Document:

Exhibit 10.10

 

REDACTED

 

 

EXECUTION VERSION

 

 

OPERATION AND MAINTENANCE AGREEMENT

 

dated as of August 5, 2004

 

by and between

 

KGEN MURRAY I and II LLC

as Owner

 

and

 

DUKE ENERGY MURRAY OPERATING, LLC

as Operator

 

for the

 

KGEN MURRAY I AND KGEN MURRAY II GENERATING FACILITIES

 

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  
	
  ARTICLE I
  DEFINITIONS

  	
  1

  
	
   

  	
  Section 1.1

  	
  Defined
  Terms

  	
  1

  
	
   

  	
  Section 1.2

  	
  Construction

  	
  8

  
	
   

  	
   

  	
   

  
	
  ARTICLE II
  RELATIONSHIP OF OWNER, OPERATOR AND SUBCONTRACTORS

  	
  9

  
	
   

  	
  Section 2.1

  	
  Status of
  Operator

  	
  9

  
	
   

  	
  Section 2.2

  	
  Subcontractors
  and Affiliates

  	
  9

  
	
   

  	
   

  	
   

  
	
  ARTICLE III
  OPERATOR RIGHTS AND RESPONSIBILITIES

  	
  9

  
	
   

  	
  Section 3.1

  	
  General

  	
  9

  
	
   

  	
  Section 3.2

  	
  Site
  Procedures

  	
  10

  
	
   

  	
  Section 3.3

  	
  Operation
  and Performance of Services

  	
  10

  
	
   

  	
  Section 3.4

  	
  Annual
  Management Plan

  	
  10

  
	
   

  	
  Section 3.5

  	
  Incentive
  Performance Standards

  	
  11

  
	
   

  	
  Section 3.6

  	
  Management/Meetings

  	
  11

  
	
   

  	
  Section 3.7

  	
  Maintenance
  and Technical Services

  	
  12

  
	
   

  	
  Section 3.8

  	
  Equipment,
  Spare Parts, Consumables, Tools and Materials

  	
  12

  
	
   

  	
  Section 3.9

  	
  Operator’s
  Personnel

  	
  13

  
	
   

  	
  Section 3.10

  	
  Reports by
  Operator

  	
  13

  
	
   

  	
  Section 3.11

  	
  Taxes and
  Employee Costs

  	
  14

  
	
   

  	
  Section 3.12

  	
  Environmental,
  Health and Safety Plan and Hazardous Materials Management

  	
  14

  
	
   

  	
  Section 3.13

  	
  Emergencies

  	
  15

  
	
   

  	
  Section 3.14

  	
  Notice of
  Non-Compliance With Laws and Governmental Requirements

  	
  15

  
	
   

  	
  Section 3.15

  	
  Permits,
  Reporting and Liens

  	
  15

  
	
   

  	
  Section 3.16

  	
  Owner’s
  Access

  	
  16

  
	
   

  	
  Section 3.17

  	
  Records

  	
  16

  
	
   

  	
  Section 3.18

  	
  Title to
  Goods, Documents and Data

  	
  16

  
	
   

  	
  Section 3.19

  	
  Duke
  Guaranty

  	
  16

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV
  OWNER RIGHTS AND RESPONSIBILITIES

  	
  17

  
	
   

  	
  Section 4.1

  	
  Management,
  Strategic Decisions and Owner Directions

  	
  17

  
	
   

  	
  Section 4.2

  	
  Owner’s
  Representatives and Review Committee

  	
  18

  
	
   

  	
  Section 4.3

  	
  Commodity
  Procurement, Scheduling and Trading

  	
  19

  
	
   

  	
  Section 4.4

  	
  Reports and
  Plans

  	
  19

  
	
   

  	
  Section 4.5

  	
  Taxes

  	
  19

  
	
   

  	
  Section 4.6

  	
  Accounting

  	
  19

  
	
   

  	
  Section 4.7

  	
  Permits and
  Reporting

  	
  19

  
	
   

  	
  Section 4.8

  	
  Amendments
  to PPA

  	
  19

  
	
   

  	
  Section 4.9

  	
  Owner
  Guaranty

  	
  20

  
					

 

i

 

	
  ARTICLE V
  PAYMENTS

  	
  20

  
	
   

  	
  Section 5.1

  	
  Payments for
  Services

  	
  20

  
	
   

  	
  Section 5.2

  	
  O&M
  Account

  	
  23

  
	
   

  	
  Section 5.3

  	
  O&M Cost
  Payment Procedure and Treatment of Purchase Orders

  	
  23

  
	
   

  	
  Section 5.4

  	
  Advance
  O&M Cost Estimate; Progress Report

  	
  23

  
	
   

  	
  Section 5.5

  	
  Final
  Billing

  	
  24

  
	
   

  	
  Section 5.6

  	
  Invoice or
  Payment Disputes or Errors

  	
  24

  
	
   

  	
  Section 5.7

  	
  Operator
  Incentive: Bonus

  	
  24

  
	
   

  	
  Section 5.8

  	
  Employee
  Incentive Plan

  	
  24

  
	
   

  	
  Section 5.9

  	
  Interest on
  Late Payments

  	
  24

  
	
   

  	
  Section 5.10

  	
  Audit

  	
  24

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI
  TERM OF AGREEMENT; TERMINATION

  	
  25

  
	
   

  	
  Section 6.1

  	
  Initial Term

  	
  25

  
	
   

  	
  Section 6.2

  	
  Termination
  Upon Insolvency

  	
  25

  
	
   

  	
  Section 6.3

  	
  Termination
  by Owner for Failure to Satisfy Performance Criteria

  	
  25

  
	
   

  	
  Section 6.4

  	
  Termination
  by Owner for Material Default; Right to Cure

  	
  26

  
	
   

  	
  Section 6.5

  	
  Termination
  by Operator for Convenience

  	
  26

  
	
   

  	
  Section 6.6

  	
  Termination
  by Operator for Material Default

  	
  26

  
	
   

  	
  Section 6.7

  	
  Rights and
  Obligations Upon Termination

  	
  26

  
	
   

  	
  Section 6.8

  	
  Transition
  Plan

  	
  28

  
	
   

  	
   

  	
   

  
	
  ARTICLE VII
  INDEMNITY AND LIMITATIONS ON LIABILITY

  	
  28

  
	
   

  	
  Section 7.1

  	
  General
  Indemnity

  	
  28

  
	
   

  	
  Section 7.2

  	
  Owner’s
  Property

  	
  28

  
	
   

  	
  Section 7.3

  	
  Third Party
  Claims

  	
  28

  
	
   

  	
  Section 7.4

  	
  Limitation
  of Liability

  	
  30

  
	
   

  	
  Section 7.5

  	
  Co-Owners

  	
  30

  
	
   

  	
   

  	
   

  
	
  ARTICLE VIII
  WARRANTIES

  	
  30

  
	
   

  	
  Section 8.1

  	
  Operator’s
  Warranty

  	
  30

  
	
   

  	
  Section 8.2

  	
  Third Party
  Warranties

  	
  30

  
	
   

  	
  Section 8.3

  	
  Warranties
  Limited

  	
  31

  
	
   

  	
   

  	
   

  
	
  ARTICLE IX
  REPRESENTATIONS

  	
  31

  
	
   

  	
  Section 9.1

  	
  Operator
  Representations

  	
  31

  
	
   

  	
  Section 9.2

  	
  Owner
  Representations

  	
  32

  
	
   

  	
   

  	
   

  
	
  ARTICLE X
  FORCE MAJEURE

  	
  33

  
	
   

  	
  Section 10.1

  	
  Definition
  of Force Majeure Event

  	
  33

  
	
   

  	
  Section 10.2

  	
  No Breach or
  Liability

  	
  33

  
	
   

  	
  Section 10.3

  	
  Mitigation

  	
  34

  
	
   

  	
  Section 10.4

  	
  Suspension
  of Performance

  	
  34

  
	
   

  	
  Section 10.5

  	
  Extended
  Force Majeure Events

  	
  34

  

 

ii

 

	
  ARTICLE XI
  INSURANCE

  	
  34

  
	
   

  	
  Section 11.1

  	
  Insurance to
  be Provided by Operator

  	
  34

  
	
   

  	
  Section 11.2

  	
  Insurance to
  be Provided by Owner

  	
  35

  
	
   

  	
  Section 11.3

  	
  Evidence of
  Insurance

  	
  36

  
	
   

  	
  Section 11.4

  	
  Subcontractors’
  Insurance

  	
  36

  
	
   

  	
  Section 11.5

  	
  Right to
  Insure

  	
  36

  
	
   

  	
   

  	
   

  
	
  ARTICLE XII
  CONFIDENTIALITY

  	
  36

  
	
   

  	
  Section 12.1

  	
  Confidential
  Information

  	
  36

  
	
   

  	
  Section 12.2

  	
  Agreement
  Confidential

  	
  37

  
	
   

  	
   

  	
   

  
	
  ARTICLE XIII
  MISCELLANEOUS

  	
  37

  
	
   

  	
  Section 13.1

  	
  Entire
  Agreement

  	
  37

  
	
   

  	
  Section 13.2

  	
  Amendments

  	
  37

  
	
   

  	
  Section 13.3

  	
  Captions

  	
  37

  
	
   

  	
  Section 13.4

  	
  Notices

  	
  38

  
	
   

  	
  Section 13.5

  	
  Severability

  	
  39

  
	
   

  	
  Section 13.6

  	
  Assignment

  	
  39

  
	
   

  	
  Section 13.7

  	
  No Waiver

  	
  39

  
	
   

  	
  Section 13.8

  	
  Applicable
  Law

  	
  39

  
	
   

  	
  Section 13.9

  	
  Exhibits

  	
  40

  
	
   

  	
  Section
  13.10

  	
  No
  Partnership Created

  	
  40

  
	
   

  	
  Section
  13.11

  	
  Consequential
  Damages

  	
  40

  
	
   

  	
  Section
  13.12

  	
  Limitations
  Application

  	
  40

  
	
   

  	
  Section
  13.13

  	
  Accommodation
  of Owner’s Financing

  	
  40

  
	
   

  	
  Section
  13.14

  	
  Survival

  	
  40

  
	
   

  	
  Section 13.15

  	
  Dispute
  Resolution

  	
  41

  

 

iii

 

EXHIBIT LIST

 

	
  Exhibit A

  	
   

  	
  Material
  Project Agreements

  
	
   

  	
   

  	
   

  
	
  Exhibit B

  	
   

  	
  Organizational
  Chart

  
	
   

  	
   

  	
   

  
	
  Exhibit C

  	
   

  	
  Site
  Description

  
	
   

  	
   

  	
   

  
	
  Exhibit D

  	
   

  	
  Form of Duke
  Guaranty

  
	
   

  	
   

  	
   

  
	
  Exhibit E

  	
   

  	
  Form of
  Owner Guaranty

  
	
   

  	
   

  	
   

  
	
  Exhibit F

  	
   

  	
  Incentive
  Performance Standards

  
	
   

  	
   

  	
   

  
	
  Exhibit G

  	
   

  	
  Operator
  Permits

  
	
   

  	
   

  	
   

  
	
  Exhibit H

  	
   

  	
  Owner
  Permits

  
	
   

  	
   

  	
   

  
	
  Exhibit I

  	
   

  	
  Form of
  Monthly Management Report

  
	
   

  	
   

  	
   

  
	
  Exhibit J

  	
   

  	
  Transition
  Plan

  

 

iv

 

OPERATION AND MAINTENANCE AGREEMENT

 

THIS OPERATION
AND MAINTENANCE AGREEMENT dated and effective as of August 5, 2004, is by and
between KGEN MURRAY I and II LLC, a Delaware limited liability company, and its
successors and permitted assigns (“Owner”),
having its principal office at 1330 Post Oak Boulevard, Houston, Texas 77056,
and DUKE ENERGY MURRAY OPERATING, LLC, a Delaware limited liability company,
and its successors and assigns (“Operator”),
having a place of business at 5400 Westheimer Court, Houston, Texas 77056.

