and
	 
	 	(h)	 	fully comprehends the requirements and contingencies for performing the Work and
that it has examined the Work Site for any additional or special requirements and
contingencies.

	6.2	 	Contractor’s Duty for Compliance while Performing Work under this Agreement

 

 

	 	 	Contractor shall not perform any aspect of the Work that it knows or should know cannot be
performed in conformity with the provisions of this Agreement. If Contractor determines that
it cannot perform the Work in conformity with this Agreement, Contractor shall immediately
advise Allegheny and consult with Allegheny to develop a mutually satisfactory resolution.
Contractor shall advise Allegheny if it knows or becomes aware of any drawings and
specifications applicable to the Work that are at variance with Law or with good engineering
and operational practices before beginning any work connected with the Work. Contractor
shall immediately notify Allegheny in writing of any such variance and ensure that the
necessary changes are made before proceeding with the part of the Work affected.

	6.3	 	Additional Warranty
	 
	 	 	Contractor warrants that all work performed and any equipment and materials provided in
connection with the Work shall be free from defect or deficiency for eighteen (18) months
from the date of the Completion Notice. If Allegheny discovers any defect or deficiency
during the warranty period, and Allegheny has notified Contractor of the defect or deficiency
either during the warranty period or within the earlier of three (3) months after this
warranty period or the next scheduled outage on the unit, Contractor shall be responsible to:
i),re-perform the engineering services to correct the deficiency and/or ii) upon Allegheny’s
concurrence, promptly repair or replace the defect or deficiency (including the provision of
all labor, materials and other incidental work to effect this correction of the defect or
deficiency). Any work performed under this Sub-Article to correct any defect or deficiency
shall be warranted on the same basis as provided in this Sub-Article for the longer of: (i)
the balance of the eighteen (18) month warranty period; or (ii) twelve (12) months from the
date of completion of the repair or replacement but such warranty shall not extend beyond
thirty (30) months. Notwithstanding the foregoing expiration of the warranty period, if a
chronic failure of components (two or more failures of the same component) occurs during the
warranty period, Contractor shall be responsible to determine the root cause of the chronic
failure and shall make the necessary repair or replacement of the Work to correct the root
cause. Contractor’s sole liability and Allegheny’s sole and exclusive remedy for any
warranted Work shall be the re-performance, repair or replacement of the Work. Such
warranted Work shall not constitute deficient Work under Article 15. The only warranties
made by Contractor are those expressly enumerated in this provision. Any other statements of
fact or descriptions expressed in the Agreement shall not be deemed to constitute a warranty
of the Work or any part thereof. THE WARRANTIES SET FORTH IN THIS PROVISION ARE EXCLUSIVE
AND IN LIEU OF ALL OTHER WARRANTIES, WHETHER STATUTORY, EXPRESS OR IMPLIED (INCLUDING ALL
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR PARTICULAR PURPOSE AND ALL WARRANTIES ARISING
FROM COURSE OF DEALING AND USAGE OF TRADE). Contractor’s maximum liability for warranty is
the total Fee paid to Contractor, which liability shall be excess of any proceeds paid by the
professional liability insurance, provided by Contractor under Exhibit G, for warranty claims
made under this Sub-Article 6.3

	6.4	 	Warranties of Others
	 
	 	 	Contractor shall require that all warranties provided by Subcontractors and/or Vendors are
assignable to Allegheny. If any warranty is not assignable, Contractor

 

 

	 	 	shall make that warranty available for Allegheny’s benefit. Contractor shall deliver a copy
of each written warranty provided by Subcontractors and/or Vendors to Allegheny. The
warranties under this Sub-Article shall be in addition to any others provided under this
Agreement or otherwise under Law.

 

 

ARTICLE 7 — PROCUREMENT AND SUBCONTRACTING

	7.1	 	Contractor shall obtain Allegheny’s agreement with (i) procurement procedure, (ii)
subcontract procedure (iii) purchase order and subcontract documents and (iv) Subcontractor
and Vendor selection.
	 
	7.2	 	No home, branch office or construction management services shall be performed by
Subcontractor(s), Vendor(s) and/or consultants without Allegheny’s prior approval.
	 
	7.3	 	Contractor shall include terms, conditions, provisions, obligations, warranties, and
guaranties no less stringent than those imposed on Contractor under this Agreement in all
purchase orders and subcontracts, except for non-material purchase orders with Vendors as
agreed to by Allegheny.
	 
	7.4	 	In purchase orders and subcontracts involving the supply of equipment, supplies, structures
and/or materials, whether permanent or temporary, Contractor shall:

	 	7.4.1	 	specify that the equipment, supplies, structures and/or materials are being
procured on behalf of Allegheny, and that Allegheny is the legal and equitable owner
thereof at the time of payment, and
	 
	 	7.4.2	 	require that Allegheny be a recipient of manufacturer’s notices related to
the equipment, supplies, structures and/or materials to be supplied including, but not
limited to, any and all health and safety advisories and notices.
	 
	 	In these purchase orders and subcontracts, Contractor shall similarly obligate
Subcontractors and Vendors to comply with Sub-Articles 7.4.1 through 7.4.2 above with
respect to all lower tier purchase orders and subcontracts. For any Subcontractors and/or
Vendors who refuse to accept this provision, Contractor shall promptly notify Allegheny for
guidance prior to placing the purchase order or subcontract.

	7.5	 	At regular intervals and as requested by Allegheny, Contractor shall review with Allegheny
each Subcontractor’s progress and performance. Subcontract administration matters of a
non-routine nature including, but not limited to, claims or potential claims shall be
reviewed with Allegheny prior to any action or response by Contractor.
	 
	7.6	 	Contractor shall be responsible to Allegheny for work performed by Subcontractors to the same
extent it is for work performed by Contractor’s employees.
	 
	7.7	 	Reviews or approvals of purchase orders, subcontracts, Subcontractors or Vendors by
Allegheny shall not create any Contractual relation between Allegheny and any Subcontractor
or Vendor.

 

 

	7.8	 	Pursuant to Public Law 95-507, the Small Business Investment Act, 15 U.S.C. 637(d),
Contractor agrees to perform to a mutually agreed plan so that small business concerns and
those concerns owned and controlled by socially and economically disadvantaged individuals, as
defined in the Act, have the opportunity to compete for purchase orders and subcontracts to
the fullest extent consistent with the efficient performance under this Agreement, and make
certifications and periodic reports required by the plan.

 

 

ARTICLE 8 — ALLEGHENY

	8.1	 	Specific Obligations

	 	8.1.1	 	Allegheny shall provide Contractor with the Job Specification, revisions
thereto, and upon request, copies of specifications, drawings, instructions and other
documents referred to in the Job Specification and not readily available to
Contractor.

	 	(a)	 	Job Specification will be identified by its Table of Contents
date.
	 
	 	(b)	 	At any time Allegheny may issue revision(s) to the Job
Specification and shall issue Change Order(s) thereto.

	 	8.1.2	 	Allegheny shall obtain from governmental authorities the licenses and
permits that it must possess to locate, construct, maintain and operate the Facility.
	 
	 	8.1.3	 	Allegheny shall fulfill its obligations under Sub-Articles 8.1.1 through
8.1.2 above, and shall provide those items specified in the Job Specification as being
provided by Allegheny in time to avoid delaying Contractor in the performance of the
Work.
	 
	 	8.1.4	 	Allegheny shall coordinate activities conducted by Allegheny or by other
Contractors employed by Allegheny on or contiguous to the Work Site with the
activities of Contractor.
	 
	 	8.1.5	 	Allegheny shall use its best efforts to provide certificates, upon
reasonable and timely request, as it is empowered to issue in support of Contractor.
	 
	 	8.1.6	 	Allegheny shall maintain the insurance coverages set forth in the OCIP under
Exhibit G and, if any such coverages are terminated, provide at least ten (10) days
notice under a Change Order for Contractor to obtain replacement insurance pursuant to
Exhibit G.

	8.2	 	Allegheny’s Project Manager
	 
	 	 	Allegheny’s project manager named in the Job Specification shall have the authority to act
for Allegheny with respect to all matters pertaining to the Work, Contractor’s performance
and the Job Specification. Communications concerning these matters received by Allegheny’s
project manager from Contractor shall be deemed to have been received by Allegheny.

	8.3	 	Access to and Use of Premises

	 	8.3.1	 	Allegheny may use any portion of its property for its own purpose and may
employ workers or other contractors of its own choosing for constructing other
facilities or maintaining or changing any of the existing facilities. Work performed
in accordance with the Job Specification at the

 

 

	 	 	 	Work Site by Allegheny and its contractors shall be coordinated with Contractor.

	 	8.3.2	 	Allegheny may refuse any person admission to the Facility or exclude any
person from performing Work under this Agreement, and Contractor shall cooperate with
Allegheny with respect thereto.
	 
	 	8.3.3	 	Allegheny may take temporary possession of and use partially completed parts
of the Work by notifying Contractor thereof and shall coordinate with Contractor to
minimize any impacts on the Work.

	 	(a)	 	Such possession by Allegheny shall not be deemed an
acknowledgement of completion of said parts of the Work and shall not limit
Contractor’s responsibility for custody and control of said parts of the Work
pursuant to Sub-Article 4.10, after possession is returned to Contractor.
	 
	 	(b)	 	A Change Order shall be issued with respect to such temporary
possession. If taking possession or use is required because Contractor’s
performance has fallen behind the agreed upon detailed work schedule,
Allegheny shall provide notice thereof, but no Change Order shall be allowed
unless the delay was excusable under force majeure pursuant to Article 37.
	 
