Document:

Exhibit 10.4

 

TRADE SECRET VERSION

 

REDACTED

 

CONTRACT FOR THE

 

PURCHASE OF FIRM CAPACITY AND ENERGY

 

BETWEEN

 

GEORGIA POWER COMPANY

 

AND

 

DUKE ENERGY SOUTHEAST MARKETING, LLC

 

JUNE 3, 2002

 

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 1

  	
  DEFINITIONS

  	
   

  	
  2

  
	
  1.1

  	
  Certain Definitions

  	
   

  	
  2

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 2

  	
  TERM OF AGREEMENT

  	
   

  	
  19

  
	
  2.1

  	
  Term

  	
   

  	
  19

  
	
  2.2

  	
  Survival

  	
   

  	
  19

  
	
  2.3

  	
  Buyer Conditions

  	
   

  	
  19

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 3

  	
  REPRESENTATIONS, WARRANTIES AND COVENANTS

  	
   

  	
  21

  
	
  3.1

  	
  Representations and Warranties of Seller

  	
   

  	
  21

  
	
  3.2

  	
  Representations and Warranties of Buyer

  	
   

  	
  22

  
	
  3.3

  	
  Seller Covenants

  	
   

  	
  24

  
	
  3.4

  	
  Buyer Covenants

  	
   

  	
  24

  
	
  3.5

  	
  Taxes

  	
   

  	
  24

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 4

  	
  REGULATORY APPROVALS

  	
   

  	
  25

  
	
  4.1

  	
  GPSC

  	
   

  	
  25

  
	
  4.2

  	
  Preservation of Terms

  	
   

  	
  26

  
	
  4.3

  	
  Other Approvals

  	
   

  	
  26

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 5

  	
  SALE AND DELIVERY OF CAPACITY AND ENERGY

  	
   

  	
  27

  
	
  5.1

  	
  Agreement to Sell and Purchase

  	
   

  	
  27

  
	
  5.2

  	
  Calculation of Monthly Capacity Payments

  	
   

  	
  29

  
	
  5.3

  	
  Calculation of Monthly Energy Payments

  	
   

  	
  29

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 6

  	
  BILLING AND COLLECTIONS

  	
   

  	
  29

  
	
  6.1

  	
  Capacity and Energy Billing and Payment

  	
   

  	
  29

  
	
  6.2

  	
  Billing Disputes and Final Accounting

  	
   

  	
  30

  
	
  6.3

  	
  Interest

  	
   

  	
  32

  
	
  6.4

  	
  Billing and Payment Records

  	
   

  	
  32

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 7

  	
  PERFORMANCE SECURITY

  	
   

  	
  33

  
	
  7.1

  	
  Seller Performance Security

  	
   

  	
  33

  
	
  7.2

  	
  Buyer Performance Security

  	
   

  	
  33

  
	
  7.3

  	
  Replacement Collateral, Release of Collateral

  	
   

  	
  33

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 8

  	
  PROJECT IMPLEMENTATION AND CONSTRUCTION

  	
   

  	
  34

  
	
  8.1

  	
  Project Implementation

  	
   

  	
  34

  
	
  8.2

  	
  Design and Construction of the Facility

  	
   

  	
  34

  
	
  8.3

  	
  Failure to Achieve Required Commercial Operation
  Date

  	
   

  	
  35

  
	
  8.4

  	
  Cover Period Energy

  	
   

  	
  36

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 9

  	
  INTERCONNECTION AND METERING

  	
   

  	
  37

  
	
  9.1

  	
  Interconnection Agreement

  	
   

  	
  37

  
	
  9.2

  	
  Meters

  	
   

  	
  37

  

 

i

 

	
  ARTICLE 10

  	
  COMMERCIAL OPERATION AND ANNUAL PERFORMANCE TESTING

  	
   

  	
  39

  
	
  10.1

  	
  Commercial Operation Test

  	
   

  	
  39

  
	
  10.2

  	
  Capacity Examination

  	
   

  	
  39

  
	
  10.3

  	
  Disputes Concerning Capacity Tests

  	
   

  	
  40

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 11

  	
  OPERATION AND MAINTENANCE

  	
   

  	
  40

  
	
  11.1

  	
  Operation and Maintenance

  	
   

  	
  40

  
	
  11.2

  	
  Maintenance Scheduling

  	
   

  	
  41

  
	
  11.3

  	
  Access to the Site and the Facility

  	
   

  	
  44

  
	
  11.4

  	
  Availability of Records

  	
   

  	
  44

  
	
  11.5

  	
  Disclaimer

  	
   

  	
  45

  
	
  11.6

  	
  Operating Committee

  	
   

  	
  45

  
	
  11.7

  	
  Equipment Failures

  	
   

  	
  46

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 12

  	
  FUEL SUPPLY

  	
   

  	
  47

  
	
  12.1

  	
  Primary Fuel Supply Plan

  	
   

  	
  47

  
	
  12.2

  	
  Natural Gas Transportation Capacity

  	
   

  	
  48

  
	
  12.3

  	
  Energy Price

  	
   

  	
  49

  
	
  12.4

  	
  Intraday Gas

  	
   

  	
  49

  
	
  12.5

  	
  Alternative Fuel Supply Arrangements

  	
   

  	
  50

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 13

  	
  ENERGY SCHEDULING AND TRANSMISSION

  	
   

  	
  53

  
	
  13.1

  	
  Coordination and Scheduling

  	
   

  	
  53

  
	
  13.2

  	
  Effect of System Emergencies

  	
   

  	
  56

  
	
  13.3

  	
  Effect of Certain Transmission Constraints

  	
   

  	
  56

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 14

  	
  INSURANCE

  	
   

  	
  60

  
	
  14.1

  	
  Insurance Required

  	
   

  	
  60

  
	
  14.2

  	
  Certificates of Insurance-Seller

  	
   

  	
  61

  
	
  14.3

  	
  Certificates of Insurance-Buyer

  	
   

  	
  61

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 15

  	
  IDEMNIFICATION

  	
   

  	
  62

  
	
  15.1

  	
  Scope of Indemnity

  	
   

  	
  62

  
	
  15.2

  	
  Notice of Proceedings

  	
   

  	
  62

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 16

  	
  FORCE MAJEURE

  	
   

  	
  63

  
	
  16.1

  	
  Definition of Force Majeure Event

  	
   

  	
  63

  
	
  16.2

  	
  No Breach or Liability

  	
   

  	
  64

  
	
  16.3

  	
  Capacity and Energy Payments

  	
   

  	
  65

  
	
  16.4

  	
  Mitigation

  	
   

  	
  65

  
	
  16.5

  	
  Suspension of Performance

  	
   

  	
  66

  
	
  16.6

  	
  Extended Force Majeure Events

  	
   

  	
  66

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 17

  	
  DEFAULT AND REMEDIES

  	
   

  	
  68

  
	
  17.1

  	
  Default by Seller

  	
   

  	
  68

  
	
  17.2

  	
  Default by Buyer

  	
   

  	
  71

  
	
  17.3

  	
  Remedies

  	
   

  	
  73

  

 

ii

 

	
  17.4

  	
  Rights of Specific Performance

  	
   

  	
  76

  
	
  17.5

  	
  Limitation of Remedies, Liability and Damages

  	
   

  	
  77

  
	
  17.6

  	
  Duty to Mitigate

  	
   

  	
  78

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 18

  	
  CHANGE OF LAW

  	
   

  	
  78

  
	
  18.1

  	
  Change of Law

  	
   

  	
  78

  
	
  18.2

  	
  NOX Emissions

  	
   

  	
  81

  
	
  18.3

  	
  No Dedication

  	
   

  	
  81

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 19

  	
  ASSIGNMENT AND TRANSFERS OF INTERESTS

  	
   

  	
  82

  
	
  19.1

  	
  Assignment and Assumption of Obligations

  	
   

  	
  82

  
	
  19.2

  	
  Relationship Between Seller and Duke Capital
  Corporation

  	
   

  	
  82

  
	
  19.3

  	
  Restrictions on Transfer of Facility

  	
   

  	
  82

  
	
  19.4

  	
  General Requirements

  	
   

  	
  83

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 20

  	
  DISPUTE RESOLUTION

  	
   

  	
  84

  
	
  20.1

  	
  Notice

  	
   

  	
  84

  
	
  20.2

  	
  Dispute Resolution, Arbitration

  	
   

  	
  84

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 21

  	
  MISCELLANEOUS PROVISIONS

  	
   

  	
  88

  
	
  21.1

  	
  Amendments

  	
   

  	
  88

  
	
  21.2

  	
  Binding Effects

  	
   

  	
  88

  
	
  21.3

  	
  Counterparts

  	
   

  	
  88

  
	
  21.4

  	
  Notices

  	
   

  	
  88

  
	
  21.5

  	
  Entire Agreement

  	
   

  	
  89

  
	
  21.6

  	
  Governing Law

  	
   

  	
  90

  
	
  21.7

  	
  Waiver

  	
   

  	
  90

  
	
  21.8

  	
  Headings

  	
   

  	
  90

  
	
  21.9

  	
  Third Parties

  	
   

  	
  90

  
	
  21.10

  	
  Agency

  	
   

  	
  90

  
	
  21.11

  	
  Severability

  	
   

  	
  91

  
	
  21.12

  	
  Negotiated Agreement

  	
   

  	
  91

  
	
  21.13

  	
  Confidentiality

  	
   

  	
  91

  
	
   

  	
   

  	
   

  	
   

  
	
  APPENDICES

  
	
   

  	
   

  	
   

  	
   

  
	
  APPENDIX A

  	
  CAPACITY PAYMENT CALCULATION

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  APPENDIX B

  	
  ENERGY PAYMENT CALCULATION

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  APPENDIX C

  	
  TECHINCAL LIMITS AND SCHEDULE PROCEDURES

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  APPENDIX D

  	
  PERFORMANCE TESTING PROCEDURES

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  APPENDIX E

  	
  INSURANCE REQUIREMENTS

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  APPENDIX F

  	
  THE SITE

  	
   

  	
   

  
					

 

iii

 

	
  APPENDIX G

  	
  REQUIRED LETTER OF CREDIT PROVISIONS

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  APPENDIX H

  	
  FORM OF GUARANTY

  	
   

  	
   

  

 

iv

 

CONTRACT FOR THE PURCHASE

OF FIRM CAPACITY AND ENERGY

 

THIS POWER PURCHASE AGREEMENT
(“Agreement”), dated as of June 3, 2002, is between Georgia Power Company,
a corporation organized and existing under the laws of the State of Georgia,
having its principal place of business in Atlanta, Georgia (“Buyer”), and Duke
Energy Southeast Marketing, LLC, a limited liability company organized and
existing under the laws of the State of Delaware, having its principal place of
business in Houston, Texas (“Seller”).

 

WITNESSETH:

 

WHEREAS, Buyer is
engaged in the distribution and sale of electricity for heat, light and power
to the public in the State of Georgia;

 

WHEREAS, Duke
Energy Murray, LLC (“DEMu”) intends to own and operate an electric power plant,
generating electricity with natural gas, located in Murray County, Georgia
(more fully defined in Section 1.1 as the “Facility”);

 

WHEREAS, Seller and
DEMu have entered into a Capacity and Energy Sales Agreement entitling Seller
to dispose of the entire electrical output of the Facility; and

 

WHEREAS, Buyer has
agreed to purchase from Seller, and Seller has agreed to sell to Buyer,
capacity and associated energy from the Facility, all in accordance with the
provisions of this Agreement.

 

NOW, THEREFORE, for
and in consideration of the premises, the mutual promises and agreements set
forth herein and other good and valuable consideration, the receipt,
sufficiency and adequacy of which are hereby acknowledged, Buyer and Seller,
each intending to be legally bound, agree as follows:

 

1

 

ARTICLE 1

 

DEFINITIONS

 

1.1                    Certain Definitions

 

In addition to the initially capitalized terms
and phrases defined in the preamble of this Agreement, the following initially
capitalized terms and phrases as and when used in this Agreement shall have the
respective meanings set forth below:

 

1.1.1            “AAA”-
has the meaning assigned in Section 20.2.2.2.1.

 

1.1.2            “Adjustment
Period” -has the meaning assigned in Section 9.2.3.

 

1.1.3            “Affiliate”
- means any Person directly or indirectly controlling or controlled by or under
direct or indirect common control of a specified Person. For proposes of this
definition, “control” means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise. (For purposes of this Agreement, it shall
be assumed that the direct or Indirect owner of fifty percent (50%) of the
outstanding capital stock or other equity interest of a Person has “control” of
such Person.) The terms “controlling” and “controlled” have meanings
correlative to the foregoing.

 

1.1.4            “After-Tax
Basis” - means, with respect to any payment received or deemed to have been
received by any Person, the amount of such payment (the “base payment”)
supplemented by a further payment (the “additional payment”) to that Person so
that the sum of the base payment plus the additional payment shall, after
deduction of the amount of all Taxes required to be paid by such Person in
respect of the receipt or accrual of the base payment and the additional
payment (taking into account any credits or deductions arising from the
underlying loss, the base payment and the additional payment and the timing
thereof), be equal to the

 

2

 

amount required to be received. Such calculations shall be made on the
basis of the assumption that the recipient is subject to U.S. federal income
taxation at the highest applicable statutory rate applicable to corporations for
the relevant period or periods, and is subject to state income taxation at the
highest applicable statutory rates applicable to corporations in the State of
Georgia for the relevant period or periods.

 

1.1.5            “Aggrieved
Party” - has the meaning assigned in Section 20.1.

 

1.1.6            “Alternate
Delivery Point” - means any point on the Transmission System (including
interfaces between the Transmission System and other transmission systems) at
which Buyer is capable of receiving energy in the quantity to be delivered at
such Alternate Delivery Point pursuant to the Southern OATT and is able to
transmit such energy to Buyer’s loads without being required either to change
the output of its resources to any material extent or to change the schedule of
its preexisting power purchases or sales (other than purchases or sales
pursuant to this Agreement).

 

1.1.7            “Alternate
Resources” - means (i) generating resources (other than the Facility)
controlled by Seller or its Affiliate which are directly connected on the
Transmission System and shall not include generating resources connected to the
Transmission System only through other transmission systems; provided, however,
that the Murray II  Generating
Facility shall be an Alternate Resource even if it is in the future connected
to the Transmission System only through other transmission systems, and (ii) for
purposes of Sections 8.3 and 13.3, any alternative source of energy.

 

1.1.8            “Annual
Period” - means any one of a succession of consecutive twelve (12) Month
periods during the Term of this Agreement beginning on June 1 and ending
on the following May 31. The first Annual Period is such period beginning
on June 1, 2005.

 

3

 

1.1.9            “Availability
Percentage” - has the meaning assigned in Section 17.1.8.

 

1.1.10 “Available” - means all times following the Delivery
Commencement Date when the Facility or an Alternate Resource (designated
pursuant to Section 5.1.4), as the case may be, is not Unavailable.

 

1.1.11 “Base Energy” - means energy produced by the Facility without
the use of duct firing.

 

1.1.12 “Business Day” - means any Day excluding Saturday, Sunday and
NERC-defined holidays.

 

1.1.13 “Buyer Guarantor” - means a Person that, at the time of
execution and delivery of its Buyer Guaranty, is a direct or indirect owner of
Buyer and (a) has (i) an investment grade such that its senior
unsecured debt (or issuer rating if such Person has no senior unsecured debt
rating) is rated at least BBB- (by Standard & Poors Rating Group) and
at least Baa3 (by Moody’s Investor Services, Inc.) and (ii) a
consolidated Net Worth of at least four hundred million dollars
($400,000,000.00); or (b) is reasonably acceptable to Seller as having
verifiable credit worthiness and Net Worth sufficient to secure Buyer Guarantor’s
obligations under its Buyer Guaranty.

 

1.1.14 “Buyer Guaranty” - means a guarantee provided by a Buyer
Guarantor that is substantially in the form of the guaranty attached hereto as Appendix H.

 

1.1.15 “Buyer Performance Security” - has the meaning assigned in Section 7.2.

 

1.1.16 “Change of Control Transaction” - in respect of a Person means
any transaction or series of related transactions which, if consummated, would
result in such Person being an Affiliate of a different ultimate parent entity
immediately after such transaction. For purposes of this definition, a Person’s
ultimate parent entity is the Person who directly or

 

4

 

indirectly owns fifty percent (50%) or more of such Person’s outstanding
capital stock or other equity interests having ordinary voting power and who
does not itself have an ultimate parent entity.

 

1.1.17 “Change of Law” - has the meaning
assigned in Section 18.1.1.

 

1.1.18 “Commercial Operation Date” - means the
date on which the Facility achieves commercial operation, which shall be deemed
to have occurred when Seller demonstrates that the Facility is capable of
producing energy and delivering same to the Transmission System through the
Interconnection Point on a reliable basis.

 

1.1.19 “Conasauga Line Outage” - has the
meaning assigned in Section 13.3.1.

 

1.1.20 “Confidential Information” - means
business or technical information rightfully in the possession of either Party,
which information derives actual or potential commercial value from not being
generally known or readily ascertainable through independent development or
reverse engineering by persons who can obtain economic value from its
disclosure and use, and includes information furnished or disclosed to the
other Party in connection with discussions leading up to execution of this
Agreement, including this Agreement. Confidential Information must be
designated in writing as confidential by the Party supplying such information
(the “Disclosing Party,” the other Party being the “Receiving Party”).
Confidential Information does not include information which: (i) is or
becomes publicly available other than as a result of a violation of this
Agreement; (ii) was, at the time of the disclosure, already in the Receiving
Party’s possession; (iii) is disclosed to the Receiving Party by a third
Party who, to the Receiving Party’s knowledge, is not prohibited from
disclosing the information pursuant to any agreement with the Disclosing Party;
(iv) the Receiving Party develops or derives without the aid, application
or use of the privileged or proprietary

 

5

 

information; or (v) the
Receiving Party is required to disclose pursuant to Legal Requirements.

 

1.1.21 “Consent” - means any approval,
consent, authorization or other applicable requirement that is required with
respect to the Project from any jurisdictional Governmental Authority,
including, without limitation, all applicable environmental certificates,
licenses, permits and approvals.

 

1.1.22 “Contracted Capacity” - means the full
capacity range of the Facility (in MW) being made available to Buyer pursuant
to this Agreement, as specified in Appendix A.

 

1.1.23 “Costs” - has the meaning assigned in Section 17.3.2.

 

1.1.24 “Cover Amount” - has the meaning
assigned in Section 8.3.1.

 

1.1.25 “Cover Period” - has the meaning
assigned in Section 8.3.1.

 

1.1.26 “CPT” - means Central Prevailing Time.

 

1.1.27 “Day”- means a calendar day.

 

1.1.28 “Default” - means an event that with
the giving of notice or the passage of time or both will become an Event of
Default.

 

1.1.29 “Defaulting Party” - has the meaning
assigned in Section 17.3.2.

 

1.1.30 “Delivery Commencement Date” - means
the later of the Commercial Operation Date or June 1, 2005.

 

1.1 31 “Demand” - has the meaning assigned in Section 20.2.2.2.1.

 

1.1.32 “DEMu” - has the meaning assigned in
the Recitals to this Agreement.

 

1.1.33 “Designated Base Capacity” - has the
meaning assigned in Appendix A, Section A.3.

 

1.1.34 “Designated Capacity” - has the meaning
assigned in Appendix A, Section A.3.

 

6

 

1.1.35 “Designated Supplemental Capacity” - has the meaning assigned in
Appendix A, Section A.3.

 

1.1.36 “Early Termination Date” - has the meaning assigned in Section 17.3.1.

 

1.1.37 “Earmarked Capacity” - has the meaning assigned in Section 12.2.3.

 

1.1.38 “East Tennessee” - means East Tennessee Natural Gas Pipeline.

 

1.1.39 “Eligible Collateral” - means a Letter of Credit, cash (with
appropriate security instruments), or a Seller Guaranty or Buyer Guaranty as
the case may be.

 

1.1.40 “Energy Put Agreement” - has the meaning assigned in Section 5.1.2.

 

1.1.41 “ETGc” - has the meaning assigned in Appendix B, Section D.

 

1.1.42 “ETGF” - has the meaning assigned in Appendix B, Section D.

 

1.1.43 “Event of Default” - means an event described in Section 17.1
for Seller and in Section 17.2 for Buyer.

 

1.1.44 “Extended Force Majeure Event” - has the meaning assigned in Section 16.6.1.

 

1.1.45 “Facility” - means the Murray I combined cycle electric
generating plant interconnected to the Transmission System at the
Interconnection Point being constructed by DEMu on the Site. The Facility shall
include, without limitation, the 620 MW 2 x 1 natural gas fired combined cycle
generator consisting of 2 GE 7FA combustion turbines and a steam turbine with
duct firing capability, and all auxiliary equipment and facilities necessary or
used for the production, control, delivery or monitoring of electricity
produced on the Site. All equipment and facilities installed on DEMu’s side of
the Interconnection Point at the Site shall be considered to be part of the
Facility.

 

1.1.46 “Facility Owner” - means any owner of more than a fifty percent
(50%)

 

7

 

interest in the
Facility.

 

1.1.47 “Federal Power Act” - means the Federal Power Act, 16 U.S.C. § § 791a
el seq. (1994), as such Act may
be amended from time to time, and any successor statute of similar import.

 

1.1.48 “FERC” - means the Federal Energy Regulatory Commission or any
Governmental Authority succeeding to the powers and functions thereof under the
Federal Power Act.

 

1.1.49 “Force Majeure Event” - means the events or circumstances
described in Section 16.1.

 

1.1.50 “Force Majeure Remedy Plan” - has the meaning assigned in Section 16.6.1.

 

1.1.51 “Forced Outage” - means a time during which the Facility is not
capable of normal operations for reasons other than Force Majeure and which is
not a Scheduled Outage or a Maintenance Outage.

 

1.1.52 “GEPD” - means the Georgia Environmental Protection Division and
its successor in function.

 

1.1.53 “Gains”- has the meaning assigned in Section 17.3.2.

