-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, A+YAi+Z0ySHRZJcT59KKIGKGNnbLChBbXtraj1KX0AnxRLp67ONyYvvV8eH2hS20 ok9PkgLbEq2OU3CbQuI+7Q== /in/edgar/work/20000731/0000912057-00-033903/0000912057-00-033903.txt : 20000921 0000912057-00-033903.hdr.sgml : 20000921 ACCESSION NUMBER: 0000912057-00-033903 CONFORMED SUBMISSION TYPE: S-4/A PUBLIC DOCUMENT COUNT: 9 FILED AS OF DATE: 20000731 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AES RED OAK LLC CENTRAL INDEX KEY: 0001117445 STANDARD INDUSTRIAL CLASSIFICATION: [4931 ] IRS NUMBER: 541889658 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-40478 FILM NUMBER: 682654 BUSINESS ADDRESS: STREET 1: 777 WASHINGTON RD CITY: PARLIN STATE: NJ ZIP: 08859 BUSINESS PHONE: 7322381462 MAIL ADDRESS: STREET 1: 1001 N. NINETEENTH ST. CITY: ARLINGTON STATE: VA ZIP: 22209 S-4/A 1 s-4a.txt FORM S-4/A AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 31, 2000 REGISTRATION NO. 333-40478 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 -------------------------- AMENDMENT NO. 1 TO FORM S-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 -------------------------- AES RED OAK, L.L.C. (Exact name of registrant as specified in its charter) DELAWARE 4930 54-1889658 (State of Organization) (Primary Standard Industrial (I.R.S. Employer Identification Classification Number) No.)
-------------------------- 1001 NORTH 19TH STREET ARLINGTON, VIRGINIA 22209 (703) 522-1315 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) ------------------------------ PATTY ROLLIN 1001 NORTH 19TH STREET ARLINGTON, VIRGINIA 22209 (703) 522-1315 (Names and addresses, including zip codes, and telephone numbers, including area codes, of agents for service) ------------------------------ IT IS RESPECTFULLY REQUESTED THAT THE COMMISSION SEND COPIES OF ALL NOTICES, ORDERS AND COMMUNICATIONS TO: MICHAEL B. BARR HUNTON & WILLIAMS 1900 K STREET, NW WASHINGTON, DC 20006 (202) 955-1500 (202) 778-2201 (FACSIMILE) APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE AND ALL OTHER CONDITIONS TO THE PROPOSED EXCHANGE OFFER DESCRIBED HEREIN HAVE BEEN SATISFIED OR WAIVED. If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. / / If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / / ______ If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / / ______ -------------------------- THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT WILL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT WILL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT WILL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- EXPLANATORY NOTE: This Amendment No. 1 is being filed by AES Red Oak, L.L.C. solely for the purpose of filing the exhibits to the Registration Statement that have not been previously filed. PART II INFORMATION NOT REQUIRED IN THE PROSPECTUS ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
EXHIBIT NUMBER DESCRIPTION - --------------------- ----------- 3* Amended and Restated Limited Liability Company Agreement, dated as of November 23, 1999 by AES Red Oak, L.L.C. 4.1(a)* Trust Indenture, dated as of March 1, 2000, by and among AES Red Oak, L.L.C., the Trustee and the Depositary Bank. 4.1(b)* First Supplemental Indenture, dated as of March 1, 2000, by and among AES Red Oak, L.L.C., the Trustee and the Depositary Bank. 4.2* Collateral Agency and Intercreditor Agreement, dated as of March 1, 2000, by and among AES Red Oak, L.L.C., the Trustee, the Collateral Agent, the Debt Service Reserve Letter of Credit Provider, the Power Purchase Agreement Letter of Credit Provider, the Working Capital Provider and the Depositary Bank. 4.3* Debt Service Reserve Letter of Credit and Reimbursement Agreement, dated as of March 1, 2000, by and among AES Red Oak, L.L.C., the Debt Service Reserve Letter of Credit Provider and the Banks named therein. 4.4* Power Purchase Agreement Letter of Credit and Reimbursement Agreement, dated as of March 1, 2000, by and among AES Red Oak, L.L.C., the Power Purchase Agreement Letter of Credit Provider and the Banks named therein. 4.5* Global Bond, dated March 15, 2000, evidencing 8.54% Senior Secured Bonds of AES Red Oak, L.L.C., Series A due 2019 in the principal amount of $224,000,000. 4.6* Global Bond, dated March 15, 2000, evidencing 9.20% Senior Secured Bonds of AES Red Oak, L.L.C., Series B due 2029 in the principal amount of $160,000,000. 4.7* Equity Subscription Agreement, dated as of March 1, 2000, by and among AES Red Oak, L.L.C., AES Red Oak, Inc. and the Collateral Agent. 4.8* Working Capital Agreement, dated as of March 1, 2000, by and among AES Red Oak, L.L.C., Working Capital Provider, and the Banks named therein. 4.9* Security Agreement, dated as of March 1, 2000, by and between AES Red Oak, L.L.C. and the Collateral Agent. 4.10* Pledge and Security Agreement, dated as of March 1, 2000, by and between AES Red Oak, Inc. and the Collateral Agent. 4.11* Pledge and Security Agreement, dated as of March 1, 2000, by and between AES Red Oak, L.L.C. and the Collateral Agent. 4.12* Consent to Assignment, dated as of March 1, 2000, by and between Williams Energy Marketing & Trading Company and the Collateral Agent, and consented to by AES Red Oak, L.L.C. (with respect to the Power Purchase Agreement).