	 	(c)	 	Allegheny shall elect at the time of such taking of
possession either to accept such part of the Work or to delay acceptance
thereof until the time set forth in Sub-Article 18.2.

	 	8.3.4	 	Contractor is responsible for ensuring that its employees, Subcontractors,
Vendors and all others permitted by Contractor to enter the Facility and other sites
made available by Allegheny for construction-related activities shall comply with
Allegheny’s regulations and requirements. Contractor also shall require said persons
to go to and from the Work Site and within such sites via a route prescribed by
Allegheny and not to deviate therefrom.

	8.4	 	Approvals, Authorizations, Agreements and Reviews
	 
	 	 	All Allegheny approvals, authorizations and agreements shall be in writing. Allegheny’s
approvals, authorizations, agreements and reviews shall not relieve Contractor of its
obligations under this Agreement.
	 
	8.5	 	Bonus Offers
	 
	 	 	Allegheny shall offer to Contractor: a schedule completion bonus following establishment of
the Scheduled Completion Date; and a target price bonus following establishment of the
Agreement Price Budget. The terms of such bonus offers shall be evidenced in a separate
agreement between the parties.

ARTICLE 9 — CHANGE ORDER

 

 

	9.1	 	Changes
	 
	 	 	Allegheny shall have the right, without additional consent from Contractor, to revise
the Job Specification within the general scope of Work set forth therein, including but
not limited to: (i) requiring additional work of Contractor and directing omission of
part of the Work previously authorized; and (ii) making final decisions on the
interpretation of any specifications, drawings, and documents included in the Job
Specification or otherwise furnished by Allegheny to Contractor and on matters where
such documents permit alternatives or are not specific. Upon notification of such
revision, Contractor shall promptly revise the Work accordingly.

	9.2	 	Change Orders

	 	(a)	 	Unless this Agreement provides otherwise, Allegheny shall issue a Change Order
when it revises the Job Specification or elements of the Work already completed or being
performed in accordance with the Job Specification, requires additional Work of
Contractor or directs omission of part of the Work previously authorized, provided that
any of the following Change Order criteria is satisfied: (i) Contractor’s costs for
performing the Work are affected thereby; or (ii) the time required for performing the
Work is affected thereby; or (iii) the scope of the Work or execution approach is
affected thereby. If any of the foregoing criteria is satisfied, Allegheny shall
authorize Contractor to prepare and Contractor shall prepare an estimate of the effects
on costs and/or completion of the Work. After Contractor and Allegheny agree on the
effects, Contractor shall proceed with the additional Work and Allegheny shall issue a
Change Order adjusting one or more aforesaid items. In the event of a significant
change in the scope of Job Specification, Contractor shall have the right to propose a
modification to the Fee and revisions to the schedule to reflect the changes made by
Allegheny.
	 
	 	(b)	 	A Change Order shall not be issued, when: (i) Contractor is required to remediate
deficient Work under Sub-Article 15.1; or (ii) to correct errors, omissions or work not
in accordance with the requirements of Sub-Articles 4.3 and 4.5; or (iii) Contractor has
not complied with a requirement of this Agreement.

 

 

ARTICLE 10 — INDEPENDENT CONTRACTOR

In performing the Work and other obligations under this Agreement, Contractor shall be an
independent Contractor and not the agent or employee of Allegheny. The relationship of employer and
employee shall not exist between Allegheny and Contractor or any of Contractor’s employees or
Subcontractor’s employees. Contractor acknowledges and agrees that, with respect to any Work
performed under this Agreement, neither Contractor nor any of its employees, nor any of
Subcontractor’s employees is eligible to participate in and will not receive any benefits from any
employee benefit plan sponsored by Allegheny. The Work shall be performed under the supervision
and control of Contractor, and Allegheny shall have no authority to supervise Contractor’s
employees, representatives or Subcontractors. Contractor shall have no authority to make
statements, representations or commitments of any kind or take any other action binding on
Allegheny, except as specifically provided in this Agreement. It is expressly agreed that it is
not the purpose or intention of this Agreement to create, nor shall the same be construed as
creating, any partnership or joint operation between Allegheny and Contractor.

ARTICLE 11 —  PAYMENT AND INVOICING

11.1 Payment

Allegheny shall enter into a Trust Account Agreement, a form of which is attached hereto
as Exhibit J, whereby Allegheny provides funds to an account and directs the Trustee to make
payments to Contractor, Subcontractors and/or Vendors for Costs and Fee for Work accomplished
pursuant to Exhibits A through C. The procedure of making such payments is delineated as
follows:

	 	11.1.1	 	On or before the fifteenth day of each month, Contractor shall render to Allegheny an
invoice for the actual, payable portion of the Agreement Price incurred for: the Work
performed by Contractor during the first seven days of Contractor’s accounting period
month, as set forth in Exhibit E, and an estimate of the payable portion of the
Agreement Price forecasted to be earned for Work performed by Contractor during the
balance of Contractor’s accounting period for that month; and the Work by Subcontractors
and Vendors not previously invoiced by Contractor to Allegheny. The invoice shall
specify, document and be adjusted for the difference between the estimate paid to
Contractor during the prior month and the actual Costs incurred by Contractor in the
prior month. Invoices shall include supporting documentation required by the Job
Specification detailing:

(a) the payable portion of actual and forecasted Costs.

(b) the payable portion of Fee earned based upon the
percentage of Work completion actually earned and approved by Allegheny as
of the end of the Contractor accounting period.

(c) a reconciliation of amounts forecasted in the prior
month versus amounts actually incurred for that month, together with an
update of

 

 

forecasted amounts for the current month and the following six (6) months..

	 	11.1.2	 	Payable amounts of Costs and Fee earned and eligible for invoicing in accordance
with Sub-Article 11.1.1 above, shall be:

	 	(a)	 	one hundred percent (100%) of Costs,
	 
	 	(b)	 	one hundred percent (100%) of Reimbursable Costs for those
Subcontractors already subject to a retention of five percent or more under
agreement with Contractor, and
	 
	 	(c)	 	one hundred percent (100%) of Fee earned.

	 	11.1.3	 	Costs and Fee shall be certified by Contractor as being allowable under this
Agreement before payment by Allegheny shall be made hereunder.
	 
	 	11.1.4	 	Invoicing for Costs shall be kept current and Allegheny shall have the right to not
pay for undisputed Costs incurred in excess of ninety (90) days from the date such
Costs should have been invoiced by Contractor to Allegheny.
	 
	 	11.1.5	 	Each invoice shall be specified net of taxes, with applicable taxes (e.g., sales
tax) identified separately.
	 
	 	11.1.6	 	Allegheny shall review each such invoice provided by Contractor and within 15
calendar days after receipt of a correct and valid invoice with full supporting
documentation Allegheny: will advise Contractor of any amount rejected, together with
the reason for the rejection; and on the last Wednesday of Contractor’s accounting
period, as set forth in Exhibit E, of the month of the invoice, shall deposit into the
Trust Account the undisputed amount of the invoice to then be paid under the Trust
Agreement to Contractor, Subcontractors and Vendors.
	 
	 	11.1.7	 	Retainage, at the rate of two and one half percent (2.5%) of the amount of each
invoice submitted by Contractor, shall be capped at five million dollars ($5 million).
Contractor, at its own expense, shall provide an ascending, irrevocable, on demand,
stand-by letter of credit in form and substance as Exhibit F attached hereto, issued
by a financial institution approved by Allegheny (“Letter of Credit”), in lieu of
Allegheny retaining funds from invoices presented by Contractor. The Letter of Credit
shall be used to cover contract and warranty claims not honored by Contractor and,
after providing Contractor with seven days notice to cure such claims and if
Contractor has not diligently pursued such cure, may be partially or wholly drawn upon
demand by Allegheny with notification to the financial institution in accordance with
the terms of the Letter of Credit. Upon expiration of the base warranty period
(eighteen (18) months from the date of the Completion Notice) as noted in Sub-Article
6.3 herein, to the extent it has not been drawn upon, Allegheny shall, promptly after
receipt of written request from Contractor, return the Letter of Credit to Contractor.

 

 

11.2 Waiver under Payment Act

Contractor hereby waives all disclosures, notices, rights, claims, privileges and benefits
under Act 7 of 1994 of the General Assembly of the Commonwealth of Pennsylvania known as the
“Contractor and Subcontractor Payment Act” and Allegheny and Contractor agree that none of
the terms and provisions of said Act shall apply to this Agreement or the Work, payment or
any claims related thereto.

 

 

ARTICLE 12 — CLAIMS AND LIENS

	12.1	 	Contractor agrees to waive all rights to mechanics’, materialmen’s or similar liens with
respect to every aspect of this Agreement. Immediately upon execution of this Agreement.
Contractor will execute and provide to Allegheny, and Allegheny will be responsible for
properly filing and indexing a Mechanics’ Lien Waiver and/or Stipulation against Liens in the
appropriate county office. Such Waiver and/or Stipulation shall be provided to Allegheny for
filing at least ten (10) days prior to Contractor or any Subcontractor or Vendor performing
any physical Work at the Work Site. Contractor shall include enforceable language waiving all
rights to any mechanics’ lien, materialmen’s lien or similar lien in all Subcontract and
Vendor agreements related to Work under this Agreement, and will require that all
Subcontractors, Vendors, or other persons supplying labor, material, services or any other
potentially lienable product for the Work will include such language in all Agreements with
any lower tier Subcontractor or Vendor of such products.
	 