 

1.1.54 “GPSC” - means the Georgia Public Service Commission or any
Governmental Authority succeeding to the powers and functions thereof.

 

1.1.55 “GPSC Certificate” - has the meaning assigned in Section 2.3.1.

 

1.1.56 “Governmental Authority” - means any local, state, regional or
federal administrative, legal, judicial or executive agency, court, commission,
department or other such entity, but excluding any such agency, court,
commission, department or other such entity acting

 

8

 

in a capacity as lender, guarantor or mortgagee.

 

1.1.57 “Incremental Replacement Costs” - means
with respect to energy that Seller fails to deliver pursuant to a Schedule, the
positive difference, if any, between the Replacement Costs and the amount that
Buyer would have paid Seller for such energy pursuant to Appendix B had Seller delivered such energy
to Buyer.

 

1.1.58 “Indemnified Party” - has the meaning
assigned in Section 15.1.

 

1.1.59 “Indemnifying Party”-has the meaning
assigned in Section 15.1.

 

1.1.60 “Initial Synchronization Date” - means
the date that includes the first instant in time when energy generated by the
Facility is delivered to the Interconnection Point in accordance with the
Interconnection Agreement.

 

1.1.61 “Interconnection Agreement” - means
that certain Interconnection Agreement by and between DEMu and Buyer, dated as
of April 23, 2001, that provides for the construction and operation of the
Interconnection Facilities and governs the interconnection and parallel
operation of the Facility with the Transmission System.

 

1.1.62 “Interconnection Facilities” - means
those facilities described in the Interconnection Agreement as facilities that
must be installed or modified in order for Seller to deliver energy from the
Facility to the Transmission System.

 

1.1.63 “Interconnection Point” - means the
point of connection between Buyer’s and Seller’s electrical facilities at the
Georgia Power DENA-Murray 500 kV Substation (also known as the Conasauga
Substation), located approximately one mile from the Facility, as described in
more detail in Appendix B to the
Interconnection Agreement.

 

1.1.64 “Interest Rate” - means the interest
per annum equal to the prime rate as published in The Wall Street Journal, or comparable successor
publication, under “Money

 

9

 

Rates,” as applied
on a daily basis and compounded quarterly.

 

1.1.65 “kV” - means kilovolt(s).

 

1.1.66 “kW” - means kilowatt(s).

 

1.1.67 “Legal Requirement” - means any law, code, statute, regulation,
rule, ordinance, judgment, injunction, order or other requirements of a
Governmental Authority having jurisdiction over the matter in question that is
valid and applicable to the matter in question at the time of the execution of
this Agreement or any time thereafter during the Term.

 

1.1.68 “Letter of Credit” - means a standby letter of credit, the form
of which contains the provisions described in
Appendix G and which (i) is issued by a U.S. commercial bank or
a foreign bank with a U.S. branch with total assets of at least $10 billion
having a general long-term senior unsecured debt rating of A - or higher (as
rated by Standard & Poors Rating Group) or A3 or higher (as rated by
Moody’s Investor Services, Inc.); and (ii) permits presentation at a
bank located in Houston, Texas, Atlanta, Georgia, New York, New York or Los
Angeles, California.

 

1.1.69 “Losses” - has the meaning assigned in Section 17.3.2.

 

1.1.70 “Maintenance Outage” - means a planned interruption of a portion
or all of the Facility’s generation capability that: (i) has been
coordinated in advance with Buyer with a mutually agreed start date, time and
duration or to which Buyer has consented pursuant to Section 11.2.2; and (ii) is
for the purpose of performing work on specific components of the Facility that
would limit the power output of the Facility but should not, in the reasonable
judgment of Seller, be postponed until the next Scheduled Outage.

 

1.1.71 “Maintenance Schedules” - has the meaning assigned in Section 11.2.1.

 

1.1.72 “Material Adverse Change” - means, as to Buyer, Buyer, or if
Buyer is

 

10

 

providing Eligible Collateral in the form of a Buyer Guaranty, the Buyer
Guarantor, experiences any of the events described in clauses (a) or (b),
and as to Seller, Seller, or if Seller is providing Eligible Collateral in the
form of a Seller Guaranty, the Seller Guarantor, experiences any of the events
described in clauses (a) or (b): (a) senior unsecured debt
unsupported by third party credit enhancement (or issuer rating if such Person
has no senior unsecured debt rating) is rated below BBB- by Standard &
Poors Rating Group or below Baa3 by Moody’s Investor Services, Inc., or (b) the
maturity of any indebtedness of such Person which in the aggregate exceeds one
hundred fifty million dollars ($150,000,000.00) is accelerated by the holder or
holders thereof as a result of a default thereunder. A Material Adverse Change
shall be deemed to occur with respect to Buyer or Seller if Buyer (or Buyer
Guarantor if applicable), or Seller (or Seller Guarantor if applicable), ceases
to have a senior unsecured debt rating (or issuer rating if such Party has no
senior unsecured debt rating) from both Standard & Poors Rating Group
and Moody’s Investor Services, Inc.

 

1.1.73 “Material Adverse Effect” means, in
respect of a Party, an effect that is reasonably likely in light of the overall
circumstances to deprive such Party of one or more of the material benefits of
this Agreement, and shall include credible evidence that there is a reasonable
likelihood of a failure of performance of this Agreement by the proposed
assignee.

 

1.1.74 “Metering System” - means all meters,
metering devices and related instruments used to measure and record electric
energy and to determine the amount of such electric energy that is being made
available or delivered to Buyer at the Interconnection Point.

 

1.1.75 “Milestone Schedule” - has the meaning
assigned in Section 8.2.1.

 

1.1.76 “Month” - means a calendar month,
commencing at the beginning of the first Day of such calendar month. “Monthly”
has a meaning correlative to that of Month.

 

11

 

1.1.77 “Monthly Availability Adjustment” - has
the meaning assigned in Appendix A,
Section D.

 

1.1.78 “Monthly Availability Percentage” or “MAP”
- has the meaning assigned in Appendix A,
Section D.

 

1.1.79 “Monthly Capacity Payment” - means the
amount to be paid by Buyer to Seller for Buyer’s purchase of the Designated
Capacity for a particular Month, as provided in Section 5.2 and Appendix A.

 

1.1.80 “Monthly Energy Payment” - means the
amount to be paid by Buyer to Seller for Buyer’s purchase of energy for a
particular Month, as provided in Section 5.3 and Appendix B, Section A.

 

1.1.81 “Monthly Fuel Charge” or “MFC - has the
meaning assigned in Appendix B,
Sections A and D.

 

1.1.82 “Monthly Invoice” - has the meaning
assigned in Section 6.1.1.

 

1.1.83 “MSC” - has the meaning assigned in Appendix B, Section C.

 

1.1.84 “Murray II Generating Facility” - means
the combined cycle electric generating plant of DEMu located adjacent to the
Facility.

 

1.1.85 “MVOM” - has the meaning assigned in Appendix B, Section B.

 

1.1.86 “MW” - means megawatt(s).

 

1.1.87 “MWh” - means megawatt-hour(s).

 

1.1.88 “MWh Delivered” - has the meaning
assigned in Appendix A, Section C.

 

1.1.89 “MWh Scheduled” - has the meaning
assigned in Appendix A, Section C.

 

1.1.90 “Natural Gas” - means natural gas
meeting the specifications set forth in Appendix C.

 

12

 

1.1.91 “NERC” - means the North American Electric Reliability Council,
including any successor thereto and subdivisions thereof.

 

1.1.92 “Net Worth” - means the dollar value calculated by subtracting
liabilities from total assets (excluding goodwill and other intangible assets
described in FASB Statement 142) as such terms are determined in accordance
with generally accepted accounting principles.

 

1.1.93 “Non-Defaulting Party” - has the meaning assigned in Section 17.3.1.

 

1.1.94 “Noticed Party” - has the meaning assigned in Section 20.1.

 

1.1.95 “NOX Allowances” - has the meaning assigned in Section 18.2.

 

1.1.96 “Operating Committee” - means the committee established pursuant
to Section 11.6.

 

1.1.97 “Operating Procedures” - means those procedures developed by the
Parties pursuant to Section 11.12.

 

1.1.98 “Operating Representatives” - means those individuals appointed
by each of the Parties to the Operating Committee pursuant to Section 11.6.

 

1.1.99 “Operator Requested Schedule” - has the meaning assigned in Section 13.1.5.

 

l.1.100 “Output Agreement” - means the Capacity and Energy Sales
Agreement dated as of the date of this Agreement by and between Seller and DEMu
with respect to the Facility.

 

1.1.101 “Party” or “Parties” - means either Buyer or Seller, or both.

 

1.1.102 “Performance Test” or “Performance Testing” - has the meaning
assigned in Appendix A, Section A.

 

1.1.103 “Person” - means any natural person, corporation, limited
liability

 

13

 

company, general
partnership, limited partnership, proprietorship, other business organization,
trust, union, association or Governmental Authority.

 

1.1.104 “Primary Gas Delivery Point” - means the point of
interconnection between the Facility and the East Tennessee pipeline lateral
serving the Facility.

 

1.1.105 “Project” - means the design, engineering, construction,
testing and commissioning of the Facility and the ownership, operation,
management and maintenance of the Facility, all of which being reasonably
expected to enable Seller to fulfill its obligations under this Agreement.

 

1.1.106 “Prudent Industry Practices”- means, any of the practices,
methods, standards and acts engaged in or approved by a significant portion of
the independent power industry in the United States that, at a particular time,
in the exercise of reasonable judgment in light of the facts known or that
should reasonably have been known at the time a decision was made, could have
been expected to accomplish the desired result consistent with good business
practices, reliability, economy, safety and expedition. Prudent Industry
Practices are not intended to be limited to the optimum practices, methods or
acts to the exclusion of all others, but rather to be acceptable practices,
methods and acts generally accepted in the United States, having due regard
for, among other things, manufacturers’ warranties, the requirements or
guidance of Government Authorities, applicable Legal Requirements, applicable
SERC operating guidelines and rules. Transmission System security coordinator
rules, NERC policies and the requirements of insurers.

 

1.1.107 “PSD Permit” - means that certain Air Quality Permit No. 4911-213-0034-P-01-0
for air emissions issued by GEPD.

 

1.1.108 “Qualified Entity” - means a Person who either on its own, or
through

 

14

 

one or more of its
Affiliates that are obligated to provide technical support to such Person on an
as-needed basis that (a) has the expert professional and technical capability
to arrange for the construction (if the Commercial Operation Date has not yet
occurred), operation and maintenance of the Facility, (b) has current
experience in excess of three (3) years in operating and maintaining or
arranging for the operation and maintenance of gas-fired combustion turbine
and/or steam turbine generating facilities (other than the Facility) and, at
the time of determination of its qualification as a Qualified Entity, operates
two or more gas fired combustion turbine and/or steam turbine generating
facilities (other than the Facility) located at separate generating sites with
an aggregate capacity of six hundred (600) MW or more, and (c) has a
consolidated Net Worth of at least two hundred million dollars
($200,000,000.00). If a Person and its Affiliates meets the requirements of
clause (c) of the proceeding sentence on a consolidated basis, but not the
requirements of clause (a) or (b), such Person may nevertheless be a
Qualified Entity if such Person (or any of its Affiliates) contracts with one
or more Persons who meet the requirements of clauses (a) or (b), as the
case may be, and who has primary responsibility for the operation and, if not
complete, the construction of the Facility.

 

1.1.109 “Replacement Costs” - means the market price at which Buyer,
acting in a commercially reasonable manner, could purchase a quantity of energy
equal to the quantity of energy not delivered by the Seller for delivery at the
Interconnection Point or an Alternative Delivery Point, plus any costs reasonably
expected to be incurred by Buyer in purchasing substitute energy, including
additional transmission costs, if any.

 

1.1.110 “Required Commercial Operation Date” - means June 1, 2005,
provided however, that such date may be extended due to a Force Majeure Event
for a term equal to the period of the delay caused by said Force Majeure Event.

 

15

 

1.1.111 “Rules” - has the meaning assigned in Section 20.2.2.2.1.

 

1.1.112 “Schedule”, “Scheduling” and “Scheduling
Instructions” - mean instructions issued by Buyer from the Scheduling Center to
Seller with respect to the scheduling of the production of electricity by the
Facility or other resources in accordance with Article 13 and Appendix C.

 

1.1.113 “Scheduled Outage” - has the meaning
assigned in Section 11.2.1.

 

1.1.114 “Scheduling Center” - means the
scheduling center designated by Buyer from time to time in writing as being the
primary control point for Scheduling Instructions and other notifications provided
pursuant to Article 13 and Appendix C,
Section II. There may only be one Scheduling Center designated at any one
time.

 

1.1.115 “Seasonal Availability Adjustment” -
has the meaning assigned in Appendix A,
Section C.

 

1.1.116 “Seasonal Availability Percentage” or “SAP”
- has the meaning assigned in Appendix A,
Section C.

 

1.1.117 “Seasonal Performance Period” or “Season”
- means either of the following periods during an Annual Period: Summer (June through
September) and Winter (October through May).

 

1.1.118 “Seller Guarantor” - means a Person
that, at the time of execution and delivery of its Seller Guaranty, is a direct
or indirect owner of Seller and (a) has (i) an investment grade such
that its senior unsecured debt (or issuer rating if such Person has no senior
unsecured debt rating) is rated at least BBB- (by Standard &  Poors Rating Group) and at least Baa3 (by
Moody’s Investor Services. Inc.) and (ii) a consolidated Net Worth of at
least four hundred million dollars ($400,000,000.00), or (b) is reasonably
acceptable to Buyer as having a verifiable

 

16

 

credit worthiness and Net Worth sufficient to secure Seller Guarantor’s
obligations under its Seller Guaranty.

 

1.1.119 “Seller Guaranty” - means a guaranty
provided by the Seller Guarantor that is substantially in the form of the
guaranty attached hereto as Appendix H.

 

1.1.120 “Seller Performance Security” - has
the meaning assigned in Section 7.1.

 

1.1.121 “SERC” - means the Southeastern
Electric Reliability Council, including any successor thereto.

 

1.1.122 “Shortfall Amount” - means the excess
of (i) the amount of energy Scheduled by Buyer in any hour, over (ii) the
amount of energy that Seller causes to be delivered to the Interconnection
Point (or to the Transmission System in the case of deliveries from Alternate
Resources) in such hour in response to such Schedule.

 

1.1.123 “Site” - means the land in Murray
County, Georgia, on which the Facility is located, as specified in Appendix F.

 

1.1.124 “SNG” - means Southern Natural Gas
Company.

 

1.1.125 “Southern Company Control Area” -
means the electric system of the Southern Companies that has been recognized by
NERC and SERC as a control area.

 

1.1.126 “Southern OATT” - means The Southern
Company’s Open Access Transmission Tariff and any successor in function
thereto.

 

1.1.127 “Station Service” - means energy
produced by the Facility that is used to serve the electrical requirements of
the Facility, and includes step-up transformer losses and line losses between
the Facility and the Interconnection Point.

 

1.1.128 “Supplemental Energy” - means the
incremental energy increase produced by the Facility as a result of duct
firing.

 

17

 

1.1.129 “System Emergency” - has the meaning
assigned in the Interconnection Agreement.

 

1.1.130 “Taxes” - means all taxes, fees,
levies, licenses or charges imposed by any Governmental Authority, together
with any interest and penalties thereon.

 

1.1.131 “Technical Limits” - means the
operational limits and constraints described in Appendix C, Section I.

 

1.1.132 “Term” - means the term of this
Agreement specified in Section 2.1.

 

1.1.133 “Termination Payment” - has the
meaning assigned in Section 17.3.2.

 

1.1.134 “Tested Base Capacity” - has the
meaning assigned in Appendix A, Section A.2.

 

1.1.135 “Tested Reliable Capacity” - has the
meaning assigned in Appendix A, Section A.2.

 

1.1.136 “Tested Supplemental Capacity” - has
the meaning assigned in Appendix A,
Section A.2.

 

1.1.137 “Threshold Amount” - has the meaning
assigned in Section 18.1.3.

 

1.1.138 “Title V Permit” - means the operating
permit with respect to air emissions from the Facility issued by GEPD and the
Environmental Protection Agency under the 1990 Amendments to the Federal Clean
Air Act.

 

1.1.139 “Tolling Commencement Date” - has the
meaning assigned in Section 12.5.1.

 

1.1.140 “Transmission System” - means the
integrated high voltage electricity transmission systems of the electric
utility operating companies of The Southern Company (currently Alabama Power
Company, Georgia Power Company, Gulf Power Company,

 

18

 

Mississippi Power Company and Savannah Electric and Power Company), as
modified or expanded from time-time, as well as any successor in function
thereto, and includes the Georgia Integrated Transmission System.

 

1.1.141 “Transmission System Constraint” - has
the meaning assigned in Section 13.3.3.

 

1.1.142 “Unavailable” - means the extent to
which at all times following the Delivery Commencement Date the Facility or an
Alternate Resource (designated pursuant to Section 5.1.4), as the case may
be, is unable to deliver energy pursuant to a Schedule due to a Scheduled
Outage, Maintenance Outage, Forced Outage, or a Force Majeure Event.

 

ARTICLE 2

 

TERM OF AGREEMENT

 

2.1                    Term. This Agreement
shall become effective when executed by both Buyer and Seller and, subject to
termination as provided in this Article 2 and in other Sections of this
Agreement, shall remain in full force and effect through May 31, 2012.

 

2.2                    Survival. All provisions of this Agreement that expressly or by implication come
into or continue in force and effect following the expiration or termination of
this Agreement shall remain in effect and be enforceable following such
expiration or termination.

 

2.3                    Buyer Conditions.

 

2.3.1            If,
by February 26, 2003, the GPSC has not approved this Agreement through the
granting of a Certificate of Public Convenience and Necessity that is
unconditional or, if conditional, with conditions that are reasonably
acceptable to Buyer (“GPSC Certificate”),

 

19

 

then Buyer may
terminate this Agreement upon written notice to Seller, provided that such
notice is delivered to Seller no later than midnight on March 12, 2003, at
which time this right of termination, if unexercised, shall expire. Upon a
termination by Buyer pursuant to this Section 2.3.1, neither Party shall
have any liability to the other Party hereunder. Within fifteen (15) Days of
the issuance of the GPSC Certificate, Buyer shall provide Seller with written
notice of whether the GPSC Certificate is unconditional and, if not, whether
the conditions are reasonably acceptable to Buyer. Absent such notice within
the specified period, the form of the GPSC Certificate will be deemed to be
unconditional.

 

2.3.2            If
prior to October 31, 2002, Buyer identifies credible evidence (including
without limitation actual limitations placed on Facility operations or studies
prepared by security coordinators of transmission systems other than the
Transmission System) that constraints are reasonably likely to be imposed
during the Term by the security coordinator of a transmission system other than
the Transmission System that are reasonably likely to materially affect Seller’s
ability to meet Buyer’s Schedules, Buyer shall have the right to serve Seller
with a written notice of termination of this Agreement. To be effective, any
such notice shall be received by Seller prior to November 2, 2002. Seller
shall have until December 1, 2002 to demonstrate to Buyer’s reasonable
satisfaction that such constraints will not materially affect Seller’s ability
to meet Buyer’s Schedules. If Buyer does not agree with Seller and does not
withdraw its termination notice on or before December 15, 2002, this
Agreement shall terminate effective December 16, 2002, and neither Party
shall have any further liability to the other Party hereunder.

 

2.3.3            If
prior to June 30, 2002, Seller does not deliver to Buyer a Seller
Guarantee in the form of Appendix H,
Buyer may terminate this Agreement upon written notice to Seller, and neither
Party shall have any further liability hereunder.

 

20

 

ARTICLE 3

 

REPRESENTATIONS, WARRANTIES
AND COVENANTS

 

3.1                    Representations and Warranties of Seller. Seller hereby makes the following
representations and warranties to Buyer as of the date of this Agreement;

 

3.1.1            Seller
is a limited liability company, duly organized, validly existing and in good
standing under the laws of the State of Delaware, that is qualified to do
business in the State of Georgia and has the legal power and authority to own
its properties, to carry on its business as now being conducted and to enter
into this Agreement and carry out the transactions contemplated hereby and
perform and fulfill all covenants and obligations on its part to be performed
under and pursuant to this Agreement.

 

3.1.2            The
execution, delivery and performance by Seller of this Agreement and the Output
Agreement, and by DEMu of the Output Agreement, have been duly authorized by
all necessary limited liability company action, and do not and will not require
any consents or approvals of Seller’s or DEMu’s (as the case may be) member(s)
or manager(s) other than those which have already been properly obtained.

 

3.1.3            The
execution and delivery of this Agreement, and the Output Agreement, the
consummation of the transactions contemplated hereby and thereby and the
fulfillment of and compliance with the provisions hereof and thereof, do not
and will not conflict with any of the terms, conditions or provisions of any
Legal Requirements applicable to Seller, or, in the case of the Output
Agreement, to DEMu, of any partnership agreement, deed of trust, mortgage, loan
agreement, other evidence of indebtedness or any other agreement or instrument
to which Seller or, in the case of the Output Agreement, DEMu, is a party or by
which it or any of its property is

 

21

 

bound, or result in a breach of or a default under any of the foregoing.

 

3.1.4            This
Agreement and the Output Agreement constitute the legal, valid and binding
obligations of Seller and, with respect to the Output Agreement, DEMu, that are
enforceable in accordance with their terms, except as such enforceability may
be limited by bankruptcy, insolvency, reorganization or similar laws relating
to-or affecting the enforcement of creditors’ rights generally or by general
equitable principles, regardless of whether such enforceability is considered
in a proceeding in equity or at law.

 

3.1.5            There
is no pending or, to the knowledge of Seller, threatened action or proceeding
affecting Seller or DEMu before any Governmental Authority that purports to
adversely affect the legality, validity or enforceability of this Agreement or
the Output Agreement.