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EXHIBIT NUMBER DESCRIPTION - --------------------- ----------- 4.13* Consent to Assignment, dated as of March 1, 2000, by and between The Williams Companies, Inc. and the Collateral Agent, and consented to by AES Red Oak, L.L.C. (with respect to the PPA Guaranty) 4.14* Consent to Assignment, dated as of March 1, 2000, by and between Raytheon Engineers & Constructors, Inc. and the Collateral Agent, and consented to by AES Red Oak, L.L.C. (with respect to the EPC Contract). 4.15* Consent to Assignment, dated as of March 1, 2000, by and between Raytheon Company and the Collateral Agent, and consented to by AES Red Oak, L.L.C. (with respect to the EPC Guaranty). 4.16* Consent to Assignment, dated as of March 1, 2000, by and between Siemens Westinghouse Power Corporation and the Collateral Agent, and consented to by AES Red Oak, L.L.C. (with respect to the Maintenance Services Agreement). 4.17* Consent to Assignment, dated as of March 1, 2000, by and between AES Sayreville, L.L.C. and the Collateral Agent, and consented to by AES Red Oak, L.L.C. (with respect to the Development and Operations Services Agreement). 4.18* Consent to Assignment, dated as of March 1, 2000, by and between Jersey Central Power and Light Company d/b/a/ GPU Energy and the Collateral Agent, and consented to by AES Red Oak, L.L.C. (with respect to the Interconnection Agreement). 4.19* Consent to Assignment, dated as of March 1, 2000, by and between the Borough of Sayreville and the Collateral Agent, and consented to by AES Red Oak, L.L.C. (with respect to the Water Supply Agreement). 5* Opinion of Hunton & Williams regarding Legality. 10.1 Fuel Conversion Services, Capacity and Ancillary Services Purchase Agreement, dated as of September 17, 1999, and Amendment No. 1, dated as of February 21, 2000, by and between AES Red Oak, L.L.C. and Williams Energy Marketing & Trading Company. (Portions of this exhibit have been omitted pursuant to a request for confidential treatment.) 10.2(a) Agreement for Engineering, Procurement and Construction Services, dated as of October 15, 1999, and Amendment No. 1, dated as of February 23, 2000, by and between AES Red Oak, L.L.C. and Raytheon Engineers & Constructors, Inc. (Portions of this exhibit have been omitted pursuant to a request for confidential treatment.) 10.2(b) EPC Contract Prepayment Coordination Agreement, dated as of March 14, 2000, between AES Red Oak, L.L.C. and Raytheon Engineers and Constructors, Inc. (Portions of this exhibit have been omitted pursuant to a request for confidential treatment.) 10.3 Guaranty, dated as of October 15, 1999, by Raytheon Company in favor of AES Red Oak, L.L.C. (Portions of this exhibit have been omitted pursuant to a request for confidential treatment.) 10.4 Maintenance Program Parts, Shop Repairs and Scheduled Outage TFA Services Contract, dated as of December 8, 1999, and Amendment No. 1, dated February 15, 2000, by and between AES Red Oak, L.L.C. and Siemens Westinghouse Power Corporation. (Portions of this exhibit have been omitted pursuant to a request for confidential treatment.) 10.5 Development and Operations Services Agreement, dated as of March 1, 2000, by and between AES Sayreville, L.L.C. and AES Red Oak, L.L.C.
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EXHIBIT NUMBER DESCRIPTION - --------------------- ----------- 10.7* Water Supply Agreement, dated as of December 22, 1999, by and between AES Red Oak, L.L.C. and the Borough of Sayreville. 10.8 Generation Facility Transmission Interconnection Agreement, dated as of April 27, 1999, by and between Jersey Central Power & Light Company d/b/a GPU Energy and AES Red Oak, L.L.C. 10.9* Mortgage, Security Agreement and Assignment of Leases and Income, dated as of March 1, 2000, by and between AES Red Oak, L.L.C. and the Mortgagee. 10.10* Assignment of Leases and Income, dated as of March 1, 2000, by and between AES Red Oak, L.L.C. and the Collateral Agent. 10.11* Financial Agreement, dated as of December 3, 1999, by and between AES Red Oak Urban Renewal Corporation and the Borough of Sayreville. 10.12* Promissory Note, dated as of March 15, 2000, of AES Red Oak Urban Renewal Corporation to AES Red Oak, L.L.C. 10.13* Ground Lease Agreement, dated as of March 1, 2000, by and between AES Red Oak, L.L.C. and AES Red Oak Urban Renewal Corporation. 10.14* Sublease Agreement, dated as of March 1, 2000, by and between AES Red Oak Urban Renewal Corporation and AES Red Oak, L.L.C. 10.15* Memorandum of Ground Lease, dated as of March 1, 2000, by and between AES Red Oak, L.L.C. and AES Red Oak Urban Renewal Corporation. 10.16* Memorandum of Sublease, dated as of March 1, 2000, by and between AES Red Oak Urban Renewal Corporation and AES Red Oak, L.L.C. 10.17* Construction Agency Agreement, dated as of March 1, 2000, by and between AES Red Oak Urban Renewal Corporation and AES Red Oak, L.L.C. 10.18* Leasehold Mortgage, Security Agreement and Assignment of Leases and Income, dated as of March 1, 2000, by and between AES Red Oak Urban Renewal Corporation and AES Red Oak, L.L.C. 10.19* Assignment of Mortgage, dated as of March 1, 2000, by AES Red Oak, L.L.C. in favor of the Collateral Agent. 10.20* URC Security Agreement, dated as of March 1, 2000, by and between AES Red Oak Urban Renewal Corporation and AES Red Oak, L.L.C. 10.21* Assignment of Leases and Income, dated as of March 1, 2000, by and between AES Red Oak Urban Renewal Corporation and AES Red Oak, L.L.C. 10.22* Assignment of Assignment of Leases and Income, dated as of March 1, 2000, by AES Red Oak, L.L.C. in favor of the Collateral Agent. 10.23 Guaranty, dated as of March 1, 2000, by The Williams Companies, Inc. in favor of AES Red Oak, L.L.C. (PPA Guaranty). (Portions of this exhibit have been omitted pursuant to a request for confidential treatment.) 23.1* Consent of Stone & Webster. 23.2* Consent of ICF Resources Incorporated.
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EXHIBIT NUMBER DESCRIPTION - --------------------- ----------- 23.3* Consent of Hunton & Williams (contained in Exhibit 5). 23.4* Consent of Deloitte & Touche LLP. 24* Power of Attorney (included on the signature page of this registration statement). 25* Statement of Eligibility and Qualification on Form T-1 of The Bank of New York, as Trustee under the Indenture. 27* Financial Data Schedule. 99.1* Form of Letter of Transmittal. 99.2* Form of Letter to Clients. 99.3* Form of Letter to Registered Holders and DTC Participants. 99.4* Form of Notice of Guaranteed Delivery.