 

W I T N E S S E T H:

 

WHEREAS,
Owner owns the Facility (as hereinafter defined) located in Murray County,
Georgia;

 

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

 

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

 

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

 

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

 

ARTICLE I

DEFINITIONS

 

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

 

“Advance O&M Cost Estimate” shall have
the meaning set forth in Section 5.4.

 

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

 

 

“Affiliate Work Force” shall mean employees
of Operator’s Affiliates who shall perform Services and are not employed
on-Site at the Facility, other than Duke Power Support Personnel, contractors
or temporary employees used by operator to perform the Services.

 

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

 

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

 

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

 

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

 

“Availability Notice Period” shall have the
meaning set forth in Section 6.3.

 

“Availability Percentage” shall have the
meaning set forth in the PPA.

 

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

 

“Bonus” shall have the meaning set forth in
Section 5.7.

 

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

 

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

 

“Capability Notice Period” shall have the
meaning set forth in Section 6.3.

 

“Commencement Date” shall mean the “Closing
Date” as defined in the PSA.

 

“Consumables” shall mean all items consumed
or needing regular periodic replacement during the operation and maintenance of
the Facility, including water treatment chemicals, small

 

2

 

 tools, lubricants, rags, oils, filter media,
additives, anti-corrosion devices, gases (CO2 , O2 , H2 , Halon, etc.) and
other expendable materials, but not spare parts or fuel.

 

“Contract Manager” shall mean an individual
designated by Operator pursuant to Section 3.9 hereof to manage Operator’s
interests with respect to this Agreement and to act as a liaison with Owner.

 

“Duke Capital” shall mean Duke Capital, LLC,
a limited liability company organized and existing under the laws of the State
of Delaware together with its successors and assigns.

 

“Duke Power” shall mean Duke Power, a
division of Duke Energy Corporation, a North Carolina corporation.

 

“Duke Power Support Personnel” shall mean
employees of Duke Energy Corporation working for Duke Power who shall perform
Services and are not employed on-Site at the Facility.

 

“Employee Incentive Plan” shall mean a plan,
if any, developed by Operator for an Operation Year in accordance with
Section 5.8 pursuant to which the Operator shall provide payments to the
Facility Work Force based on the accomplishment of specific performance
measures.

 

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

 

“Extended Force Majeure Event” shall have
the meaning set forth in Section 10.5.

 

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

 

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

 

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

 

3

 

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

 

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

 

“Force Majeure Remedy Plan” shall have the
meaning set forth in Section 10.5.

 

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

 

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

 

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

 

“GPC” shall mean Georgia Power Company, a
corporation organized and existing under the laws of the State of Georgia.

 

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

 

4

 

“Incentive Performance Standards” shall mean
the performance standards set forth on Exhibit F hereto, as such standards
may be revised and updated from time to time as provided in Section 3.5.

 

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

 

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

 

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

 

“Interconnection Agreements” shall mean (a)
the Interconnection Agreement dated as of April 23, 2001 by and between Owner
and GPC, (b) the Interconnection Agreement dated as of March 28, 2002 by and
between Owner and Board of Water, Light and Sinking Fund Commissioners of the
City of Dalton and (c) any other interconnection agreement entered into from
time to time with respect to the Facility, in each case, as amended from time
to time.

 

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

 

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

 

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

 

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

 

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

 

“Minimum Performance Criteria” shall mean
(a) an Availability Percentage for the Facility of at least sixty percent (60%)
for any 12 consecutive months during which 800 or more MWh are scheduled and
(b) a demonstrated capability for the Facility (determined pursuant to a
Performance Test (as defined in the PPA) at any time) of at least two hundred
and eighty (280) MW.

 

5

 

“Monthly Management Report” shall mean the
report delivered pursuant to Section 3.10(b) in the form of
Exhibit I, as such form may be modified by the parties hereto from time to
time.

 

“Murray I Facility” shall mean that certain
nominal 620 MW, natural gas-fired, combined cycle facility located
approximately 30 miles southeast of Chattanooga, Tennessee that interconnects
with Georgia Power Company’s Conasauga substation.

 

“Murray II Facility” shall mean that certain
nominal 620 MW, natural gas-fired, combined cycle facility located
approximately 30 miles southeast of Chattanooga, Tennessee that interconnects
with Dalton Utilities’ Loopers Farm substation.

 

“Murray Title V Permit” shall mean that
certain Part 70 Operating Permit No. 4911-213-0034-V-03-0 issued by the Georgia
Department of Natural Resources on May 28, 2004.

 

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

 

“O&M Account”  shall mean the “Murray O&M Account” as defined in the
Reimbursement Documents.

 

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

 

“Operating Committee” shall have the meaning
set forth in the PPA.

 

“Operating Representative” shall have the
meaning set forth in the PPA.

 

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

 

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

 

“Owner Permits” shall mean the
authorizations, consents, exemptions, decrees, licenses, permits, certificates,
requirements, orders and approvals identified on Exhibit H and all other
authorizations, consents, exemptions, decrees, licenses, permits, certificates,
requirements, orders and approvals (other than the Operator Permits) now or
hereafter required to be obtained and 

 

6

 

maintained
under applicable Law and Governmental Requirements in connection with the
ownership and operation of the Facility.

 

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

 

“Plant Manager” shall mean an individual
designated by Operator and approved by Owner pursuant to Section 3.9
hereof, who shall supervise the day-to-day performance of the Services at the
Facility on behalf of Operator.

 

“PPA” shall mean the Contract for the
Purchase of Firm Capacity and Energy dated as of June 3, 2002 between GPC
and Owner (as assignee of Duke Energy Marketing America, LLC, a Delaware
limited liability company), as amended from time to time in accordance with the
terms of the Reimbursement Agreement.

 

“Project Company Permitted Liens” shall have
the meaning set forth in the Reimbursement Documents.

 

“Prudent Industry Practices” shall have the
meaning set forth in the PPA.

 

“PSA” shall mean the Purchase and Sale
Agreement dated May 3, 2004 by and among Duke Energy North America, LLC,
Duke Energy Capital of Texas, Inc. and KGen Partners LLC, as amended from time
to time.

 

“Reimbursement Agreement” shall mean the
Reimbursement Agreement dated as of the date hereof between Owner and certain
of its Affiliates and Duke Capital, as amended from time to time.

 

“Reimbursement Agreement Default” shall mean
a “Default” as defined in the Reimbursement Agreement.

 

“Reimbursement Documents” shall have the
meaning set forth in the Reimbursement Agreement.

 

“Retained Obligations” shall have the meaning
set forth in the Reimbursement Agreement.

 

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

 

“Routine Maintenance” shall mean
maintenance, excluding Scheduled and Unscheduled Maintenance, of a regular or
minor nature that reasonably should be performed periodically to keep the
Facility in working order including lubrication, repacking of valves, minor
leak repair, adjustments, preventive maintenance, calibrations, replacement of
Consumables and similar services, outage repairs and general housekeeping.

 

7

 

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

 

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

 

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

 

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

 

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

 

Section 1.2             Construction.

 

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

 

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

 

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

 

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

 

(e)           Each party hereto acknowledges that
it and its attorneys have been given an equal opportunity to negotiate the
terms and conditions of this Agreement and that any rule of 

 

8

 

construction
to the effect that ambiguities are to be resolved against the drafting party or
any similar rule operating against the drafter of an agreement shall not be
applicable to the construction or interpretation of this Agreement.

 

ARTICLE II

RELATIONSHIP OF OWNER, OPERATOR AND SUBCONTRACTORS

 

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

 

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

 

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

 

ARTICLE III

OPERATOR RIGHTS AND RESPONSIBILITIES

 

Section 3.1             General.

 

(a)           During the term of this Agreement,
Operator shall manage and provide all services necessary for the operation and
maintenance of the Facility in accordance with the provisions of this
Agreement, including the standards set forth in Section 3.3 (collectively, the “Services”). In performance of the Services,
Operator will follow the reasonable requests of Owner not otherwise prohibited
by Section 4.1(b).

 

(b)           Notwithstanding anything in this
Agreement to the contrary, Operator shall not be required to comply with any
request or requirement of Owner prohibited by Section 4.1(b). Notwithstanding
anything in this Agreement to the contrary:

 

(i)            Operator’s failure
to comply in any respect with any request or requirement of Owner prohibited by
Section 4.1(b) shall not be deemed to be a breach of this Agreement by
Operator,

 

9

 

(ii)           Operator shall not
be liable under this Agreement or otherwise for any failure to comply in any
respect with any request or requirement of Owner prohibited by Section 4.1(b),
and

 

(iii)          Owner shall
compensate Operator for any and all reasonable costs resulting from Operator’s
compliance or failure to comply in any respect with any request of Owner
prohibited by Section 4.1(b) to the extent that Operator is not otherwise
compensated for such costs under this Agreement, and such costs shall not be
included for purposes of determining, pursuant to Section 3.4, 5.1(b),
5.1(c) or 5.1(d) whether expenditures are more than 10% in excess of the
aggregate amount of the Budget or the relevant Major Line Item, if applicable.