 

3.1.6            DEMu
is a limited liability company, duly organized, validly existing in good
standing under the laws of the State of Delaware, is an Affiliate of Seller, is
qualified to do business in the State of Georgia, is the sole owner of the
Facility, and has the legal power and authority to own its properties, to carry
on its business as now being conducted and to enter into the Output Agreement
and carry out the transactions contemplated thereby and perform and fulfill all
covenants and obligations on its part to be performed under and pursuant to the
Output Agreement.

 

3.2                    Representations and Warranties of Buyer. Buyer hereby makes the following
representations and warranties to Seller as of the date of this Agreement:

 

3.2.1            Buyer
is a corporation, duly organized, validly existing and in good standing under
the laws of the State of Georgia, that is qualified to do business in the State
of

 

22

 

Georgia and has the legal power and authority to own its properties, to
carry on its business as now being conducted and to enter into this Agreement
and carry out the transactions contemplated hereby and perform and fulfill all covenants
and obligations on its part to be performed under and pursuant to this
Agreement.

 

3.2.2            The
execution, delivery and performance by Buyer of this Agreement have been duly
authorized by all necessary corporate action, and do not and will not require
any consent or approval of Buyer’s Board of Directors or shareholders other
than that which has already been obtained.

 

3.2.3            Subject
to Section 2.3, the execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby and the fulfillment of and
compliance with the provisions of this Agreement do not and will not conflict
with any of the terms, conditions or provisions of any Legal Requirements
applicable to Buyer, or of any partnership agreement, deed of trust, mortgage,
loan agreement, other evidence of indebtedness or any other agreement or
instrument to which Buyer is a party or by which it or any of its property is
bound, or result in a breach of or a default under any of the foregoing.

 

3.2.4            This
Agreement constitutes the legal, valid and binding obligation of Buyer that is
enforceable in accordance with its terms, except as such enforceability may be
limited by bankruptcy, insolvency, reorganization or similar laws relating to
or affecting the enforcement of creditors’ rights generally or by general
equitable principles, regardless of whether such enforceability is considered
in a proceeding in equity or at law.

 

3.2.5            There
is no pending or, to the knowledge of Buyer, threatened action or proceeding
affecting Buyer before any Governmental Authority which purports to adversely
affect the legality, validity or enforceability of this Agreement.

 

23

 

3.3                    Seller Covenants.
Seller shall maintain throughout the Term the legal right to sell to Buyer the
entire electrical output of the Facility pursuant to the Output Agreement or on
terms no less favorable to Buyer than the terms of the Output Agreement.

 

3.4                    Buyer Covenants

 

3.4.1            Promptly
upon execution of this Agreement, Buyer shall designate the Facility as a
network resource pursuant to the Southern OATT (with such designation to be
effective as of the Delivery Commencement Date), and except as otherwise
provided in Section 13.3, shall maintain such designation in effect for
the Term.

 

3.4.2            Buyer
shall, at the request of Seller, but only to the extent permissible under the
Southern OATT, designate any Alternate Resource as a secondary network resource
(or similar designation) for the period during which such Alternate Resource is
used to provide Buyer with energy pursuant to this Agreement.

 

3.5                    Taxes

 

3.5.1            Subject
to Section 18.1, Seller shall pay, or cause to be paid, all Taxes on or
with respect to the production and delivery of energy pursuant to this
Agreement arising prior to delivery to the Interconnection Point (including
Taxes related to the ownership and/or operation of the Facility and income
derived therefrom). Seller shall also be responsible for all sales, use, excise
or other similar Taxes directly related to the purchase or use of fuel used to
deliver energy to Buyer except during such times, if any, that Buyer procures
fuel to meet its Scheduling Instructions, in which case Buyer shall be
responsible for such sales, use, excise or

 

24

 

other similar Taxes directly related to the purchase or use of such
fuel. Buyer shall pay, or cause to be paid, all Taxes on or with respect to
energy delivered pursuant to this Agreement at and from the Interconnection
Point (including all sales, use, excise or other similar Taxes on the sale to
Buyer and purchase from Seller of capacity and energy pursuant to this
Agreement).

 

3.5.2            Each
Party shall use reasonable efforts to implement and administer the provisions
of this Agreement in accordance with the intent of the Parties to minimize
Taxes so long as neither Party is materially adversely affected by such
efforts.

 

3.5.3            In
the event Seller is required by law or regulation to remit or pay Taxes that
are Buyer’s responsibility hereunder, Seller may include such Taxes in the next
Monthly Invoice and Buyer shall remit payment thereof in accordance with Article 6.
Conversely, if Buyer is required by law or regulation to remit or pay Taxes
that are Seller’s responsibility hereunder, Buyer may deduct the amount of any
such Taxes from the sums otherwise due to Seller under this Agreement. Any
refunds associated with such Taxes will be handled in the same manner. Nothing
herein shall obligate or cause a Party to pay or be liable to pay any Taxes
from which it is exempt under applicable Legal Requirements.

 

ARTICLE 4

 

REGULATORY APPROVALS

 

4.1                    GPSC. Buyer shall use
its reasonable efforts to obtain the GPSC Certificate prior to December 31,
2002, and in furtherance thereof to target a filing of the application therefor
on or before June 7, 2002, and to diligently pursue the issuance of the
GPSC Certificate. Seller agrees to assist and support Buyer, in a timely manner
and to the extent reasonably requested by Buyer, in obtaining the GPSC Certificate.

 

25

 

4.2                    Preservation of Terms.
Each Party agrees that, except with the prior written consent of the other
Party, it will not, and will use reasonable efforts to assure that its
Affiliates will not, institute or voluntarily cooperate in the institution or
conduct of any claim, action or proceeding of FERC under Section 205, Section 206
or any other portion of the Federal Power Act, any provision of Georgia law
(other than Buyer’s participation in the proceeding before the GPSC for the
purpose of obtaining the GPSC Certificate) or any other Legal Requirement which
claim, action or proceeding is intended for the purpose of, or could reasonably
be expected to have the effect of, changing the terms of this Agreement then in
effect. Without limiting the foregoing, but subject to the terms of this
Agreement, the Parties agree that the rates for service specified herein shall
remain in effect for the Term and shall not be subject to change through
application to FERC pursuant to the provisions of Section 205 or 206 of
the Federal Power Act, any provision of Georgia law or any other Legal
Requirement, absent written agreement of the Parties.

 

4.3                    Other Approvals. Each
Party shall diligently pursue or cause to be pursued any and all other Consents
required to be possessed by such Party, or, in the case of Seller, by the owner
or operator of the Facility in a manner that is reasonably expected to enable
such Party to perform its obligations under this Agreement. Each Party agrees
to assist and support the other Party, in a timely manner and to the extent
reasonably requested by the other Party, in obtaining such Consents.

 

26

 

ARTICLE 5

 

SALE AND DELIVERY OF
CAPACITY AND ENERGY

 

5.1                    Agreement to Sell and Purchase

 

5.1.1            At
all times following the Delivery Commencement Date, but subject to the terms of
this Agreement, Seller shall make available to Buyer the entire electrical
capability of the Facility, net of Station Service, when Buyer Schedules such
electrical capability. Subject to the terms of this Agreement, Buyer agrees to
purchase from Seller such electrical output of the Facility, pursuant to Buyer’s
Scheduling Instructions and the Designated Capacity associated with the
Facility after the Delivery Commencement Date. Notwithstanding the foregoing,
Seller may sell all or part of the electrical capability of the Facility and
associated energy to third parties during any Conasauga Line Outage in
accordance with the provisions of Section 13.3.1.

 

5.1.2            To
the extent Buyer can practicably accept energy without harm. Buyer shall
purchase from Seller the energy produced by the Facility during any Performance
Test at the same price for energy delivered pursuant to the provisions of the
Energy Put Agreement between Southern Company Services, Inc. and Duke
Energy Trading and Marketing, L.L.C. dated January 16, 2002 (the “Energy
Put Agreement”). Upon Seller’s request, Buyer will consult with Seller
regarding the timing of such testing so as to maximize the resulting economic
benefit for both Parties. Invoices for all such Performance Test energy will be
handled pursuant to the provisions of the Energy Put Agreement.

 

5.1.3            Except
as otherwise provided in Sections 5.1.4, 8.4 and 13.3 with respect to delivery
of energy at Alternate Delivery Points, Seller shall deliver energy from the
Facility to Buyer at the Interconnection Point. The risk of loss of energy
shall pass from Seller to Buyer at the point of delivery. If Seller creates a
control area covering the Facility, it shall promptly notify Buyer. If Buyer
desires that the Facility be removed from such control area during any portion
of the Teem, Buyer shall provide Seller with at least six (6) Months
advance notice of such action (but such notice shall not be given before June 1,
2004). Following receipt of such notice, Buyer

 

27

 

and Seller shall discuss in good faith Buyer’s reasons for requiring
that the Facility be removed from Seller’s control area and alternative ways of
addressing Buyer’s concerns, but Buyer shall have the right in its sole
discretion to require the Facility to be removed from Seller’s control area.
Unless Buyer withdraws its notice in writing, Seller shall remove the Facility
from Seller’s control area for the period beginning on the later of the (i) last
Day of such six month period, or (ii) the Delivery Commencement Date and
ending on the last Day of the Term, provided, however, following any such
removal, Buyer shall be responsible for providing generator balancing services
with respect to the Southern Company Control Area necessary for the receipt of
energy pursuant to Buyer’s Schedules and for any costs thereof.

 

5.1.4            Following
the Commercial Operation Date, in the event that the Facility is Unavailable,
Seller may deliver energy at an Alternate Delivery Point from Alternate
Resources in order to meet Buyer’s Schedules subject to the other provisions of
this Agreement. Such Alternate Delivery Point shall be the point of
interconnection between the Alternate Resources and the Transmission System,
except in the case of the Murray II Generating Facility when it is connected to
the Transmission System through another transmission system. Delivery of energy
from Alternate Resources shall be MWh Delivered for purposes of the Monthly
Availability Percentage and the Seasonal Availability Percentage calculations.
In order to exercise its right to deliver energy from Alternate Resources,
Seller shall provide Buyer with advance telephonic notice (to be promptly
followed by written confirmation), as more fully provided in the Operating
Procedures which notice shall specify the Alternate Resource(s) to be used.
Seller may change Alternate Resources from time to time by notice to Buyer,
provided that Alternate Resources may be changed only twice in any Day. If
Seller elects to provide energy from Alternate Resources, it shall, to the
extent that the designated Alternate Resources are Available, (i) provide
energy from

 

28

 

such Alternate Resources for the remainder of the period for which the
Facility is Unavailable, or the remainder of the calendar week in which Seller
elects to use Alternate Resources, whichever is shorter, and (ii) shall
provide Buyer with a uniform quantity of energy in each hour that Buyer
Schedules at least that quantity of energy.

 

5.1.5            Notwithstanding
the designation by Seller of the Designated Capacity pursuant to Appendix A, Buyer shall be entitled to Schedule the
entire energy that the Facility is capable of producing when operated in
accordance with Prudent Industry Practices.

 

5.1.6            Seller
may sell any capacity or energy of the Facility not Scheduled by Buyer to any
Person; provided, however, that Seller shall make such capacity and energy
available to Buyer in accordance with Buyer’s Scheduling Instructions, except
during periods when Seller is authorized to sell energy to third parties
pursuant to this Section 5.1.

 

5.2                    Calculation of Monthly Capacity Payments. Subject to the terms of this Agreement,
Buyer shall pay Seller a Monthly Capacity Payment calculated in accordance with
Appendix A, Section B.

 

5.3                    Calculation of Monthly Energy Payments. Buyer shall pay Seller a Monthly Energy Payment calculated in
accordance with Appendix B, Section A.

 

ARTICLE 6

 

BILLING AND COLLECTIONS

 

6.1                    Capacity and Energy Billing and Payment

 

6.1.1            Subject
to the provisions of Section 6.2, by the tenth (10th) Day of each Month
(commencing with July, 2005), Seller shall send Buyer an invoice stating the
Monthly

 

29

 

Capacity Payment, the Monthly Energy Payment, and any Monthly
Availability Adjustment or Seasonal Availability Adjustment for the immediately
preceding Month (or Season in the case of the Seasonal Availability Adjustment)
(“Monthly Invoice”). Seller shall also provide Buyer, by the third (3rd)
Business Day of each Month, a good faith preliminary estimate of the Monthly
Invoice that will be sent for the immediately preceding Month pursuant to this Section 6.1.1;
provided, however, that the failure of Seller to provide a preliminary estimate
shall not alter Buyer’s obligations respecting payment.

 

6.1.2            All
Monthly Invoices shall be due and payable by Buyer on or before the tenth
(10th) Day after Buyer’s receipt of such invoice. If such tenth (10th) Day is
not a Business Day, then payment shall be due on the next succeeding Business
Day. Subject to the provisions of Section 6.2, Buyer shall make payment to
Seller in accordance with such invoices on or before the date due in
immediately available funds, through wire transfer of funds to an account
designated by Seller, or other means acceptable to Seller. Interest on unpaid
amounts shall accrue from the date such payments were due at a rate equal to  the Interest Rate. Each Monthly Invoice
shall contain a statement explaining in reasonable detail how such invoice was
calculated pursuant to Sections 5.2 and 5.3.

 

6.2                    Billing Disputes and Final Accounting

 

6.2.1            If
Buyer questions or contests the amount or propriety of any payment claimed by
Seller to be due pursuant to this Agreement, Buyer shall make payment to Seller
of amounts not in dispute, but may withhold amounts disputed in good faith
until after the settlement of such question or contest in accordance with this Section 6.2.
Notwithstanding the foregoing, Buyer shall not be entitled to withhold any
Taxes paid by Seller which are, as between

 

30

 

Buyer and Seller,
the undisputed obligation of Buyer pursuant to Section 3.5. At the time of
any such withholding, Buyer shall provide Seller with a written explanation of
Buyer’s reasons therefore; provided, however, that the failure of Buyer to
provide such explanation shall not alter its right to withhold unless Buyer
also fails to provide such written explanation within five (5) Business
Days of receipt of Seller’s written inquiry concerning such withholding.

 

6.2.2            In
the event Buyer questions or contests the correctness of any charge or credit,
Buyer shall provide Seller with written notice of such amount and the basis for
Buyer’s question or contest. Seller shall promptly review the questioned charge
or credit and shall notify Buyer of any error in Seller’s determination of
amounts owed by Buyer and issue an amended invoice in the amount of any payment
that Buyer is required to make in respect of such redetermination. If Buyer
disputes in good faith Seller’s amended invoice amount, then the matter shall
be resolved pursuant to the provisions of Article 20 applicable to billing
disputes. To the extent Seller disagrees with Buyer’s basis for questioning the
original invoice, Seller shall provide a written explanation of its position.

 

6.2.3            Seller
shall have until the end of one (1) year after the delivery of energy
under this Agreement to correct any invoice for payment due for such energy and
associated capacity and deliver a corrected invoice to Buyer. Buyer shall have
until the end of one (1) year after its receipt of any invoice to question
or contest the correctness of any charge or credit made to Buyer on such invoice.
If Buyer has made payment under an invoice and thereafter questions or contests
the correctness thereof, Seller shall not be required to refund any payment
received from Buyer until such time as it is finally determined that Seller’s
invoice was in error.

 

31

 

6.3                    Interest.
If either Party does not make a payment requited by this Agreement when due,
then interest at the Interest Rate from the date such overdue payment was due
until such overdue payment, together with interest, is paid shall be added to
the due payment. If either Party makes a payment pursuant to an invoice that is
later determined to have been incorrect, then interest at the Interest Rate
from the date such overpayment was made, together with interest, shall be added
to the overpayment until such overpayment is refunded to such Party. Remittance
received by mail, if mail is a means of payment acceptable to a Party owed such
payment, will be accepted without interest charges if such payment is
postmarked on or before the due date. If the due date of any payment falls on a
Day other than a Business Day, the next succeeding Business Day shall be the
last Day on which payment can be postmarked without interest charges being
assessed. Notwithstanding this Section 6.3, no interest shall be paid with
respect to any Monthly Availability Adjustment or Seasonal Availability
Adjustment so long as such Monthly Availability Adjustment or Seasonal
Availability Adjustment have been correctly calculated and invoiced in
accordance with this Agreement.

 

6.4                    Billing
and Payment Records. Each Party
will, until the end of one (1) year after its receipt of any invoice, make
available to the other Party, and each Party may audit, such books and records
of the other Party as are necessary for such Party to verify the calculation of
the Monthly Capacity Payments, the Monthly Energy Payments, any Monthly
Availability Adjustment, any Seasonal Availability Adjustment and any other
invoice, charge or payment demand made in connection with this Agreement.

 

32

 

ARTICLE 7

 

PERFORMANCE SECURITY

 

7.1                    Seller
Performance Security. Upon execution of this Agreement, Seller shall
deliver to Buyer Eligible Collateral in an amount [***] (the “Seller Performance Security”). The Seller
Performance Security shall be reduced to (a) [***] as of the first Day of the [***] Annual Period, (b) [***] as of the first Day of the [***] Annual Period, and (c) [***] as of the first Day of the [***] Annual Period. The parties agree that the initial Seller
Performance Security shall be in the form of a Seller Guaranty from Duke
Capital Corporation. In the event that a Material Adverse Change occurs in
respect of Seller, upon two (2) Business Days prior written notice from
Buyer, Seller shall deliver to Buyer replacement Seller Performance Security in
the form of Eligible Collateral. Seller shall endeavor to give Buyer prompt
written notice of any Material Adverse Change in respect of Seller but the failure
to do so shall not be a Default or Event of Default hereunder.

 

7.2                    Buyer
Performance Security. In the event that a Material Adverse Change occurs in
respect of Buyer, upon two (2) Business Days prior written notice from
Seller, Buyer shall deliver to Seller Eligible Collateral in the same amount as
the Seller Performance Security (“Buyer Performance Security”), which shall be
reduced at the same times and to the same amounts set forth in Section 7.1
for the Seller Performance Security. Buyer shall endeavor to give Seller prompt
written notice of any Material Adverse Change in respect of Buyer but the
failure to do so shall not be a Default or Event of Default hereunder.

 

7.3                    Replacement
Collateral, Release of Collateral. Upon any reduction of the amount of the
Seller Performance Security or Buyer Performance Security pursuant to Section 7.1
or 7.2, the beneficiary thereof shall upon two (2) Business Days

 

 

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

 

33

 

written request by
the other Party release any Eligible Collateral that is no longer required. The
choice of any Eligible Collateral provided by a Party may be selected from time
to time by such Party, and upon receipt of substitute Eligible Collateral, the
holder of the Eligible Collateral for which substitution is being made shall
promptly release such Eligible Collateral. Notwithstanding the foregoing, as
long as Seller is an Affiliate pf Duke Capital Corporation, and Duke Capital
Corporation qualifies as a Seller Guarantor, Seller shall not substitute
another Seller Guarantor for Duke Capital Corporation.

 

ARTICLE 8

 

PROJECT IMPLEMENTATION
AND CONSTRUCTION

 

8.1                    Project Implementation.
Seller acknowledges that Buyer has entered into this Agreement with the
expectation that the Commercial Operation Date will occur prior to the Required
Commercial Operation Date. The provisions of Sections 8.2, 8.3 and 8.4
constitute the Parties’ agreements concerning the Commercial Operation Date and
the consequences of the failure of the Commercial Operation Date to occur by
such date.

 

8.2                    Design and Construction of the Facility

 

8.2.1            If
the Facility is not in Commercial Operation by January 1, 2003, Seller
will provide Buyer with Initial Synchronization Date and Commercial Operation
Date estimates (“Milestone Schedule”). Seller shall notify Buyer of any changes
in these estimates and the status of construction as they may occur from time
to time (including the reason(s) for the change); provided, however, that such
notification shall not relieve Seller from any of its obligations set forth
elsewhere herein.

 

34

 

8.2.2            Buyer
shall have the right to reasonably request information regarding the status of
the Facility and to inspect its construction, start-up and testing. Seller
shall cooperate and shall cause the owner and operator of the Facility and its
contractors to cooperate in providing the information requested by Buyer and in
such physical inspections of the Facility as may be reasonably required by
Buyer during and after completion of construction. Buyer shall provide
reasonable prior notice to Seller regarding such inspections. All activities of
Buyer, its designated employees and agents at the Site shall be subject to the rules and
procedures of Seller and the owner or operator of the Facility (including,
without limitation, those related to health and safety).

 

8.3                    Failure to Achieve Required Commercial Operation Date.

 

8.3.1            In
the event that the Commercial Operation Date does not occur on or before the
Required Commercial Operation Date, Seller shall deliver to Buyer from
Alternate Resources, the amount of energy Scheduled by Buyer, up to a maximum
of [***] in any one hour (the “Cover Amount”), in accordance with Section 8.4,
for each Day of the period beginning on the Required Commercial Operation Date
and ending on the earlier of March 1, 2006 and the Commercial Operation
Date (the “Cover Period”). Seller shall continuously apprise Buyer of (a) the
schedule for the Commercial Operation Date, including during the Cover
Period if applicable, and (b) the adequacy of transmission systems (other
than the Transmission System) and any constraints that Seller learns or
determines are being or may be imposed by the security coordinators of such
transmission systems. Seller shall respond to Buyer’s reasonable requests for
information related to the foregoing.

 

8.3.2            In
the event that the Commercial Operation Date does not occur on or before March 1,
2006, then this Agreement shall terminate effective immediately and Seller
shall

 

 

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

 

35

 

pay Buyer as liquidated damages an amount of [***] in full discharge of Seller’s obligations hereunder and neither
Party shall have any further liability under this Agreement.

 

8.4                    Cover
Period Energy

 

8.4.1            During
the Cover Period, if any, Buyer and Seller agree as follows:

 

8.4.1.1   Buyer
shall issue Scheduling Instructions in accordance with the provisions of this
Agreement regarding Scheduling, and Seller shall, at its expense, deliver or
cause to be delivered all energy so Scheduled (but not in excess of the Cover
Amount) to an Alternate Delivery Point designated by Seller.