- ------------------------ * Previously filed as an Exhibit to our Company's Registration Statement No. 333-40478 on Form S-4. II-4 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant has duly caused this amendment to the registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the County of Arlington, and Commonwealth of Virginia, on July 31, 2000. AES RED OAK, L.L.C. By: /s/ BARRY SHARP ----------------------------------------- Barry Sharp
POWER OF ATTORNEY Pursuant to the requirements of the Securities Act of 1933, this amendment to the registration statement has been signed below by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ JOHN RUGGIRELLO* President and Director ------------------------------- July 31, 2000 John Ruggirello /s/ BARRY SHARP Director and Chief Financial Officer (and ------------------------------- principal accounting officer) July 31, 2000 Barry Sharp Director ------------------------------- July 31, 2000 Roger Naill /s/ BARRY SHARP ------------------------------- *Barry Sharp, Attorney-in-Fact
II-5 EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION - --------------------- ----------- 3* Amended and Restated Limited Liability Company Agreement, dated as of November 23, 1999 by AES Red Oak, L.L.C. 4.1(a)* Trust Indenture, dated as of March 1, 2000, by and among AES Red Oak, L.L.C., the Trustee and the Depositary Bank. 4.1(b)* First Supplemental Indenture, dated as of March 1, 2000, by and among AES Red Oak, L.L.C., the Trustee and the Depositary Bank. 4.2* Collateral Agency and Intercreditor Agreement, dated as of March 1, 2000, by and among AES Red Oak, L.L.C., the Trustee, the Collateral Agent, the Debt Service Reserve Letter of Credit Provider, the Power Purchase Agreement Letter of Credit Provider, the Working Capital Provider and the Depositary Bank. 4.3* Debt Service Reserve Letter of Credit and Reimbursement Agreement, dated as of March 1, 2000, by and among AES Red Oak, L.L.C., the Debt Service Reserve Letter of Credit Provider and the Banks named therein. 4.4* Power Purchase Agreement Letter of Credit and Reimbursement Agreement, dated as of March 1, 2000, by and among AES Red Oak, L.L.C., the Power Purchase Agreement Letter of Credit Provider and the Banks named therein. 4.5* Global Bond, dated March 15, 2000, evidencing 8.54% Senior Secured Bonds of AES Red Oak, L.L.C., Series A due 2019 in the principal amount of $224,000,000. 4.6* Global Bond, dated March 15, 2000, evidencing 9.20% Senior Secured Bonds of AES Red Oak, L.L.C., Series B due 2029 in the principal amount of $160,000,000. 4.7* Equity Subscription Agreement, dated as of March 1, 2000, by and among AES Red Oak, L.L.C., AES Red Oak, Inc. and the Collateral Agent. 4.8* Working Capital Agreement, dated as of March 1, 2000, by and among AES Red Oak, L.L.C., Working Capital Provider, and the Banks named therein. 4.9* Security Agreement, dated as of March 1, 2000, by and between AES Red Oak, L.L.C. and the Collateral Agent. 4.10* Pledge and Security Agreement, dated as of March 1, 2000, by and between AES Red Oak, Inc. and the Collateral Agent. 4.11* Pledge and Security Agreement, dated as of March 1, 2000, by and between AES Red Oak, L.L.C. and the Collateral Agent. 4.12* Consent to Assignment, dated as of March 1, 2000, by and between Williams Energy Marketing & Trading Company and the Collateral Agent, and consented to by AES Red Oak, L.L.C. (with respect to the Power Purchase Agreement). 4.13* Consent to Assignment, dated as of March 1, 2000, by and between The Williams Companies, Inc. and the Collateral Agent, and consented to by AES Red Oak, L.L.C. (with respect to the PPA Guaranty) 4.14* Consent to Assignment, dated as of March 1, 2000, by and between Raytheon Engineers & Constructors, Inc. and the Collateral Agent, and consented to by AES Red Oak, L.L.C. (with respect to the EPC Contract).
EXHIBIT NUMBER DESCRIPTION - --------------------- ----------- 4.15* Consent to Assignment, dated as of March 1, 2000, by and between Raytheon Company and the Collateral Agent, and consented to by AES Red Oak, L.L.C. (with respect to the EPC Guaranty). 4.16* Consent to Assignment, dated as of March 1, 2000, by and between Siemens Westinghouse Power Corporation and the Collateral Agent, and consented to by AES Red Oak, L.L.C. (with respect to the Maintenance Services Agreement). 4.17* Consent to Assignment, dated as of March 1, 2000, by and between AES Sayreville, L.L.C. and the Collateral Agent, and consented to by AES Red Oak, L.L.C. (with respect to the Development and Operations Services Agreement). 4.18* Consent to Assignment, dated as of March 1, 2000, by and between Jersey Central Power and Light Company d/b/a/ GPU Energy and the Collateral Agent, and consented to by AES Red Oak, L.L.C. (with respect to the Interconnection Agreement). 4.19* Consent to Assignment, dated as of March 1, 2000, by and between the Borough of Sayreville and the Collateral Agent, and consented to by AES Red Oak, L.L.C. (with respect to the Water Supply Agreement). 5* Opinion of Hunton & Williams regarding Legality. 10.1 Fuel Conversion Services, Capacity and Ancillary Services Purchase Agreement, dated as of September 17, 1999, and Amendment No. 1, dated as of February 21, 2000, by and between AES Red Oak, L.L.C. and Williams Energy Marketing & Trading Company. (Portions of this exhibit have been omitted pursuant to a request for confidential treatment.) 10.2(a) Agreement for Engineering, Procurement and Construction Services, dated as of October 15, 1999, and Amendment No. 1, dated as of February 23, 2000, by and between AES Red Oak, L.L.C. and Raytheon Engineers & Constructors, Inc. (Portions of this exhibit have been omitted pursuant to a request for confidential treatment.) 10.2(b) EPC Contract Prepayment Coordination Agreement, dated as of March 14, 2000, between AES Red Oak, L.L.C. and Raytheon Engineers and Constructors, Inc. (Portions of this exhibit have been omitted pursuant to a request for confidential treatment.) 10.3 Guaranty, dated as of October 15, 1999, by Raytheon Company in favor of AES Red Oak, L.L.C. (Portions of this exhibit have been omitted pursuant to a request for confidential treatment.) 10.4 Maintenance Program Parts, Shop Repairs and Scheduled Outage TFA Services Contract, dated as of December 8, 1999, and Amendment No. 1, dated February 15, 2000, by and between AES Red Oak, L.L.C. and Siemens Westinghouse Power Corporation. (Portions of this exhibit have been omitted pursuant to a request for confidential treatment.) 10.5 Development and Operations Services Agreement, dated as of March 1, 2000, by and between AES Sayreville, L.L.C. and AES Red Oak, L.L.C. 10.7* Water Supply Agreement, dated as of December 22, 1999, by and between AES Red Oak, L.L.C. and the Borough of Sayreville. 10.8 Generation Facility Transmission Interconnection Agreement, dated as of April 27, 1999, by and between Jersey Central Power & Light Company d/b/a GPU Energy and AES Red Oak, L.L.C. 10.9* Mortgage, Security Agreement and Assignment of Leases and Income, dated as of March 1, 2000, by and between AES Red Oak, L.L.C. and the Mortgagee.