	12.2	 	Contractor agrees that it will indemnify, defend and hold Allegheny harmless from any fines,
penalties, assessments, attorneys fees, expenses or costs of any kind incurred by Allegheny or
assessed against Allegheny in connection with any violation or alleged violation by Contractor
or any Subcontractor or Vendor of any Occupational Safety and Health statutes, regulations or
requirements.
	 
	12.3	 	In the event any Subcontractor, Vendor or third party asserts any claim that would, if
successful, cause an increase in the Agreement Price, become a cost, or cause an extension of
the Scheduled Completion Date, Contractor shall immediately notify Allegheny of the receipt of
such claim, and shall immediately provide to Allegheny all claim documentation received from
such claimant. Allegheny shall have the right to monitor the progress and handling of such
claim in every respect, and may, at Allegheny’s sole option, undertake the handling and
defense of any such claim with counsel of its own choosing and at its sole cost. Contractor
agrees to fully cooperate with Allegheny in the negotiation, handling and/or defense of any
such claim, including but not limited to the provision of documentary and witness support, and
shall not settle or make payment on any such claim without the written consent of Allegheny.
	 
	12.4	 	Contractor agrees that it will continue performance under this Agreement during the pendency
of any dispute or claim, and Allegheny agrees to continue paying undisputed amounts due during
the pendency of any dispute or claim.

 

 

ARTICLE 13 — TAXES AND DUTIES

	13.1	 	Contractor shall pay when due:

	 	13.1.1	 	Taxes and fees imposed by reason of the performance of the Work by Contractor
including, but not limited to, sales, excise, storage, consumption and use taxes;
licenses, permit and registration fees; and income, profit, franchise, and personal
property taxes, but excluding fees for licenses and permits obtained by Allegheny
pursuant to Sub-Article 8.1.2.
	 
	 	13.1.2	 	Employment taxes and contributions imposed by applicable Law, or trade union
Agreements or regulations, with respect to or measured by compensation (wages,
salaries or other) paid to employees of Contractor including, but not limited to taxes
and contributions for unemployment compensation insurance, old age benefits, welfare
funds, pensions and annuities, and disability insurance, and
	 
	 	13.1.3	 	Import/export license fees and import/export taxes and duties on services, equipment
and materials, and construction tools, equipment and supplies imported or exported by
Contractor.

	13.2	 	Except to the extent due to Allegheny’s non-payment of undisputed invoices, Contractor shall
defend, indemnify and hold Allegheny harmless from liability resulting from Contractor’s or
Subcontractors’ or Vendors’ failure to (i) make timely payment of or to pay any of the items
in Sub-Article 13.1 above, or (ii) comply with the reporting, filing or other procedural
requirements with respect to their payment. Interest, penalties or other liabilities arising
from such failures shall not be allowed as Costs and shall be for
Contractor’s account.
	 
	13.3	 	Contractor shall develop procedures and minimize the sales and use tax or value added tax
burden on purchases of equipment, materials, and services under this Agreement. Prior to
Contractor’s initiation of procurement activities hereunder, it shall obtain Allegheny’s
approval of the aforesaid procedures.
	 
	13.4	 	If Contractor fails to obtain immunity or exemption from taxes or duties from which
Contractor or Subcontractors are exempt under applicable Law, or fails to obtain a refund or
credit, including interest, applicable for any such taxes or duties paid, such taxes and
duties shall not be allowed as Costs and shall be for Contractor’s account.
	 
	13.5	 	Contractor shall promptly notify Allegheny of matters pertaining to nonpayment or payment
under protest of, claim for immunity or exemption from, or claim for refund of or credit
against any taxes or duties that are applicable to the Work.
	 
	13.6	 	Without liability to Contractor, Allegheny shall withhold income and other taxes from
payments due to Contractor under this Agreement to the extent that such withholding is
required by Law. Payment by Allegheny to the appropriate governmental office of the amount of
money so withheld will be deemed to have

 

 

	 	 	been made on behalf of Contractor hereunder for the amount of such payment as if the payment
had been made to Contractor and will relieve Allegheny of any further obligation to
Contractor with respect to the amount so withheld. The receipt for any such withholding tax
will be given to the Contractor.

 

 

	13.7	 	Sales and Use Tax Responsibilities

	 	13.7.1	 	Except as expressly provided in Sub-Article 13.7.2 below, all permanent equipment
and materials purchased by Contractor for incorporation as a permanent part of the
Work shall be purchased by Contractor. Contractor shall pay sales and/or accrue and
pay use tax as appropriate. Allegheny shall have the option to purchase equipment and
materials directly in order to utilize its public utility sales tax exemption.
	 
	 	13.7.2	 	Contractor shall pay applicable sales or use tax on: (i) equipment, materials and
supplies (including but not limited to consumable supplies and small tools) that will
not become a permanent part of the Work; (ii) third party rentals including
construction equipment; and (iii) permanent equipment and materials purchased by
Contractor.
	 
	 	13.7.3	 	Contractor shall, in its accounting of the Agreement Price Budget, distinguish
between (i) permanent equipment and materials purchased for incorporation as a
permanent part of the Work and (ii) those equipment, materials and supplies which
Contractor shall have paid sales and use tax in accordance with Sub-Article 13.7.2
above.
	 
	 	13.7.4	 	The Contractor agrees to assign and transfer to Allegheny all its rights to sales
and use tax which may be refunded as a result of a claim for refund for materials
purchased in connection with this Agreement. The Contractor further agrees that it
will not file a claim for refund for any sales or use tax which is the subject of this
assignment.

ARTICLE
14 — INSPECTION OF WORK

	14.1	 	Allegheny or its representative shall at all times have access to the Work whether it is in
preparation or in progress and Contractor shall provide proper facilities for such access and
for inspection. If the Job Specification, Allegheny’s instructions, any Law or any public
authority require any Work to be specifically inspected, tested or approved, Contractor shall
give Allegheny timely notice of: (i) readiness for inspection; and (ii) the date fixed for any
inspection to be performed by a public authority.
	 
	14.2	 	Inspections by Allegheny shall be promptly made. If any part of the Work requiring
Allegheny’s inspection or witnessing is closed or covered before such inspection or witnessing
has been performed, Allegheny may require said Work to be opened or uncovered for inspection
or witnessing and reclosed or recovered. Costs associated therewith shall be for Contractor’s
account.

 

 

ARTICLE 15 – DEFICIENT WORK

	15.1	 	Any or all of the following, at Allegheny’s option, shall be deemed deficient Work hereunder:
(i) any Work performed or equipment and/or materials furnished by Contractor or Subcontractors
that does not conform with requirements as set forth in this Agreement, or (ii) Contractor has
at any time failed to remedy any imperfections in the Work, or (iii) Contractor has failed to
supply a sufficient number of properly skilled workmen or satisfactory equipment and/or
materials, or (iv) Contractor, or any Subcontractor or Vendor, fails upon request to
demonstrate financial ability to complete the Work in accordance with the terms of this
Agreement, or (v) Contractor has failed to execute the Work with promptness and diligence
satisfactory to Allegheny, or (vi) Contractor has failed to comply with any of the provisions
of this Agreement. Upon receipt of notice from Allegheny that any such deficiency exists,
Contractor shall promptly undertake and proceed with due diligence to remedy such deficiency
to meet the requirements of the Job Specification or to the satisfaction of Allegheny.
	 
	15.2	 	For Contractor’s remediation pursuant to the foregoing Sub-Article, Allegheny shall pay
Contractor in accordance with Exhibit A, costs incurred by Contractor in correcting
deficiencies in the Work, except for: (i) amounts recoverable from Subcontractors, Vendors or
others; and (ii) costs incurred as a result of Contractor’s failure to substantially meet or
exceed the standards prevailing in the industry pertaining to such Work.
	 
	15.3	 	If Contractor does not within ten (10) days after receipt of such notice undertake and
proceed with due diligence to remedy such deficiencies, Allegheny may declare Contractor in
material breach of this Agreement, and by written notice setting forth the effective date of
removal, may remove Contractor from all or any part of the Work and use or dispose of all
materials, supplies, tools and equipment in connection therewith. Allegheny may then complete
all or any part of the Work from which Contractor has been removed.
	 
	15.4	 	In the event that Allegheny does remove Contractor and take possession as aforesaid, then
notwithstanding Article 11, Contractor shall only be entitled to payment for the part of the
Work performed by it and acceptable to Allegheny under the terms and conditions of this
Agreement up to the effective date of such removal, reduced by: (i) costs recoverable under
Subcontractors’ or Vendors’ guarantees; (ii) costs recoverable under insurance policies; and
(iii) Allegheny’s retainage out of moneys owing to Contractor of an amount sufficient to
indemnify Allegheny against extra costs incurred by Allegheny to remedy deficiencies. The
rights and remedies of Allegheny provided by this Article are in addition to any other rights
and remedies provided by Law or this Agreement.

ARTICLE 16 — SUSPENSION

	16.1	 	Suspension of Work
	 
	 	 	Allegheny may suspend at any time and for any reason any part of the Work by giving notice to
Contractor specifying the part of the Work to be suspended and the effective date of
suspension. Suspension under this Article cannot last more than three months. Contractor
shall cease work on said part of the Work on the effective date of suspension, but shall
continue to perform any part of the Work not suspended.

 

 

	16.2	 	Compensation
	 
	 	 	For the part of the Work suspended, compensation to Contractor during the period of
suspension shall be in accordance with Exhibits A and B, limited however to:

	 	 (a)	 	Contractor’s employees whose retention on the Work during the suspension has been
authorized in advance by Allegheny; and
	 
	 	 (b)	 	Other items directly related to the suspended part of the Work if authorized in
advance by Allegheny,
	 
	 	 	 	and subject to the other provisions of this Agreement that may reduce or suspend payment.