 

8.4.1.2   Subject
to the terms of this Agreement, during the Cover Period, Buyer shall make
Monthly Capacity Payments in accordance with Appendix
A and Buyer will pay Seller in accordance with applicable portions
of Appendix B for the Scheduled
energy delivered during the Cover Period. For purposes of calculating the price
for energy pursuant to Appendix B,
the first [***] of Scheduled
energy shall be treated as Base Energy and any Scheduled energy in excess of [***] shall be treated as Supplemental
Energy.

 

8.4.1.3   If
Seller fails to deliver any Scheduled energy (up to the Cover Amount), Seller
shall pay to Buyer, within [***]
of receipt of an invoice therefor, an amount equal to Buyer’s Incremental
Replacement Costs. Buyer will submit such invoices on a [***] basis unless the accrued amount of unpaid Incremental
Replacement Costs after set off of any amounts owed Seller by Buyer hereunder
exceeds [***] in which case Buyer
may invoice Seller in its discretion. If Seller fails to pay the Incremental
Replacement Costs when due, Buyer may charge interest at the Interest Rate from
the date such

 

 

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

 

36

 

amount was due until the date of the payment.

 

ARTICLE 9

 

INTERCONNECTION AND
METERING

 

9.1                    Interconnection Agreement. The Interconnection Agreement will govern the construction, ownership
and operation of the Interconnection Facilities.

 

9.2                    Meters

 

9.2.1            Seller
shall or shall cause others to design, locate, construct, install, own, operate
and maintain the Metering System in accordance with Prudent Industry Practices
in order to measure and record the amount of energy and capacity delivered from
the Facility to Buyer at the Interconnection Point. The meters shall be of a
mutually acceptable accuracy range and type. Neither Buyer, Seller, Seller’s
Affiliates nor the employees, subcontractors or contractors of any of them
shall willfully tamper with the Metering System with the intent of fraudulently
or wrongly modifying the amounts paid by Buyer under this Agreement. Buyer may,
at its own cost, install additional meters or other such facilities, equipment
or devices on Buyer’s side of the Interconnection Point as Buyer deems
necessary or appropriate to monitor the measurements of the Metering System;
provided, that in all cases Seller will be entitled to base its invoiced
amounts solely by reference to its own Metering System. The Parties shall
mutually agree on the telemetering equipment that is appropriate to coordinate
the Facility with the Scheduling Center and Seller shall, at its sole cost,
install or cause the installation of such telemetering equipment. The
telemetered data shall be delivered by Seller to the electrical switchyard of
the Facility.

 

9.2.2            Seller
shall or shall cause others to inspect and test all meters at such times

 

37

 

as will conform to
Prudent Industry Practices, but not less often than once biennially. Seller
shall be responsible for all costs and expenses incurred in connection with
such inspections or tests.

 

9.2.3            If
the Metering System fails to register, or if the measurement made by a metering
device is found upon testing to vary by more than one percent (1.0%) from the
measurement made by the standard meter used in the test, an adjustment shall be
made correcting all measurements of energy made by the Metering System during: (i) the
actual period when inaccurate measurements were made by the Metering System, if
that period can be determined to the mutual satisfaction of the Parties; or (ii) if
such actual period cannot be determined to the mutual satisfaction of the
Parties, the second half of the period from the date of the last test of the
Metering System to the date such failure is discovered or such test is made (“Adjustment
Period”). If the Parties are unable to agree on the amount of the adjustment to
be applied to the Adjustment Period, the amount of the adjustment shall be
determined: (i) by correcting the error if the percentage of error is
ascertainable by calibration, tests or mathematical calculation; or (ii) if
not so ascertainable, by estimating on the basis of deliveries under similar
conditions during the period since the last test. Within thirty (30) Days after
the determination of the amount of any adjustment, Buyer shall pay Seller any
additional amounts then due for deliveries of energy or Designated Capacity
during the Adjustment Period or Buyer shall be entitled to a credit against any
subsequent payments for energy or Designated Capacity, as the case may be.

 

9.2.4            Buyer
and its representatives shall be entitled to be present at any test,
inspection, maintenance and replacement of any part of the Metering System
relating to obligations under this Agreement.

 

38

 

ARTICLE 10

 

COMMERCIAL OPERATION AND
ANNUAL PERFORMANCE TESTING

 

10.1              Commercial
Operation Test. The Tested
Reliable Capacity of the Facility shall be established in accordance with Appendix A and the Performance Test
procedures set forth in Appendix D.
Seller shall designate the initial Designated Base Capacity and the initial
Designated Supplemental Capacity in accordance with Appendix A.

 

10.2              Capacity
Examination

 

10.2.1 Prior to each Annual Period following
the Delivery Commencement Date, Seller may redesignate the Designated Base
Capacity and the Designated Supplemental Capacity in accordance with Appendix A. Ether Seller or Buyer may elect
to have a new Performance Test performed as provided in Appendix A.

 

10.2.2 If as a result of any reduction in the
Tested Base Capacity or Tested Supplemental Capacity through a Performance
Test, the Designated Base Capacity exceeds the Tested Base Capacity or the
Designated Supplemental Capacity exceeds the Tested Supplemental Capacity, the
Designated Base Capacity and the Designated Supplemental Capacity, as the case
may be, shall be reduced to the demonstrated level as provided in Appendix A, Section A.3.

 

10.2.3 Subject to Sections 13.3.3.2.2 and
17.1.9 of this Agreement, the payment of liquidated damages pursuant to Appendix A, Section A.3, shall be
Buyer’s sole and exclusive remedy for a reduction of the Tested Reliable
Capacity below the lower end of the Contracted Capacity range.

 

39

 

10.3              Disputes
Concerning Capacity Tests. In the event the Parties disagree with
respect to the Performance Test results, the dispute shall be resolved pursuant
to the provisions of Article 20 applicable to Performance Test results. If
such dispute is not resolved by the first Day of any Annual Period, the
Designated Capacity for such Annual Period may not exceed that capacity
demonstrated by the most recent undisputed Performance Test, subject to the
outcome of this dispute resolution process.

 

ARTICLE 11

 

OPERATION AND MAINTENANCE

 

11.1              Operation
and Maintenance

 

11.1.1 Seller shall or shall cause others to manage, control, operate
and maintain all parts of the Facility in a manner consistent with Prudent
Industry Practices, taking into account Buyer’s right to Schedule the
Facility, and in accordance with applicable planning standards and operating
policies of the SERC and NERC and in accordance with the Operating Procedures
to be developed by the Operating Committee. Seller shall and shall cause others
to: (i) be in compliance with all Legal Requirements applicable to Seller
and to the owner and operator of the Facility and (ii) diligently seek to
obtain, maintain, comply with and, as necessary, renew and modify from time to
time, any and all Consents. Notwithstanding the foregoing, a failure by Seller
to comply with the provisions of this Section 11.1.1 shall not constitute
an Event of Default under Section 17.1.5; provided, however, that Buyer
shall have the right to seek the remedy of specific performance with respect to
any such failure.

 

11.1.2 Seller and Buyer shall mutually develop
written Operating Procedures no later than sixty (60) Days prior to the
Required Commercial Operation Date. Topics covered shall include deliveries of
energy during start-up and testing of the Facility; the method of

 

40

 

day-to-day
communications; clearance and switching practices; daily capacity availability
and energy reports; Facility operations log; reactive power output; technical
limits regarding Facility operation (such as minimum run times, minimum down
times between starts, and other limits specified in Appendix C); ramp rates for the delivery of power to the
Transmission System; coordination of maintenance scheduling; designation of
confidential information and such other matters as the Operating
Representatives shall agree are appropriate. The Operating Representatives
shall be responsible for modifying, from time to time, these Operating
Procedures in writing to reflect agreed upon changes. In the event of
inconsistency or conflict between the Operating Procedures and specific terms
of this Agreement, the specific terms of this Agreement shall take precedence.

 

11.1.3 Seller shall or shall cause others to employ at the Facility all
safety devices and safety practices required by Prudent Industry Practices. To
the extent consistent with Prudent Industry Practices, Seller shall keep accurate
records of any accident or other occurrence at the Site that results in injury
to persons or damage to property. Seller shall provide to Buyer reasonable
access to these records upon not less than seven (7) Days notice during
normal business hours, but shall not be required to provide access to
employment records regarding Facility personnel.

 

11.2              Maintenance
Scheduling

 

11.2.1 Commencing in 2004 and each year thereafter, Seller shall submit
to Buyer, before September 1, maintenance schedules and outage plans for
the Facility that conform to Prudent Industry Practices for similar equipment,
including in terms of frequency and duration (“Maintenance Schedules”), for the
next four (4) Annual Periods or the number of such Annual

 

41

 

Periods remaining
in the Term, whichever is less. Seller stall not schedule any maintenance
of the Facility during the Months of May through September of any
Annual Period that would decrease the capacity output of the Facility below the
Designated Capacity without the prior written consent of Buyer. Buyer shall
have thirty (30) Days to review the proposed Maintenance Schedules and may
propose changes to the Maintenance Schedule for the next Annual Period
provided that they are reasonable in light of the burdens that such changes
impose on Seller compared to the burdens avoided by Buyer as a result of such
changes and do not delay any scheduled maintenance to a later Annual Period.
Any such changes proposed by Buyer shall be accompanied by an explanation of
the reasons that Buyer requires such changes. Such changes shall be
incorporated into the Maintenance Schedules for such next Annual Period within
thirty (30) Days, to the extent that they involve maintenance scheduled during the
Months of January or February. To the extent that such changes involve
maintenance scheduled during the Months of March, April, October, November or
December, they shall also be incorporated into the Maintenance Schedules unless
Seller provides supporting documentation within thirty (30) Days demonstrating
that such changes (a) will cause Seller to incur incremental additional
costs that are material, or (b) would be contrary to Prudent Industry
Practices. Notwithstanding the foregoing, Seller shall not be required to
incorporate any changes that (w) would reasonably be expected to result in
equipment damage or excessive degradation, (x) would reasonably be expected to
result in voiding Seller’s equipment warranty, (y) would reasonably be expected
to cause Seller to violate its obligations under its existing long term
maintenance agreement with the General Electric Company in any material
respect; or (z) would require Seller to conduct maintenance at the same time as
Seller has scheduled maintenance at the Seller’s Murray II Generating Facility.
In the event that Seller is not required to accept Buyer’s proposed

 

42

 

Maintenance Schedule changes in the Months of March, April,
October, November or December because such changes will cause Seller
to incur material incremental costs, Buyer and Seller agree to use commercially
reasonable efforts to promptly develop Maintenance Schedules that are
reasonably acceptable to the Parties, considering the burdens that Buyer’s
changes impose on Seller compared to the burdens avoided by Buyer as a result
of such changes. Any dispute concerning this Section 11.2.1 shall be
resolved in accordance with the provisions of Article 20 applicable to
Maintenance Schedule disputes. The outages scheduled in the final approved
Maintenance Schedule shall be the “Scheduled Outages” for purposes of this
Agreement.

 

11.2.2 In addition to Scheduled Outages,
Seller may request an unlimited number of Maintenance Outages during any Annual
Period. Seller shall request each Maintenance Outage at least twenty-four (24)
hours in advance. Such request shall identify the equipment and Designated
Capacity that will not be available for Schedule and the proposed start
time and duration for the Maintenance Outage. Buyer shall respond to Seller’s
request as soon as reasonably practicable. Seller shall not take a Maintenance
Outage without Buyer’s prior written or telephonic consent, and such consent
shall not be unreasonably withheld, conditioned or delayed; provided, however,
that the Parties acknowledge that it shall be reasonable for Buyer to deny any
request for a Maintenance Outage if Buyer reasonably believes that it may Schedule the
Facility to a level that would require the availability of the equipment that
is proposed to be unavailable during the Maintenance Outage. Buyer shall have
the right to revoke its consent to a Maintenance Outage if changed conditions
require Scheduling of the Designated Capacity scheduled to be unavailable
during such Maintenance Outage; provided, however, that Buyer may only revoke
its consent if it provides Seller with notice of revocation at least twelve
(12) hours prior to the scheduled start of the Maintenance Outage. In addition,
if Buyer reasonably

 

43

 

requests Seller to return all or part of that portion of the Facility
that is affected by the Maintenance Outage to full availability status, Seller
shall comply as soon as reasonably practical.

 

11.3              Access
to the Site and the Facility

 

11.3.1. Seller grants and has caused others to
grant Buyer, its designated employees and agents the right to enter the Site
with such prior notice to Seller as is reasonable to: (i) install,
operate, maintain, replace and/or remove the Interconnection Facilities; (ii) inspect,
maintain, and test meters and other Buyer equipment; (iii) interconnect,
interrupt, monitor, or measure energy generated by the Facility in accordance
with the terms of this Agreement; (iv) monitor Performance Tests; (v) inspect
the Facility, and (vi) inspect and test facilities related to the supply
of Natural Gas. All activities of Buyer, its designated employees and agents at
the Site shall be subject to the rules and procedures of Seller and the
owner or operator of the Facility (including, without limitation, those related
to health and safety).

 

11.4              Availability
of Records. Seller shall or
shall cause others to keep accurate records and all other data necessary for
the purposes of proper administration of this Agreement in accordance with the
following guidelines:

 

11.4.1 All such records shall be maintained
for a minimum of two (2) years after the creation of such record or data
and for any additional period of time required by Governmental Authorities with
jurisdiction over Seller, provided, however, that such records will be kept for
as long as is necessary to complete any audit that began or was announced
during such two-year period.

 

11.4.2 An accurate and up-to-date operating
log shall be maintained at the Facility with records of: (i) real and
reactive power production for each clock hour; (ii) changes

 

44

 

in operating status; (iii) Scheduled Outages, Maintenance Outages
and Forced Outages; (iv) any unusual conditions found during inspections;
and (v) any significant events related to the operation of the Facility.

 

11.4.3 Buyer shall have the right from time to
time, upon not less than seven (7) Days notice to Seller and during normal
business hours, to examine the records and data relating to this Agreement.

 

11.5              Disclaimer. Seller understands and agrees that Buyer’s
receipt and review of any material related to the Project or any physical
inspection of the Facility conducted by Buyer under any provision of this
Agreement is solely for its own information. By conducting such reviews or
inspections, Buyer makes no endorsement of the design or representation or
warranty of the safety, durability or reliability of the Facility, all of which
are the sole responsibility of Seller in accordance with the terms of this
Agreement, and Buyer shall not be deemed to have accepted any condition of the
Facility that is not in full compliance with the terms hereof. Seller shall in
no way represent to any third party that, as a result of the Buyer’s receipt
and review of any material or any inspections, Buyer is in any way responsible
for the engineering or construction soundness of the Facility.

 

11.6              Operating
Committee

 

11.6.1 The Parties shall establish an
Operating Committee comprised of two (2) Operating Representatives, one (1) appointed
by each of Seller and Buyer. Seller and Buyer, as the case may be, shall
provide written notice of such appointments to the other Party. Such
appointments may be changed at any time by similar written notice. The
Operating

 

45

 

Representatives
shall meet as necessary, but not less often than once each calendar year, at a
mutually agreeable time and place upon prior written notice. The Operating
Representatives shall represent the Parties in all matters arising hereunder
that may be delegated to them by mutual agreement of the Parties, but shall not
have the authority to modify or amend the terms of this Agreement.

 

11.6.2 Each Party shall cooperate in providing to the Operating
Representatives all information required in the performance of their duties. If
the Operating Representatives are unable to agree on any matter falling under
their jurisdiction, such matter shall be submitted to senior officers for
discussion and resolution. All decisions and agreements made by the Operating
Representatives or their principals shall be evidenced in writing.

 

11.7              Equipment
Failures

 

11.7.1 If the Facility suffers a Forced Outage due to equipment
failure, Seller shall use commercially reasonable efforts to repair the
Facility and end the Forced Outage as soon as practicable under the
circumstances. If a Party believes in good faith that the Forced Outage will
have a duration of longer than one (1) Month, Seller shall, or Buyer may
request that Seller, provide a repair plan which shall describe, to the extent
known, (i) the cause of the Forced Outage, (ii) the efforts to be
taken by Seller to repair the Facility, and (iii) the estimated duration
of the Forced Outage. Seller shall update its repair plan from time to time as
additional information becomes available.

 

11.7.2 If Seller estimates in good faith in its repair plan, or in any
update to its repair plan, that the Forced Outage will have a duration of fifteen
(15) Months or longer, or if the Forced Outage continues for more than
twenty-four (24) Months, then either Party shall have the

 

46

 

right, upon prior
written notice received by the other Party within thirty (30) Days of receipt
by Buyer of Seller’s repair plan, or update to such repair plan, as the case
may be, or at any time which is more than twenty-four (24) Months following the
beginning of such Forced Outage, to terminate this Agreement effective on the
thirtieth (30th) Day following receipt of such notice. The effective
date of such termination shall be deemed to be an Early Termination Date within
the meaning of Section 17.3.1, and Buyer shall be entitled, as its sole
remedy in respect of such termination, to receive the Termination Payment
pursuant to Section 17.3.2 (calculated as if Buyer were the Non-Defaulting
Party); provided, however, that in the case where Buyer elects to terminate
this Agreement pursuant to this Section 11.7.2, if the Forced Outage was not caused by a failure to
operate or maintain the Facility in accordance with Prudent Industry Practices,
such Termination Payment shall not exceed [***] provided
further that in the case where Seller elects to terminate this Agreement
pursuant to this Section 11.7.2, Seller’s estimated return-to-service date
in its latest repair plan shall be deemed to be the Early Termination Date
within the meaning of Section 17.3.1. Any dispute between the Parties
concerning Seller’s estimated return-to-service date in any repair plan
submitted to Buyer pursuant to this Section 11.7.2 shall be resolved in
accordance with the provisions of Article 20 applicable to such repair
plans.

 

ARTICLE 12

 

FUEL SUPPLY

 

12.1              Primary
Fuel Supply Plan.

 

12.1.1 Except as otherwise provided in this Agreement, Seller shall
have sole responsibility for making available to the Facility the quantities of
Natural Gas at the rates of

 

 

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

 

47

 

delivery required
to accommodate Buyer’s Scheduling Instructions, subject to the scheduling
flexibility permitted by the application of the pipeline’s tariff. If Seller is
unable to meet Buyer’s Schedule as a result of Seller’s failure to provide
the required quantities of Natural Gas for reasons other than a Force Majeure
Event, Seller shall reimburse Buyer for the Incremental Replacement Cost of the
energy that Seller is unable to provide.

 

12.2              Natural
Gas Transportation Capacity.

 

12.2.1 Except as otherwise provided in this
Agreement, Seller shall bear all actual costs incurred to provide delivered
Natural Gas to the Facility in order to meet Buyer’s Schedules.

 

12.2.2 At Seller’s expense Seller shall
acquire, construct, own, operate and maintain, all facilities, infrastructures
and property interests that are necessary for Seller to receive, measure and
use Natural Gas which Seller is required to deliver pursuant to this Agreement
so as to enable the Facility to produce energy as committed to Buyer under this
Agreement.

 

12.2.3 Seller shall have the right, pursuant to this Section 12.2.3,
to designate firm transportation capacity on the Texas Eastern Transmission
Company Pipeline, the Tennessee Gas Pipeline or the Southern Natural Gas
Pipeline (whether firm, released firm or other options that provide firm
transportation capacity) to serve this Agreement. Such designation shall be
made by written notice to Buyer given, with respect to firm transportation
capacity acquired by Seller prior to February 1, 2005, on or before May 1,
2005, and with respect to firm transportation capacity acquired by Seller after
February 1, 2005, on or before the date [***] after the
date of acquisition of such transportation capacity. Each notice shall

 

 

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

 

48

 

provide detailed
information as to such firm transmission capacity, including, without
limitation, the terms thereof and the actual cost to Seller of acquiring such
firm transportation capacity, and shall be accompanied with a copy of the
contract or other agreement pursuant to which such transaction capacity is
being provided. The designation of firm transportation capacity to serve this
Agreement (any such capacity being hereinafter referred to as “Earmarked
Capacity”), shall not restrict the ability of Seller to modify the terms
thereof to assign, transfer or release all or any part thereof, but for as long
as any such Earmarked Capacity is held by Seller, such Earmarked Capacity shall,
to the extent not already used to provide Natural Gas to meet Buyer’s
Schedules, be made available to Buyer to transport Natural Gas supplied by
Buyer pursuant to Section 12.4. Earmarked Capacity shall be deemed to be
the first transportation capacity used to meet Buyer’s Schedules. Seller shall
provide Buyer prompt written notice of any modification to the terms of, or
assignment, transfer or release of any Earmarked Capacity, and to extent
assigned, transferred or released, such transportation capacity shall no longer
be considered Earmarked Capacity.

 

12.3              Energy
Price. Buyer shall
pay, in accordance with Appendix B,
for energy that is, delivered to Buyer pursuant to the Buyer’s Scheduling
Instructions, including energy received during periods of ramp up and ramp
down. Subject to Section 5.1.2, Buyer is not responsible for costs
associated with generating energy at the Facility for any other purposes,
including (but not limited to) Station Service, initial start-up, testing and
synchronization of the Facility and sales to third parties.

 

12.4              Intraday
Gas.

 

12.4.1 When energy is scheduled pursuant to intraday Scheduling
parameters

 

49

 

prior to the
Tolling Commencement Date, Seller will provide Buyer a commodity gas price for
supplying Natural Gas to the Facility, or for buying back excess Natural Gas
resulting from an intraday Schedule decrease, as appropriate. Buyer shall
have the option of (i) not changing the existing Scheduling Instruction, (ii) proceeding
with the intraday Scheduling increase or decrease based on the quoted price (to
buy the incremental gas supply, or to “sell-back” the excess Natural Gas
supply, as applicable), (iii) proceeding with the intraday Scheduling
increase and notifying Seller that Buyer will supply the required incremental
Natural Gas supply (a) into the East Tennessee Pipeline for delivery to
the Facility, or (b) at the receipt point of any Earmarked Capacity
available to meet Buyer’s intraday Schedules pursuant to Section 12.2.3,
if applicable, and in either case, Buyer shall be obligated to pay the Fuel Use
and Commodity Rate for such quantity of Natural Gas determined pursuant to
Appendix B, Section D, or (iv) proceeding with the intraday
Scheduling decrease and purchase from Seller at Seller’s quoted price, and take
delivery of, all surplus Natural Gas supply resulting from the intraday
Scheduling decrease.