 

(c)           Operator shall promptly notify Owner
if it becomes aware of a request or direction by Owner to Operator that
violates Section 4.1(b).

 

Section 3.2             Site Procedures. Operator
shall provide Owner with copies of any and all site procedures established by
Operator in connection with performing the Services at the Facility, and shall
promptly notify Owner of any amendment or modification to such site procedures.
Any such site procedures shall (a) be in compliance with all Governmental
Requirements and Laws; (b) be in accordance with Prudent Industry Practices;
and (c) otherwise be consistent with the terms of this Agreement. Any such site
procedures provided by Operator to Owner are hereby designated by Operator as
confidential information and shall be delivered to Owner subject to the
restrictions set forth in Section 12.1.

 

Section 3.3             Operation and Performance of
Services. Operator shall perform the Services in accordance in all material
respects with this Agreement and the applicable provisions of the PPA, the
Annual Management Plan (other than variances in items contained therein
(including the Budget) to the extent permitted by this Agreement), Prudent
Industry Practices, Laws and Governmental Requirements, and in accordance with
those provisions in the Material Project Agreements relating to the operation
and maintenance of the Facility.

 

Section 3.4             Annual Management Plan.

 

(a)           On or before the Commencement Date,
Operator shall develop and deliver to Owner the Annual Management Plan (the “Annual Management Plan”) for the initial
Operation Year in a form reasonably acceptable to Owner (except to the extent
that such acceptance is conditioned upon or would result in or require
modifications to the Annual Management Plan that are inconsistent with Prudent
Industry Practice, Laws and Governmental Requirements, or the terms of the
applicable provisions of the PPA). The Annual Management Plan shall set forth
the Operator’s operations and maintenance and management plan for the Facility,
including Operator’s (i) annual goals and objectives in respect of operations,
maintenance and management of the Facility, (ii) major maintenance schedule for
the 24-month period after the beginning of the Operation Year, (iii) capital
investment plan, (iv) technical support plan, (v) environmental, health and
safety operating plan, (vi) if requested by Owner, supplies and materials
inventory recommendations and (vii) Budget.

 

10

 

(b)           No later than one hundred twenty
(120) days before the beginning of each successive Operation Year, Operator
shall submit to Owner a proposed Annual Management Plan for the Operating Year
succeeding the then-current Operating Year. Within forty-five (45) days after
Owner receives such proposed Annual Management Plan, Owner shall advise
Operator of any required changes to such Annual Management Plan as Owner may
deem necessary (except to the extent that such changes are inconsistent with
the PPA, Prudent Industry Practice, Laws or Governmental Requirements). Not
more than ten (10) days following Operator’s receipt of Owner’s comments on
such proposed Annual Management Plan, Owner and Operator shall meet to discuss
the terms of such Annual Management Plan and Owner’s requested changes thereto.
Owner and Operator shall use reasonable efforts to reach agreement thereon at
least sixty (60) days prior to the beginning of such Operation Year. If such
revised Annual Management Plan is not timely approved, Operator shall continue
to operate in accordance with the Annual Management Plan then currently in use
(provided the Budget contained therein shall be adjusted pursuant to the
Inflation Index and any Budget overrun proposals previously approved or deemed
approved by Owner with respect to such Budget) and the approval of such proposed
Annual Management Plan shall be subject to dispute resolution pursuant to
Section 13.15 of this Agreement.

 

(c)           In the event Operator determines that
(i) the finalized Budget for any Operation Year or (ii) any Major Line Item in
such Budget, likely will be exceeded by more than 10%, Operator promptly shall
give Owner notice of such fact and Operator shall promptly develop and deliver
to Owner a Budget overrun proposal for the remainder of such Operation Year. Such
Budget overrun proposal shall be prepared in the same form as the Budget and
shall be subject to Owner’s approval; provided, however, such
Budget overrun proposal shall be deemed approved to the extent such Budget
overruns are due to operating schedules in excess of the schedules contemplated
in the current Budget and requested by Owner subsequent to the approval of the
current Budget, and amounts incurred by Operator pursuant to Sections
3.1(b)(iii), 3.7(b), 3.13, 3.15, 5.1(b)(xi) and (xii), 5.10 and 11.5 shall not
be included in any such 10% calculation.

 

Section 3.5             Incentive Performance Standards.
As of the date of this Agreement, Operator and Owner have agreed upon the
Incentive Performance Standards set forth in Exhibit F. Operator or Owner may
suggest proposed changes to the Incentive Performance Standards not later than
(i) in the case of Owner, one hundred-eighty (180) days prior to the end of
each Operation Year, and (ii) in the case of Operator, ninety (90) days prior
to the end of each Operation Year. Within forty-five (45) days after receipt,
the party receiving any such proposed changes shall advise the proposing party
of any objections thereto. Not more than ten (10) days following delivery of
any objections, Owner and Operator shall meet to discuss the proposed changes
to the Incentive Performance Standards and the objections thereto. Owner and
Operator shall use reasonable efforts to reach agreement thereon at least
thirty (30) days prior to the end of the current Operation Year. If Operator
and Owner are unable to agree on revised Incentive Performance Standards,
either party may submit the matter to dispute resolution pursuant to Section
13.15 of this Agreement.

 

Section 3.6             Management/Meetings. Pursuant
to Section 3.4, Operator shall develop management systems, policies, procedures
and programs as set forth in the Annual Management Plan to manage the technical
and business operations of the Facility, which management systems 

 

11

 

shall be
developed in conjunction with Owner’s management system. At Owner’s invitation,
or, in Operator’s sole discretion, as necessary for the daily operations of the
Facility (with prompt notice by Operator to Owner), Operator shall attend and
participate in any meetings and committees regarding the management, operations
and maintenance of the Facility, including (a) the Review Committee as
provided in Section 4.2(b), (b) meetings of the Operating Committee, and (c)
meetings with GPC, federal, state, county, or local government entities
(including in respect of environmental, health and safety issues), and major
suppliers and customers.

 

Section 3.7             Maintenance and Technical
Services.

 

(a)           Operator shall provide and perform
all Maintenance for the Facility in accordance with Section 3.3, including
planning, outage management, technical supervision, maintenance of computer
systems and programs at the Facility, labor, tooling and equipment, and
inspection reports and recommendations for Maintenance. In the event Owner
enters into any long term service agreement for any maintenance services for
the Facility, Operator shall manage, monitor and oversee such agreement and the
services provided thereunder as agent for Owner.

 

(b)           In the event Operator determines any
material Unscheduled Maintenance is advisable or necessary (other than in
connection with an event described in Section 3.13), (i) Operator shall
immediately inform Owner of the need, extent and approximate cost of such
Unscheduled Maintenance by contacting the Asset Manager, or in the absence of
the Asset Manager, his designee, by phone or in person, (ii) Operator shall, at
Owner’s expense, follow any direction provided by Owner as a result of such
contact (to the extent consistent with the PPA, Prudent Industry Practice,
Laws, Governmental Requirements and this Agreement) and (iii) in the event
Operator, after reasonably diligent efforts (including that provided for in
subsection (i) of this sentence), is unable to reach and receive direction from
Owner for a 12 hour period, Operator shall, at Owner’s expense, perform
Unscheduled Maintenance in a manner consistent with Section 3.3. The cost
of any Unscheduled Maintenance performed in accordance with the preceding
sentence shall be reimbursed or paid by Owner pursuant to Article V and shall
not be included for purposes of determining, pursuant to Sections 3.4, 5.1(b),
5.1(c) or 5.1(d), whether expenditures are more than 10% in excess of the
aggregate amount of the Budget or the relevant Major Line Item, if applicable.

 

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

 

Section 3.8             Equipment, Spare Parts,
Consumables, Tools and Materials.

 

(a)           Pursuant to Section 3.4, Operator
shall provide to Owner as set forth in the Annual Management Plan detailed
recommendations for inventory of Equipment, Consumables, spare parts, tools and
any other supplies and materials necessary to perform the Services and operate
the Facility.

 

12

 

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

 

Section 3.9             Operator’s Personnel.

 

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

 

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

 

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

 

(d)           From and after the Commencement Date,
Operator shall provide and employ in connection with the performance of
Services under this Agreement:  (i)
professional and technically competent management personnel for the execution
of the Services; and (ii) other qualified, skilled and experienced labor, in
each case as necessary for the proper and timely execution of the Services. Operator
may provide certain professional or technical support services using off-Site
employees and consultants. Operator shall comply with all Laws and Governmental
Requirements regarding licensing of personnel performing the Services at the
Facility.

 

Section 3.10           Reports by Operator. Operator
shall provide the following reports to Owner in a form and content as
reasonably requested by Owner:

 

13

 

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

 

(b)           Monthly Management
Reports;

 

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

 

(d)           Such other reports
reasonably requested by Owner; provided, that the requested form and
content of any such additional reports shall not exceed the capabilities of the
information technology systems contemporaneously in use by Operator at the
Facility.

 

Section 3.11           Taxes and Employee Costs. Operator
shall be responsible for the payment of actual wages and salaries of the
Facility Work Force for the performance of the Services, including
compensation, payroll taxes, benefits, insurance and other terms and conditions
of employment and shall be reimbursed by Owner therefor pursuant to Article V. The
benefits and insurance provided for the Facility Work Force shall be
commensurate with the benefits of other employees of Operator and its
Affiliates. Owner shall have no obligation for any income tax incurred by
Operator on its net income.

 

Section 3.12           Environmental, Health and Safety
Plan and Hazardous Materials Management.

 

(a)           Pursuant to Section 3.4, Operator
shall provide a comprehensive environmental, health and safety operating plan
for the Facility as set forth in the Annual Management Plan and designate a
representative for the purpose of managing such plan. In connection with
complying in all material respects with the Murray Title V Permit, Operator
shall at all times, including start-up, shut down and malfunction, operate the
Facility in a manner that is in accordance with (i) the use of best operational
practices to minimize emissions, (ii) the operation of all associated air
pollution equipment in a manner consistent with good air pollution control
practice for minimizing emissions and (iii) operation of the Facility in a
manner to ensure that the duration of excess emissions is minimized.