	16.3	 	Resumption
	 
	 	 	Allegheny may, at any time, authorize resumption of the suspended part of the Work by
notifying Contractor of the part of the Work to be resumed and the effective date of
suspension withdrawal. Work shall be resumed as promptly as possible and as agreed to by the
parties after receipt of such notice. A Change Order shall be issued to reflect the
difference in Contractor’s costs for performing the Work, or the time required to perform the
Work, or both.

	16.4	 	Liability
	 
	 	 	For the part of the Work suspended in accordance with this Article, except as
otherwise provided in Sub-Article 16.2, Allegheny shall not be liable for any additional
costs, claims, damages or liabilities of Contractor, Subcontractors or Vendors.

ARTICLE 17 — TERMINATION

	17.1	 	Termination for Convenience
	 
	 	 	Allegheny may terminate this Agreement or any part of the Work at any time and for any reason
by giving notice to Contractor specifying the part of the Work to be terminated and the
effective date of termination. Contractor shall promptly prepare for Allegheny’s approval a
plan for terminating that part of the Work and shall cease work on said part of the Work on
the effective date of termination.. Contractor shall continue to perform any part of the
Work not terminated, and upon Allegheny’s approval shall implement the plan for termination.

	17.2	 	Termination for Material Breach
	 
	 	 	In the case of material breach by Contractor of this Agreement, Allegheny may terminate this
Agreement or any part of the Work at any time, by giving prompt notice to Contractor
specifying the part of the Work to be terminated and the effective date of termination.
Contractor shall cease work on said part of the Work on the termination effective date, but
shall continue to perform any part of the Work not terminated.
	 
	 	 	In the event it is subsequently determined that any such termination by Allegheny for
material breach is without substance or foundation, such termination shall be

 

 

	 	 	considered and administered as a termination for convenience pursuant to Sub-Article 17.1.

	17.3	 	Termination by Contractor

	 	17.3.1	 	In the event that all of the Work was suspended pursuant to Sub-Article 16.1 and
Allegheny has not authorized resumption within three months of such suspension,
Contractor may give notice to Allegheny of its intention to terminate this Agreement.
If, within thirty (30) days of said notice Allegheny does not authorize resumption of
the Work, or any part thereof, Contractor may terminate this Agreement with immediate
effect, and Allegheny will compensate Contractor pursuant to Sub-Article 17.4 below.
	 
	 	17.3.2	 	In the event Allegheny fails to pay Contractor undisputed amounts required to be paid
hereunder when such amounts are due, Contractor may, at its sole discretion and upon the
provision of written notice to Allegheny, immediately suspend its performance of the
Work. Contractor shall not be required to resume performance of suspended Work until
such time as undisputed past due amounts have been paid by Allegheny.

 

 

	17.4	 	Compensation
	 
	 	 	If this Agreement or any part of the Work is terminated, in accordance with Sub-Articles 17.1
or 17.3, Allegheny with respect to such Work will pay Contractor, only for the part of the
Work satisfactorily performed in accordance with this Agreement and obligations incurred
prior to the effective date of termination and for such additional amounts directly related
to the Work performed by Contractor in terminating, providing said Work was authorized in
advance by Allegheny, and subject to the other provisions of this Agreement that may reduce
or suspend payment. Such payment will be made to Contractor:

	 	(a)	 	for non-lump sum and non-unit cost agreements, according to Exhibit A;
	 
	 	(b)	 	for lump sum and unit-cost agreements, the percentage of any lump sum or unit
cost price (as the case may be) which represents the percentage of the Work completed by
Contractor; and
	 
	 	(c)	 	for direct costs that Contractor incurs in terminating the Work under this
Agreement, including unpaid legally enforceable obligations to Subcontractors and
Vendors and others as well as transportation costs for return of employees, construction
tools and equipment, provided those costs were authorized in advance by Allegheny and
are properly supported by time sheets, invoices and the like.

Allegheny shall have audit rights pursuant to Article 28 to verify the actual costs of the
Work performed by Contractor in terminating.

	17.5	 	No Compensation
	 
	 	 	In the event any Work is terminated in accordance with Sub-Article 17.2, Allegheny shall have
no obligation to compensate Contractor under this Agreement for such terminated Work, other
than the costs described in Sub-Article 17.4(c).

	17.6	 	Liability
	 
	 	 	For any part of the Work terminated in accordance with Sub-Articles 17.1 or 17.3,
except as otherwise provided in Sub-Article 17.4, Allegheny shall not be liable for any
additional costs, claims, damages or liabilities of Contractor, Subcontractors or
Vendors.

ARTICLE 18 — COMPLETION AND ACCEPTANCE

	18.1	 	Completion
	 
	 	 	Contractor shall promptly notify Allegheny when Contractor considers it has substantially met
the criteria set forth in the Job Specification for completion of the Work. Within ten (10)
calendar days after receipt of said notice, Allegheny shall issue a Completion Notice with
respect to the Work, or alternatively, notify Contractor of deficiencies to be remedied
before a Completion Notice will be issued. Contractor shall promptly correct such
deficiencies and notify Allegheny when they are remedied.

	18.2	 	Acceptance

 

 

	 	 	When Contractor considers that: (i) the entire Work has been completed in accordance
with the Job Specification; (ii) Contractor has corrected known deficiencies; and (iii)
Contractor has furnished to Allegheny those documents required under this Agreement,
except for those documents specified in Sub-Article 11.1.6 as requisite for final
payment of Agreement Price, it shall notify Allegheny thereof. Within fourteen (14)
calendar days, Allegheny shall: (i) notify Contractor of acceptance certifying its
agreement that said criteria have been satisfied; or (ii) notify Contractor of the
deficiencies still to be remedied or activities to be completed before a notice of
acceptance will be issued.

ARTICLE 19 — TITLE

Title to all parts of the Work supplied by Allegheny shall remain in Allegheny at all times.
Title to all equipment, materials, supplies and structures procured by Contractor from third
parties and intended, at the time of such procurement or supply, to be incorporated into, or
used in the construction of the Work (excluding Contractor’s and Subcontractors’ construction
tools, construction equipment and rented items) shall pass to Allegheny upon payment therefor
by Allegheny, or upon delivery to the Work Site, whichever occurs earlier. Delivery of
equipment, materials, supplies and structures to the Work Site shall not relieve Allegheny of
its obligations of payment for such items in accordance with this Agreement. In the case of
termination of this Agreement, to the extent any right or interest exists in and to all
equipment, materials, supplies and structures procured by Contractor from third parties with
funds to be supplied by Allegheny through the trust account, said right or interest shall vest
in Allegheny at the moment of purchase by Contractor, and shall not vest in Contractor.
Contractor shall act as bailee for Allegheny with regard to all equipment, materials, supplies
and structures supplied by Allegheny or procured by Contractor from third parties with funds
to be supplied by Allegheny.

ARTICLE 20 — DISTRIBUTION OF RISK, RELEASE AND INDEMNITY

	20.1	 	Contractor’s Responsibilities

	 	20.1.1	 	Contractor agrees, to the extent not prohibited by Law, to defend, indemnify and
hold Allegheny and its agents, officers and employees harmless from (i) all third
party claims, obligations and liabilities (and all costs and expenses including
attorneys’ fees incurred in connection therewith) to the proportionate extent caused
by the negligence, gross negligence, recklessness or willful misconduct of Contractor
and (ii) all claims for death, disease, bodily injury and/or property damage
including, without limitation, claims from Contractor’s employees, Subcontractors’
employees and/or Vendors’ employees (other than property damage to the Work itself)
that may arise in connection with the Work or that occur during Contractor’s
performance of the Work, including all costs and expenses including attorneys’ fees
incurred in connection therewith.
	 
	 	20.1.2	 	Contractor shall also cause any Subcontractor, to the extent not prohibited by Law,
to indemnify, defend and hold Allegheny and Contractor and their respective
principals, officers, partners, agents and employees harmless from all third party
claims for death, disease, bodily injury and/or property damage (other than property
damage to the Work itself) that may arise in

 

 

	 	 	 	connection with Subcontractor’s performance of the Work including, but not limited
to, claims from any Subcontractor employees.

	 	20.1.3	 	Contractor’s and all Subcontractor’s obligations to indemnify and hold Allegheny
harmless shall not be limited by a limitation on the amount or type of damages,
compensation or benefits payable by or for the Contractor or Subcontractor under
workers’ compensation acts, disability benefit acts or other employee benefit acts.
Where personal injury, death, disease or loss of or damage to property arises from a
cause or causes attributable jointly to the negligence of one or more of Allegheny,
Contractor and/or any Subcontractor, each indemnitor’s duty of indemnification shall
be in proportion to its allocable share of such negligence.
	 
	 	20.1.4	 	(a) Contractor hereby waives all rights of subrogation against Allegheny, and
against all Contractors and Subcontractors enrolled in the OCIP, in connection with
any and all events, occurrences, claims, losses and/or payments arising from or in
connection with the performance of the Work.

	 	(b)	 	Contractor shall cause each of its Subcontractors, in their respective
subcontracts, to waive all rights of subrogation against Allegheny, and against all
Contractors and Subcontractors enrolled in the OCIP, in connection with any and all
events, occurrences, claims, losses and/or payments arising from or in connection
with the performance of the Work.
	 