EXHIBIT NUMBER DESCRIPTION - --------------------- ----------- 10.10* Assignment of Leases and Income, dated as of March 1, 2000, by and between AES Red Oak, L.L.C. and the Collateral Agent. 10.11* Financial Agreement, dated as of December 3, 1999, by and between AES Red Oak Urban Renewal Corporation and the Borough of Sayreville. 10.12* Promissory Note, dated as of March 15, 2000, of AES Red Oak Urban Renewal Corporation to AES Red Oak, L.L.C. 10.13* Ground Lease Agreement, dated as of March 1, 2000, by and between AES Red Oak, L.L.C. and AES Red Oak Urban Renewal Corporation. 10.14* Sublease Agreement, dated as of March 1, 2000, by and between AES Red Oak Urban Renewal Corporation and AES Red Oak, L.L.C. 10.15* Memorandum of Ground Lease, dated as of March 1, 2000, by and between AES Red Oak, L.L.C. and AES Red Oak Urban Renewal Corporation. 10.16* Memorandum of Sublease, dated as of March 1, 2000, by and between AES Red Oak Urban Renewal Corporation and AES Red Oak, L.L.C. 10.17* Construction Agency Agreement, dated as of March 1, 2000, by and between AES Red Oak Urban Renewal Corporation and AES Red Oak, L.L.C. 10.18* Leasehold Mortgage, Security Agreement and Assignment of Leases and Income, dated as of March 1, 2000, by and between AES Red Oak Urban Renewal Corporation and AES Red Oak, L.L.C. 10.19* Assignment of Mortgage, dated as of March 1, 2000, by AES Red Oak, L.L.C. in favor of the Collateral Agent. 10.20* URC Security Agreement, dated as of March 1, 2000, by and between AES Red Oak Urban Renewal Corporation and AES Red Oak, L.L.C. 10.21* Assignment of Leases and Income, dated as of March 1, 2000, by and between AES Red Oak Urban Renewal Corporation and AES Red Oak, L.L.C. 10.22* Assignment of Assignment of Leases and Income, dated as of March 1, 2000, by AES Red Oak, L.L.C. in favor of the Collateral Agent. 10.23 Guaranty, dated as of March 1, 2000, by The Williams Companies, Inc. in favor of AES Red Oak, L.L.C. (PPA Guaranty). (Portions of this exhibit have been omitted pursuant to a request for confidential treatment.) 23.1* Consent of Stone & Webster. 23.2* Consent of ICF Resources Incorporated. 23.3* Consent of Hunton & Williams (contained in Exhibit 5). 23.4* Consent of Deloitte & Touche LLP. 24* Power of Attorney (included on the signature page of this registration statement). 25* Statement of Eligibility and Qualification on Form T-1 of The Bank of New York, as Trustee under the Indenture. 27* Financial Data Schedule. 99.1* Form of Letter of Transmittal. 99.2* Form of Letter to Clients.
EXHIBIT NUMBER DESCRIPTION - --------------------- ----------- 99.3* Form of Letter to Registered Holders and DTC Participants. 99.4* Form of Notice of Guaranteed Delivery.
- ------------------------ * Previously filed as an Exhibit to our Company's Registration Statement No. 333-40478 on Form S-4. EX-10.1 2 ex-10_1.txt EXHIBIT 10.1 Exhibit 10.1 An asterisk ([*]) indicates that confidential information has been omitted and filed separately with the Securities and Exchange Commission as part of a Confidential Treatment Request. FUEL CONVERSION SERVICES, CAPACITY AND ANCILLARY SERVICES PURCHASE AGREEMENT BY AND BETWEEN AES RED OAK, L.L.C. AND WILLIAMS ENERGY MARKETING & TRADING COMPANY Dated September 17, 1999 TABLE OF CONTENTS
PAGE ARTICLE I: DEFINITIONS AND INTERPRETATION.........................................................................1 SECTION 1.1 Definitions....................................................................................1 SECTION 1.2 Interpretation................................................................................16 ARTICLE II: TERM.................................................................................................16 SECTION 2.1 Term..........................................................................................16 SECTION 2.2 Commercial Operation Date.....................................................................16 ARTICLE III: PURCHASE OF FUEL CONVERSION SERVICES...............................................................18 SECTION 3.1 Delivery of Natural Gas.......................................................................18 SECTION 3.2 Fuel Conversion Services......................................................................18 SECTION 3.3 Fuel Conversion Option Demand Payment.........................................................18 SECTION 3.4 Costs and Expenses............................................................................18 SECTION 3.5 Energy Exercise Fee...........................................................................19 SECTION 3.6 Adjustments...................................................................................19 SECTION 3.7 Variable O&M Payments.........................................................................19 SECTION 3.8 Facility Heat Rate Bonus or Credits...........................................................19 SECTION 3.9 Alternative Delivery Point....................................................................19 ARTICLE IV: PURCHASE AND SALE OF UNFORCED CAPACITY...............................................................20 SECTION 4.1 Sale of Temperature Adjusted Unforced Capacity................................................20 SECTION 4.2 Additional and Expansion Capacity.............................................................20 ARTICLE V: PROJECT DEVELOPMENT...................................................................................21 SECTION 5.1 Progress Reporting............................................................................21 SECTION 5.2 Establishing Facility Capacity................................................................21 SECTION 5.3 Required Permits and Approvals................................................................22 SECTION 5.4 Access to Site................................................................................22 ARTICLE VI: INITIAL START UP TESTING, TESTING AND COMMERCIAL OPERATION...........................................22 SECTION 6.1 Other Sales of Energy.........................................................................22 SECTION 6.2 Purchase of Natural Gas.......................................................................23 SECTION 6.3 Gas Price.....................................................................................23 SECTION 6.4 Replacement Index.............................................................................23 SECTION 6.5 Notice of Commercial Operation Date...........................................................23 SECTION 6.6 Demonstration of Facility Capacity............................................................23 ARTICLE VII: INTERCONNECTION AND METERING EQUIPMENT..............................................................24
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PAGE SECTION 7.1 Responsibility for Interconnection Facilities.................................................24 SECTION 7.2 Amendment of Interconnection Agreement........................................................24 SECTION 7.3 Gas Interconnection...........................................................................25 ARTICLE VIII: OPERATION AND DISPATCH.............................................................................26 SECTION 8.1 Operation Standards...........................................................................26 SECTION 8.2 Parallel Operation............................................................................26 SECTION 8.3 Disconnection by Host Utility.................................................................26 SECTION 8.4 Automatic Regulation..........................................................................27 SECTION 8.5 Energy and Ancillary Nominations and Confirmations............................................27 SECTION 8.6 Right to Energy and Ancillary Services........................................................27 SECTION 8.7 Facility Availability Status..................................................................28 SECTION 8.8 Combined Cycle Operation......................................................................29 SECTION 8.9 O&M