 

(b)           Operator shall be responsible for the
on-Site management of, and shall act as Owner’s agent with respect to the
off-Site transportation, treatment, storage and disposal of, all Hazardous
Materials generated or brought onto the Site in connection with the provision
of the Services, all in compliance in all material respects with applicable
Laws. In addition, Operator shall use reasonable efforts to not allow any
Hazardous Materials to adversely affect, in any material manner, the operation
of the Facility or threaten, in any material manner, the health or safety of
any person. Operator shall promptly notify Owner should any Hazardous Materials
problem arise and shall work to remedy such situation. Operator shall not give
notice to any Governmental Authority relating to any release of Hazardous
Materials without Owner’s consent; except with respect to any notice required
to be made by Governmental Requirements 

 

14

 

or Laws, and
in any such event, Operator shall, where possible, provide Owner with advance
notice of any such notice required to be made by Operator. Owner shall indemnify
and hold harmless Operator, its Affiliates, officers and directors from and
against any and all liability arising in connection with Hazardous Materials
existing on the Site at the commencement of this Agreement. Operator shall
notify Owner promptly upon its discovery of the actual or suspected presence of
any such Hazardous Materials.

 

Section 3.13           Emergencies. In the event of
any event or emergency involving the Facility and materially endangering
personnel or property, Operator shall, at Owner’s expense, take such action as
is necessary and reasonable to prevent, avoid, or mitigate injury, damage or
loss and shall, as soon as practicable, contact the Asset Manager after any
such material incident and provide a written report to Owner of any such material
incident and Operator’s response within 48 hours. Whenever, in the opinion of
Owner, Operator has not taken sufficient precautions for the safety of the
public or persons at the Facility or the protection of the Facility or the
structures or property on or adjacent to the Facility, creating in the opinion
of Owner an emergency or material event or probability of an emergency or
material event requiring immediate action, then Owner may direct Operator to
take such corrective action as Owner deems appropriate, and Operator shall
promptly execute, at Owner’s expense, such corrective measures as directed by
Owner. Any costs incurred by Operator in handling any such event or emergency
shall be reimbursed or paid by Owner pursuant to Article V and shall not be included
in the amount spent for purposes of determining, pursuant to Sections 3.4,
5.1(b), 5.1(c) or 5.1(d), whether expenditures are more than 10% in excess of
the aggregate amount of the Budget or the relevant Major Line Item, if
applicable.

 

Section 3.14           Notice of Non-Compliance With Laws
and Governmental Requirements. Operator shall promptly notify Owner of any
known non-compliance or potential non-compliance with any Governmental
Requirements or Laws.

 

Section 3.15           Permits, Reporting and Liens.

 

(a)           Operator shall be responsible for
obtaining, renewing and maintaining all Operator Permits. Upon Owner’s
reasonable request, Operator shall (i) participate in obtaining and maintaining
the Owner Permits, (ii) participate in meetings with Governmental Authorities
regarding regulatory or compliance matters affecting the Facility, and (iii)
cooperate and assist in preparing ordinary course notices, reports and
communications required under any Governmental Requirement, Law or any power,
sale, tolling, fuel supply, water supply, regional transmission operator,
independent system operator, transmission services or other agreement relating
to the Facility. Operator may elect, in its sole discretion and without
creating any obligation on the part of Operator, to perform any of (i), (ii) or
(iii) above if Owner fails to perform such obligations or as necessary for the
daily operations of the Facility (with prompt notice to Owner); provided,
however, Owner shall be the party responsible for such matters as
provided in Section 4.7. Any costs incurred by Operator in handling such
matters shall be reimbursed or paid by Owner pursuant to Article V and shall
not be included in the amount spent for purposes of determining, pursuant to
Sections 3.4, 5.1(b), 5.1(c) or 5.1(d), whether expenditures are more than 10%
in excess of the aggregate amount of the Budget or the relevant Major Line
Item, if applicable. Operator shall provide prompt notice to Owner of any known

 

15

 

(A) investigation
or inquiry by any Governmental Authority, and (B) request by any Governmental
Authority for non-ordinary course notices, reports or communications.

 

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

 

Section 3.16           Owner’s Access. Subject to
Article 12, upon reasonable notice Operator shall provide Owner or its
representatives with unrestricted access to the Site and Operator’s records
concerning the Facility and this Agreement subject to Owner’s observance of
safety measures reasonably deemed by Operator to be necessary or appropriate; provided,
however, that (a) Operator shall have no obligation to provide
confidential records regarding the Facility Work Force, Affiliate Work Force or
Duke Power Support Personnel, including human resource files, personnel
records, or Operator’s internal financial records, (b) such access shall not
unreasonably interfere with the operation of the Facility and (c) such access
shall not violate any Governmental Requirement or Law. Operator shall also
afford Site access to others as may be necessary or appropriate to the
servicing, maintaining, modifying or upgrading of the land or facilities
located thereon or as otherwise directed by Owner, subject to such Person’s
observance of safety measures reasonably deemed by Operator to be necessary or
appropriate.

 

Section 3.17           Records. Operator shall
maintain in good order in all material respects all books, records and accounts
with respect to the Services (including all records of Facility operation costs
other than Operator’s internal financial records), required pursuant to any
Governmental Requirements or Laws or, to the extent known by Operator, required
pursuant to any agreement relating to the Facility, and shall retain such
records during the term of this Agreement. Upon expiration or earlier
termination of this Agreement, Operator shall deliver to Owner all records
referred to in this Section 3.17.

 

Section 3.18           Title to Goods, Documents and Data.
Owner shall have full title and all rights in and to any goods and other
property paid for directly or indirectly by Owner immediately when such amounts
are paid and all reports and other documents provided by or on behalf of
Operator to Owner as part of the Services. Owner agrees that all programs,
procedures, inventions, processes and other intellectual property developed by
Operator, including for use on or at the Facility, shall remain the property of
Operator. Owner shall be granted, during the term of this Agreement and solely
as may be necessary for the provision of the Services hereunder, a non-transferable,
non-exclusive limited license to the use of such intellectual property of
Operator used on or at the Facility.

 

Section 3.19           Duke Guaranty. On the
Commencement Date and for the term of this Agreement, Operator shall provide
and cause to be maintained a guaranty by Duke Capital of the obligations of
Operator under this Agreement in the form attached as Exhibit D.

 

16

 

ARTICLE IV

OWNER RIGHTS AND RESPONSIBILITIES

 

Section 4.1             Management, Strategic Decisions
and Owner Directions.

 

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

 

(i)            Provide direction
necessary to allow Operator to comply with the provisions of the PPA and all
other contractual obligations of Owner;

 

(ii)           Provide information
reasonably requested by Operator to facilitate Operator’s development of a
management system, policies, procedures and programs to manage the technical
and business operations of the Facility or performance of the Services,
including estimated run hours, starts, duration of run hours and other Owner
operating criteria (such estimated operating information as it relates to the
Annual Management Plan to be delivered not later than 90 days prior to the
required delivery date of each Annual Management Plan under Section 3.4 as such
information may be supplemented by mutual agreement of the parties);

 

(iii)          Participate in the
Review Committee with Operator;

 

(iv)          Select in its sole
discretion an individual to act as the Operating Representative appointed by
Owner to the Operating Committee under the PPA; provided that Owner
shall invite a representative of Operator to attend meetings of the Operating
Committee;

 

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

 

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

 

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

 

(i)            conflicts with a
provision of this Agreement,

 

(ii)           conflicts with a
provision of the PPA,

 

17

 

(iii)          is reasonably
likely to result in a greater likelihood of drawings or increased exposure
under the Retained Obligations,

 

(iv)          impairs Operator’s
ability to perform its Services or otherwise comply with this Agreement,

 

(v)           is inconsistent with
Prudent Industry Practices, Laws or Governmental Requirements, or

 

(vi)          materially adversely
affects the health or safety of any person.

 

In the event
that Owner requests that Operator act in a manner that is inconsistent with
paragraphs (i) and (iv) above (other than actions that are inconsistent with
(iii), (v) and (vi) above) because Owner is required to take such action
pursuant to the PPA, Owner agrees to take instructions from Operator to dispute
such required action pursuant to the PPA or otherwise take commercially
reasonable efforts to resolve such inconsistency.

 

Section 4.2             Owner’s Representatives and
Review Committee.

 

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

 

(b)           Review Committee. Operator and
Owner will establish an oversight committee (the “Review Committee”) for the purpose of coordinating major
operations at the Facility, including (i) interaction with and major
operational decisions that relate to GPC, Governmental Authorities, and major
suppliers and customers, (ii) planning major maintenance events,
(iii) positions to be taken at Operating Committee meetings, and (iv)
other significant operational matters deemed appropriate by Owner and Operator;
provided, however, that there shall at all times be an equal
number of representatives serving on the Review Committee that have been
appointed by Owner and Operator, respectively. Operator and Owner shall appoint
to the Review Committee the Asset Manager, Contract Manager and Plant Manager
and such other individuals mutually agreed upon by Owner and Operator. Owner
and Operator, as the case may be, shall provide written notice of such
appointments to the other party. Such appointments may be changed at any time
by similar written notice. The members of the Review Committee shall meet as
necessary, but not less often than two times per year, at a mutually agreeable
time and place upon reasonable prior written notice to all members, provided
that one such meeting per year shall be held at the Facility. Each party shall
cooperate in providing the Review Committee 

 

18

 

with all
information reasonably requested by the members of the Review Committee, as a
group, for the performance of their duties. If the members of the Review
Committee are unable to agree on any matter falling under their jurisdiction,
such matter shall be submitted to senior officers of Owner and Operator for
discussion and resolution. All recommendations, decisions and agreements made
by the Review Committee shall be evidenced in writing; provided, however,
that the Review Committee shall not have the authority to modify or amend the
terms of this Agreement.

 

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

 

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

 

Section 4.5             Taxes. Owner shall pay any
duty or tax as may arise out of or relate to the operation of the Facility,
except for duties or taxes for which Operator is responsible under
Section 3.11 or which arise out of or relate to Operator’s net income. All
payments to Operator shall be without reduction for any duties or taxes. If
Owner is exempt from the payment of any applicable sales and or use taxes or
has a direct payment permit with respect to such taxes, Owner shall provide
Operator with a copy of the certificate or permit, duly executed and issued by
the appropriate Governmental Authority. Owner shall indemnify Operator from and
against any taxes (and any interest or penalties related thereto) that are the
responsibility of Owner under this Agreement, provided that such
indemnification obligation shall not arise with respect to taxes for which
Operator has the responsibility of making payment under Section 3.11.

 

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

 

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

 

Section 4.8             Amendments to PPA. Owner shall
notify Operator as soon as practicable of any amendments to the definitions of
any terms in the PPA incorporated by reference in this 

 

19

 

Agreement. Owner
shall provide Operator as soon as practicable with copies of any amendments or
modifications to the PPA executed by Owner and GPC from time to time.