	 	(c)	 	All insurance provided by Contractors and/or Subcontractors shall be endorsed
to waive the insurer’s rights of subrogation against Allegheny. All insurance
provided by Contractors and/or Subcontractors enrolled in the OCIP shall be
endorsed to waive the insurer’s rights of subrogation against all other Contractors
and Subcontractors enrolled in the OCIP.

	20.2	 	Allegheny’s Responsibilities

	 	20.2.1	 	Allegheny agrees to indemnify and save Contractor harmless from any and all damages,
claims, causes of action, liabilities, loss, cost fines, penalties or expense claimed by
third parties for property damage and or bodily injury, including death, to the
proportionate extent caused by the negligence, gross negligence or willful misconduct of
Allegheny, its agents, employees, or affiliates.
	 
	 	20.2.2	 	Allegheny shall be responsible for and hold Contractor harmless for loss of or damage
howsoever caused to Allegheny’s property intended to be incorporated into or used in the
Work and located at the Work Site, even if the loss or damage results from Contractor’s
negligence, except that Contractor shall be responsible for the first $5,000 of any such
loss.
	 
	 	20.2.3	 	Allegheny will indemnify Contractor for loss of or damage howsoever caused to
Contractor’s property intended to be incorporated into the Work and located at the Work
Site, even if the loss or damage results from

 

 

	 	 	 	Contractor’s negligence, except that Contractor shall be responsible for the first
$5,000 of any such loss.

	 	20.2.4	 	Notwithstanding the provisions of Sub-Articles 20.2.1 and 20.2.2, Contractor shall
also be responsible, and not compensated by Allegheny, for:

	 	(a)	 	any loss of money or securities in the care, custody or control
of Contractor, which are used or intended for use in paying for or performing
the Work;
	 
	 	(b)	 	unexplained or mysterious disappearance of any property in
Contractor’s care, custody or control, or shortage of any property disclosed on
taking inventory; or

	(c)	 	theft of property on the part of Contractor, Subcontractors or their employees.

ARTICLE
21 — INSURANCE

	21.1	 	Contractor shall participate, and require Subcontractors to participate, in Allegheny’s
Controlled Insurance Program (OCIP) pursuant to Exhibit G and meet the other insurance
coverage requirements set forth in Exhibit G.
	 
	21.2	 	Upon Allegheny’s request, Contractor agrees to participate in a project-wide bonding program,
subguard, primeguard or other insurance programs, and Contractor shall not bond
Subcontractors, unless requested by Allegheny.

 

 

ARTICLE 22 — TOOLS AND EQUIPMENT

Allegheny may loan or furnish tools or equipment to Contractor as an accommodation for use at a
Work Site. Any tools and equipment are loaned or furnished on an “as is, where is” basis.
Contractor agrees:

	22.1	 	to inspect the tools and equipment and make its own determination, before commencing the
Work, that they are adequate for the safe and efficient performance of the Work by Contractor.
	 
	22.2	 	that the tools and equipment will be loaned or furnished by Allegheny and accepted by
Contractor without warranty or representation by Allegheny as to their condition or fitness
for Contractor purpose.
	 
	22.3	 	to return the tools and equipment to Allegheny at the conclusion of use in good condition as
when received, ordinary wear and tear excepted.

Notwithstanding the foregoing, Contractor’s failure to provide regular maintenance of tools and
equipment loaned or furnished by Allegheny shall be deemed to be willful misconduct.

ARTICLE 23 — RESPONSIBILITY FOR CONSEQUENTIAL DAMAGES

Notwithstanding any other provisions contained elsewhere in this Agreement to the contrary, neither
party, nor their respective affiliates, consultants, agents or Subcontractors or Vendors of any
tier, nor any employees, officers, or directors of any of the foregoing, shall be liable to the
other for any special, indirect, incidental, punitive, consequential or exemplary damages of any
kind or nature whatsoever, or damages arising from or in connection with any other party’s loss of
actual or anticipated profits or revenues, loss by reason of shutdown, non-operation, or increased
expense of manufacturing or operation, loss of use, cost of capital, damage to or loss of property
or equipment of Allegheny, or claims of customers of either party, regardless of whether due to or
based upon delay, breach of Agreement, warranty, tort, negligence, strict liability, error or
omission, indemnity or any other cause whatsoever.

 

 

ARTICLE 24 — GOVERNING LAW AND DISPUTE RESOLUTION

	24.1	 	Governing Law
	 
	 	 	The validity, interpretation and construction of this Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of Pennsylvania.

	24.2	 	Dispute Resolution
	 
	 	 	All disputes arising under this Agreement or relating to the Work: (i) between Allegheny and
Contractor; (ii) between and among Contractor, Subcontractors and/or Vendors; and (iii)
between and among Allegheny, Contractor and other contractors of Allegheny shall be resolved
in accordance with the Dispute Resolution Procedure attached hereto as Exhibit H. Contractor
agrees that any disputes with other contractors of Allegheny or their subcontractors will not
delay completion of the Work, which shall be continued by Contractor, subject to the rights
herein provided. All purchase orders and subcontracts shall require Subcontractors and
Vendors to agree to resolve all disputes in accordance with said Dispute Resolution
Procedure. Contractor shall require that Subcontractors and Vendors comply with the Dispute
Resolution Procedure and it be flowed down to lower-tier Subcontractors, as well as use best
efforts to flow the Dispute Resolution Procedure down to lower-tier Vendors. Subcontractors
or Vendors consent to be joined in any dispute resolution proceeding, at Allegheny’s option,
if the Subcontractor’s or Vendor’s Work is related to such proceeding.

ARTICLE 25 — OWNERSHIP OF INVENTIONS AND DOCUMENTS

	25.1	 	Ownership of Documents
	 
	 	 	Drawings, specifications and other documents,
including those in electronic form, prepared by
Contractor and Contractor’s consultants are
instruments of service for use solely with
respect to the Work and other work for
Allegheny. Contractor and Contractor’s
consultants shall be deemed the authors and
owners of their respective instruments of
service and shall retain all common law,
statutory and other reserved rights, including
copyrights. Upon execution of this Agreement,
Contractor grants to Allegheny a paid up royalty
free, nonexclusive license to reproduce
Contractor’s and Contractor’s consultant’s
instruments of service for the purpose of
constructing, using, maintaining, operating,
expanding or updating the Work and other work
for Allegheny, provided that Allegheny shall
comply with all obligations, including payment
of all undisputed sums due, under this
Agreement. If Allegheny is in compliance with
the foregoing requirements, to the extent
necessary, Contractor and Contractor’s
consultants also grant to Allegheny a paid up
nonexclusive license to create and use
photographs, drawings, sketches, artistic
representations and other similar
representations of the Work or other work for
Allegheny and to modify and/or change the Work
or other work for Allegheny.

 

 

	25.2	 	Contractor shall cause provisions substantially similar to Sub-Article 25.1 to be included
with all of Contractor’s agreements with its consultants and shall require all of Contractor’s
consultants to grant the licenses to Allegheny as described in Sub-Article 25.1.  
	 
	25.3	 	Contractor shall provide to Allegheny, in a medium (e.g., disk, magnetic tape, network
direct transfer, etc.) approved by Allegheny, a digital copy of the most recent design
drawings, specifications and other documents, including those which were produced or created
by Contractor’s consultants and/or others.
	 
	25.4	 	In the case of products, materials, systems, etc., protected by patent, Contractor and its
consultants shall not specify or cause to be specified any infringing use of a patent. Should
Contractor become aware of or receive notice of potential infringement of any intellectual
property right related to the Work or other work for Allegheny, regardless of the source of
that awareness or notice, Contractor shall (i) immediately cease the copying and any other
activity which is the potential source of infringement; and within seven (7) calendar days
(ii) investigate the potential infringement; (iii) submit to Allegheny copies of all documents
relating to that awareness, the notice, or the object thereof; and (iv) issue to Allegheny a
complete written response and analysis of the potential infringement and the course of action
recommended by Contractor. Contractor shall submit to Allegheny a supplement of the initial
report within seven (7) calendar days of Contractor’s receipt of, or awareness of, additional
related information. Nothing in this Agreement shall be deemed to relieve Contractor of its
obligations under this Sub-Article, nor shall Allegheny’s receipt of the information indicated
in this Sub-Article give rise to any duty or obligation on the part of Allegheny.

	25.5	 	Ownership of Inventions
	 
	 	 	If Contractor or its personnel or Subcontractors or their personnel make any inventions,
discoveries or improvements (collectively, “Inventions”) patentable or unpatentable,
resulting from Contractor’s work hereunder, Contractor shall promptly disclose those
Inventions to Allegheny in writing. Inventions covered in this Sub-Article shall include
those conceived during the term of this Agreement between Allegheny and Contractor. Further,
Contractor hereby assigns, and shall require its employees and Subcontractors to assign, each
such Invention to Allegheny. Contractor also shall require its employees to execute such
papers as Allegheny requests in connection with any assignment and in connection with the
acquisition of letters patent, U.S. and foreign, on any Inventions. Any compensation to
which a Contractor’s employee may be entitled by Law or otherwise for assigning Inventions
shall be for Contractor’s account.