Contractor................................................................................29 SECTION 8.10 Delivery to Facility.........................................................................29 SECTION 8.11 Natural Gas Nominations and Scheduling.......................................................29 SECTION 8.12 Imbalance Prevention.........................................................................29 SECTION 8.13 Transporter Penalties........................................................................30 SECTION 8.14 Actual Flow of Natural Gas...................................................................30 ARTICLE IX: MAINTENANCE.........................................................................................30 SECTION 9.1 Maintenance Standards.........................................................................30 SECTION 9.2 Maintenance Certification.....................................................................31 SECTION 9.3 Records of Outage Statistics..................................................................31 SECTION 9.4 Operations Forecasts..........................................................................31 ARTICLE X: METERING, BILLING, PAYMENT AND TAXES..................................................................32 SECTION 10.1 Generally....................................................................................32 SECTION 10.2 Metering of Net Electric Energy..............................................................32 SECTION 10.3 Metering of Natural Gas......................................................................33 SECTION 10.4 Monthly Statements...........................................................................33 SECTION 10.5 Record Retention.............................................................................35 SECTION 10.6 Maintenance and Testing of Gas Metering Equipment............................................36 SECTION 10.7 Responsibility for Taxes.....................................................................36 SECTION 10.8 Fuel Conversion Volume Rebate and Non-Dispatch Payments......................................38 ARTICLE XI: DISPUTE RESOLUTION...................................................................................39 SECTION 11.1 Third Party Engineer.........................................................................39 SECTION 11.2 Designated Representatives...................................................................40
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PAGE SECTION 11.3 Arbitration..................................................................................41 SECTION 11.4 Survival of Article..........................................................................42 ARTICLE XII: REPRESENTATIONS, WARRANTIES AND COVENANTS...........................................................42 SECTION 12.1 By Seller....................................................................................42 SECTION 12.2 By Williams..................................................................................43 ARTICLE XIII: LIABILITY, DEDICATION..............................................................................44 SECTION 13.1 Third Parties................................................................................44 SECTION 13.2 Limitation of Liability......................................................................44 SECTION 13.3 No Dedication to the Public..................................................................44 ARTICLE XIV: INDEMNITY...........................................................................................44 SECTION 14.1 Indemnity....................................................................................44 SECTION 14.2 Environmental Indemnity......................................................................45 SECTION 14.3 Claims by Employees..........................................................................46 SECTION 14.4 Risk of Loss.................................................................................47 SECTION 14.5 Survival of Article..........................................................................47 ARTICLE XV: INSURANCE............................................................................................47 SECTION 15.1 Insurance Generally..........................................................................47 SECTION 15.2 Risk Insurance...............................................................................48 SECTION 15.3 Copies.......................................................................................48 ARTICLE XVI: FORCE MAJUERE.......................................................................................49 SECTION 16.1 Excused Performance..........................................................................49 SECTION 16.2 Exclusions from Force Majeure................................................................50 SECTION 16.3 Labor Disputes...............................................................................51 SECTION 16.4 Termination from Force Majeure...............................................................51 SECTION 16.5 Extension from Force Majeure.................................................................51 ARTICLE XVII: EVENTS OF DEFAULT; TERMINATION, REMEDIES...........................................................51 SECTION 17.1 Events of Default............................................................................51 SECTION 17.2 Cure and Termination.........................................................................53 ARTICLE XVIII: SECURITY..........................................................................................54 SECTION 18.1 Indemnity for Delay..........................................................................54 SECTION 18.2 Seller's Guaranty............................................................................54 SECTION 18.3 Williams Guaranty............................................................................55 SECTION 18.4 Option to Bind...............................................................................56
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PAGE ARTICLE XIX: SEVERAL OBLIGATIONS.................................................................................57 SECTION 19.1 Several Obligations..........................................................................57 ARTICLE XX: WAIVER...............................................................................................57 SECTION 20.1 No Continuing Waiver.........................................................................57 ARTICLE XXI: ASSIGNMENT..........................................................................................57 SECTION 21.1 Assignment...................................................................................57 SECTION 21.2 Transfer of Facility.........................................................................58 SECTION 21.3 Void Assignments or Transfers................................................................58 SECTION 21.4 Cost Reimbursement...........................................................................58 ARTICLE XXII: NOTICES............................................................................................59 SECTION 22.1 Notice Requirements..........................................................................59 SECTION 22.2 Timing.......................................................................................59 ARTICLE XXIII: GRATUITIES........................................................................................59 SECTION 23.1 No Gratuities................................................................................59 ARTICLE XXIV: CAPTIONS...........................................................................................60 SECTION 24.1 Captions.....................................................................................60 ARTICLE XXV: CHOICE OF LAWS......................................................................................60 SECTION 25.1 Choice of Laws...............................................................................60 ARTICLE XXVI: MISCELLANEOUS PROVISIONS...........................................................................61 SECTION 26.1 Access and Confidentiality...................................................................61 SECTION 26.2 Survival.....................................................................................61 SECTION 26.3 Cost Responsibility..........................................................................62 SECTION 26.4 No Third Party Rights........................................................................62 SECTION 26.5 Announcements................................................................................62 SECTION 26.6 Support of Financing.........................................................................62 SECTION 26.7 Right to Purchase Facility...................................................................62 SECTION 26.8 Assignment of Third Party Agreements.........................................................62 SECTION 26.9 Examination of Records.......................................................................63 SECTION 26.10 Successors and Assigns......................................................................63 SECTION 26.11 Counterparts................................................................................63 SECTION 26.12 Entire Agreement............................................................................63 SECTION 26.13 Severability................................................................................63
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PAGE SECTION 26.14 Modification in Writing.....................................................................63 SECTION 26.15 Emissions Allowances........................................................................64 SECTION 26.16 Williams' Right to Intertie.................................................................64
v TABLE OF APPENDICES 1. PRICING 2. CONFIDENTIALITY AGREEMENT 3. EXEMPT WHOLESALE GENERATOR CERTIFICATION 4.A. PRELIMINARY SINGLE-LINE DIAGRAM SHOWING NATURAL GAS DELIVERY POINTS 4.B. PRELIMINARY SINGLE-LINE DIAGRAM SHOWING ELECTRIC DELIVERY POINTS 5. FORM OF GUARANTY BY THE AES CORPORATION 6. FORM OF GUARANTY BY THE WILLIAMS COMPANIES, INC. 7. LIST OF THIRD PARTY ENGINEERS 8. BILLING TEMPLATE 9. OPERATING SPECIFICATIONS vi FUEL CONVERSION SERVICES, CAPACITY AND ANCILLARY SERVICES PURCHASE AGREEMENT THIS FUEL CONVERSION SERVICES, CAPACITY AND ANCILLARY SERVICES PURCHASE AGREEMENT (together with the Appendices hereto, this "Agreement"), dated as of September 17, 1999, by and between AES Red Oak, L.L.C., a Delaware limited liability company ("Seller"), and Williams Energy Marketing & Trading Company, a corporation organized and existing under the laws of the State of Delaware ("Williams"), (Seller and Williams hereinafter referred to individually as a "Party" and collectively as the "Parties"). WITNESSETH: WHEREAS, Williams is engaged in the purchase of fuel conversion services to obtain electric energy for sale and the purchase of capacity and ancillary services; and WHEREAS, Seller will own, operate and maintain the Facility (as hereinafter defined) to be located at the Site (as hereinafter defined); and WHEREAS, Seller proposes to qualify the Facility as an exempt wholesale generator under the applicable rules of the Federal Energy Regulatory Commission ("FERC"); and WHEREAS, Williams intends to deliver Natural Gas (as hereinafter defined) to the Facility in accordance with this Agreement; and WHEREAS, Seller desires to sell and Williams desires to purchase Unforced Capacity (as hereinafter defined), Ancillary Services (as hereinafter defined) and Fuel Conversion Services (as hereinafter defined) under the terms and conditions hereinafter set forth. NOW, THEREFORE, in consideration of the mutual covenants and promises set forth below, the Parties hereto, intending to be legally bound, hereby covenant, promise and agree as follows: ARTICLE I: DEFINITIONS AND INTERPRETATION SECTION 1.1 Definitions For purposes of this Agreement, the following definitions shall apply unless the context clearly indicates otherwise. All capitalized terms used in this Agreement that are not defined in this Article I shall have the definitions contained elsewhere herein, including the Appendices hereto. 1 "ACCEPTED ELECTRICAL PRACTICES" - those practices, methods and acts engaged in or approved by a significant portion of the electric utility industry during the relevant time period, or any of the practices, methods and acts which, in exercise of reasonable judgment in light of the facts known at the time a decision is made, that could have been expected to accomplish a desired result at reasonable cost consistent with good business practices, reliability, safety and expedition. Accepted Electrical Practices are not intended to be limited to the optimum practices, methods or acts to the exclusion of others, but rather to those practices, methods and acts generally accepted or approved by a significant portion of the electric utility industry in the relevant region, during the relevant time period, as described in the immediately preceding sentence. "AFFILIATE" - with respect to any specified Person, any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, "control" (including, with correlative meanings, the terms "controlling," "controlled by" and "under common control with"), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise. "ALLOCATED START-UP DURATION" - the time period required by Seller to permit a Cold Start, Warm Start or Hot Start of the Facility as Scheduled for a Dispatch Period under normal Facility equipment conditions. Such period of time will be set initially based on the engineering, construction and procurement contractor's guidelines, which shall be provided by Seller to Williams promptly after receipt by Seller of such guidelines from the engineering, procurement and construction contractor but in any event no later than the Commercial Operation Date, and revised by the Parties after the first Contract Year to reflect actual operating experience; provided, however, that such revised periods shall be within [*] of the engineering, construction and procurement contractor's guidelines. "ALTERNATIVE DELIVERY POINT" - any physical point on the transmission system operated by PJM, other than the Primary Delivery Point, that is mutually agreed to by the Parties pursuant to Section 3.9 at which Seller may deliver or cause to be delivered Energy and/or Ancillary Services and at which Williams shall receive such Energy and/or Ancillary Services. "ANCILLARY SERVICES" - those services which the Facility is capable of providing that are defined or described as "Ancillary Services" in the PJM Tariff and in the event such PJM Tariff does not exist, then those similar or related services to the extent commonly sold or saleable (or used or usable) in the electric power generation or transmission industry within the PJM market from time to time. "ANTICIPATED COMMERCIAL OPERATION DATE" - has the meaning given such term in Section 2.2. 