 

Section 4.9             Owner Guaranty. On the
Commencement Date and for the term of this Agreement, Owner shall provide and
cause to be maintained a guaranty by KGen Partners LLC, a Delaware limited
liability company, and each of the Companies (as such term is defined in the
PSA) except the Owner, of all payment and performance obligations of Owner
under this Agreement in the form attached as Exhibit E.

 

ARTICLE V

PAYMENTS

 

Section 5.1             Payments for Services.

 

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

 

(b)           O&M Costs. Owner shall pay
directly pursuant to Section 5.3, or reimburse Operator (on a monthly basis) to
the extent Operator in its sole discretion elects to pay any such costs
directly, for the below-enumerated costs to the extent actually incurred by
Operator pursuant to this Agreement (such costs being the “O&M Costs”); provided that Owner
shall not have any obligation to pay or reimburse any such amount with respect
to any Operation Year to the extent such amount, when taken together with other
amounts not approved by Owner hereunder, is more than ***** in excess (in the
aggregate for any Operation Year) of the aggregate amount of the Budget or the
relevant Major Line Item, if applicable (other than additional amounts approved
by Owner in a Budget overrun proposal or amounts otherwise specifically
excluded from this calculation under this Agreement, including those in Section
5.1(e)):

 

(i)            Facility Work
Force Wages and Salaries:  The actual
wages, salaries and employee incentives determined in accordance with
Section 5.8 for such time as is devoted to the Services at a rate equal to
1.5 times such actual wages, salaries and employee incentives (including paid
time off) performed by the Facility Work Force and the Affiliate Work Force;

 

(ii)           Duke Power
Support Personnel, Contractors or Temporary Employees. The actual cost to
Operator of any Duke Power Support Personnel, contractors or temporary
employees used by Operator to perform the Services;

 

(iii)          Transportation,
Travel and Relocation Expense. The cost of transportation, travel and
relocation expense of the Facility Work Force in accordance with Operator’s
established policies, which policies shall be approved by Owner (provided
that the costs of relocation expense shall not exceed $10,000 per employee for 

 

 

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

 

20

 

non-exempt and
craft employees below the level of manager without the prior approval of
Owner);

 

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

 

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

 

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

 

(vii)         Materials and
Equipment. The actual cost of Equipment, Consumables, materials, supplies,
spare parts, tools and miscellaneous supplies procured for the Facility;

 

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

 

(ix)           Subcontracts.
The actual cost of subcontracts to perform the Services;

 

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

 

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

 

(xii)          Claims and
Judgments. The actual cost of attorneys’ fees, costs, settlements, and/or
judgments incurred in connection with any litigation, claims or disputes
(except for such matters solely between Owner and Operator) arising out of or
in connection with the performance of this Agreement, (including the
performance of the Services on real property of or to which Owner does not have
sole right, title and possession), except (A) those expenses, fines and
penalties resulting from Operator’s negligent acts or omissions or its
operation of the Facility or performance of the Services in a manner in
violation of this Agreement or any Law or Governmental Requirement in 

 

21

 

each case in
an amount not to exceed (when added with the amount of all other damages
subject to Section 7.4) the limitation of liability set forth in Section 7.4,
(B) those expenses, fines and penalties resulting from Operator’s gross
negligence or willful misconduct (done with an intent to harm) and (C) fees,
costs, settlements, and/or judgments for which Operator is reimbursed by
proceeds of insurance provided pursuant to Section 11.1 of this Agreement. Costs
enumerated in this Section 5.1(b)(xii) shall be reimbursed or paid by Owner
pursuant to this Article V and shall not be included for purposes of
determining whether expenditures are more than ***** in excess of the aggregate
amount of the Budget or the relevant Major Line Item, if applicable;

 

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

 

(xiv)        Other. All
other actual direct costs incurred in connection with the Services.

 

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

 

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

 

(e)           Notwithstanding anything to contrary
in this Agreement, amounts incurred by Operator pursuant to Sections
3.1(b)(iii), 3.7(b), 3.13, 3.15, 5.1(b)(xi) and (xii), 5.10 and 11.5 or to
comply with changes in Law since the date of the then current Budget shall not
be included in any such ***** calculation under this Section 5.1 or *****
calculation under Section 3.4(c).

 

 

*** 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.

 

22

 

Section 5.2             O&M Account.

 

(a)           Establishment of Accounts. Owner
will establish and fund or cause to be established and funded (i) the O&M
Account, (ii) the Liquidity Reserve Account, (iii) the Murray Liquidity MM
Sub-Reserve Account, (iv) the Major Maintenance Reserve Account, (v) the
Murray MMR Sub-Reserve Account and (vi) the Loss Proceeds Account, each of (ii)
to (vi) as defined in the Reimbursement Documents, on or prior to the Commencement
Date in accordance with, and as more specifically set forth in, the
Reimbursement Documents.

 

(b)           Payments from O&M Account.
Owner will make payments from the O&M Account for all O&M Costs, the
Annual Management Fee, the Bonus or for any other amounts payable by or on
behalf of Owner to or on behalf of Operator hereunder. In the event that a
Reimbursement Agreement Default has occurred and is continuing, Operator shall
have the right (but not the obligation) to pay such costs from the O&M
Account, or to advance its own funds for such purpose subject to reimbursement
by Owner provided that all such payments are in accordance with the
terms of this Agreement. Operator will have the authority to make payments
directly out of the O&M Account from and after the Commencement Date but it
will not exercise such rights until, and the authority of Owner to make such
payments shall cease upon, the occurrence and during the continuance of the
conditions set forth in the preceding sentence.

 

Section 5.3             O&M Cost Payment Procedure
and Treatment of Purchase Orders. With respect to O&M Costs for goods
and services provided by third-parties to Owner or Operator in connection
herewith and costs incurred directly by Operator that are not covered by
Section 5.4, Operator promptly shall review invoices received for such goods
and services and, if Operator determines such invoices are properly payable,
promptly shall forward such invoices to Owner for payment. Owner shall use
commercially reasonable efforts to pay on or before the due date therefor, for
Owner’s account (except to the extent Operator has, in its sole discretion,
directly incurred an O&M Cost, in which case for Operator’s account), such
invoices, except for any portion that Owner in good faith disputes, directly to
the third-party payee. Operator shall endeavor to resolve any such dispute with
the third-party payee.

 

Section 5.4             Advance O&M Cost Estimate;
Progress Report. With respect to O&M Costs incurred directly by
Operator that are estimatable, on or about the twentieth day of each month
Operator shall furnish Owner with a billing covering the estimated amount of
such O&M Costs for the following month (each, an “Advance O&M Cost Estimate”). Each
Advance O&M Cost Estimate shall (a) itemize requested payments by type, (b)
provide reasonable substantiation and documentation supporting such request,
(c) be generated, where applicable, using Owner’s billing system, and (d)
otherwise be in the form reasonably requested by Owner. Owner shall pay each
Advance O&M Cost Estimate within twenty (20) days after receipt. Together
with the Advance O&M Cost Estimate, Operator shall furnish Owner with a
detailed progress report of all O&M Costs for the preceding month and, for
such preceding month, shall compare O&M Costs not paid directly by Owner to
third-parties with the Advance O&M Cost Estimate, and shall set forth any
credits received from third-party vendors. Any net deficiencies or excesses
against the Advance O&M Cost Estimate (after taking into account any
third-party credits) for any month shall be reflected as a credit or debit, as
appropriate, in the Advance O&M 

 

23

 

Cost Estimate
for the following month. Each progress report will be supported by
documentation substantiating all O&M Costs actually incurred in such month
and otherwise shall be in form reasonably acceptable to Owner. Each progress
report also shall compare the month’s O&M Costs and year-to-date O&M
Costs incurred against the Budget on a line-item basis as set forth in the
Budget.

 

Section 5.5             Final Billing. If requested
by Owner, after the end of each Operation Year, Operator shall submit a
statement summarizing O&M Costs incurred and payments and credits received
during such Operation Year.

 

Section 5.6             Invoice or Payment Disputes or
Errors. If either party discovers an error in the amount of any Operator or
Owner invoice or payment made pursuant to this Article V or disputes a payment
requested pursuant to this Article V, such party shall notify the other
party within sixty (60) days of discovery of such dispute or error; provided
that neither party shall be entitled to correction of any such error if notice
of such error is not delivered in writing to the other party within one year of
the applicable invoice or payment. If the correct amount of any Operator or
Owner invoice is disputed in good faith, the party with the payment obligation
shall pay any amount not in dispute, and failure to pay the amount in dispute
shall not be deemed to be a default hereunder.

 

Section 5.7             Operator Incentive:  Bonus. Operator shall receive a bonus of
up to ***** per year (the “Bonus”)
based upon Operator’s annual performance in meeting the Incentive Performance
Standards, which shall be payable as promptly as practicable following the end
of each Operation Year but in no event later than August 15 immediately
following the end of such Operation Year.

 

Section 5.8             Employee Incentive Plan. Operator
may develop and deliver to Owner an Employee Incentive Plan for such Operation
Year, which plan shall be generally consistent with similar plans established
by Operator or its Affiliates at the Facility or at other facilities owned by
Operator’s Affiliates.

 

Section 5.9             Interest on Late Payments. Any
amounts (a) disputed and subsequently found to have been correctly invoiced or
owed, or (b) not timely paid in accordance with this Agreement shall accrue
interest at the lesser of (i) the maximum rate of interest permitted by
applicable Law and (ii) with respect to amounts less than sixty (60) days
past due, a rate equal to 5% over the Base Rate or with respect to amounts that
are sixty (60) or more days past due, a rate equal to 2% over the interest rate
set forth in the Reimbursement Agreement; provided if such overdue
amounts are being contested in good faith and adequate reserves have been
deposited into a segregated account in which the Operator has a perfected
security interest then the interest rate with respect to amounts less than
sixty (60) days past due shall apply to such amounts.