 

 

	25.6	 	Infringement Notice and Indemnification
	 
	 	 	If either Contractor or Allegheny is made the subject of any claim or lawsuit based on the
alleged infringement or misappropriation of any third-party patent, copyright, trade secret
or other proprietary right by reason of any aspect of the Work provided hereunder, it shall
promptly notify the other party in writing. Allegheny shall defend and indemnify Contractor
against those claims or lawsuits based on the actual or alleged infringement or
misappropriation of any such third-party right by Contractor only to the extent that
Contractor’s allegedly infringing or misappropriating conduct is expressly required in
writing by Allegheny. This indemnity shall not extend to conduct of Contractor, which is
discretionary to Contractor. Contractor shall defend and indemnify Allegheny against all
other claims or lawsuits based on the actual or alleged infringement or misappropriation of
any third-party right. The indemnities set forth in this Sub-Article 25.6 shall include,
without limitation, all penalties, awards, and judgments; all court and arbitration costs;
legal costs, including attorneys fees; and other reasonable out-of-pocket costs incurred in
connection with such claims or lawsuits. The indemnifying party shall have the right to
control the defense of any litigation, and to settle or compromise all claims and lawsuits
subject to its indemnity. However, the indemnifying party may not settle or compromise such
claim or lawsuit without the written consent of the indemnified party if any settlement or
compromise: (i) requires the indemnified party to part with any property right or interest,
assume any obligation or make any payment not indemnified; or (ii) subjects the indemnified
party to any injunction. Subject to the foregoing, the indemnified party shall have the
right, at its option and expense, but not the obligation, to retain advisory counsel to
represent its interests in defending any such claim or lawsuit.
	 
	 	 	If any action results in an injunction against Allegheny with respect to the Work performed
under this Agreement, Contractor agrees that it shall, at its option and its sole expense,
either: (i) procure for Allegheny the right to continue using the infringing subject matter;
or (ii) replace or modify the same so that it becomes non-infringing.

 

 

ARTICLE
26 — CONFIDENTIAL INFORMATION

	26.1	 	Contractor’s Duty of Confidentiality
	 
	 	 	Contractor shall hold in confidence all business and technical information that is made
available to Contractor, directly or indirectly, by Allegheny or developed or acquired by
Contractor in performing the Work under this Agreement (collectively “Confidential
Information”), except:

	 	(a)	 	information, which is or becomes, without fault of Contractor, part of the public
domain;
	 
	 	(b)	 	information, which Contractor can show, was received by Contractor from an
independent third party that is under no obligation to Allegheny regarding the
information;
	 
	 	(c)	 	information, which Contractor can show was already in Contractor’s possession at
the time the information, was made available to Contractor, directly or indirectly, from
Allegheny.

Additionally, if so required by Law or valid legal or regulatory process, Contractor may
disclose Confidential Information, but only following notice by Contractor to Allegheny of
the requirement to disclose and reasonable cooperation with any attempt by Allegheny to
maintain the confidentiality of such Confidential Information.

	26.2	 	Contractor’s Use of Confidential Information
	 
	 	 	Contractor shall not, without the prior written approval of Allegheny, as appropriate, use
the Confidential Information that Contractor is required to keep confidential hereunder for
any purpose other than the performance of the Work under this Agreement.

	26.3	 	Contractor’s Information
	 
	 	 	The existing Confidentiality Agreement between Allegheny and Contractor, dated March
16, 2006 shall apply to confidential information disclosed prior to the date of this
Agreement, but is superceded by the terms of this Article 26 from the date of this
Agreement forward. Except for the underlying data and proprietary methodology for
developing and preparing estimates and measured performance, which are herein designated
confidential by Contractor, Allegheny shall have no obligation of confidence with
respect to any other information disclosed to Allegheny by Contractor, and Allegheny
shall be free to use or disclose any or all of the information contained in any drawing,
record or other document to third parties without accounting to Contractor therefor. In
the absence of any such separate confidentiality agreement, Contractor shall not place
any restrictive notices on any information, no matter the form of its recording, that
Contractor provides to Allegheny hereunder. If Contractor places any such restrictive
notices on any drawing, record or other document, Allegheny is hereby authorized to
nullify, remove, or disregard those notices.

 

 

ARTICLE 27 — USE OF TRADEMARK AND PUBLICITY

Contractor shall not, without the prior written consent of Allegheny: (i) use the name or any
trade name or registered trademark of Allegheny in any advertising or communications to the public
in any format, except as necessary to perform the Work; (ii) make publicity releases or
announcements regarding this Agreement, the performance of the Work or any related activities; or
(iii) take any photographs, video or other recordings of Allegheny’s property, except as otherwise
provided in the Job Specification. Contractor shall cause Subcontractors and Vendors to comply
with these requirements.

ARTICLE 28 — AUDIT

	28.1	 	Contractor shall maintain and preserve, and shall require Subcontractors to maintain and
preserve, in accordance with generally accepted accounting practices, accurate documentation
and data (including but not limited to written and electronic records, books of account,
correspondence, plans, permits, licenses, drawings, payroll records, memoranda, invoices
including all back-up details, receipts, records relating to air freight and ground
transportation and documentation of related systems and controls) pertaining to the
performance of the Work under this Agreement, as well as any gift or entertainment expenses
incurred by Contractor or Subcontractors pertaining to the Work under this Agreement. A
listing of the minimum data field requirements for audit purposes to be maintained by
Contractor and Subcontractors is attached hereto as Exhibit K.
	 
	28.2	 	At all reasonable times, Contractor shall permit and shall require Subcontractors to permit,
employees and agents of Allegheny, and its insurers, to have access to its and their offices
and work locations to examine, reproduce and retain copies of such documentation and data and
discuss with Contractor’s and Subcontractors’ personnel in connection therewith, as necessary
for Allegheny to verify and monitor: (i) that Reimbursable Costs are actually incurred and
paid; (ii) the existence and effectiveness of Contractor’s and Subcontractors’ business
practices; and (iii) Contractor’s compliance with the terms of this Agreement. Where Work is
billable under Fixed Rates, Allegheny shall have sufficient access to those rates to satisfy
themselves that the Work provided thereunder have not also been separately billed on some
other basis (e.g., a reimbursable basis).
	 
	28.3	 	The provisions of this Article shall be applicable during the term of this Agreement and for
a period of three (3) years thereafter. If errors or deficiencies are identified by an audit
or otherwise, Contractor shall take prompt corrective action and advise Allegheny thereof.

 

 

ARTICLE 29 — BUSINESS STANDARDS

	29.1	 	Business Standards
	 
	 	 	Contractor, in performing its obligations under this Agreement, shall establish and maintain
in effect appropriate business standards, procedures and controls to avoid any real or
apparent impropriety that might affect adversely or conflict with the interests of Allegheny.
Contractor shall exercise all reasonable care and diligence to prevent any actions or
conditions, which could result in a conflict with the best interests of Allegheny. This
obligation shall apply to the activities of the employees of Contractor and Subcontractors in
their relations with the employees of Allegheny and their families and/or third parties
arising from this Agreement. These efforts shall include, but not be limited to,
establishing precautions to prevent their employees or Subcontractors from making, receiving,
providing or offering any substantial gifts, extravagant entertainment, payments, loans, or
other considerations.

	29.2	 	Accuracy of Records
	 
	 	 	Contractor agrees that all financial settlements, billings, and reports rendered to Allegheny
or its representative shall reflect properly the facts about all activities and transactions
handled for the account of Allegheny, which data may be relied upon as being complete and
accurate in any further recordings and reporting made by Allegheny or its representatives for
whatever purpose.
	 
	29.3	 	Compliance With Law
	 
	 	 	Contractor agrees and will secure agreement by Subcontractors to comply with Law in
performance of the Work. Notwithstanding anything in this Agreement to the contrary, no
provision shall be interpreted or applied so as to require Allegheny or Contractor to do, or
refrain from doing, anything which would constitute a violation of, or result in a loss of
economic benefit under, United States anti-boycott and other export laws and regulations.
Contractor represents that it shall not make any improper payments of money or anything of
value to a government official (whether appointed, elected, honorary, or a career government
employee) in connection with this Agreement, nor shall it make improper payments to a third
party knowing or suspecting that the third party will give the payment, or a portion of it,
to a government official.
	 
	29.4	 	Notice of Non-Compliance
	 
	 	 	Contractor agrees to notify Allegheny promptly upon discovery of any instance where the
Contractor fails to comply with this Article. If Contractor discovers or is advised of any
errors or exceptions related to its invoicing for the Work, Contractor and Allegheny will
together review the nature of the errors or exceptions, and Contractor will, if appropriate,
promptly take corrective action and adjust the relevant invoice or refund overpayments.

 

 

ARTICLE 30 — NO INFORMATION BROKERING

	30.1	 	Warranty and Representation
	 
	 	 	Contractor and Allegheny are aware of a practice (referred to in this Article as “Information
Brokering”) where certain parties approach contractors, subcontractors vendors, or others and
offer confidential information or illicit influence in order to obtain business through
corruption of competitive bidding processes. Contractor recognizes that the practice of
Information Brokering or any other corruption of the Agreement award process is not
permitted. Allegheny and Contractor agree, warrant and represent that they have not and
will not, and Contractor shall direct Subcontractors not to, utilize Information Brokering in
connection with this Agreement.

	30.2	 	Notification
	 
	 	 	Contractor agrees that it will promptly notify Allegheny’s General Counsel in writing if
anyone approaches Contractor for the purpose of Illegal Information Brokering concerning
this Agreement or any related business interest of Allegheny. Allegheny undertakes that
such notice and any related information provided by Contractor will be treated with the
utmost discretion.

ARTICLE
31 — MANAGEMENT OF WASTE AND HAZARDOUS MATERIALS

	31.1	 	Contractor and its Subcontractors shall have the responsibility and liability for the proper
management of non-hazardous wastes resulting from their Work, as well as for the proper
disposal of non-hazardous wastes at the Work Site, pursuant to the Job Specification and
according to Law. In particular, but without limitation, Contractor and Subcontractors shall
implement procedures to minimize the generation of non-hazardous waste. These procedures
shall include, at a minimum, process substitution, materials recovery, and continued product
use.
	 