2 "AUTOMATIC REGULATION" - the capability of a Unit to increase or decrease automatically its megawatt output from a set point in response to a control signal from a remote operations center. Such capability to regulate will be set initially based on the engineering, construction and procurement contractor's guidelines, which shall be provided by Seller to Williams promptly after receipt by Seller of such guidelines from the engineering, procurement and construction contractor but in any event no later than the Commercial Operation Date, and revised by the Parties after the first Contract Year to reflect actual operating experience; provided, however, that such revised capability shall be within [*] of the engineering, construction and procurement contractor's guidelines provided prior to the Commercial Operation Date. "BACK-UP ELECTRIC METERING EQUIPMENT" - metering equipment comparable to the Electric Metering Equipment. "BEGINNING REQUESTED DISPATCH HOUR" - the first clock hour during which the Facility is Scheduled to deliver Net Electric Energy and/or Ancillary Services during a Dispatch Period. "BILLING MONTH" - except for the first such period under this Agreement, which may be shorter, one-twelfth (1/12) of a year, or the period of approximately thirty (30) Days between two (2) regular consecutive readings of the Host Utility's electric meter or meters, but not less than twenty-six (26) Days and not more than thirty-five (35) Days. "BTU" - the quantity of heat required to raise the temperature of one pound of water one degree Fahrenheit at 60 degrees Fahrenheit. "BUSINESS DAY" - any Day on which the Federal Reserve Bank of New York, New York is open for business. "CAPACITY RESOURCE" - net capacity from owned (or contracted) generating resources which are designated and committed by a Load Serving Entity, as defined in the Reliability Assurance Agreement, to serve its obligations under the Reliability Assurance Agreement or generating resources that have otherwise been accredited as "Capacity Resources" under procedures adopted and implemented by PJM. "CENTRAL PREVAILING TIME" - the time in the central time zone of the United States. "COLD START" - a start of a Unit in Combined Cycle Mode given that all of the breakers of that Unit's combustion turbine generator have been open for at least the previous [*]. "COMBINED CYCLE MODE" - the simultaneous operation of a combustion turbine(s), heat recovery steam generator(s) and steam turbine for the purpose of producing Net Electric Energy. 3 "COMMERCIAL OPERATION DATE" - the Day on which (i) the Initial Start-Up Testing of the Facility has been successfully completed to the satisfaction of Seller and Williams has received written notice thereof from Seller, (ii) Seller has received all approvals necessary for it to make the sales contemplated hereunder to Williams, and (iii) Seller has obtained all required permits and authorizations for operation of the Facility. "CONTRACT ANNIVERSARY DATE" - the last Day of the month in which the Commercial Operation Date occurs and each succeeding anniversary of such Day throughout the Term of this Agreement. "CONTRACT QUANTITY" - the temperature adjusted contract quantity of Energy Williams shall be obligated to receive according to its Dispatch Notice which shall be up to 764.3 MWh/h [*] and, in accordance with Appendix 9, the allowable dispatch curve. The Contract Quantity will be adjusted annually based on PJM's facility output test or rating. "CONTRACT YEAR" - the twelve months ending on the Contract Anniversary Date of each year except for the first Contract Year which shall also include any portion of the month between the Commercial Operation Date and the end of the month in which the Commercial Operation Date occurs. "DAILY GAS INDEX" - has the meaning given such term in the definition of Gas Price. "DAY" - a period of twenty-four (24) consecutive hours, beginning at 12:01 a.m. Eastern Prevailing Time. "DISPATCH" - the act of directing a Unit(s) or the Facility to generate Net Electric Energy and/or Ancillary Services, pursuant to a Dispatch Notice. "DISPATCH NOTICE" - a notice delivered to Seller by or on behalf of Williams directing the Dispatch of the Facility for a specific Dispatch Period and quantity of Energy and/or Ancillary Services effective until the delivery of a subsequent Dispatch Notice and in a form to be agreed to by the Parties no later than twelve (12) months after the Execution Date, provided that when such notice is given telephonically it shall be promptly confirmed in writing by facsimile or electronic transmission. "DISPATCH OPERATION" - the operation of the Facility at the direction of Williams. "DISPATCH PERIOD" - a period of time during which Williams has requested delivery of Net Electric Energy and/or the provision of Ancillary Services starting with a Beginning Requested Dispatch Hour and concluding with an Ending Requested Dispatch Hour. A Dispatch Period may continue for more than one calendar Day. 4 "DUFF & PHELPS" - Duff & Phelps Credit Rating Company, a company headquartered in Chicago, Illinois that provides ratings and research on corporate financings. "EARLY SHUTDOWN NOTICE" - a notice provided by Williams to Seller during a Dispatch Period requesting an earlier Ending Requested Dispatch Hour of a Unit(s) or the Facility than that specified in the Dispatch Notice which commenced such Dispatch Period, provided that such earlier Ending Requested Dispatch Hour shall not be any sooner than one (1) hour after receipt by Seller of such Early Shutdown Notice. "EASTERN PREVAILING TIME" - the time in the eastern time zone of the United States. "ELECTRIC METERING EQUIPMENT" - electric meters and associated equipment, which shall be owned by the Host Utility and operated and maintained in accordance with the Interconnection Agreement, including, without limitation, metering transformers and meters for measuring kilowatt-hours and reactive volt-ampere hours, utilized in determining the amount of Net Electric Energy and/or Ancillary Services delivered by Seller to the Primary Delivery Point under this Agreement. "EMERGENCY(IES)" - a condition(s) or situation(s) which the Host Utility, PJM or Seller reasonably deems imminently likely to endanger life or property including the Facility; or imminently likely to impair or adversely affect the Host Utility's electrical system or the electrical systems of others to which the Host Utility's electrical system is directly or indirectly connected. Such a condition or situation may include, but is not limited to, a forced outage of the Host Utility's electrical system, potential overloading of the Host Utility's transmission and/or distribution circuits, unusual operating conditions on either the Host Utility's or Seller's electrical system or conditions such that the Host Utility is unable to accept Net Electric Energy from the Facility without jeopardizing the Facility, the Host Utility's electrical system or the electrical systems of others to which the Host Utility's electrical system is directly or indirectly connected. "ENDING REQUESTED DISPATCH HOUR" - the last clock hour during which the Facility is Scheduled to deliver Net Electric Energy or Ancillary Services during a Dispatch Period. "ENERGY" - electric energy measured in MWh (whole or in part) that meets or exceeds the specifications of the Regional Transmission Owner in effect at the time the Energy is delivered to the Primary Delivery Point or Alternative Delivery Point. "ENERGY EXERCISE FEE" - has the meaning given to such term in Appendix 1, Section II, A.3. "ENVIRONMENTAL LAW" - any applicable federal, state, local or other governmental legal requirement governing or relating to (i) the environment, (ii) releases or threatened releases of Hazardous Materials including, without limitation, 5 investigations, monitoring and abatement of such releases, and (iii) the manufacture, handling, transport, use, treatment, storage or disposal of Hazardous Materials or materials containing Hazardous Materials. "EXECUTION DATE" - the date set forth in the preamble to this Agreement. "EXPANSION CAPACITY" - an increase in the amount of electric generating capacity located on the Site but not a part of the Facility. "FACILITY" - the combined cycle electric generating facility located in Sayreville, New Jersey, with a design electric generating capacity of approximately 764.3 MW [*] at [*]. Fahrenheit consisting of three (3) 501 "F" type combustion turbines, three (3) heat recovery steam generators and one (1) steam turbine, with evaporative cooling on the inlet air flow, together with all of the parts, instruments, appurtenances, accessories and other property that may be installed in or attached to or otherwise become part of such facility. The Facility is comprised of two bus bars. Bus bar 1 (two (2) combustion turbines and one (1) auxiliary station) receives approximately 350 MW. Bus bar 2 (one (1) steam turbine, one (1) combustion turbine and one (1) auxiliary station) receives approximately 410 MW. "FACILITY CAPACITY" - the actual total net MW generating capability of the Facility measured at the Primary Delivery Point when operating on Natural Gas in Combined Cycle Mode at [*]. Fahrenheit as established during Initial Start-Up Testing of the Facility and as demonstrated and adjusted from time to