 

Section 5.10           Audit. Subject to Article 12,
upon reasonable prior notice (a) Owner, its representatives or any agent on
behalf of the Owner’s financing parties may inspect, copy and audit Operator’s
books, records, accounts, ledgers, time cards, estimates, schedules,
correspondence and other documents related to Operator’s performance of its
obligations 

 

 

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

 

24

 

hereunder and
amounts due to Operator hereunder and amounts for which Operator is reimbursed
hereunder and (b) Operator agrees to provide copies of such information to
Owner upon request, at Owner’s expense; provided, however, that
(i) Operator shall have no obligation to provide access to or copies of
confidential records regarding the Facility Work Force, Affiliate Work Force or
Duke Power Support Personnel, including human resource files, personnel
records, or Operator’s internal financial records, (ii) such inspection shall
not unreasonably interfere with the operation of the Facility and (iii) such
inspection shall not result in the Operator being in violation of any Governmental
Requirement or Law. Owner shall reimburse Operator for its actual and
reasonable costs incurred by Operator for such audits to the extent such audit
assistance is not otherwise reimbursed by Owner pursuant to this Agreement. Any
such costs incurred by Operator shall be reimbursed or paid by Owner pursuant
to Article V and shall not be included in the amount spent for purposes of
determining, pursuant to Sections 3.4, 5.1(b), 5.1(c) or 5.1(d) whether
expenditures are more than 10% in excess of the aggregate amount of the Budget
or the relevant Major Line Item, if applicable. Owner’s acceptance or approval
or payment of Operator’s charges shall not operate as a waiver of Owner’s right
to audit the Operator in accordance with this Section 5.10.

 

ARTICLE VI

TERM OF AGREEMENT; TERMINATION

 

Section 6.1             Initial Term. This Agreement
shall become effective upon full execution and delivery of this Agreement. The
initial term of this Agreement shall commence on the Commencement Date and
shall expire, unless earlier terminated in accordance with the terms hereof, on
the earliest to occur of (a) May 31, 2012, (b) termination of the Retained
Obligations and (c) release of Duke Capital under the Retained Obligations.

 

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

 

Section 6.3             Termination by Owner for Failure
to Satisfy Performance Criteria. In the event that during any Operation
Year the Facility fails, for reasons attributable to Operator’s violation of
any of its obligations under this Agreement (which violation shall in no event
include a violation attributable to a Force Majeure Event), (a) to comply with
part (a) of the definition of Minimum Performance Criteria, Owner may, by sixty
(60) days’ prior written notice to Operator (the “Availability Notice Period”), terminate this Agreement, or (b)
to demonstrate the capability in part (b) of the definition of Minimum
Performance Criteria, Owner may, by twenty (20) days’ prior written notice
(unless such failure is not capable of being cured as set forth in the proviso
below within twenty (20) days, in which case such notice period shall be
extended by an additional twenty (20) days) to Operator (such twenty (20) day
period (or, if extended, such forty (40) day period) being the “Capability Notice Period”), terminate this
Agreement; provided, however, that Operator may, within ten (10) days after any
such failure, 

 

25

 

submit a cure
plan that is reasonably expected to resolve the cause of such unsatisfactory
Availability Percentage or inadequate demonstrated capability, as the case may
be, as soon as practicable, but in no event later than the expiration of the
Availability Notice Period or Capability Notice Period, as applicable; provided
further, however, that Owner may not terminate this Agreement as provided in
(a) or (b) above in the event such unsatisfactory Availability Percentage or
inadequate demonstrated capability, as the case may be, is cured by the end of
the Availability Notice Period or Capability Notice Period, as applicable. When
used in this Section 6.3, the definition of “Force Majeure Event” (as set forth
in Section 10.1) shall be modified to delete clauses (e), (f) and (g) from the
second sentence of Section 10.1 in their entirety and include clause (h) of
Section 10.1 only to the extent the failures referred to therein are caused by
contractors, suppliers or vendors of Operator.

 

Section 6.4             Termination by Owner for
Material Default; Right to Cure. If Operator violates a material provision
of this Agreement and fails to cure or to commence and continue good faith
remedial efforts to cure such default within sixty (60) days of receipt of
notice thereof from Owner, then Owner may, without prejudice to any right or
remedy available to it under this Agreement, terminate this Agreement. Owner,
at its option, shall have the right to cure such default on behalf of Operator
without terminating the Agreement. Owner shall also have the right to perform
such defaulted obligation upon termination.

 

Section 6.5             Termination by Operator for
Convenience. Operator shall have the right to terminate this Agreement for
convenience upon sixty (60) days written notice to Owner.

 

Section 6.6             Termination by Operator for
Material Default. If Owner violates a material provision of this Agreement
(including a payment default) and fails to cure or to commence and continue
good faith remedial efforts to cure such default within thirty (30) days (or,
with respect to a payment default, five (5) days) of receipt of notice thereof
from Operator, then Operator may, without prejudice to any right or remedy
available to it under this Agreement, terminate this Agreement.

 

Section 6.7             Rights and Obligations Upon
Termination.

 

(a)           Upon the expiration or termination of
this Agreement, Operator shall have no further rights under this Agreement
(except as set forth in Section 13.14) and shall not be entitled to
receive any further payments under this Agreement except as set forth in this
Section 6.7.

 

(b)           Upon the expiration or termination of
this Agreement, Operator shall be entitled to a payment equal to the sum of
(i) the O&M Costs incurred by Operator for all Services provided by
Operator through the date of termination, and costs incurred in connection with
Operator’s obligations under Section 6.7(c)(iii), (ii) the pro rata
portion of the Annual Management Fee through the date of termination, including
any Bonus payable to the date of termination and (iii) any amounts payable
under Section 6.7(c)(iii).

 

26

 

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

 

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

 

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

 

(iii)          Operator shall, at
Owner’s expense, perform (for a period not to exceed one hundred-eighty (180)
days following termination) the following relative to the Services affected by
termination action to the extent reasonably requested by Owner:  (A) discontinue the Services as of the
date of termination of this Agreement or such earlier date specified by Owner;
(B) place no further orders or subcontracts for Equipment or Services as
of the date of termination of this Agreement or such earlier date specified by
Owner; (C) as of the termination date or such earlier date designated by
Owner, assign to Owner or its designee all orders, subcontracts and other
contractual agreements related solely to the Services or Facility as may be
designated by Owner, provided that (I) Owner or its designee shall
assume Operator’s obligations under such agreements from and after the date of
such assignment, (II) such assignment is permitted under the applicable
agreement and (III) Operator shall be entitled to retain such rights under
such agreements as are necessary to prosecute at Owner’s expense a claim
against the counterparty for amounts owing Operator for which Owner has not
reimbursed Operator and to enforce rights with respect to liabilities that
Operator may have to Owner after such assignment, provided that Operator
shall keep Owner informed about and cooperate with Owner with respect to any such
action against a counterparty so as to minimize any adverse effect on the
relationship between Owner and counterparty; (D) promptly make every
reasonable effort to procure cancellations of all such orders and agreements
not so assigned upon terms reasonably satisfactory to Owner; (E) assist
Owner in preparing an inventory of all Equipment, tools, Consumables, spare
parts and other supplies in use or in storage at the Site; (F) assist Owner in
training Operator’s successor and in otherwise transitioning Operator’s
successor and (G) remove from the Site goods, equipment, material and the like
belonging to Operator;

 

(iv)          Operator will make
certain employees of Operator and/or its Affiliates that have provided services
relating to the Facility available to Owner and/or its Affiliates to discuss
potential employment with Owner and/or its Affiliates and Owner and/or its
Affiliates shall make offers of employment to such employees that Owner desires
to employ in accordance with the provisions of Section 6.9 of the PSA. Such
employees that have been made available to Owner or such Affiliates shall be
deemed “Available Employees” under the PSA and shall be subject to the terms
and conditions of Section 6.9 of the PSA (except that any references
therein to the “Employment Transfer Date” shall be deemed to be references to
the date on which Operator ceases to be the Operator under the O&M
Agreement).

 

27

 

Section 6.8             Transition Plan. In
connection with Operator’s obligations under Section 6.7(c)(iii)(F),
Operator shall, within fifteen (15) days of termination of this Agreement or
delivery of a written notice of termination pursuant to this Article VI,
develop an action plan, including the items listed on Exhibit J, for use by
Operator’s successor in transitioning operation of the Facility from Operator.

 

ARTICLE VII

INDEMNITY AND LIMITATIONS ON LIABILITY

 

Section 7.1             General Indemnity.

 

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

 

(b)           Owner hereby irrevocably indemnifies,
and agrees to defend and hold harmless Operator, its Affiliates and
Subcontractors, and its and their respective officers, directors, employees and
agents from and against Claims and Damages, arising from third party claims,
demands, suits, causes of action, proceedings, investigations, judgments or
liabilities to the extent caused by or arising out of any breach by Owner of
this Agreement or any negligent acts or omissions or willful misconduct of
Owner or its Affiliates, employees, agents or subcontractors (other than
Operator and its Subcontractors) or anyone acting under Owner’s direction or
control or on Owner’s behalf (which in no event shall include Operator) in
connection with or incident to the performance of this Agreement.

 

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

 

Section 7.3             Third Party Claims.

 

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

 

28

 

(b)           If any legal proceeding or action is
brought by a third party against Operator in connection with the Services or
the Facility, and Owner reasonably anticipates that it shall be required by
this Agreement to indemnify or reimburse Operator for such claim or for
litigation expenses connected therewith, Owner will be entitled to participate
in such proceeding and, to the extent that it wishes, to assume the defense of
such proceeding if (i) Owner provides written notice to Operator within
twenty (20) days after receipt of Operator’s notice of such proceeding pursuant
to Section 7.3(a) that Owner intends to undertake such defense and to
indemnify Operator with respect thereto and (ii) Owner conducts the
defense of the third party claim actively and diligently with counsel
reasonably satisfactory to Operator. Operator shall, in its sole discretion,
have the right to employ separate counsel (who may be selected by Operator in
its sole discretion) in any such action and to participate in the defense
thereof, and the fees and expenses of such counsel shall be paid by Operator
and shall not be reimbursed hereunder by Owner. If Owner has acknowledged in
writing its obligation to indemnify Operator with respect to such claim,
Operator shall fully cooperate with Owner and its counsel in the defense or
compromise of such claim or demand, provided that all reasonable
out-of-pocket expenses incurred thereby by Operator shall be paid by the Owner
(except as otherwise set forth in Section 5.1(b)(xii)(II)).

 

(c)           If (i) notice is given to the
Owner of the commencement of any proceeding and the Owner does not, within
twenty (20) days after the Operator’s notice is given, give notice to Operator
of its election to assume the defense of such proceeding, (ii) the
condition set forth in Section 7.3(b)(ii) above becomes unsatisfied, or
(iii) Operator determines in good faith that there is a reasonable
probability that a proceeding will adversely affect it other than as a result
of monetary damages for which it would be entitled to reimbursement under this
Agreement, Operator will (upon further notice to Owner) without prejudice of
its right to be indemnified with respect thereto have the right to undertake
the defense, compromise or settlement of such claim.