	31.2	 	Contractor and Subcontractors shall, in performing the Work, have the responsibility and
liability for all hazardous materials brought onto or generated at the Work Site by Contractor
and Subcontractors, including the proper permitting, removal and disposal of all such
hazardous materials according to Law. In particular, but without limitation, Contractor and
Subcontractors shall implement procedures to minimize the generation of hazardous materials.
These procedures shall include, at a minimum, process substitution, materials recovery, and
continued product use. When possible, Contractor shall select less toxic alternatives to
minimize the generation of hazardous materials. Contractor shall maintain a log of all
hazardous materials, including their quantity, locations and place of disposal, and provide
copies of such log regularly to Allegheny. Contractor in performing the Work shall remove all
Contractor and Subcontractor hazardous materials from the Work Site as soon as practicable,
but in no event later than acceptance of the Work.
	 
	31.3	 	In the event pre-existing hazardous materials, including asbestos or asbestos containing
materials, are identified at the Work Site, Contractor shall provide notice of such existence
and Allegheny shall remove and dispose of such materials.

 

 

31.4 Contractor shall defend, indemnify and hold harmless Allegheny, and Allegheny’s parents,
subsidiaries, contractors, subcontractors and suppliers of any tier, affiliates and the officers,
directors, employees, successors and assigns of each of them, from and against all Losses (as
defined in Sub-Article 31.5 below) resulting from or related to: (i) any hazardous material that
has been brought onto the Work Site by Contractor or any Subcontractors or any person acting on
behalf of, or under the direction or supervision of Contractor or Subcontractors; (ii) Contractor’s
failure to timely notify Allegheny of the presence of any hazardous material on, or the release of
any hazardous material on or from, the Work Site, (iii) Contractor’s failure to remove or properly
dispose of any such hazardous materials or waste generated by Contractor or Subcontractors at the
Work Site; or (iv) Contractor’s or a Subcontractor’s failure to comply with Law with respect to any
such hazardous materials or waste. Contractor’s obligations hereunder shall not be limited by the
provisions of any Workers’ Compensation act or similar statute or otherwise.

31.5 Allegheny shall protect, defend, indemnify and hold harmless Contractor and its affiliates,
consultants, agents, Subcontractors and Vendors of any tier, and any and all employees, officers,
or directors of any of the foregoing (the “Contractor’s Indemnified Parties”), from and against any
and all claims (including all penalties, attorney’s fees, fines, or administrative or civil
sanctions related directly to such claims), losses, costs, judgments, damages, (but excluding
incidental, consequential, indirect and special damages), penalties, and liabilities (the “Losses”)
suffered as a result of or arising out of or in connection with the performance of the Work and
relating to any hazardous material not introduced to the Work Site by Contractor or Contractor’s
Indemnified Parties.

ARTICLE 32 — ASSIGNMENT OF AGREEMENT

Allegheny may assign this Agreement, including all its rights and obligations hereunder, without
the consent of Contractor. Allegheny also may add Monongahela Power Company as another owner party
to this Agreement without the consent of Contractor and Monongahela Power Company shall have all
the rights of Allegheny under this Agreement. Contractor shall not assign this Agreement or any
part hereof without Allegheny’s prior written approval, which approval shall not relieve Contractor
of its obligations under this Agreement. Any assignment made by Contractor not in accordance with
this Article shall be void.

ARTICLE
33 — EXECUTIVE SPONSOR AND NOTICES

	33.1	 	Executive Sponsor

	 	33.1.1	 	Allegheny’s Executive Sponsor, Michael V. Herriott, or other such person as may be
subsequently designated in writing by Allegheny, shall be the primary contact with
Contractor’s corporate management and shall have authority to act for Allegheny with
respect to all matters pertaining to this Agreement.

 

 

	 	33.1.2	 	Contractor’s Executive Sponsor, Frank C. Gross, Jr., an officer of Contractor or some
other officer as may be subsequently designated in writing by Contractor, shall have
authority to act for Contractor with respect to all matters pertaining to this
Agreement. The Executive Sponsor shall be available to Allegheny’s representatives at
any reasonable time, regarding among other things, communications to Contractor’s
corporate management of its performance of the Work. It is agreed that the Executive
Sponsor shall maintain a detailed knowledge of the progress of the Work and of
significant or anticipated problems and shall ensure that Contractor fulfils its
obligations under this Agreement. In particular, the Executive Sponsor shall attend
regular project review meetings and shall receive copies of Contractor’s regular
progress reports and other significant correspondence. If Contractor’s Project Manager
and Allegheny’s Project Manager cannot reach agreement on any material matter related to
the Work, the matter will be decided by Contractor’s Executive Sponsor and Allegheny’s
Executive Sponsor.

	33.2	 	Notices

	 	33.2.1	 	Notices required by this Agreement shall be in writing and shall be sent by hand or
certified mail or overnight delivery services to Contractor or Allegheny at the
respective party’s office address set forth below, to the attention of the respective
Designated Representative:

	 	 	 	 	 
	 

	 	Allegheny:

	 	Contractor:
	 

	 	ATTN: Michael V. Herriott
	 	ATTN: James D. Ferrara
	 

	 	     Allegheny Energy
	 	Washington Group International
	 

	 	     800 Cabin Hill Drive
	 	 510 Carnegie Center
	 

	 	     Greensburg, PA 15601
	 	Princeton, NJ 08543-5287
	 
	 	 	 	 
	 

	 	With a copy to:	 	 
	 
	 	 	 	 
	 

	 	Allegheny:

	 	Contractor:
	 

	 	ATTN: General Counsel
	 	ATTN: Charles J. Nash, Jr.
	 

	 	     Allegheny Energy
	 	.Washington Group International
	 

	 	     800 Cabin Hill Drive
	 	 510 Carnegie Center
	 

	 	     Greensburg, PA 15601
	 	Princeton, NJ 08543-5287

	 	33.2.2	 	The effective date of notice shall be the date the notice is received by the addressee
or it reaches the office of the addressee, whichever is earlier.

 

 

ARTICLE 34 — ALCOHOL AND DRUGS

	34.1	 	Contractor certifies that to the best of its knowledge and belief, none of its personnel or
those of Subcontractors shall perform any Work for Allegheny while under the influence of
alcohol and/or drugs. Contractor’s and Subcontractor’s personnel performing the Work for
Allegheny shall be informed about its alcohol and drug policy.
	 
	34.2	 	Contractor’s and Subcontractors’ personnel shall be advised to neither abuse medications nor
use, possess, distribute or sell alcohol and/or drugs when performing the Work for Allegheny
or on premises owned or controlled by Allegheny. Upon for cause suspicion that so happens,
Contractor’s or Subcontractors’ personnel shall be suspended from performing Work for
Allegheny. In such instances, Allegheny also has the right to instruct the Contractor to
remove subject personnel from performing the Work for Allegheny. In those instances where
personnel have been removed from performing the Work caused by possible alcohol and drug
abuse, such personnel shall be allowed to resume performing the Work only if the Contractor
can document that such personnel have passed an alcohol and drug test.
	 
	34.3	 	The Contractor shall introduce guidelines and implement procedures to ensure an alcohol and
drug free working place when performing the Work for Allegheny. Allegheny has the right to
request documentation to ensure that the guidelines and procedures are in compliance with
Allegheny’s requirements.

The obligations of Contractor set forth in this Article 34 are in addition to, and are to be read
consistently with, Contractor’s obligations regarding alcohol and drugs as set forth in the Safety
and Health Manual.

ARTICLE 35 — HEALTH AND SAFETY

Contractor and any Subcontractor and/or Vendor shall work according to all applicable safety
regulations issued by public authorities and Allegheny, and shall handle and leave equipment
and premises in accordance with these regulations. Specific requirements shall be defined
before the service is carried out. Safety equipment shall be used in accordance with
applicable rules for this type of work. Contractor shall report all accidents, injuries and
near-misses promptly to Allegheny’s Designated Representative. The obligations of Contractor
set forth in this Article 35 are in addition to, and are to be read consistently with,
Contractor’s obligations regarding health and safety as set forth in the Safety and Health
Manual.

ARTICLE 36 — RIGHT OF REMOVAL

Contractor shall promptly remove from Work Site any employee or agent of Contractor, any
Subcontractor or any employee or agent of Subcontractor performing Work under this Agreement,
or any Vendor or any employee or agent of Vendor performing Work under this Agreement as
Allegheny may for any reason designate. If Allegheny has a reasonable basis for designating
such removal, Contractor hereby releases and forever discharges and holds harmless Allegheny
from any costs, claims, losses, and damages

 

 

of any kind whatsoever based on negligence, defamation, wrongful discharge/dismissal or otherwise
which Contractor may suffer, sustain, pay or incur as the result of any removal and will indemnify,
defend and hold harmless Allegheny against any third party claims based on removals under this
Article.

 

 

ARTICLE 37 — FORCE MAJEURE

	37.1	 	No delay or failure of performance by either party shall constitute default hereunder or give
rise to any claim for damages if, and to the extent, such delay or failure is caused by force
majeure. Force majeure means an unforeseeable, irresistible occurrence beyond the control and
without the fault or negligence of the party affected and which said party is unable to
prevent or provide against by the exercise of reasonable diligence including, but not limited
to: acts of God or the public enemy; expropriation or confiscation of facilities; war,
rebellion, sabotage or riot, floods, unusually severe weather that could not reasonably have
been anticipated; fires, explosions, or other catastrophes; changes in Law; strikes or any
other concerted acts of workers; and other similar occurrences; but lack of finances shall in
no event be deemed to be a cause beyond a party’s control.
	 