 

12.5              Alternative Fuel
Supply Arrangements

 

12.5.1 If Buyer desires additional intraday scheduling flexibility,
Buyer may during the Month of [***] in any year, commencing with [***] give
Seller notice of its election to supply Natural Gas to the Facility to meet its
Schedules. Any such notice shall, unless withdrawn, be effective on [***] of
the calendar year following the year in which such notice is given (the “Tolling
Commencement Date”).

 

12.5.2 Effective on the Tolling Commencement Date, for the remainder of
the Term (i) Seller shall be relieved of all obligations under this
Agreement to supply Natural Gas to the Facility to meet Buyer’s Schedules and,
except as provided in Section 12.5.3, to make Natural

 

 

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

 

50

 

Gas transportation
capacity available to transport Natural Gas to the Facility, and (ii) Buyer
shall bear all actual costs incurred to provide delivered Natural Gas to the
Facility in order to meet its Schedules, which, in the case of charges imposed
by East Tennessee, shall, with respect to the firm transportation capacity made
available to Buyer by Seller pursuant to the last sentence of this Section 12.5.2,
be [***] and [***] Buyer shall retain title to Natural Gas provided by Buyer on
and after the Tolling Commencement Date, the title to all energy generated by
the Facility as a result of the conversion of such Natural Gas to energy in the
Facility shall vest in Buyer immediately upon generation thereof and this
Agreement shall be treated as creating a tolling arrangement pursuant to which
Seller makes the Facility available to Buyer to convert Buyer’s Natural Gas
into Buyer’s energy. Notwithstanding the foregoing, risk of loss of Natural Gas
shall pass from Buyer to Seller at the delivery point into East Tennessee or
such other point as to which Buyer and Seller may agree, and risk of loss of
energy generated at the Facility shall pass from Seller to Buyer at the
Interconnection Point. From and after the Tolling Commencement Date for the
remainder of the Term, Seller shall make available to Seller [***] of the firm
Natural Gas transportation capacity on East Tennessee held by Seller on the
date of this Agreement to meet Buyer’s Schedules.

 

12.5.3 Effective on the Tolling Commencement Date, Seller shall convey
to Buyer by assignment, release or other means all Earmarked Capacity in
accordance with the pipeline’s tariffs and in a manner that, to the extent
possible, preserves the economic benefits of such firm transportation capacity.
Seller shall be responsible for, and shall indemnify and hold Buyer and its
Affiliates harmless from, all costs, expenses and liabilities in respect of the
Earmarked Capacity conveyed to Buyer to the extent such costs, expenses and
liabilities relate to periods prior to the Tolling Commencement Date and Buyer
shall be responsible for, and shall

 

 

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

 

51

 

indemnify and hold
Seller and its Affiliates harmless from, and shall obtain the release of Seller
and its Affiliates from, any and all costs, expenses and liabilities in respect
of the Earmarked Capacity conveyed to Buyer to the extent such costs, expenses
and liabilities relate to periods on or after the Tolling Commencement Date.

 

12.5.4 The Parties agree to put into place procedures effective as of
the Tolling Commencement Date which (i) preserve for the Parties the
economic effect of the heat rates used in the calculation of the energy price
to meet Buyer’s Schedules (including ramp-ups and ramp-downs) prior to the
Tolling Commencement Date, (ii) provide for the delivery of Natural Gas to
the Facility at Seller’s expense (based on Buyer’s actual costs) to allow
Seller to fulfill its obligations under this Agreement, including Station
Service and initial start-up Natural Gas to meet Buyer’s Schedules and Natural
Gas consumed for testing and synchronization of the Facility, (iii) preserves
the ability of Seller to provide Natural Gas to the Facility at its own cost
and expense for purposes other than meeting Buyer’s Schedules, or otherwise
fulfilling its obligations under this Agreement, (iv) provide for the
appropriate metering of Natural Gas for the Facility, (v) result in each
Party being responsible for its own Natural Gas imbalance penalties, and (vi) provide
for such other matters as to which the Parties agree are necessary or
appropriate for restructuring this Agreement as a tolling arrangement;
provided, however, that neither Party shall have any obligation to agree to any
procedures that modify the economic arrangements (other than Natural Gas supply)
contained in this Agreement or benefits of this Agreement to such Party. The
Parties agree that Buyer is not responsible for the costs incurred with
generating energy at the Facility for any purposes other than pursuant to Buyer’s
Schedules, including (but not limited to) Station Service, initial start-up,
testing and synchronization of the Facility and sales to third parties. Either
Party may, at any time after June 1, 2003, request that

 

52

 

work on such procedures commence with the objective of completing such
procedures within ninety (90) Days after commencement thereof.

 

ARTICLE 13

 

ENERGY SCHEDULING AND
TRANSMISSION

 

13.1              Coordination
and Scheduling.

 

13.1.1 Buyer and Seller agree to Schedule the
Facility in accordance with the procedures set forth in this Section 13.1
and Appendix C, Section II
Seller is not obligated to deliver energy in response to those portions of
Scheduling Instructions that materially deviate from such procedures.

 

13.1.2 The electrical output committed under
this Agreement shall be subject to  Scheduling Instructions issued by the Scheduling Center. Seller shall
cause the Facility operator to
comply with such Scheduling Instructions at the time designated for compliance
therewith, subject to Prudent
Industry Practices, the Technical Limits and the Scheduling procedures set forth in Appendix C. At the request of Buyer, Seller shall make
reasonable efforts to cause the Facility
to control voltage by producing or absorbing reactive power subject to the
Technical Limits and other
technical operating constraints; provided, however, that such actions do not cause Seller to violate any provisions
of its Interconnection Agreement and provided that Buyer shall reimburse Seller for any incremental
costs incurred by Seller (including the cost of reduced output), in excess of those costs Seller would
have incurred under the Interconnection Agreement, as a result of Seller’s compliance with any such requests.

 

13.1.3 Buyer covenants that determinations to
submit Scheduling Instructions to Seller shall be based solely on
considerations of the reliability of Buyer’s system, economic

 

53

 

dispatch order and the costs associated with economic unit commitment,
and not on the  availability
status of the Facility or any impact that the determination may have on Monthly Capacity Payments.

 

13.1.4 Buyer and Seller shall maintain written
records of the quantities of energy  to be delivered each hour during the Term. Following the Delivery
Commencement Date, Buyer may Schedule energy
at any time during the Term and Seller shall cause the entire output capability of the Facility to be available to
Buyer when Scheduled.

 

13.1.4.1 If Buyer elects to Schedule energy
for delivery on the next Business Day, Buyer shall provide its Schedule for
such delivery to Seller no later than 8:30 a.m. CPT on the Business Day
prior to the Day of delivery. This day-ahead Scheduling Instruction will also
include any electric deliveries from midnight to midnight for any calendar Days
that precede the next Business Day (i.e.
weekends and holidays). Buyer shall also provide a non-binding, good faith
estimate of its Scheduling Instructions for the twenty-four (24) hour period
following the next Business Day. Subject to any then existing tariff provisions
and operational constraints of the upstream pipelines, including any scheduling
flexibility offered by the pipeline operator, Buyer may submit Scheduling
Instructions for each hour in increments of fifty (50) MW, which may vary hour
to hour, subject to a minimum of two hundred (200) MW up to the full Base
Energy output capability. Each Scheduling Instruction shall cover a minimum
period of eight (8) consecutive hours. Supplemental Energy may also be
Scheduled by Buyer at the full Designated Supplemental Capacity each hour
subject to a minimum of four (4) consecutive hours per Day. Scheduling of
the entire Designated Base Capacity is a prerequisite to the Scheduling of
Supplemental Energy. Buyer will be required to accept and pay for energy during
ramp up and ramp down periods at a price which reflects the heat rate for the
Scheduled amount, but

 

54

 

otherwise as determined for Base Energy or Supplemental Energy, as the
case may be.

 

13.1.4.2 For Scheduling Instructions submitted
after the day-ahead  deadline,
Buyer must provide Seller with a proposed revised Schedule at least two (2) hours
prior to the start-up or ramp up of energy delivery, subject to any then
existing tariff provisions and operational constraints of the upstream
pipelines, including any scheduling flexibility offered by the pipeline
operator. Within thirty (30) minutes thereafter, Seller will provide Buyer with
an estimate of the economic consequences of such intraday Scheduling
Instruction after which Buyer shall notify Seller no later than thirty (30)
minutes following receipt of Seller’s estimate if it elects to implement such
intraday Scheduling Instructions. If energy is not already Scheduled, Buyer
will be assessed a turbine start event, in accordance with Appendix B, Section C. Buyer will be
responsible for the actual costs of implementing the intraday Scheduling
Instruction, including any associated imbalance penalties, if any, assessed by
The Southern Company pursuant to the Southern OATT, and by the gas
transportation providers. As provided in Section 12.4, Buyer shall have
the right to supply its own intraday gas commodity if it elects not to utilize
the gas commodity offered by Seller for the intraday Schedule Instruction.

 

13.1.4.3 Notwithstanding anything contained in
Section 13.1.4.2 to the contrary, if Seller elects to meet Buyer’s
Schedules from Alternate Resource(s), (i) Buyer shall not have the right
to give intraday Scheduling Instructions during the calendar week in which
Alternate Resource(s) are first used as a result of any Forced Outage, and (ii) thereafter,
Buyer’s right to give intraday Scheduling Instructions shall be subject to any
then existing tariff provisions and operational constraints of the upstream
pipelines, including any scheduling flexibility offered by the pipeline
operator, serving the Alternate Resource(s).

 

13.1.5 Seller may from time to time request
that the Facility be allowed to deliver

 

55

 

electric energy
output to Buyer in order to test and/or evaluate Facility equipment (“Operator
Requested Schedule”). Seller shall request such Operator Requested Schedule from
Buyer at least one (1) Business Day in advance, and Buyer shall have the
right to approve such Operator Requested Schedule (such approval not to be
unreasonably withheld, conditioned or delayed). If, for whatever reason, Buyer
determines that it is necessary to Schedule the Facility during an
Operator Requested Schedule, then Buyer may cancel or interrupt, as the case
may be, the Operator Requested Schedule and subsequently Schedule the
Facility as it deems appropriate. Payment for any energy delivered resultant
from any such Operator Requested Schedule will be as described in Section 5.1.2
of this Agreement.

 

13.2              Effect
of System Emergencies. The Parties recognize that pursuant to the
Interconnection Agreement, Seller may be required to take certain actions
during System Emergencies and may be required to disconnect the Facility from
the Transmission System to allow for repair or maintenance on the
Interconnection Facilities or the Transmission System. Subject to the
provisions of Section 13.3, to the extent that Seller is required pursuant
to the Interconnection Agreement to take any action, other than instances where
Seller’s acts or omissions are the cause for the required actions, which will
adversely affect its ability to meet Buyer’s Schedules, Seller shall be excused
from meeting Buyer’s Schedules and the amount of energy that Seller is unable
to deliver to Buyer as a result of such action shall not be treated as MWh
Scheduled.

 

13.3              Effect of Certain
Transmission Constraints.

 

13.3.1 If, as a result of an outage (a “Conasauga Line Outage”) on that
segment of the Transmission System consisting of the 500 kV transmission line
between the Conasauga 500 kV

 

56

 

substation and the
Bowen 500 kV substation (or, if different than the Bowen 500 kV substation, the
substation closest to the Conasauga 500 kV substation to its south), Buyer is
unable to use such segment for the transmission of energy from the Facility to
Buyer’s loads, Buyer shall have the right to require Seller to deliver energy
Scheduled during the remainder of the Conasauga Line Outage to an Alternate
Delivery Point, and shall be entitled, for the period during which energy is to
be delivered at the Alternate Delivery Point, to redesignate the Facility as
not being a network resource pursuant to the Southern OATT. Buyer shall have
the right to make separate elections as to whether to accept energy at the
Delivery Point or an Alternate Delivery Point for each week of the Conasauga
Line Outage. The first such election shall be made upon at least two (2) hours’
prior notice and each subsequent election shall be made upon at least
twenty-four (24) hours’ prior written notice. Following receipt of a notice
from Buyer requiring that energy be delivered at an Alternate Delivery Point,
Seller shall, for energy Scheduled during the period covered by such notice,
have the option either to (i) deliver the Scheduled energy at any
Alternate Delivery Point selected by Seller either from the Facility or from
Alternate Resources, or (ii) treat the Facility as being Unavailable as a
result of a Forced Outage; provided, however, that in either case, and unless
Seller elects to deliver energy from the Facility to Buyer, Seller shall have
the right to sell the electrical capability of and the associated energy from
the Facility to third parties during the period covered by such notice. Buyer
shall provide Seller with prompt written notice of any Conasauga Line Outage
and shall keep Seller fully informed as to the facts and circumstances
surrounding such outage.

 

13.3.2 The Parties agree that Buyer and its Affiliates have no
intention or obligation to expand the Transmission System in order to establish
a separate electrical circuit connecting the Interconnection Point to the
Transmission System. Buyer shall have no obligation

 

57

 

to cause
modifications to the Transmission System in preparation for the receipt and
transmission of energy from Alternate Resources anytime during the Term.

 

13.3.3 Following the Delivery Commencement Date, in the event that
constraints are imposed upon the Facility by the security coordinator of the
transmission system of the Tennessee Valley Authority or are imposed on the
Facility (but not on other native load facilities of The Southern Company and
its Affiliates) by the security coordinator of a transmission system other than
the Transmission System or the transmission system of the Tennessee Valley
Authority (a “Transmission System Constraint”), the following provisions shall
apply:

 

13.3.3.1 The Parties agree that fifty percent (50%) of MWh Scheduled
which Seller is unable to deliver or which Buyer is unable to receive as a
result of any Transmission System Constraint shall be included as MWh Delivered
for purposes of the Monthly Availability Percentage and the Seasonal
Availability Percentage calculations performed pursuant to Appendix A, Sections C and D. Each Party
shall provide the other Party with prompt written notice of any Transmission
System Constraints and the facts and circumstances surrounding such
constraints.

 

13.3.3.2 If, as a result of the imposition of Transmission System
Constraints, the Facility is unable to deliver or Buyer is unable to receive
five percent (5%) of the MWh Scheduled during any period of one hundred twenty
(120) Days in which Buyer Schedules energy in at least eight hundred (800)
hours, either Party shall have the right, upon thirty (30) Days prior written
notice to the other Party, to require that the Tested Reliable Capacity be
reduced to an amount equal to a capacity level which, based on Buyer’s actual
Schedules during such period and if such capacity level were the declared
Designated Capacity, would have reduced the MWh Scheduled that Seller was
unable to deliver as a result of the imposition of

 

58

 

Transmission
System Constraints to two percent (2%) of the total MWh Scheduled during such
period, with the amount of any such reduction being applied pro-rata to Tested
Base Capacity and to Tested Supplemental Capacity. Such reduction shall be
effective as of the date thirty-one (31) Days after receipt of such notice.
Thereafter, the Tested Reliable Capacity determined pursuant to a Performance
Test shall not exceed the amount determined pursuant to this Section 13.3.3.2,
unless Seller provides Buyer with credible evidence that the effect of any
Transmission System Constraints has been mitigated.

 

13.3.3.2.1 Within five (5) Business Days after the reduction of
the Tested Reliable Capacity pursuant to the first sentence of Section 13.3.3.2,
Seller shall, by written notice to Buyer, re-establish the Designated Base
Capacity and the Designated Supplemental Capacity at levels which do not exceed
the then current Tested Base Capacity and Tested Supplemental Capacity, and in
the absence of any such notice, the Designated Base Capacity shall be equal to
the Tested Base Capacity and the Designated Supplemental Capacity shall be
equal to the Tested Supplemental Capacity.

 

13.3.3.2.2 If the Tested Reliable Capacity as reduced pursuant to the first sentence of Section 13.3.3.2
is less than two hundred eighty (280) MW, either Party shall have the right,
upon ninety (90) Days prior written notice to the other Party, to terminate
this Agreement. Following such termination, neither Party shall have any
further liability or obligation hereunder except for any liability accrued
prior to the effective date of such termination.

 

59

 

ARTICLE 14

 

INSURANCE

 

14.1              Insurance
Required.

 

14.1.1 Seller shall acquire and maintain, or shall cause the owner of
the Facility to acquire and maintain, at their sole cost and expense, the types
and amounts of insurance coverage as are consistent with Prudent Industry
Practices but in no event less than the types and amounts described in Appendix E and this Article 14. All
such insurance shall be written by a company or companies with a Best’s rating
of no less than “A.”

 

14.1.2 To the extent of the indemnities assumed by Seller hereunder,
Buyer shall be designated as an additional insured as its interests may appear
on all required policies, and each such policy shall be primary and shall not
contribute to any insurance that may otherwise be maintained by, or on behalf
of, Buyer.

 

14.1.3 To the extent of the indemnities assumed by Seller hereunder,
all insurance required hereunder shall contain provisions waiving the insured’s
and the insurer’s rights of subrogation or recovery of any kind against Buyer,
its Affiliates and their respective agents, employees, officers, directors,
successors and assigns.

 

14.1.4 Buyer shall acquire and maintain at its sole cost and expense,
the types and amounts of insurance coverage as are consistent with Prudent
Industry Practices but in no event less than the types and amounts described in
Appendix E and this Article 14.
All such insurance shall be written by a company or companies with a Best’s
rating of no less than “A.”

 

14.1.5 To the extent of the indemnities assumed by Buyer hereunder, all
insurance required hereunder shall contain provisions waiving the insured’s and
the insurer’s rights of subrogation or recovery of any kind against Seller, the
Facility Owner, the Facility operator and their respective Affiliates and their
respective agents, employees, officers, directors, successors and assigns.

 

60

 

14.1.6 Notwithstanding this Agreement’s insurance requirements, each
Party may self-insure all or any part of the insurance coverage provided for in
this Agreement, subject to the other Party’s prior written consent. All
self-insurance coverage shall be treated as if it were an insurance policy.

 

14.2              Certificates
of Insurance-Seller. Within ten (10) Days of the execution of this
Agreement, Seller will provide Buyer with certificates of insurance evidencing
the required coverage set forth above and in Appendix
E. Such certificates shall provide for a minimum of thirty (30) Days
advance notice to Buyer of cancellation or material change in coverage. Failure
by Seller to cause the procurement of the insurance coverage or the delivery of
certificates of insurance required by this Article 14 or Appendix E shall not relieve Seller of the
insurance requirements set forth herein or therein or in any way relieve or
limit Seller’s obligations and liabilities under any other provision of this
Agreement.

 

14.3              Certificates
of Insurance-Buyer. Within ten (10) Days of the execution of this
Agreement, Buyer will provide Seller with certificates of insurance evidencing
the required coverage set forth above and in Appendix
E. Such certificates shall provide for a minimum of thirty (30) Days
advance notice to Seller of cancellation or material change in coverage.
Failure by Buyer to cause the procurement of the insurance coverage or the delivery
of certificates of insurance required by this Article 14 or Appendix E shall not relieve Buyer of the
insurance requirements set forth herein or therein or in any way relieve or
limit Buyer’s obligations and liabilities under any other provision of this
Agreement.

 

61

 

ARTICLE 15

 

INDEMNIFICATION

 

15.1              Scope
of Indemnity. Each Party (the “Indemnifying Party”) expressly agrees to
indemnify, hold harmless and defend the other Party and its Affiliates,
trustees, agents, officers, directors, employees, members and permitted assigns
(“Indemnified Party”) against all claims, liability, costs or expenses (on an
After-Tax Basis) for loss, damage or injury to the person or property of third
parties in any manner directly or indirectly related to: (a) activities on
the Indemnifying Party’s respective side of the Interconnection Point (in the
case of such loss, damage or injury related to the generation, transmission or
distribution of energy); or (b) any other activities to the extent that
they involved the negligence or willful misconduct of the Indemnifying Party,
unless such loss, damage or injury is the result of the negligence or willful
misconduct of the Indemnified Party. Further, Seller agrees to indemnify, hold
harmless and defend Buyer and its Affiliates, trustees, agents, officers,
directors, employees, members and permitted assigns against all claims,
liability, costs or expenses (on an After-Tax Basis) (x) imposed by any
transmission system owner or operator (other than those of the Transmission
System) and arising from the testing or operation of the Facility, or (y)
arising from the negligence or willful misconduct of any Facility owner or
operator.

 

15.2              Notice
of Proceedings. An Indemnified Party which becomes entitled to
indemnification under this Agreement shall promptly notify the other Party of
any claim or proceeding in respect of which it is to be indemnified. Such
notice shall be given as soon as reasonably practicable after the Indemnified
Party obligated to give such notice becomes aware of such claim or proceeding.
Failure to give

 

62

 

such notice shall
not excuse an indemnification obligation except to the extent failure to
provide notice adversely affects the Indemnifying Party’s interests. The
Indemnifying Party shall assume the defense thereof with counsel designated by
the Indemnifying Party; provided, however, that if the defendants in any such
action include both the Indemnified Party and the Indemnifying Party and the
Indemnified Party reasonably concludes that there may be legal defenses
available to it that are different from or additional to, or inconsistent with,
those available to the Indemnifying Party, the Indemnified Party shall have the
right to select and be represented by separate counsel, at the expense of the
Indemnifying Party. If the Indemnifying Party fails to assume the defense of a
claim, the indemnification of which is required under this Agreement, the
Indemnified Party may, at the expense of the Indemnifying Party, contest,
settle, or pay such claim; provided, however, that settlement or full payment
of any such claim may be made only with the Indemnifying Party’s consent or,
absent such consent, written opinion of the Indemnified Party’s counsel that
such claim is meritorious or warrants settlement.