 

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

 

(e)           Neither party shall consent to the
entry of any judgment or enter into any settlement with respect to a claim for
indemnification (or for which Owner is required under this Agreement to
reimburse Operator) without the prior written consent of the other party to
this Agreement (not to be unreasonably withheld) unless the judgment or
proposed settlement does not involve a finding or admission of any violation of
law by the other party and does not adversely affect the other party’s rights
and obligations as determined by the other party.

 

29

 

Section 7.4             Limitation of Liability. Except
to the extent such damages relate solely to the gross negligence or willful
misconduct (done with an intent to harm) of Operator or its Affiliates,
employees or Subcontractors or anyone acting under Operator’s direction or
control or on Operator’s behalf, notwithstanding anything to the contrary
contained in this Agreement, the annual aggregate liability of Operator for any
twelve-month period ending on each anniversary of the Commencement Date for
damages occurring during such twelve-month period arising out of or relating in
any manner to the performance or nonperformance of obligations in connection
with this Agreement or the performance or nonperformance of the Services
(including (A) legal expenses incurred by Operator pursuant to clauses (xi)(A)
and (xii)(A) of Section 5.1(b) and (B) amounts pursuant to Section 8.1),
whether based on contract, warranty, indemnity, tort (including negligence),
strict liability, or otherwise, shall be capped at a sum equal to *****.

 

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

 

ARTICLE VIII

WARRANTIES

 

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

 

Section 8.2             Third Party Warranties. Operator
shall, for the protection of Owner, use reasonable efforts to obtain customary
warranties from all vendors, contractors, Subcontractors and suppliers from
which Operator procures Equipment, spare parts or other goods and services for
the Facility which shall be assignable to Owner to the full extent of the terms
thereof. Operator shall be responsible for enforcing all such third-party
warranties during the term of this Agreement. Operator shall ensure that, to
the extent feasible, any third-party warranties that are still in existence at
the termination of this Agreement shall be assigned on such date to Owner, and
Operator hereby assigns, effective as of the date of termination of this
Agreement, all of its rights with respect to such warranties to Owner, provided,
that Operator shall retain such rights 

 

 

*** 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.

 

30

 

as are
necessary to prosecute any claims against the third-parties for amounts owing
Operator, for which Owner has not reimbursed Operator, and to enforce rights
with respect to liabilities that Operator may have to Owner after such
assignment, provided that Operator shall keep Owner informed about and
cooperate with Owner with respect to any such action against a third-party so
as to minimize any adverse effect on the relationship between Owner and the
third-party. Operator’s obligations with respect to Equipment, spare parts or
other goods purchased by Operator from third parties shall be limited to those
set forth in this Section 8.2, provided, however, that
nothing in this sentence shall release Operator from any obligation under this
Agreement with respect to services performed by or on behalf of Operator in
connection with any such goods.

 

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

 

ARTICLE IX

REPRESENTATIONS

 

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

 

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

 

(b)           No Violation of
Law. Operator is not in violation of any applicable laws or any judgment
entered by any Governmental Authority, which violations or judgments,
individually or in the aggregate, would affect Operator’s ability to perform
its obligations under this Agreement. Neither the execution, delivery and
performance by the Operator 

 

31

 

of its
obligations under this Agreement, nor the consummation of the transactions
contemplated hereby, violates any Laws or Governmental Requirements.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

32

 

ARTICLE X

FORCE MAJEURE

 

Section 10.1           Definition of Force Majeure Event.
For the purposes of this Agreement, a “Force Majeure Event” as to any party
means any occurrence, nonoccurrence or set of circumstances that is beyond the
reasonable control of such party and is not caused by such party’s negligence,
lack of due diligence, or failure to follow Prudent Industry Practices,
including flood, ice, earthquake, windstorm or eruption; fire; explosion;
invasion, riot, civil war, commotion or insurrection; sabotage, terrorism or
vandalism; military or usurped power; or act of God or of a public enemy. The
term Force Majeure Event shall not include: 
(a) the inability to meet a Law or Governmental Requirement or the
change in a Law or Governmental Requirement after the date of this Agreement
which increases the costs of performance by a Party of its obligations
hereunder but which does not preclude or make illegal such performance;
(b) a Site-specific strike, walkout, lockout or other labor dispute over
employment conditions at the Facility, (but not including any such action or
matter as a result of an organizational campaign at the Facility);
(c) equipment failure, unless such equipment failure results directly from
another Force Majeure Event; (d) Owner’s inability to perform its
obligations hereunder arising from its lack of ownership of or direct control
over the Site or the Facility; (e) unavailability of transmission
capability, including a Conasauga Line Outage or any Transmission System
Constraints (as such terms are defined in the PPA); (f) 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; (g) 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 Owner’s failure to comply with the applicable
pipeline tariff, provided  further that Owner 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 Owner; (h) 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. Notwithstanding
any provision of the foregoing to the contrary, to the extent that a “Force
Majeure Event” hereunder affects or relates to performance under the PPA and
the parties hereto and GPC do not agree with respect to the existence, duration
or impact of such Force Majeure Event, Owner and Operator agree that if GPC
consents to Operator’s participation in the dispute resolution procedures under
the PPA, the existence, duration or impact of such Force Majeure Event shall be
determined pursuant to such dispute resolution procedures. Owner hereby
consents to Operator’s participation in any such dispute resolution
proceedings.

 

Section 10.2           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 the extent that and for so long as failure to
perform such obligations is due to a Force Majeure Event.

 

33

 

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

 

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

 

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

 

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

 

Section 10.4           Suspension of Performance. The
suspension of performance due to a Force Majeure Event shall be of no greater
scope and of no longer duration than is required by such Force Majeure Event. No
Force Majeure Event shall extend this Agreement beyond its stated term as set
forth in Section 6.1.

 

Section 10.5           Extended Force Majeure Events.

 

(a)           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 months or longer (an “Extended
Force Majeure Event”), that party may request that the other party
submit a plan (a “Force Majeure Remedy Plan”)
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 10
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.

 

(b)           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.

 

ARTICLE XI

INSURANCE

 

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

 

34

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

The amounts of
insurance required by this Section 11.2 may be satisfied by Owner’s purchasing
primary coverage in the amounts of the combined primary and excess and/or
umbrella limits specified or by buying a combination of primary and excess
umbrella liability policies. The structure of the coverage is Owner’s option,
so long as the total amount of insurance meets the overall requirements of this
Agreement. Owner shall cause Owner’s insurance underwriters to 

 

35

 

waive their
rights of subrogation against Operator for all insurance required by this
Section 11.2. Owner shall ensure that Operator is named as an additional
insured on each insurance policy relating to the ownership, operation and
maintenance of the Facility, which Owner is required to procure and maintain
pursuant to any financing or other project agreements.

 

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

 

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

 

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

 

ARTICLE XII

CONFIDENTIALITY

 

Section 12.1           Confidential Information. Except
as hereinafter provided, each of the parties shall treat as confidential and
not disclose to any third party confidential or proprietary information
concerning the Facility or this Agreement and designated by the other party as
confidential (either by specific reference on the face of a document containing
the information or by written communication regarding a reasonable class of
information), unless such confidential information (i) was already in the
possession of such party or its Affiliates in a non-confidential form at the
time such entity obtained such confidential information hereunder, (ii) was or
is published or otherwise is or becomes generally available to the public
through no fault of such party, or any of its Affiliates, (iii) was or is made
available to such party, or its Affiliates, without restriction by any Person
which is not bound by, and does not impose, an obligation of confidentiality or
use with respect thereto, (iv) is developed independently by employees of
such party or its Affiliates who have not had access to confidential
information pursuant to this Agreement, (v) is required to be disclosed in
connection with the PPA to the power purchaser 

 

36

 

thereunder, or
(vi) is required to be disclosed under any Governmental Requirement or Law. Each
of the parties may use any such confidential information only in connection
with its activities under this Agreement and disclose, reveal, or otherwise
make any such confidential information available to third parties, in either
case, only with the prior written consent of the other party hereto. Each of
the parties shall provide the other party hereto prompt notice of any
disclosure required under any Governmental Requirement or Law so that such
other party may seek a protective order or other appropriate remedy and shall
cooperate with such other party’s efforts to obtain such remedy. Operator
agrees that, with respect to information provided by Owner to Operator for
which Owner owes confidential obligations to third-parties, Operator shall
abide by such obligations to the extent Owner informs Operator in writing of
such obligations. Operator shall establish and enforce reasonable procedures
for the protection of confidential information and shall restrict disclosure of
such information to only those employees, officers, and agents of Operator or
its Affiliates who need to know such information in connection with the
performance of this Agreement as set forth herein. Each of the parties shall
take such reasonable and prudent steps and precautionary measures as are
required to assure compliance with this Section 12.1 by such of its
employees, officers, agents, Affiliates and other Persons as shall be given
access to such confidential information and shall be liable for any
non-compliance with this Section 12.1 by itself, its Affiliates’ and their
respective employees and officers.

 

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

 

ARTICLE XIII

MISCELLANEOUS

 

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

 

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

 

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

 

37

 

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

 

If to Owner:

 

*****

*****

*****

*****

*****

*****

*****

*****

 

If to
Operator:

 

*****

*****

*****

*****

*****

 

with a copy
to:

 

*****

*****

*****

*****

*****

 

with a copy
to:

 

*****

*****

*****

*****

*****

 

Each party
shall have the right to change the place to which notice, demand, offer, or
other instrument shall be sent or delivered by similar notice sent in like
manner to the other party. The effective date of any notice, demand, offer, or
other instrument issued pursuant to this Agreement shall be the date
(a) of delivery, if delivered by telecopier with answer back confirmation,
(b) when delivered, if hand delivered, (c) if sent by overnight
courier, one Business 

 

 

*** 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.

 

38

 

Day after
delivery to such courier, and (d) if sent by registered or certified mail,
three (3) Business Days after being deposited in U.S. mail.