	37.2	 	The following are specifically excluded as force majeure occurrences unless: (i) they were
caused by force majeure of the type set forth in the preceding clause; and (ii) an acceptable
alternate source of work or materials is unavailable:

	 	(a)	 	late performance by a Subcontractor caused by a shortage of supervisors or labor,
inefficiencies, or similar occurrences.
	 
	 	(b)	 	late delivery of equipment or materials caused by congestion at a manufacturer’s
plant or elsewhere, an oversold condition of the market, inefficiencies, or similar
occurrences.

	37.3	 	The party invoking the force majeure will: (i) immediately notify the other party; (ii) make
every effort to remedy the cause of non-performance; and (iii) perform the entirety of its
obligations as soon as this cause has gone, the other party being released from its
Contractual obligations until such time as the cause has gone. Contractor shall not have the
right to terminate the Work by reason of Allegheny having invoked force majeure.
	 
	37.4	 	When the effect of said occurrence is established, Allegheny shall issue a Change Order.

ARTICLE 38 — AMENDMENTS

Any amendment to the terms of this Principal Document and Exhibits shall only be effective if made
in writing and signed by Allegheny and Contractor.

ARTICLE 39 — PRECEDENCE

In the event of a conflict between any provisions of this Agreement, the terms in this Principal
Document shall take precedence and govern over the Job Specification and the Exhibits.

ARTICLE 40 — MISCELLANEOUS

	40.1	 	Severability
	 
	 	 	If any provision or portion of this Agreement shall be adjudged invalid or unenforceable by a
court of competent jurisdiction or by operation of Law, that

 

 

	 	 	provision or portion of this Agreement shall be deemed omitted and the remaining provisions
shall remain in full force and effect.

 

 

	40.2	 	Waiver
	 
	 	 	No waiver by a party of a right or default under this Agreement shall be effective unless in
writing. No such waiver shall be deemed a waiver of any subsequent right or default of a
similar nature or otherwise.
	 
	40.3	 	Remedies Cumulative
	 
	 	 	The remedies provided for in this Agreement are cumulative and shall be in addition to other
remedies available at Law. Notwithstanding anything to the contrary contained herein, the
remedies specified in Article 6 shall be Allegheny’s sole and exclusive remedies for any
warranty claims.
	 
	40.4	 	Sole Benefit
	 
	 	 	This Agreement and all rights hereunder are intended for the sole benefit of the parties
hereto and shall not imply or create any rights on the part of, or obligations to, any other
person.
	 
	40.5	 	Counter Parts
	 
	 	 	This Agreement may be executed in counterparts, which shall, in the aggregate, when
signed by all parties constitute one and the same instrument, and thereafter, each
counterpart shall be deemed an original instrument as against any party who has executed it.
Facsimile signatures shall be enforceable as original signatures.

ARTICLE 41 — SURVIVING OBLIGATIONS

Contractor’s obligations under this Agreement including, without limitation, the requirements of
Articles 6,12,13,15, 20, 21, 26, 28, 31, 40 and 41 shall survive any termination or suspension of
the Work, Completion of the Facility, Acceptance or Allegheny’s making full payment of the
Agreement Price, anything in this Agreement to the contrary notwithstanding.

ARTICLE
42 — LIMITATION OF LIABILITY

Notwithstanding any other provisions contained elsewhere in this Agreement to the contrary, in no
event shall the liability of Contractor to Allegheny, whether in contract, warranty, tort,
negligence, strict liability, delay, error or omission, indemnity, or otherwise for the performance
or breach of this Agreement or anything done in connection therewith (but excluding fraud and
willful misconduct by Contractor) exceed twenty five percent (25%) of the amount paid to Contractor
under this Agreement. Said liability shall be excess of any valid and collectible insurance under
Exhibit G.

 

 

ARTICLE 43 — ENTIRE AGREEMENT

This Agreement constitutes the entire agreement between Allegheny and Contractor, and it supersedes
all prior negotiations, representations or agreements, either oral or written, related to the
subject matter hereof including, without limitation, Allegheny’s invitation for proposals and
Contractor’s proposal, except to the extent they are expressly incorporated herein.

IN WITNESS WHEREOF, the parties, intending to be legally bound, have duly executed this Agreement
in duplicate originals as of day and year first written above.

	 	 	 	 	 	 	 	 	 	 	 
	 

	 	Washington Group International
	 	 	 	 	 	Allegheny Energy Supply Company, LLC
	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:

	 	/s/ Louis Pardi	 	 	 	By:	 	/s/ Michael V. Herriott	 	 
	 

	 	 
	 	 	 	 	 	 	 	 
	Name:

	 	Louis Pardi	 	 	 	Name:	 	Michael V. Herriott	 	 
	 

	 	 
	 	 	 	 	 	 	 	 
	 

	 	(Typed or Printed)
	 	 	 	 	 	(Typed or Printed)	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Title:

	 	President-Power	 	 	 	Title:	 	V. P. Construction &
Engineering	 	 
	 

	 	 
	 	 	 	 	 	 	 	 
	Date:

	 	July 13, 2006	 	 	 	Date:	 	July 13, 2006EX-10.3

 

Exhibit 10.3

	 	 	 	 	 

Allegheny Energy Service Corporation

800 Cabin Hill Drive

Greensburg, PA 15601

August 3, 2006

David E. Flitman

c/o Allegheny Energy, Inc.

800 Cabin Hill Drive

Greensburg, PA 15601

     Dear David:

     You and Allegheny Energy Service Corporation (“AESC”) for itself and as agent for its parent,
Allegheny Energy, Inc. (“AEI”), the affiliates and subsidiaries of AESC and AEI (the “AE
Companies”), and any successors or assigns of any of the foregoing, entered into an Offer of
Employment (the “Offer Letter”) dated as of January 3, 2005 (attached hereto as Exhibit A) which
provided for certain severance benefits in the event of your termination of employment without
cause. You, AESC, and AEI have agreed that, effective July 7, 2006, you will no longer serve as
Vice President, Distribution and that instead you will serve as the President of Allegheny Power
and President of each of Monongahela Power Company, The Potomac Edison Company and West Penn Power
Company.

     Accordingly, the Board of Directors of Allegheny Energy, Inc. (the “Board”), at its July 13,
2006 meeting, approved certain severance benefits in the event your employment is terminated
without Cause. It is hereby agreed that the following severance benefits, which were approved by
the Board, shall replace and supersede the severance benefits documented in the fifth bulleted
sentence of the Offer Letter:

     If your employment with AESC is terminated by AESC other than for Cause,

	 	(i)	 	AESC shall pay to you in a lump sum cash payment, less applicable taxes and
withholdings, within thirty (30) days after the date of termination of your employment an
amount equal to the sum of your annual base salary (as in effect immediately prior to the
date of termination) plus your target bonus under the AEI Annual Incentive Plan,
	 
	 	(ii)	 	for one year from the date of termination, AESC shall either (A) arrange to provide
you and your dependents, at AESC’s cost, with life, disability, medical and dental
coverage, whether insured or not insured, providing substantially similar benefits to
those which you and your dependents were receiving immediately prior to the date of
termination, or (B) in lieu of providing such coverage, pay to you no less frequently than
quarterly in advance an amount which, after taxes, is sufficient for you to purchase
equivalent benefits coverage referred to in clause (A) and

 

 

	 	(iii)	 	all stock options that would have vested had you continued employment with AESC
until one (1) year from the date of termination shall vest on the scheduled vesting date
and shall be exercisable for ninety (90) days after the scheduled vesting date,
provided, however, that in no event shall such options be exercised later
than the date of expiration of the options determined pursuant to the option award letters
(determined as if your employment with AESC had not terminated). Except as otherwise set
forth in clause (iii), all unvested stock options shall expire as of the date of such
employment termination.

     For purposes of this letter agreement, “Cause” shall mean any of the following:

          (A) Your conviction of, or plea of guilty or nolo contendere to a felony or a lesser crime
or offense which, in the reasonable opinion of AESC, could adversely affect the business or
reputation of the AE Companies;

          (B) Your repeated failure to follow specific lawful directions of the Board or any officer to whom
you report;

          (C) Your willful misconduct, gross neglect, fraud, embezzlement or dishonesty either in connection
with your duties hereunder or which otherwise causes damage or, in the reasonable opinion of AESC,
is likely to cause damage, to the AE Companies;

          (D) Your failure to perform a substantial part of your duties;

          (E) Your willful violation of any policy, procedure or guideline of the AE Companies that could
materially and adversely affect the business or reputation of the AE Companies;

          (F) Your abuse of alcohol or illegal drugs; or

          (G) Your material violation of the confidentiality, non-competition or non-solicitation covenants
in any Agreement between you and any AE Company.

 

 

     Please signify your agreement with the foregoing by signing the attached copy of this letter
in the place indicated.

	 	 	 	 	 
	 	Very truly yours,

Allegheny Energy Service Corporation

 	 
	 	By:  	/s/
Paul J. Evanson 	 
	 	 	Paul J. Evanson 	 
	 	 	Chairman, President, and
Chief Executive Officer 	 
	 
	 	Allegheny Energy, Inc.

 	 
	 	By:  	/s/
Paul J. Evanson 	 
	 	 	Paul J. Evanson 	 
	 	 	Chairman, President, and
Chief Executive Officer 	 
	 

	 	 	 
	AGREED AND ACCEPTED:
	 	 
	/s/
David E. Fitman
	 	 
	 

David E. Flitman

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