 

ARTICLE 16

 

FORCE MAJEURE

 

16.1              Definition
of Force Majeure Event. For the purposes of this Agreement, a “Force
Majeure Event” as to a Party means any occurrence, nonoccurrence or set of
circumstances that is beyond the reasonable control of such Party and is not
caused by such Party’s negligence, lack of due diligence, or failure to follow
Prudent Industry Practices, including (without limitation) flood, ice,
earthquake, windstorm or eruption; fire; explosion; invasion, riot, civil war,
commotion or insurrection; sabotage, terrorism or vandalism; military or
usurped power, or act of God or of a public enemy. The term Force Majeure Event
shall not include: (i) the inability to meet a Legal Requirement or the
change in a

 

63

 

Legal Requirement
after the date of this Agreement which increases the costs of performance by a
Party of its obligations hereunder but which does not preclude or make illegal
such performance; (ii) a site-specific strike, walkout, lockout or other
labor dispute over employment conditions at the Facility, (but not including
any such action or matter as a result of an organizational campaign at the
Facility); (iii) equipment failure, unless such equipment failure results
directly from another Force Majeure Event; (iv) Seller’s inability to
perform its obligations hereunder arising from its lack of ownership of or
direct control over the Site or the Project; (v) unavailability of
transmission capability, including a Conasauga Line Outage or any Transmission
System Constraints; (vi) changes in market conditions that affect the cost
or availability of the Facility’s fuel supply or the cost of power from
resources other than the Facility; (vii) any event affecting the ability
of a Party to provide Natural Gas to the Facility unless such an event affects
firm transportation and constitutes a force majeure event under the applicable
pipeline tariff, or is the result of an operational flow order that is not
directed toward Seller’s failure to comply with the applicable pipeline tariff,
provided further that Seller shall be excused from performance only so long as
and to the extent that it is unable to reschedule transportation volumes
on the unaffected pipelines at no additional cost to Seller; or (viii) failures
of contractors, suppliers or vendors (other than fuel suppliers or
transporters), unless such failures are caused by an event which would be a
Force Majeure Event, if experienced by a Party.

 

16.2              No
Breach or Liability. Either Party shall be excused from performance of its
obligations hereunder other than accrued payment obligations and shall not be
construed to be in default in respect of such obligations to

 

64

 

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

 

16.3              Capacity
and Energy Payments. Buyer’s
obligation to make Monthly Capacity Payments shall be excused pro rata to the
extent that Seller’s obligations to honor Scheduling Instructions from Buyer
are excused as a result of Force Majeure Event claimed by Seller; provided,
however, that Seller may continue to receive such capacity and energy payments
during a Force Majeure Event so long as it covers Buyer’s Scheduling Instructions
in a manner consistent with Section 8.4. Seller must give Buyer written
notice of its decision to cover within seven (7) Days of the declaration
of the Force Majeure Event. To be valid, this notification shall include a
written, irrevocable commitment by Seller to cover Buyer’s Scheduling
Instructions for the duration of the Force Majeure Event.

 

16.4              Mitigation. Following the occurrence of a Force Majeure
Event, the affected Party shall:

 

(i) give the other Party notice thereof,
followed by written notice if the first notice is not written, as promptly as
possible after such Party becomes aware of such Force Majeure Event, describing
the particulars of such Force Majeure Event;

 

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

 

(iii) give the other
Party written notice promptly after it determines when it is able to resume
performance of its obligations under this Agreement.

 

65

 

16.5              Suspension
of Performance. The suspension of performance due to a Force Majeure Event
shall be of no greater scope and of no longer duration than is required by such
Force Majeure Event. No Force Majeure Event shall extend this Agreement beyond
its stated Term. If Seller’s ability to deliver Natural Gas to the Facility is
restricted by a Force Majeure Event relating to a pipeline, the quantity of
Natural Gas that Seller shall be excused from providing shall be calculated as
follows:

 

[***] = the greater of:

 

(i) [***]

 

(ii) [***]

 

Where,

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

16.6              Extended
Force Majeure Events.

 

16.6.1 If a Party has reason to believe that a
Force Majeure Event which is preventing the other Party from performing its
obligations hereunder will result in a suspension of such performance for a
term of six (6) Months or longer (an “Extended Force Majeure Event”), that
Party may request that the other Party submit a “Force Majeure Remedy Plan,”

 

 

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

 

66

 

which the other Party shall submit to the requesting Party within thirty
(30) Days of the request. If the Party claiming an excuse under this Article 16
has reason to believe that a Force Majeure Event is an Extended Force Majeure
Event, it shall notify the other Party promptly and shall submit a Force
Majeure Remedy Plan to the other Party within thirty (30) Days thereafter. The
Force Majeure Remedy Plan shall set forth a course of repairs, improvements,
changes to operations or other actions which should permit the affected Party
to perform its obligations under this Agreement as soon as reasonably
practicable.

 

16.6.2 While a Force Majeure Remedy Plan is in
effect, the Party prevented from performing its obligations due to the Force
Majeure Event shall provide Monthly status reports to the other Party notifying
the other Party of the steps which have been taken to remedy the Force Majeure
Event and the expected remaining duration of the Party’s inability to perform
its obligations.

 

16.6.3 The Party not prevented from performing
its obligations due to the Force Majeure Event may at any time terminate this
Agreement effective upon ten (10) Days prior written notice if: (i) the
affected Party fails to provide a Force Majeure Remedy Plan as provided for in
this Section 16.6; (ii) the affected Party fails to carry out the
Force Majeure Remedy Plan in a method reasonably designed to cause that Party
to be able to perform its obligations hereunder; or (iii) the affected
Party remains unable to perform its obligations hereunder twelve (12) Months
following the submission of the Force Majeure Remedy Plan or fifteen (15)
Months following notice of the Force Majeure Event pursuant to Section 16.4(i),
whichever occurs first. Notwithstanding the foregoing, as long as Seller is
able to respond to Scheduling Instructions Scheduling 280 MW or more, Buyer
shall not have the right to terminate this Agreement as a result of an Extended
Force Majeure Event claimed by Seller.

 

67

 

16.6.4 Upon termination of this Agreement as
provided in Section 16.6.3, the Parties shall have no further liability or
obligation to each other except for any obligation arising prior to the date of
such termination.

 

ARTICLE 17

 

DEFAULT AND REMEDIES

 

17.1              Default
by Seller. The occurrence of
any of the following events shall constitute an Event of Default by Seller:

 

17.1.1 Any representation or warranty made by
Seller herein or in any certificate delivered to Buyer pursuant hereto or by
Seller Guarantor in the Seller Guaranty shall prove to be incorrect in any
material respect when made, unless Seller shall promptly commence and
diligently pursue action to cause such representation or warranty to become
true in all material respects and does so within thirty (30) Days after notice
thereof has been given to Seller by Buyer (unless such cure is not capable of
being effected within such thirty (30) Day period in which case Seller shall
have an additional thirty (30) Day period in which to perform such cure) and
such cure removes any material adverse effect on Buyer of such representation
or warranty having been incorrect.

 

17.1.2 A court having jurisdiction shall
enter: (i) a decree or order for relief in respect of Seller in an
involuntary case or proceeding under any applicable Federal or state
bankruptcy, insolvency, reorganization or other similar law; or (ii) a
decree or order adjudicating Seller bankrupt or insolvent, or approving as
properly filed a petition seeking reorganization, arrangement, adjustment or
composition of or in respect of Seller under any applicable Federal or state
law, or appointing a custodian, receiver, liquidator, assignee, trustee,
sequestrator or other similar official of Seller or of any substantial part of
its affairs.

 

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17.1.3 Seller shall: (i) commence a
voluntary case or proceeding under any-applicable Federal or state bankruptcy,
insolvency, reorganization or other similar law or any other case or proceeding
to be adjudicated a bankrupt or insolvent; (ii) consent to the entry of a
decree or order for relief in respect of Seller in any involuntary case or
proceeding under any applicable Federal or state bankruptcy, insolvency,
reorganization or other similar law or to the commencement of any bankruptcy or
insolvency case or proceeding against it; (iii) file any petition, answer
or consent seeking reorganization or relief under any applicable Federal or
state law; (iv) consent to the filing of any petition or to the
appointment of or taking possession by a custodian, receiver, liquidator,
assignee, trustee, sequestrator or similar official of Seller or of any
substantial part of its property; (v) make an assignment for the benefit
of creditors; (vi) admit in writing its inability to generally pay its
debts as they become due; or (vii) take any action in furtherance of any
of the foregoing.

 

17.1.4 Seller fails to comply or cause
compliance with the Seller Performance Security requirements of Section 7.1
or Seller Guarantor breaches any of its obligations under the Seller Guaranty.

 

17.1.5 Seller fails to perform or observe any
material obligation of Seller under this Agreement, other than those
obligations specifically addressed in Section 17.1, which failure
materially and adversely affects the ability of Seller or Buyer to perform
their respective obligations under this Agreement and continues for a period of
thirty (30) Days after written notice thereof from Buyer unless such cure is
not capable of being effected within such thirty (30) Day period, in which case
Seller shall have an additional thirty (30) Day period in which to perform such
cure.

 

17.1.6 A violation of the requirements of Article 19
through an assignment or

 

69

 

transfer of this Agreement or an ownership interest in the Facility or a
Change of Control Transaction.

 

17.1.7 Seller fails to pay Buyer any amount
payable by Seller to Buyer (other than amounts in dispute that are not
expressly required by this Agreement to be paid) pursuant to this Agreement for
fifteen (15) Days after the same shall have become due and payable and Seller fails
to cure such failure to pay within fifteen (15) Days after receipt of written
demand therefore from Buyer.

 

17.1.8 Except for the circumstances addressed
by Section 11.7.2, the Availability Percentage for any twelve (12)
consecutive Months during which eight hundred (800) or more MWh are Scheduled
is below sixty percent (60%); provided, however, that Seller may, within
fifteen (15) Days after the end of such twelve (12) Month period, submit a cure
plan that is reasonably expected to resolve the cause of the unsatisfactory
Availability Percentage as soon as practicable, but in no event later than
ninety (90) Days from the end of such twelve (12)-Month period. If Seller fails
to submit such a cure plan in a timely manner or fails to diligently pursue implementation
of the cure plan, or if the unsatisfactory Availability Percentage is not, in
fact, cured by the end of the ninety (90) Day period, and remains uncured for
twelve (12) consecutive Months, then Buyer shall have the right to declare an
Event of Default. The cause of the unsatisfactory Availability Percentage shall
be deemed cured if the average Monthly Availability Percentage determined
prospectively are at least sixty percent (60%). For the purposes of this Section 17.1.8,
the “Availability Percentage” shall mean the sum of the MW Scheduled and MW
Delivered which sum is then divided by the MW Scheduled.

 

17.1.9 Except for the circumstances addressed
by Section 11.7.2, the demonstrated capability of the Facility determined
pursuant to a Performance Test at any time

 

70

 

after the Commercial Operation Date is below two hundred and eighty
(280) MW, and Seller fails to promptly commence and diligently pursue or cause
others to pursue action to cure and which action cures such inadequate
demonstrated capacity within thirty (30) Days (unless such cure is not capable
of being effected within such thirty (30) Day period, in which case Seller
shall have an additional thirty (30) Day period in which to cause such cure).
Seller shall submit a plan for curing such inadequate demonstrated capability
as soon as reasonably practicable, but in no event more than fifteen (15) Days
after the Performance Test revealing such inadequate demonstrated capability.
If Seller fails to deliver the cure plan within such fifteen (15) Day period or
to cause implementation of the cure plan (including implementation of such
actions as Buyer may reasonably request), Buyer shall have the right to declare
an Event of Default.

 

17.1.10 Seller breaches its obligations under
Sections 5.1.1 and 5.1.6 to the extent that the Facility is Available, and such
breach continues for more than two (2) hours after Buyer provides Seller
with written notice of such breach; provided, however, that, subject to Section 17.3.4,
such a breach shall not be an Event of Default so long as (a) Seller
believes in good faith that either the Facility is Unavailable or Seller is not
obligated to comply with Buyer’s Schedule, and (b) Seller provides Buyer
with prompt written notice of the Unavailability of the Facility or the reasons
why Buyer’s Schedules do not comply with Section 13.1.

 

17.2              Default
by Buyer. The occurrence of
any of the following events shall constitute an Event of Default by Buyer:

 

17.2.1 Buyer fails to pay any amount payable
by Buyer to Seller (other than amounts in dispute that are not expressly
required by this Agreement to be paid) pursuant to this Agreement for fifteen
(15) Days after the same shall have become due and payable and Buyer fails to cure
such failure to pay within fifteen (15) Days after receipt of written demand
therefor

 

71

 

from Seller.

 

17.2.2 Buyer fails to perform or observe any
material obligation of Buyer under this Agreement, other than those obligations
included in this Section 17.2, which failure materially and adversely
affects the ability of Seller or Buyer to perform their respective obligations
under this Agreement and continues for a period of thirty (30) Days after
written notice thereof from Seller (unless such cure is not capable of being
effected within such thirty (30) Day period, in which case Buyer shall have an
additional thirty (30) Day period in which to perform such cure.)

 

17.2.3 Any representation or warranty made by
Buyer herein or in any certificate delivered to Seller pursuant hereto or by
Buyer Guarantor (if applicable) in the Buyer Guaranty shall prove to be
incorrect in any material respect when made, unless Buyer shall promptly
commence and diligently pursue action to cause such representation or warranty
to become true in all material respects and does so within thirty (30) Days
after notice thereof has been given to Buyer by Seller (unless such cure is not
capable of being effected within such thirty (30) Day period in which case
Buyer shall have an additional thirty (30) Day period in which to perform such
cure) and such cure removes any material adverse effect on Seller of such
representation or warranty having been incorrect.

 

17.2.4      A court
having jurisdiction shall enter: (i) a decree or order for relief in
respect of Buyer in an involuntary case or proceeding under any applicable
Federal or state bankruptcy, insolvency, reorganization or other similar law;
or (ii) a decree or order adjudicating Buyer bankrupt or insolvent, or
approving as properly filed a petition seeking reorganization, arrangement,
adjustment or composition of or in respect of Buyer under any applicable
Federal or state law, or appointing a custodian, receiver, liquidator, assignee,
trustee, sequestrator or other

 

72

 

similar official
of Buyer or of any substantial part of its affairs.

 

17.2.5 Buyer shall: (i) commence a voluntary case or proceeding
under any applicable Federal or state bankruptcy, insolvency, reorganization or
other similar law or any other case or proceeding to be adjudicated a bankrupt
or insolvent; (ii) consent to the entry of a decree or order for relief in
respect of Buyer in any involuntary case or proceeding under any applicable
Federal or state bankruptcy, insolvency, reorganization or other similar law or
to the commencement of any bankruptcy or insolvency case or proceeding against
it; (iii) file any petition, answer or consent seeking reorganization or
relief under any applicable Federal or state law; (iv) consent to the
filing of any petition or to the appointment of or taking possession by a
custodian, receiver, liquidator, assignee, trustee, sequestrator or similar
official of Buyer or of any substantial part of its property; (v) make an
assignment for the benefit of creditors; (vi) admit in writing its
inability to generally pay its debts as they become due; or (vii) take any
action in furtherance of any of the foregoing.

 

17.2.6 Buyer fails to comply or cause compliance with the Buyer
Performance Security requirements of Section 7.2 or Buyer Guarantor (if
applicable) breaches any of its obligations under the Buyer Guaranty.

 

17.3 Remedies.

 

17.3.1 If an Event of Default occurs at any time during the Term, the
non-defaulting Party (the “Non-Defaulting Party”) may, for so long as the Event
of Default is continuing, subject to the provisions of Article 20, take
one or more of the following actions: (i) establish a date (which date
shall be between five (5) and ten (10) Business Days after the
Non-Defaulting Party delivers written notice of such date to the Defaulting
Party) on which this

 

73

 

Agreement shall
terminate (the “Early Termination Date”), (ii) proceed by appropriate
proceedings in accordance with this Agreement at law, in equity or otherwise,
to protect and enforce its right to damages (actual or liquidated) or, where
the Event of Default is one other than the failure to pay money, equitable
relief, including specific performance, and (iii) immediately cease
performance or withhold any payments, or both, due in respect of this
Agreement.

 

17.3.2 If an Early Termination Date has been established, the
Non-Defaulting Party shall in good faith calculate its Gains, Losses and Costs
resulting from the termination of this Agreement, aggregate such Gains, Losses
and Costs into a single net amount (the “Termination Payment”), and then notify
the defaulting Party (the “Defaulting Party”). The Gains, Losses and Costs shall
be determined by comparing the cost under this Agreement of the capacity and
energy that would be available under this Agreement for the remainder of the
Term had this Agreement not been terminated to the market price of capacity and
energy of equivalent reliability and Scheduling flexibility for the remaining
Term (had this Agreement not been terminated). To ascertain such market price,
the Non-Defaulting Party may consider, among other evidence, the settlement
prices of NYMEX energy futures contracts, quotations from leading dealers in
energy and gas swap contracts, offers for replacement capacity and energy made
by bona fide third-parties (including offers received by the Non-Defaulting
Party in response to any request for proposals for capacity and energy
contracts), all adjusted for the length of the remaining Term (had this
Agreement not been terminated) and differences in locational basis,
reliability, scheduling flexibility and any other considerations affecting
value. Neither Party shall be required to enter into replacement transactions
in order to determine the Termination Payment. If the Non-Defaulting Party’s
aggregate Losses and Costs exceed its aggregate Gains, the Defaulting Party
shall, unless it disagrees with such Termination Payment

 

74

 

calculation,
within fifteen (15) Business Days of receipt of such notice, pay the net amount
to the Non-Defaulting Party, which amount shall bear interest at the Interest
Rate from the Early Termination Date until paid. If the Non-Defaulting Party’s
aggregate Gains exceed its aggregate Losses and Costs, if any, resulting from
the termination of this Agreement, the Non-Defaulting Party may retain such
Gains unless the Non-Defaulting Party disagrees with such Termination Payment
calculation. If the Defaulting Party disagrees with the calculation of the
Termination Payment, the issue shall be resolved pursuant to the provisions of Article 20
applicable to Termination Payment disputes, and the resulting Termination
Payment shall be due and payable within three (3) Business Days after the
award. As used in this Section 17.3.2: (i) ”Costs” shall mean,
brokerage fees, commissions and other similar transaction costs and expenses
reasonably incurred by such Party either in terminating any agreement which it
has entered into to fulfill its obligations hereunder or entering into new
agreements which replace this Agreement, and attorneys’ fees, if any, incurred
in connection with enforcing its rights under this Agreement; (ii) ”Gains”
shall mean, an amount equal to the economic benefit determined on a mark to
market basis (exclusive of Costs), if any, to it resulting from the termination
of its obligations with respect to this Agreement; and (iii) ”Losses”
shall mean an amount equal to the economic loss determined on a mark to market
basis (exclusive of Costs), if any, to it resulting from the termination of its obligations with respect to this
Agreement.

 

17.3.3 Notwithstanding any other provision of
this Agreement, if Buyer or Seller fails to pay to the other Party any amounts
when due, the Aggrieved Party, in addition to any other rights and remedies
under this Agreement, shall have the right to suspend performance, following
five (5) Business Days written notice to the other Party, until such
amounts plus interest at the Interest Rate have been paid. A Party’s right to
damages or other relief from a

 

75

 

breach commences
as of the first Day of the breach and accrues thereafter until cured, without
regard to whether such breach results in an Event of Default or termination,
and following the expiration of any applicable cure period, each Party shall
have all rights and remedies available at law and equity, all of which rights and
remedies shall be cumulative and nonexclusive subject to and to the extent
permitted by law and Section 17.5; provided, however, that no right to
damages or other relief from a breach shall exist with respect to any breach
that is cured within the applicable cure period.

 

17.3.4 If Seller sells energy to a third party during periods in which
Seller believes in good faith that Seller was not obligated to comply with
Buyer’s Schedules, and it is subsequently determined that Seller was, in fact,
obligated to meet such Schedules, Seller shall reimburse Buyer for the
Incremental Replacement Costs incurred by Buyer in replacing any Scheduled
energy that Seller failed to deliver.

 

17.4              Rights
of Specific Performance. In the case of an Event of Default, the Parties
recognize that any remedy at law may be inadequate because the actual damages
of the Non-Defaulting Party may exceed the amount of any guaranty or other
collateral available to the Non-Defaulting Party. The Parties agree that in
such an event, the Non-Defaulting Party shall be entitled to pursue an action
for specific performance and the defaulting Party waives all of its rights to
assert as a defense to such action that the Non-Defaulting Party’s remedy at
law is adequate. In addition, in the event of Seller’s failure to comply with
the requirements of Section 11.1.1, the Parties recognize and agree that
if the interests of Buyer are harmed as a result of such noncompliance, Buyer’s
remedy at law will be inadequate and Buyer shall be entitled to pursue an
action for specific performance, in which

 

76

 

case, Seller
waives all of its rights to assert as a defense to such action for specific
performance that Buyer’s remedy at law is adequate.