 

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

 

Section 13.6           Assignment. This Agreement
shall be binding upon, shall inure to the benefit of, and may be performed by,
the successors and permitted assigns of the parties hereto. No direct or
indirect assignment, pledge, or other transfer of this Agreement or any rights
under this Agreement by either party shall be made without the other party’s
prior written consent, which consent shall not be unreasonably withheld, provided
that no consent shall be required for any transfer that is (a) incident to a
merger or consolidation with, or transfer of all or substantially all of the
assets of the transferor to another person which shall, as part of such
succession, assume all the obligations of the transferor under this Agreement,
(b) by Owner or Operator to an Affiliate, (c) by Owner to a project entity to
be formed by Owner or any Affiliate of Owner and others, (d) by Owner to any
purchaser of a majority or greater interest in the Facility (subject to such
permitted transferee joining in this Agreement on a joint and several basis in
the case of a purchase of a part of the Facility from Owner), or (e) in
connection with the Financing, in the case of clauses (a) through (d), to the
extent such transfers are permitted under the Reimbursement Agreement. If a
transferee assumes all or any part of the transferor’s obligations under this
Agreement, then such assignment shall relieve the transferor of the transferred
obligations under this Agreement, subject to the reasonable approval of the
other party to this Agreement based on evidence of the financial capability of
the transferee to undertake the transferor’s obligations under this Agreement. If
an Owner transfers all or any part of its interest in this Agreement which
results in more than one Owner, then unless all of such Owners appoint one
agent to act on their behalf under this Agreement and notify Operator thereof
in writing, transferor Owner shall act as agent for all such Owners under this
Agreement.

 

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

 

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

 

39

 

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

 

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

 

Section 13.11         Consequential Damages. Neither
party shall in any event be responsible or liable to the other party for
consequential, indirect or punitive damages, including liability for loss of
use of the Facility or existing property, loss of profits, loss of product or
business interruption, however caused, except to the extent any third-party
claims against which a party is entitled to indemnification and any liquidated
damages provided for under this Agreement are deemed to be consequential
damages provided, however, that in no event will the
Reimbursement Obligation, amounts paid directly by Operator to continue the
operation or to maintain the Facility, amounts owed to Operator in connection
with its provision of the Services or damages payable to third parties pursuant
to indemnity claims be considered consequential, indirect or punitive damages
assessed against Owner.

 

Section 13.12         Limitations Application. Neither
party makes any representations, covenants, warranties or guarantees, express
or implied, other than those expressly set forth herein. The parties’ rights,
liabilities, responsibilities and remedies with respect to the Services,
whether in contract or otherwise, shall be exclusively those expressly set
forth in this Agreement. Except as specifically otherwise provided herein,
indemnities against, releases from, assumptions of, and limitations on liability
expressed in this Agreement, as well as waivers of subrogation rights expressed
herein, shall apply even in the event of the fault, negligence or strict
liability of the party indemnified or released or whose liability is limited or
assumed or against whom rights of subrogation are waived and shall extend to
each party, their Affiliates, and their respective officers, directors,
employees, and agents.

 

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

 

Section 13.14         Survival. The provisions of
Sections 3.17, 4.5, 5.1(b)(xii), 5.9, 13.4, 13.5, 13.8, 13.11, 13.12 and
13.14 and Articles VII, VIII and XII and those provisions which by their
nature are intended to survive, including confidentiality and indemnity
obligations, shall survive the termination of this Agreement without limitation
or as otherwise specified.

 

40

 

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

 

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

 

(b)           In the event that
the parties are unable to resolve the dispute through the procedures above,
either party shall submit such dispute to arbitration by delivering to the
other a notice demanding expedited arbitration of the dispute in accordance
with the commercial arbitration rules of the AAA then in effect. The place of
arbitration shall be at a site chosen by the parties or, in the absence of
agreement, by the arbitrator and the arbitrator shall determine the rules of
procedure for discovery, which discovery shall be limited in scope with no
depositions, no interrogations or requests for admissions. The arbitrator shall
begin hearing evidence within thirty (30) days of appointment and shall render
his or her decision within thirty (30) days after the close of evidence. Each
party shall have fifteen (15) days in which to present evidence;

 

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

 

41

 

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

 

	
   

  	
  OWNER:

  
	
   

  	
   

  
	
   

  	
  KGEN MURRAY
  I AND II LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ GERALD K.
  LINDNER

  	
   

  
	
   

  	
  Name: Gerald
  K. Lindner

  
	
   

  	
  Title:   Chief
  Executive Officer

  

 

1

 

	
   

  	
  OPERATOR:

  
	
   

  	
   

  
	
   

  	
  DUKE ENERGY
  MURRAY OPERATING, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ LON C.
  MITCHELL, JR.

  	
   

  
	
   

  	
  Name: Lon C.
  Mitchell, Jr.

  
	
   

  	
  Title:   Vice
  President

  

 

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Exhibit 10.11    
    

 
  FIRST AMENDMENT TO OPERATION AND MAINTENANCE AGREEMENT    
    

        This First Amendment to Operation and Maintenance Agreement (the "First Amendment") is made and entered into as of
February 8, 2007, by and between KGEN MURRAY I AND II LLC, a Delaware limited liability company (the "Company"), and DUKE ENERGY MURRAY
OPERATING, LLC, a Delaware limited liability company (the "Operator"). The Company and the Operator are sometimes referred to, individually, as a
"Party" or, collectively, as the "Parties". 

RECITALS 

        A.    WHEREAS,
the Company and Operator have entered into that certain Operation and Maintenance Agreement, dated as of August 5, 2004 (the "O&M
Agreement"); and 

        B.    WHEREAS,
the Parties desire to amend the O&M Agreement; 

        NOW,
THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the Parties, intending to be
legally bound, hereby agree as follows: 

Section 1.    Defined Terms.    

        Capitalized
terms used in this First Amendment and not defined herein shall have the meanings assigned to such terms in the O&M Agreement. 

Section 2.    Amendments.    

        (a)   The
terms "O&M Account," "Reimbursement Agreement," "Reimbursement Agreement Default," "Reimbursement Documents," and "Retained Obligations" are hereby deleted from
Section 1.1 of the O&M Agreement and wherever such terms otherwise appear in the O&M Agreement. 

        (b)   Section 3.19
of the O&M Agreement is hereby amended by replacing the reference to "Duke Capital" with "Duke Energy Corporation". 

        (c)   Section 5.2
of the O&M Agreement is hereby amended by deleting it in its entirety and replacing it with the word "[Reserved]." 

        (d)   Section 6.1
of the O&M Agreement is hereby amended by deleting it in its entirety and replacing it with the following: 

        "Section 6.1    Initial Term.    This Agreement shall become effective upon full execution and delivery of this
Agreement. The initial term of this Agreement shall commence on the Commencement Date and, unless earlier terminated in accordance with the terms and conditions of this Article 6, shall expire
on May 31, 2012.". 

Section 3.    Release.    

        Reference
is made to the Guaranty Agreement dated August 5, 2004 ("Owner Guaranty") made by KGen Partners LLC, KGen Enterprise LLC, KGen Hinds LLC, KGen Hot Spring LLC, KGen
Marshall LLC, KGen New Albany LLC, KGen Sandersville LLC, KGen Southaven LLC for the benefit of the Operator. Operator hereby releases and discharges each of KGen Enterprise LLC, KGen Marshall LLC,
KGen New Albany LLC, and KGen Southaven LLC (collectively, the "Released Obligors") from all present and future claims, liabilities and obligations under the Owner Guaranty and acknowledges that none
of the Released Obligors shall have any liability under the Owner Guaranty in respect thereof. Except to the extent provided in the preceding sentence, the Owner Guaranty remains in full force and
effect. 

Section 4.    Legal Effect.    

        This
First Amendment shall be effective upon the Company delivering written notice to the Operator that (A) either (i) the Company's current lenders have consented to this
First Amendment or (ii) such lenders have been repaid in full; and (B) the Reimbursement Agreement has been terminated. The Company covenants that pending the delivery of such notice, it
shall keep Operator reasonably informed of material developments regarding the matters referenced in (A) and (B). Except as expressly modified by the terms of this First Amendment, the O&M
Agreement remains unchanged and in full force and effect. 

Section 5.    Miscellaneous.    

        (a)    No Waiver.    No failure to exercise and no delay in exercising, on the part of the Party, any right, remedy,
power or privilege provided herein or by statute or at law or in equity shall operate as a waiver thereof; nor shall any single or partial exercise of any such right, remedy, power or privilege
preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. 

        (b)    Amendment and Waivers.    Any term of this First Amendment may be amended only with the written consent of both
the Operator and the Company. The observance of any term of this First Amendment may be waived only if such waiver is in writing signed by the Party waiving such term. 

        (c)    Successors and Assigns.    Neither this First Amendment nor any of the rights, interests or obligations
hereunder shall be assigned, in whole or in part, by operation of law or otherwise except in accordance with Section 13.6 of the O&M Agreement. Any attempted or purported assignment in
violation of the preceding sentence shall be null and void and of no effect whatsoever. Subject to the preceding two sentences, this Agreement shall be binding upon, inure to the benefit of, and be
enforceable by, the Parties and their respective successors and permitted assigns. This First Amendment is not intended to confer upon any person other than the Parties any rights or remedies;
provided that each of the Released Obligors and their respective successors and assigns shall be express third party beneficiaries of the provisions of Section 3 and are entitled to enforce the
same. 

        (d)    Severability.    Any provision of this Amendment that is prohibited or unenforceable in any jurisdiction shall,
as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of this Amendment, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 

        (e)    Headings.    The headings of this First Amendment are for purposes of reference only and shall not limit or
otherwise affect the meaning hereof. 

        (f)    GOVERNING LAW.    THIS FIRST AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK, APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED IN SUCH STATE WITHOUT GIVING EFFECT TO CONFLICT OF LAWS PROVISIONS (OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL
OBLIGATIONS LAW). 

        (g)    Counterparts.    This First Amendment may be executed in any number of counterparts, each of which will shall
be an original, but all of which together shall constitute one instrument. 

        (h)    Entire Agreement.    This First Amendment sets forth the entire agreement of the parties hereto with respect to
its subject matter, and supersedes all previous understandings, written or oral, with respect thereto. 

[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK] 

        IN WITNESS WHEREOF, the Parties have executed this First Amendment as of the date first above written. 

	 	 	KGEN MURRAY I AND II LLC, a Delaware limited liability company
	

 	
 	

By:	
 	

/s/  DONALD E. BOYD      

	 	 	 	 	Name:	Donald E. Boyd
	 	 	 	 	Title:	Executive Vice President
	

 	
 	

DUKE ENERGY MURRAY OPERATING, LLC, a Delaware limited liability company
	

 	
 	

By:	
 	

/s/  CURTIS H. DAVIS      

	 	 	 	 	Name:	Curtis H. Davis
	 	 	 	 	Title:	Vice President

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Exhibit 10.11

FIRST AMENDMENT TO OPERATION AND MAINTENANCE AGREEMENT

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