 

17.5 Limitation of Remedies, Liability and Damages. THE PARTIES
CONFIRM THAT THE EXPRESS REMEDIES AND MEASURES OF DAMAGES PROVIDED IN THIS
AGREEMENT SATISFY THE ESSENTIAL PURPOSES HEREOF FOR BREACH OF ANY PROVISION FOR
WHICH AN EXPRESS REMEDY OR MEASURE OF DAMAGES IS PROVIDED, SUCH EXPRESS REMEDY
OR MEASURE OF DAMAGES SHALL BE THE SOLE AND EXCLUSIVE REMEDY, THE OBLIGOR’S
LIABILITY SHALL BE LIMITED AS SET FORTH IN SUCH PROVISION AND ALL OTHER
REMEDIES OR DAMAGES AT LAW OR IN EQUITY ARE WAIVED. IF NO REMEDY OR MEASURE OF
DAMAGES IS EXPRESSLY HEREIN PROVIDED, THE OBLIGOR’S LIABILITY SHALL BE LIMITED
TO DIRECT ACTUAL DAMAGES ONLY, SUCH DIRECT ACTUAL DAMAGES SHALL BE THE SOLE AND
EXCLUSIVE REMEDY AND ALL OTHER REMEDIES OR DAMAGES AT LAW OR IN EQUITY ARE
WAIVED. UNLESS EXPRESSLY HEREIN PROVIDED, AND EXCEPT FOR THE PAYMENT OF
LIQUIDATED DAMAGES, REPLACEMENT COSTS OR INCREMENTAL REPLACEMENT COSTS
SPECIFIED HEREIN, NEITHER PARTY SHALL BE LIABLE FOR CONSEQUENTIAL, INCIDENTAL,
PUNITIVE, EXEMPLARY OR INDIRECT DAMAGES, LOST PROFITS OR OTHER BUSINESS
INTERRUPTION DAMAGES, BY STATUTE, IN TORT OR CONTRACT, UNDER ANY INDEMNITY
PROVISION OR OTHERWISE. IT IS THE INTENT OF THE PARTIES THAT THE LIMITATIONS
HEREIN IMPOSED ON REMEDIES AND THE MEASURE OF DAMAGES BE WITHOUT REGARD TO THE
CAUSE OR CAUSES RELATED THERETO, INCLUDING THE NEGLIGENCE OF ANY

 

77

 

PARTY, WHETHER
SUCH NEGLIGENCE BE SOLE, JOINT OR CONCURRENT, OR ACTIVE OR PASSIVE. TO THE
EXTENT ANY DAMAGES REQUIRED TO BE PAID HEREUNDER ARE LIQUIDATED, THE PARTIES
ACKNOWLEDGE THAT THE DAMAGES ARE DIFFICULT OR IMPOSSIBLE TO DETERMINE,
OTHERWISE OBTAINING AN ADEQUATE REMEDY IS INCONVENIENT AND THE LIQUIDATED
DAMAGES DO NOT CONSTITUTE A PENALTY AND ARE A REASONABLE APPROXIMATION OF THE
HARM OR LOSS. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS AGREEMENT, IN NO
EVENT SHALL BUYER’S LIABILITY TO SELLER FOR A TERMINATION PAYMENT UNDER THIS
AGREEMENT EXCEED AN AMOUNT EQUAL TO THE SUM OF ANY AMOUNTS THEN OWED BY BUYER
HEREUNDER PLUS THE TOTAL OF ALL REMAINING MONTHLY CAPACITY PAYMENTS FOLLOWING
TERMINATION THAT WOULD HAVE BEEN PAYABLE TO SELLER UNDER THIS AGREEMENT HAD THE
AGREEMENT REMAINED IN EFFECT THROUGH THE END OF THE TERM.

 

17.6 Duty to Mitigate. Notwithstanding any other provision of
this Agreement, each Party has a duty to mitigate damages and covenants that it
will use commercially reasonable efforts to minimize any damages it may incur
as a result of the other Party’s performance or non-performance.

 

ARTICLE 18

 

CHANGE OF LAW

 

18.1              Change
of Law.

 

18.1.1 A “Change of Law” means a change in a Legal Requirement
constituting a

 

78

 

new environmental
or tax law or regulation or a new interpretation of such law or regulation,
which change is enacted after the execution date of this Agreement and that is
generally applicable to facilities that are similar to and similarly situated
as the Facility. The provisions of Sections 18.1.3 and 18.1.4 shall not apply
to a Change of Law that has been reflected in Buyer’s capacity and/or energy
payments through the previous operation of those sections.

 

18.1.2 The Parties acknowledge that, except as provided in Sections
18.1.3 and 18.1.4, the capacity and energy payments made by Buyer shall not be
altered as a result of a Change of Law that causes either Party to incur
additional costs or realize savings in carrying out its obligations under this
Agreement.

 

18.1.3 If a Change of Law (or cumulative Changes of Law) in the
aggregate causes Seller to incur additional costs that are projected to
increase Seller’s annual costs of carrying out its obligations under this
Agreement above [***] (the “Threshold Amount”) per year, such
additional costs in excess of the Threshold Amount may be passed through to
Buyer; provided, however, that such Threshold Amount shall be increased to [***] in
any  case where a Change of Law affects the cost of
electric generation at the Facility but not at other facilities similar to and
similarly situated as the Facility. Seller shall notify Buyer of the Change of
Law and the Seller’s proposed increase in capacity or energy payments under
this Agreement. For purposes of calculating the annual cost increase associated
with capitalized additions or modifications to the Facility (determined in
accordance with generally accepted accounting principles), the Parties will at
that time establish an appropriate levelized fixed charge rate (incorporating
an after-tax return of [***] for
application to the original capital cost of such additions or modifications.
This calculation will represent the total cost associated

 

 

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

 

79

 

with the
identified addition or modification, including depreciation, carrying costs,
and any other cost or expense item related to capital investments. Upon receipt
of such notice, Buyer will within thirty (30) Days make a good faith
determination whether Seller’s proposed price increase results from a Change of
Law as specified in this Agreement. In the event Buyer concurs that the
proposed price increase results from a Change of Law, the proposed increased
rates will take effect consistent with the timing of the additional cost
incurrence (but in no event earlier than the end of the thirty (30) Day
period). If Buyer disagrees with Seller’s determination, such disagreement
shall be resolved pursuant to the provisions of Article 20 applicable to
Change of Law disputes. The results of any such dispute resolution procedures
shall be retroactively applied (with interest at the Interest Rate) to reflect
any such increase in Seller’s costs.

 

18.1.4 If a Change of Law (or cumulative Changes of Law) in the
aggregate causes Seller to incur a reduction in costs that are projected to
decrease Seller’s annual costs of carrying out its  obligations
under this Agreement by more than [***]
per year, such reduction in excess of such amount will be passed through
to Buyer. Buyer may notify Seller of the Change of Law and Buyer’s proposed
decrease in capacity or energy payments under this Agreement. Upon receipt of
such notice, Seller will within thirty (30) Days make a good faith
determination whether Buyer’s proposed price decrease results from a Change of
Law as specified in this Agreement. In the event that Seller concurs that the
proposed price decrease results from a Change of Law, the proposed decreased
rates will take effect consistent with the timing of the additional cost
reduction (but in no event earlier than the end of the thirty (30) Day period).
If Seller disagrees with Buyer’s determination, such disagreement shall be
resolved pursuant to the provisions of Article 20 applicable to Change of
Law disputes. The result of any such dispute resolution procedures shall

 

 

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

 

80

 

be retroactively
applied (with interest at the Interest Rate) to reflect any such reduction in
Seller’s costs.

 

18.1.5 Under no circumstances can Buyer’s determination regarding the
applicability of the Change of Law provision to a proposed price increase or
Seller’s determination regarding the applicability of the Change of Law
provision to a proposed price decrease constitute an Event of Default under Article 17
of this Agreement.

 

18.2              NOX
Emissions. Buyer shall supply Seller with the actual number of allowances
required by any Governmental Authority or Consent for emission of nitrogen
oxides (“NOX Allowances”) for energy purchased from Seller and delivered from
the Facility pursuant to this Agreement, subject to the following limitations:

 

(i)                         Seller
shall be first required to use, at no cost to Buyer, all NOX Allowances Seller
or other Persons are granted with respect to the Facility through any type of
state or Federal set-aside program during the Term; and

 

(ii)                      Buyer
shall not be required to provide NOX Allowances that are needed due to the
Facility exceeding a NOX emission rate of 0.011 lbs/MMBtu.

 

18.3              No
Dedication. No undertaking by Seller
under this Agreement is intended to constitute the dedication of the Facility
or any part thereof to the public or affect the status of Seller as an
independent entity and not a public utility or public service company.

 

81

 

ARTICLE 19

 

ASSIGNMENT AND TRANSFERS
OF INTERESTS

 

19.1              Assignment
and Assumption of Obligations. A Party may assign this Agreement or any
portion thereof only with the prior written consent of the other Party. An
assignment hereunder shall relieve the assignor of its obligations under this
Agreement as provided in Section 19.4.2.

 

19.2              Relationship
Between Seller and Duke Capital Corporation. Buyer’s prior written consent shall be required for any Change of
Control Transaction with respect to Seller if (i) immediately prior to
such Change of Control Transaction, Seller was an Affiliate of Duke Capital
Corporation, and (ii) immediately after such Change of Control
Transaction, Seller will not be an Affiliate of Duke Capital Corporation.

 

19.3              Restrictions
on Transfer of Facility. Seller
acknowledges that, pursuant to the Output Agreement, it has the right, during
the Term, to consent to certain assignments or transfers of interests in the
Facility and to certain Change of Control Transactions involving the Facility
Owner. Seller agrees that, without the prior written consent of Buyer, there
will be no (a) assignment or transfer of any interest in the Facility
during the Term, or (b) Change of Control Transaction with respect to any
Facility Owner during the Term; provided, however that Buyer’s consent will not
be required if (i) no Default or Event of Default would exist immediately
after such assignment, transfer or Change of Control Transaction, (ii) immediately
after such assignment, transfer or Change of Control Transaction at least a
fifty percent (50%) interest in the Facility is owned directly or indirectly by
a Qualified Entity, and (iii) Seller continues to be legally entitled to
dispose of the entire electrical output of the Facility throughout the Term
either pursuant to the Output Agreement or on terms no less favorable to Buyer
than the terms of the Output Agreement.

 

82

 

19.4              General
Requirements.

 

19.4.1 Any consent required by Sections 19.1,
19.2 or 19.3 shall not be unreasonably withheld, conditioned or delayed, and
the Parties agree that it shall be unreasonable to withhold or condition any
consent to an assignment, or Change of Control Transaction pursuant to Section 19.1
or 19.2 if (i) such assignment, transfer or Change of Control Transaction
does not have a Material Adverse Effect on the Party whose consent is required,
(ii) no Default or Event of Default would exist immediately after such
assignment, transfer or Change of Control Transaction, and (iii) immediately
after such assignment, transfer or Change of Control Transaction, Seller is
legally entitled to dispose of the entire electrical output of the Facility
throughout the Term either pursuant to the Output Agreement or on terms no less
favorable to Buyer than the terms of the Output Agreement. A Party requesting
any such consent shall provide the other Party with a written request therefore
containing relevant information concerning any assignment of this Agreement,
assignment or transfer of an interest in the Facility, or Change of Control
Transaction for which consent is required pursuant to Sections 19.1, 19.2
and/or 19.3. If the Party whose consent is requested determines not to grant
any requested consent it shall, within fifteen (15) Days after of the receipt
of a written request therefore, provide the requesting Party with a written
explanation for the reasons for such denial, including, if applicable, a
detailed explanation as to why the assignment, transfer or Change of Control
Transaction will cause a Material Adverse Effect on such Party, and in the
absence of any such notice, the requested consent shall be deemed to have been
granted.

 

19.4.2 An assignor of this Agreement shall be
entitled to a written release from any and all liability hereunder provided (i) such
assignor requests such release in writing, (ii) the assignee assumes all
of the assignor’s obligations and liability under this Agreement, and (iii) any
consent required pursuant to Section 19.1 has been granted.
Notwithstanding the foregoing,

 

83

 

nothing contained in this Section 19.4.2 shall prohibit a Party
whose consent is required pursuant to this Article 19 but who is entitled
to deny such consent, from conditioning such consent on the assignor retaining
all or any part of its liability under this Agreement.

 

ARTICLE 20

 

DISPUTE RESOLUTION

 

20.1              Notice. Either Party (“Aggrieved Party”) shall have
the right to give notice to the other Party (“Noticed Party”) that the Noticed
Party is not performing in accordance with the terms and conditions of this
Agreement. Such notice shall describe with specificity the basis for the
Aggrieved Party’s belief and may describe the recommended options to correct
the failure.

 

20.2              Dispute
Resolution, Arbitration.

 

20.2.1 Except as otherwise provided in Section 17.5,
any dispute or claims arising under this Agreement that cannot be resolved by
the Parties through negotiation by the Parties’ managers shall be referred to
senior executives (president or a vice president) of the Parties for
resolution, which executives shall have the authority to decide or resolve the
matter in dispute. The senior executives shall attempt to meet and resolve the
dispute within thirty (30) Days.

 

20.2.2 If the Parties are unable to resolve a
dispute as provided in Section 20.2.1, (a) the Parties agree to
arbitrate those disputes described in the Subsections 20.2.2.1 and 20.2.2.2
using the procedures provided in such subsections, and (b) in the case of
any dispute that is not described in the Subsections 20.2.2.1 or 20.2.2.2,
either Party may pursue its rights and remedies available under other
provisions of this Agreement.

 

20.2.2.1                                If the dispute is with respect to the results of a Performance

 

84

 

Test (Section 10.3), the development of Maintenance Schedules (Section 11.2.1),
or the return-to-service date in any Seller repair plan submitted to Buyer
pursuant to Section 11.7.2, the Parties shall attempt to agree upon the
selection of an independent third party expert to make a determination
concerning such dispute. If the Parties are unable to mutually agree on the
selection of an expert within fifteen (15) Days (following the expiration of
the Section 20.2.1 thirty (30)-Day period), then the Party asserting the
dispute shall provide a list of five (5) qualified experts (none of which
shall have performed, or been employed by a firm that has provided, services
for the Party proposing the list within the last ten (10) years) to the
other Party and such other Party shall select one expert from such list, which
expert shall not have performed, or been employed by a firm that has provided,
services for such other Party within the last ten (10) years. Within
fifteen (15) Days of the selection of the expert, the parties shall file with
the expert written positions (with supporting documentation) concerning the
dispute. The expert may request additional filings and shall render a decision
within fifteen (15) Days of receipt of all filings. In the case of a dispute
concerning a Performance Test, the independent expert’s determination shall be
applied to establish the Tested Reliable Capacity as if no dispute had arisen
and all capacity billing under Section 5.2 shall (if necessary and as soon
as practicable) be adjusted retroactively (with interest at the Interest Rate)
to reflect Designated Capacity equal to such expert’s determination. Seller
may, however, nominate a different amount of Designated Capacity for
prospective application consistent with other provisions of this Agreement. In
the case of any dispute resolved under this Section 20.2.2.1, if the
independent expert adopts the position of one of the Parties, then the other
Party shall pay the fees and expenses of such expert. Otherwise, these fees and
expenses will be shared equally by the Parties.

 

85

 

20.2.2.2                                If
the dispute concerns the application of Section 13.2 or Article 18,
or the calculation of a Termination Payment pursuant to Section 17.3.2, or a billing dispute under Section 6.2.2,
then the Parties agree to arbitrate such dispute in accordance with the
following procedures:

 

20.2.2.2.1                        At
the request of either Party upon written notice to the other Party (a “Demand”),
the dispute shall be finally settled by binding arbitration before a single
arbitrator in accordance with the Expedited Procedures of the Commercial
Arbitration Rules (the “Rules”) of the American Arbitration Association (“AAA”)
then in effect, except as modified herein. The Demand must include statements
of the facts and circumstances surrounding the dispute, the legal obligation
breached by the other Party, the amount in controversy and the requested relief
accompanied by all relevant documents supporting the Demand.

 

20.2.2.2.2                        Arbitration
shall be held in Atlanta, Georgia. The arbitration shall be governed by the
United States Arbitration Act, 9 U.S.C. §§ 1 et  seq.

 

20.2.2.2.3                        Unless
the Parties otherwise agree, the arbitrator selected shall have a reasonable
degree of expertise in the subject matter of the dispute, shall not have
provided services to either Party or any of their respective Affiliates within
the last ten (10) years and shall be selected from a national panel of
potential arbitrators.

 

20.2.2.2.4                        The
award shall be in writing (stating the award and the reasons therefor) and
shall be final and binding upon the Parties, and shall be the sole and
exclusive remedy between the Parties regarding any claims, counterclaims,
issues, or accountings presented to the arbitrator. The arbitrator shall be
authorized in his or her discretion to grant pre-award and post-award interest
at commercial rates. Judgment upon any award may be entered in

 

86

 

any court having
jurisdiction. Each of the Parties hereby consents to service of process by
registered mail at its address set forth herein and agrees that its consent to
service of process by mail is made for the express benefit of the other Party.

 

20.2.2.2.5                        This
Agreement and the rights and obligations of the Parties shall remain in full
force and effect pending the award in any arbitration proceeding hereunder.

 

20.2.2.2.6                        Unless
otherwise ordered by the arbitrators, each Party shall bear its own costs and
fees, including attorneys’ fees and expenses. The Parties expressly agree that
the arbitrators shall have no power to consider or award any form of damages
barred by Section 17.5, or any other multiple or enhanced damages, whether
statutory or common law.

 

20.2.2.2.7                        With
respect to the disputes covered by this Section 20.2.2.1 and 20.2.2.2, the
Parties, to the fullest extent permitted by law, hereby irrevocably waive and
exclude any rights of application or appeal or rights to state a special case
for the opinion of the courts or any other recourse to the court system other
than to enforce the Parties’ agreement to resolve disputes in accordance with Article 20.

 

20.2.2.2.8                        EACH
PARTY UNDERSTANDS THAT IT WILL NOT BE ABLE TO BRING A LAWSUIT CONCERNING ANY
DISPUTE THAT MAY ARISE WHICH IS COVERED BY THE ARBITRATION PROVISION.

 

20.2.3 WAIVER OF JURY TRIAL. EACH PARTY WAIVES ALL RIGHT TO
TRIAL BY JURY IN ANY ACTION BROUGHT PURSUANT TO OR IN RESPECT OF THIS
AGREEMENT.

 

87

 

ARTICLE 21

 

MISCELLANEOUS PROVISIONS

 

21.1              Amendments.
This Agreement may be amended only by a written instrument duly executed by
authorized representatives of Buyer and Seller.

 

21.2              Binding
Effect. This Agreement and any extension shall inure to the benefit of and
shall be binding upon the Parties and their respective permitted successors and
assigns.

 

21.3              Counterparts.
This Agreement may be executed in several counterparts, each of which shall be
an original and all of which shall constitute a single instrument.

 

21.4              Notices.
Unless otherwise specified, where notice is requited by this Agreement, such
notice shall be in writing and shall be deemed given: (i) upon receipt,
when mailed by United States registered or certified mail, postage prepaid,
return receipt requested; (ii) upon the next Business Day, when sent by
overnight delivery, postage prepaid using a recognized courier service; or (iii) upon
receipt, when sent by facsimile transmission, provided receipt of such
facsimile transmission is confirmed before 5:00 P.M. CPT by facsimile
transmission or otherwise in writing. In all instances, notice to the
respective Parties should be directed as follows:

 

To Seller:

 

[***]

[***]

[***]

[***]

[***]

 

 

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

 

88

 

[***]

 

with a copy to:

 

[***]

[***]

[***]

[***]

[***]

[***]

 

To Buyer:

 

[***]

[***]

[***]

[***]

[***]

[***]

 

with a copy to:

 

[***]

[***]

[***]

[***]

[***]

[***]

 

or to such other addressees as may later be designated by the Parties.

 

21.5              Entire
Agreement. This Agreement
(including the attached Appendices A through
H, inclusive) constitutes the
entire understanding between the Parties and supersedes any previous agreements
between the Parties. The Parties have entered into this Agreement in reliance
upon the representations and mutual undertakings contained herein and not in
reliance upon any oral or written representations or information provided by
one Party to the other Party not contained or incorporated herein.

 

 

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

 

89

 

21.6              Governing
Law. This Agreement shall be
governed by and construed in accordance with the laws of the State of Georgia.

 

21.7              Waiver. The failure of either Party to enforce at
any time any of the provisions of this Agreement, or to require at any time
performance by the other Party of any of the provisions hereof, shall in no way
be construed to be a waiver of such provisions, or in any way to affect the
validity of this Agreement or any part hereof or the right of such Party
hereafter to enforce every such provision. No modification or waiver of all or
any part of this Agreement shall be valid unless it is reduced to a writing,
signed by both Parties, that expressly states that the Parties agree to a
waiver or modification, as applicable.

 

21.8              Headings. The headings contained in this Agreement are
used solely for convenience and do not constitute a part of the Agreement
between the Parties, nor should they be used to aid in any manner in the
construction of this Agreement.

 

21.9              Third
Parties. This Agreement is
intended solely for the benefit of the Parties hereto. Nothing in this
Agreement shall be construed to create any liability for any person not a Party
to this Agreement.

 

21.10        Agency. This Agreement shall not be interpreted or
construed to create an association, joint venture, or partnership between the
Parties or to impose any partnership obligation or liability upon either Party.
Neither Party shall have any right, power or authority to enter into any
agreement or undertaking for, or act on behalf of, or to act as or be an agent
or representative of, or to otherwise bind, the other Party.

 

90

 

21.11        Severability. If any term or provision of this Agreement
or the application thereof to any person, entity, or circumstance shall to any
extent be invalid or unenforceable, the remainder of this Agreement, or the
application of such term or provision to persons, entities or circumstances other
than those as to which it is invalid or unenforceable, shall not be affected
thereby, and each term and provision of this Agreement shall be valid and
enforceable to the fullest extent permitted by law.

 

21.12        Negotiated
Agreement. This Agreement
shall be considered for all purposes as prepared through the joint efforts of
the Parties and shall not be construed against one Party or the other as a
result of the preparation, substitution or other event of negotiation, drafting
or execution hereof.

 

21.13        Confidentiality.

 

21.13.1 The Parties acknowledge that portions
of this Agreement contain Confidential Information and may require the Parties
to disclose additional Confidential Information to one another. Each Party
agrees that: (i) for a period of five (5) years from the date hereof
for Confidential Information contained in this Agreement; and (ii) for a
period of five (5) years from the date of disclosure for additional
Confidential Information disclosed during the Term, it will not, without the
written consent of the other Party or as otherwise provided herein, disclose to
any third party (other than to Affiliates of the disclosing Party or
consultants and advisors to such Affiliates and the disclosing Party who need
to know such information in connection with the performance of their duties or
services for such Affiliates or the disclosing Party), such portions of this
Agreement, or the terms or provisions hereof, or any additional Confidential
Information disclosed pursuant to such Party’s performance of this Agreement
and

 

91

 

identified as
Confidential Information at the time of such disclosure, except to the extent
that disclosure to a third party is required by law, or by a court or by an
administrative agency having jurisdiction over the disclosing Party.

 

21.13.2 The Parties agree to seek confidential treatment of the
Confidential Information in this Agreement from the GPSC, but acknowledge that
certain terms, conditions and provisions of this Agreement will need to be
disclosed in connection with the application for a Certificate of Public
Convenience and Necessity. No assurance or commitment is made regarding the
ability of Buyer to obtain the requested confidential treatment in that
proceeding or otherwise.

 

21.13.3 The Parties agree to seek confidential treatment of the
Confidential Information in this Agreement from FERC, but acknowledge that
certain Confidential Information may be made publicly available by FERC.

 

21.13.4 Any public statement by a Party hereto concerning the
transaction described herein shall be reviewed and agreed upon by the Parties
before release, which agreement shall not be unreasonably withheld, conditioned
or delayed.

 

[The next page is
the signature page.]

 

92

 

IN WITNESS WHEREOF, the
Parties have caused this Agreement to be executed under seal by their duly
authorized officers, as of the date first above written.

 

 

	
  GEORGIA POWER COMPANY

  	
   

  	
  DUKE ENERGY SOUTHEAST

  MARKETING, LLC

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Jeffrey L. Wallace

  	
   

  	
  By:

  	
  /s/ F. Mitchell Davidson

  	
   

  
	
  Name:

  	
  Jeffrey L. Wallace

  	
   

  	
  Name:

  	
  F. Mitchell Davidson

  	
   

  
	
  Title:

  	
  Vice President

  	
   

  	
  Title:

  	
  Vice President

  	
   

  
	
  Attest:

  	
  /s/ Janice D. Wolfe

  	
   

  	
  Attest:

  	
  /s/ Patricia H. Jones

  	
   

  
	
  Title:

  	
  Corporate Secretary

  	
   

  	
  Title:

  	
  Assistant Secretary

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  [SEAL]

  	
   

  	
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Exhibit 10.5  

 
  CONSENT AND AMENDMENT
  TO THE
  CONTRACT FOR THE PURCHASE OF FIRM CAPACITY AND ENERGY    
    

        This CONSENT AND AMENDMENT TO THE CONTRACT FOR THE PURCHASE OF FIRM CAPACITY AND ENERGY (this "Agreement") is entered into as of July 16, 2004, by and
among GEORGIA POWER COMPANY, a Georgia corporation ("GPC"), DUKE ENERGY MARKETING AMERICA, LLC, a Delaware limited liability company ("DEMA"), DUKE CAPITAL LLC, a Delaware limited liability company
("DUKE CAPITAL"), and DUKE ENERGY MURRAY, LLC (to be known from and after the Effective Date as "KGEN MURRAY I AND II LLC"), a Delaware limited liability company ("DE Murray"). 

RECITALS  

        A.    GPC
and DEMA (the successor by merger to Duke Energy Southeast Marketing, LLC) entered into the Contract for the Purchase of Firm Capacity and Energy on June 3,
2002 (as amended, the "PPA"), pursuant to which DEMA agreed to sell to GPC, and GPC agreed to purchase from DEMA, capacity and associated energy from the Facility (as defined in the PPA). Capitalized
terms used but not otherwise defined in this Agreement have the meanings given such terms in the PPA. 

        B.    Duke
Energy North America, LLC ("DENA") has entered into a Purchase and Sale Agreement dated as of May 3, 2004 among DENA, Duke Energy Capital of
Texas, Inc. and KGen Partners LLC (as amended, the "PSA") pursuant to which, among other things, all of DEMA's rights and obligations under the PPA will be assigned to DE Murray and all of the
membership interests in DE Murray will be acquired by KGen Partners LLC or a wholly-owned subsidiary thereof (KGen Partners LLC and/or one or more of its subsidiaries, as applicable, the "Buyer"). 

        C.    Duke
Capital, as Seller Guarantor under the PPA, executed the Guaranty Agreement dated June 3, 2002 in favor of GPC (the "Guaranty Agreement"), as required
pursuant to Section 7.1 of the PPA. Duke Capital will continue to provide Eligible Collateral under the PPA after the closing of the transactions contemplated by the PSA, notwithstanding that
it will no longer be an affiliate of DE Murray. 

        D.    On
June 3, 2002, DEMA and DE Murray entered into the Capacity and Energy Sales Agreements (also called the Electric Energy and Ancillary Service Sales Agreement)
(the "Output Agreement") whereby DE Murray agreed to sell to DEMA certain electrical output from the Facility which DEMA, in turn, used to satisfy its obligations to GPC pursuant to the PPA. Once DE
Murray is a party to the PPA, the Output Agreement will no longer be required and, as such, DEMA and DE Murray will terminate such agreement. 

        E.    DEMA
has requested that GPC (a) consent to the assignment of the PPA from DEMA to DE Murray, the assignment of the membership interests in DE Murray from DENA to
Buyer, the termination of the Output Agreement and a collateral assignment of Buyer's interest in the PPA to a collateral agent for the benefit of the lenders (the "Acquisition Lenders") providing
financing to Buyer and certain other secured creditors described in the Lender Consent (as defined below) and (b) amend the PPA in certain respects in order to facilitate the foregoing. 

        F.     In
connection with Duke Capital continuing to provide Eligible Collateral and in order to preserve the protections afforded to Duke Capital when it was providing Eligible
Collateral on behalf of an affiliate, Duke Capital has requested that (a) GPC provide prior written notice to Duke Capital of any written modification or waiver of the PPA that could reasonably
be expected to materially increase the likelihood of a drawing under or materially increase the exposure of any Eligible Collateral provided or to be provided by or on behalf of Duke Capital, and
(b) the obligation of Duke Capital to provide Eligible Collateral cease with respect to obligations under the PPA arising after the earlier to occur of (i) GPC's consent (except for its
consent under Section 1.1 hereof or its consent under Sections l(a), l(b), 1(e)(i) or l(e)(ii) of the Lender Consent) in writing after the Effective Date to (1) a 

 

Change
of Control Transaction with respect to the owner of the Facility or (2) an assignment of the PPA or any portion thereof pursuant to 19.1 of the PPA, subject to certain exceptions and
(ii) the acquisition of equity interests resulting in a Change of Control Transaction to the extent described in and in accordance with the provisions of clause 1(f) of the Lender
Consent. 

        G.    The
parties hereto now desire to enter into this Agreement to evidence certain consents, amendments and further agreements, all conditioned upon the closing of the
transactions contemplated by the PSA. 

        NOW,
THEREFORE, in consideration of the foregoing premises and the representations, warranties, and covenants contained herein, the parties hereto agree as follows: 

ARTICLE 1

AGREEMENTS  

        Section 1.1.    PPA Consent.    Notwithstanding anything to the contrary contained in the PPA, including
without limitation Sections 3.3, 19.1, 19.2 and 19.3 thereof, subject to the satisfaction of the conditions set forth in Section 2.1 below, GPC hereby consents to (a) the assignment by
DEMA of all of its rights and obligations under the PPA to DE Murray (and, as a result, the termination of the Output Agreement), (b) the sale by DENA of the membership interests in DE Murray
to Buyer, and (c) the collateral assignment of Buyer's interest in the PPA to a collateral agent for the benefit of the lenders providing financing to Buyer and the other secured parties
described therein (and, with respect to such collateral assignment, GPC hereby agrees to execute and deliver a consent in favor of such a collateral agent substantially in the form of the consent (the
"Lender Consent") attached hereto as Exhibit A). In connection with the assignment referred to in clause (a) above, DE Murray hereby assumes as of the Effective Date all of DEMA's
liabilities, duties, obligations, risk of loss and other responsibilities, whether existing or contingent, relating to and under the PPA. As contemplated by Section 19.4.2 of the PPA, GPC
hereby releases and forever discharges as of the Effective Date DEMA and its directors, officers and employees from any and all liabilities, duties, obligations, risk of loss and other
responsibilities, whether existing or contingent, relating to and under the PPA. Duke Capital hereby consents to (a) the assignment by DEMA of all of its rights and obligations under the PPA to
DE Murray (and, as a result, the termination of the Output Agreement), (b) the sale by DENA of the membership interests in DE Murray to Buyer, (c) the assumption by DE Murray as of the
Effective Date of all of DEMA's liabilities, duties, obligations, risk of loss and other responsibilities, whether existing or contingent, relating to and under the PPA, and (d) the release of
DEMA and its directors, officers and employees as provided in the preceding sentence. 

        Section 1.2.    PPA Amendments.    

        (a)   The
definition of "Seller" in the preamble of the PPA shall be deleted in its entirety and replaced with the following: 

        "KGen
Murray I and II LLC, a limited liability company organized and existing under the laws of the State of Delaware ("Seller")." 

All
references throughout the PPA to "Duke Energy Murray, LLC" (or "DEMu") as an entity that is separate and distinct from "Seller" shall be replaced with "Seller" or deleted, as reflected in the
redlined version of the PPA attached hereto as Exhibit B. 

        (b)   The
definition of "Seller Guarantor" in Section 1.1.118 of the PPA is hereby amended in its entirety by replacing the current definition with the following: 

        "Seller
Guarantor"—means a Person that, at the time of execution and delivery of its Seller Guaranty (a) has (i) an investment grade such that its senior
unsecured debt (or issuer rating if such Person has no senior unsecured debt rating) is rated at least BBB- (by 

2

 

Standard &
Poor's Rating Group) and at least Baa3 (by Moody's Investor Services, Inc.) and (ii) a consolidated Net Worth of at least four hundred million dollars
($400,000,000.00); or (b) is reasonably acceptable to Buyer as having a verifiable credit worthiness and Net Worth sufficient to secure Seller Guarantor's obligations under its Seller
Guaranty." 

In
connection with the aforementioned amendment to the definition of Seller Guarantor, the form of Seller Guaranty set forth in Appendix H of the PPA is hereby amended by replacing the second
sentence of the second paragraph of Section 1 in its entirety with the following: 

        "The
phrase "payment obligations" does not include any obligation incurred after any transaction or series of related transactions are consummated after the "Effective Date" (as defined
in the Consent referred to below) which results in Obligor being an affiliate of an ultimate parent entity other than MatlinPatterson Global Opportunities Partners II L.P. immediately after such
transaction(s), if such transaction(s) either (a) are consented to by Beneficiary in writing or (b) constitute a Change of Control Transaction to the extent described in and effectuated
in accordance with Section 1.3(b) of the Consent and Amendment to the Contract for the Purchase of Firm Capacity and Energy dated as of July 16, 2004 among Beneficiary, Obligor, Duke
Capital, LLC and Duke Energy Marketing America, LLC (the "Consent"). For purposes of this definition, a person or entity is an affiliate of an ultimate parent entity if such ultimate parent entity is
the person or entity who directly or indirectly owns fifty percent (50%) or more of such person's or entity's outstanding capital stock or other equity interests having ordinary voting power and who
does not itself have an ultimate parent entity (other than, in the case of MatlinPatterson Global Opportunities Partners II L.P., its general partner)." 

        (c)   In
order to reflect that the Output Agreement is being terminated in connection with the assignment of the PPA to Seller, the references to, and any phrases containing
any reference to, the Output Agreement in the PPA, including without limitation Sections 3.3, 19.3 and 19.4 thereof, are hereby amended to read as set forth on the redlined version of the PPA attached
hereto as Exhibit B. 

        (d)   Section 19.2
of the PPA is hereby amended by replacing all references to "Duke Capital Corporation" in Section 19.2 with "MatlinPatterson Global
Opportunities Partners II L.P.". 

        (e)   Section 3.3,
"Seller Covenants," is hereby amended in its entirety to read: 

        "3.3.1 Seller
agrees that from and after the earlier of the 180th day following the Effective Date or May 31, 2005, it shall maintain one or more agreements to
provide for the operations and maintenance of the Facility which Seller shall enter into only with Persons that satisfy the requirements of clauses (a) and (b) of the definition of
Qualified Entity (and Duke Energy North America, LLC or any of its Affiliates shall be deemed to satisfy such requirements) and each of which agreements shall (i) be consistent with the
requirements of this Agreement, (ii) require compliance with Prudent Industry Practices, (iii) provide that Buyer shall be a third party beneficiary of the agreement with a right to
enforce such agreement provided that an Event of Default by the Seller shall have occurred under this Agreement relating to the operation and maintenance of the Facility, and (iv) include other
provisions that are consistent with Prudent Industry Practices, which shall be deemed satisfied if such agreement includes terms substantially consistent with the term sheet attached as
Exhibit C to the Consent and Amendment to the Contract for the Purchase of Firm Capacity and Energy dated as of July 16, 2004 (the "Consent"); provided that notwithstanding the foregoing
the July 8, 2004 draft of the Operation and Maintenance Agreement, attached as Exhibit D to the Consent, between Seller and Duke Energy Murray Operating, LLC (and any substantially
similar final agreement thereof or any replacement agreement on substantially similar terms with Duke Energy North America, LLC or any of its Affiliates) shall be deemed to satisfy the 

3

 

requirements
of this section. At the time when Seller enters into any operation and maintenance agreement, it shall provide to Buyer a certification that such agreement complies with this covenant and
shall also provide Buyer with a copy of such agreement (with pricing and economic terms redacted). Seller acknowledges that this covenant is a material obligation of the Agreement. 

        3.3.2 Seller
agrees from and after the earlier of the 180th day following the Effective Date or May 31, 2005, it shall maintain one or more agreements to provide for
fuel supply or fuel management services for the Facility which Seller shall enter into only with Persons that (i) have the expert professional and technical capability to arrange for and/or
supply the fuel supply for the Facility and (ii) have current experience in excess of three (3) years in supplying or arranging for the supply of Natural Gas to combustion turbine and/or
steam turbine generating facilities. Sequent Energy, Inc and its Affiliates are deemed to meet the foregoing criteria. Each such fuel supply or fuel management agreement shall be consistent with the
requirements of this Agreement. At the time Seller enters into any fuel supply or fuel management agreement, it shall provide to Buyer a certification that such agreement complies with the foregoing
requirements of this covenant and shall also provide Buyer with a copy of such agreement (with pricing and economic terms redacted). In the event that Seller experiences failures in fuel supply that
result in the Monthly Availability Percentage (provided that for these purposes the calculation of the Monthly Availability Percentage shall not include energy Scheduled during any period of Forced
Outage other than as a result of failure of fuel supply) of less than 70% for four consecutive
months, then upon the written request of Buyer, Seller shall deliver a cure plan to Buyer that demonstrates Seller's commercially reasonable efforts to remedy such unavailability, including by
entering into firm transportation agreements on commercially reasonable terms as soon as reasonably practicable to assure that the Facility can reasonably be expected to meet the day-ahead
energy Schedules of Buyer. Seller acknowledges that this covenant is a material obligation of the Agreement." 

        (f)    The
PPA is also hereby amended to include those other miscellaneous PPA changes (including certain amendments to the representations and warranties of Seller in
Section 3.1 of the PPA) which, together with the changes described in this Section 1.2, are set forth on the redlined version of the PPA attached hereto as Exhibit B. For the
avoidance of doubt, the version of the PPA attached hereto as Exhibit B is not intended to be an operative document and is being attached only for purposes of reflecting the additional
amendments to the PPA reflected therein that the parties have agreed to pursuant to Section 1.2 of this Agreement. 

        Section 1.3.    Duke Capital Eligible Collateral Understanding.    Notwithstanding anything to the contrary
contained in the PPA, GPC agrees that Duke Capital shall be released from its obligations with respect to Eligible Collateral for obligations under the PPA arising from and after the earlier to occur
of: 

        (a)   GPC's
consent (except for its consent under Section 1.1 hereof or its consent under Sections 1(a), 1(b), 1(e)(i) or 1(e)(ii) of the Lender Consent)
in writing after the Effective Date to (i) a Change of Control Transaction with respect to the owner of the Facility or (ii) an assignment of the PPA or any portion thereof pursuant to
Section 19.1 of the PPA (except for an assignment of the Monthly Energy Payment to an entity designated by Seller as responsible for supplying fuel to the Facility in accordance with the terms
of the PPA); or 

        (b)   the
acquisition of equity interests after the Effective Date resulting in a Change of Control Transaction with respect to the owner of the Facility to the extent
described in and in effectuated in accordance with Section 1(f) of the Lender Consent. 

        Section 1.4    Notice of PPA Amendments.    GPC acknowledges that (i) DE Murray, KGen Murray LLC, and
KGen LLC have entered into an agreement with Duke Capital pursuant to which DE 

4

 

Murray,
KGen Murray LLC, and KGen LLC have agreed not to permit any written modification or waiver of the PPA that could reasonably be expected to materially increase the likelihood of a drawing under
or materially increase the exposure of any Eligible Collateral provided or to be provided by Duke Capital and (ii) pursuant to such agreement, any such amendments to the PPA require DE Murray
to obtain Duke Capital's prior written consent. GPC agrees to provide Duke Capital (at least 5 Business Days prior to the effectiveness thereof) with copies of any proposed amendment to the PPA that
GPC believes could reasonably be expected to materially increase the likelihood of a drawing under or materially increase the exposure of any Eligible Collateral provided or to be provided by or on
behalf of Duke Capital. 

ARTICLE 2

MISCELLANEOUS  

        Section 2.1.    Conditions Precedent.    This Agreement constitutes a binding agreement among the parties as of
the date hereof, but, notwithstanding anything to the contrary herein, the provisions of Article 1 and Section 2.2(b) hereof are conditioned upon and subject to the following: 

        (a)   the
closing of the transactions contemplated by the PSA (the "Effective Date"); 

        (b)   the
occurrence both before and after giving effect to the transactions contemplated by the PSA to occur on the Effective Date of no fact or circumstance arising from the
transactions contemplated by the PSA which results in a Seller's Default or Event of Default under the PPA, including under Section 7.1 thereof which requires Eligible Collateral to be provided
to GPC. For purposes of clarification, when determining whether a Seller's Default or Event of Default results after giving effect to the transactions described in Section 2.1(b), references to
the PPA shall mean the PPA as amended in accordance with Section 1.2 hereof; 

        (c)   the
assignment of the Firm Fuel Transportation Agreement, between DEMA and East Tennessee Natural Gas Company, dated December 31, 2003, from DEMA to DE Murray; 

        (d)   GPC's
receipt of replacement certificates of insurance evidencing the required insurance coverage for Seller under Section 14.1 and Appendix E of the PPA
and providing a minimum of thirty (30) Days advance notice to GPC of cancellation or material change in coverage; and 

        (e)   GPC's
receipt (which shall be deemed to include, without limitation, public notice of such written order) from the Georgia Public Service Commission of a written order
approving without condition (or, if conditional, only with such conditions that are reasonably acceptable to GPC) the transactions described herein as they relate to the PPA, unless the Georgia Public
Service Commission decides that such order or approval is not necessary (in which case this clause (e) shall not be a condition precedent under this Section 2.1). For purposes of this
Section 2.1(e), such order or approval shall be deemed to be reasonably acceptable to GPC upon the earlier to occur of (i) GPC providing written notice to DEMA of such acceptance by GPC
and (ii) the 5th Business Day after GPC's receipt of such order or approval, unless in the case of this clause (ii) GPC has notified DEMA in writing on or prior to such 5th Business Day
that such order or approval is not reasonably acceptable to GPC. 

        Section 2.2    Representations and Warranties.    Each party represents and warrants that (a) it is
validly organized under the laws of its jurisdiction and has full corporate or limited liability company power, as applicable, to execute, deliver and perform this Agreement, (b) the execution,
delivery and performance of this Agreement by it have been duly authorized by all necessary corporate or limited liability company and governmental action, as applicable, and do not contravene its
organizational documents, and (c) this Agreement has been validly executed and delivered by it. DE Murray represents and warrants on the Effective Date (after giving effect to the transactions
contemplated by the PSA to occur on the Effective Date) that the representations and warranties contained in 

5

 

Section 3.1.1
through 3.1.5 of the FPA, as amended in accordance with Section 1.2 hereof are true and correct in all material respects. 

        Section 2.3.    No Other Amendments.    Except as amended, modified or waived by this Agreement, the PPA
remains in full force and effect as originally written. 

        Section 2.4.    Governing Law.    This Agreement shall be governed by and construed in accordance with the laws
of the State of Georgia. 

        Section 2.5.    Counterparts.    This Agreement may be executed in several counterparts, each of which shall be
an original and all of which shall constitute a single instrument. 

        Section 2.6.    Amendments.    No waiver, amendment or other modification to the terms of this Agreement shall
be valid unless in writing and signed by the parties hereto. 

[The
remainder of the page is intentionally left blank.] 

6

 

        IN
WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized. 

	 	 	GEORGIA POWER COMPANY
	

 	
 	

By:	
 	

/s/ Ronnie L. Bates

	 	 	Name:	 	Ronnie L. Bates

	 	 	Title:	 	Senior Vice President Planning Sales and Service

	

 	
 	

DUKE ENERGY MARKETING AMERICA, LLC
	

 	
 	

By:	
 	

/s/ Len C Mitchell, Jr

	 	 	Name:	 	Len C Mitchell, Jr

	 	 	Title:	 	Vice President

	

 	
 	

DUKE CAPITAL LLC
	

 	
 	

By:	
 	

/s/ Illegible

	 	 	Name:	 	 

	 	 	Title:	 	 

	

 	
 	

DUKE ENERGY MURRAY, LLC (to be known from and after the Effective Date as "KGEN MURRAY I AND II LLC")
	

 	
 	

By:	
 	

/s/ Lindsay A. Hall

	 	 	Name:	 	Lindsay A. Hall

	 	 	Title:	 	Vice President

7

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CONSENT AND AMENDMENT TO THE CONTRACT FOR THE PURCHASE OF FIRM CAPACITY AND ENERGY

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