time pursuant to Section 6.6. "FACILITY TESTING" - Seller's operation and testing of the Facility, including performance tests, to determine, among other things, the operating characteristics of the Facility, the Facility Capacity and the Facility's ability to meet Seller's obligations pursuant to this Agreement; provided that any transmission costs associated with Initial Start-Up Testing shall be paid by Seller. "FERC" - the Federal Energy Regulatory Commission or any successor agency thereto. "FINAL CO DATE" - has the meaning given such term in Section 2.2(c). "FIRST PAID EXTENSION OPTION" - has the meaning given such term in Section 2.2(a). "FORCE MAJEURE" - [*] 6 [*] "FORCED OUTAGE" - a "Generator Forced Outage" as defined in the PJM Agreement. Forced Outages include: "TOTAL FORCED OUTAGE" - during periods other than Planned Outages or Maintenance Outages, the Facility is unable to engage in Dispatch Operation, or the Facility is declared by Seller to be in a Total Forced Outage for what would otherwise be a Partial Forced Outage. "PARTIAL FORCED OUTAGE" - during periods other than Planned Outages or Maintenance Outages, the Facility is partially able to engage in Dispatch Operation, and has not been declared by Seller to be in a Total Forced Outage. "FREE EXTENSION OPTION" - has the meaning given such term in Section 2.2(a). "FUEL CONVERSION OPTION DEMAND CHARGE" - a fixed monthly amount as set forth on Appendix 1, Section II, A.2, Table I attached hereto. "FUEL CONVERSION OPTION DEMAND PAYMENT" - the product of the Fuel Conversion Option Demand Charge and the Facility Capacity, which is to be paid by Williams to Seller as set forth in Appendix 1, Section II, A.2. "FUEL CONVERSION SERVICES" - (i) operation of the Facility by Seller to combust the Natural Gas delivered by Williams in order to generate and deliver at the Primary Delivery Point Net Electric Energy or to provide at the Primary Delivery Point Ancillary Services or (ii) the provision of Energy or Ancillary Services in accordance with Section 3.9. "FUEL CONVERSION VOLUME REBATE" - has the meaning given such term in Section 10.8. "FULLY AVAILABLE" - any time the Facility is not in a Forced Outage, Maintenance Outage, Partial Outage or Planned Outage and capable of producing 100% of the Facility Capacity and Ancillary Services. "GAS DAILY" - the daily publication referred to herein published by FT Energy. 7 "GAS DAY" -- A period of 24 consecutive hours beginning at 9 A.M. Central Prevailing Time. "GAS PRICE" -- if Natural Gas is Scheduled during the Gas Day prior to expected flow, the Gas Price shall be the sum of the price published by GAS DAILY for Natural Gas to flow on such Gas Day under the heading "Daily Price Survey" and under the column heading "Midpoint" for the point "Transco Z6 (NY)" (the "Daily Gas Index"), plus applicable Transportation Charges from the reference point for the Daily Gas Index to the Facility, plus [*]; if Natural Gas is Scheduled during the same Gas Day of expected flow the price shall be the market price as determined by Williams in a commercially reasonable manner for Natural Gas delivered for the reference point "Transco Z6 (NY)" (the "Intraday Gas Price") plus applicable Transportation Charges from the reference point for the Daily Gas Index to the Facility. "GDPIPD" -- the annual Gross Domestic Product Implicit Price Deflator as reported by the United States Department of Commerce, Bureau of Economic Analysis monthly in the SURVEY OF CURRENT BUSINESS (Index base 1992 = 100). "GPU" -- Metropolitan Edison Company, Pennsylvania Electric Company and Jersey Central Power and Light Company, collectively doing business as GPU Energy, Inc., and their Affiliates. "GUARANTY AMOUNT" -- has the meaning given such term in Section 18.4. "HAZARDOUS MATERIALS" -- any petroleum or petroleum products, radioactive materials, asbestos in any form that is or could become friable, urea formaldehyde foam insulation, transformers or other equipment that contain dielectric fluid containing polychlorinated biphenyls ("PCBs") and any other chemicals, materials or substances which are now or hereafter become defined as or included in the definition of "hazardous substances," "hazardous wastes," "hazardous materials," "extremely hazardous wastes," "restricted hazardous wastes," "toxic substances" or "toxic pollutants" under, or are regulated or become regulated as such by Environmental Laws, including but not limited to the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended (42 U.S.C. Section 9601 ET SEQ.); the Hazardous Material Transportation Act, as amended (42 U.S.C Section 1801 ET SEQ.); the Resource Conservation and Recovery Act, as amended (42 U.S.C. Section 6901 ET SEQ.); the Toxic Substances Control Act, as amended (15 U.S.C. Section 2601); the Clean Air Act, as amended (42 U.S.C Section 7401 ET SEQ.); the Federal Water Pollution Control Act, as amended (33 U.S.C. Section 1251 ET SEQ.); or in the regulations promulgated pursuant to said laws. "HEAT RATE" -- the actual Facility fuel efficiency performance while operating in Combined Cycle Mode and on Natural Gas (expressed in Btu per kWh (HHV)). Prior to the Commercial Operation Date, Seller shall provide, for information purposes only, Williams with Heat Rate curves for the Facility, when said curves are reasonably available, which show expected changes to the Heat Rate due to changes in ambient 8 temperature and other conditions. Seller also shall inform Williams of any material changes in the expected Heat Rate of the Facility. "HEAT RATE TARGET" -- shall be [*] Btu per kWh (HHV). If Williams issues a Dispatch Notice for less than the Facility Capacity then the Heat Rate Target will be in accordance with the Heat Rate curve that shows the Heat Rate Target at other allowable dispatch levels which shall be included herein as Appendix 9. In all cases such Heat Rate Target shall be adjusted as appropriate to account for the provision of Ancillary Services which affect Heat Rate. Seller will provide Williams such curve as soon as reasonably practicable but in no event later than the Commercial Operation Date. "HHV" -- higher heating value. "HOST UTILITY" -- Jersey Central Power & Light Company, which also does business as GPU Energy, or its successor. "HOT START" -- a start of a Unit in Combined Cycle Mode given that all of the breakers of that Unit's combustion turbine generator have been open for no more than [*]. "IMBALANCE" -- has the meaning given such term in Section 8.12. "INITIAL START-UP TESTING" -- Seller's operation and testing of the Facility prior to the Commercial Operation Date, including performance tests, to determine, among other things, the operating characteristics of the Facility, the Facility Capacity and the Facility's ability to meet Seller's obligations pursuant to this Agreement; provided that any transmission costs associated with Initial Start-Up Testing shall be paid by Seller. "INTERCONNECTION AGREEMENT" -- that certain agreement between Seller and Host Utility dated April 27, 1999. "INTERCONNECTION FACILITIES" -- all structures, facilities, equipment, auxiliary equipment, devices and apparatus including the Protective Apparatus directly or indirectly required and installed to interconnect and deliver Net Electric Energy and Ancillary Services from the Facility to the Primary Delivery Point, including, but not limited to, electric transmission and/or distribution lines, transformation, switching, Electric Metering Equipment, any other metering equipment, communications, and safety equipment, including, but not limited to, equipment required to protect (i) the Host Utility's electrical system and its customers from faults occurring at the Facility, and (ii) the Facility from faults occurring on the Host Utility's electrical system or on the electrical systems of others to which the Host Utility's electrical system is directly or indirectly connected. "INVESTMENT GRADE" -- a rating in one of the four highest categories (without regard to subcategories within such rating categories) by Standard & Poor's or Moody's. 9 "kW" -- kilowatt "kWh" -- kilowatt-hour. "LATE PAYMENT INTEREST RATE" -- the Prime Rate plus one (1) percent per annum. "LENDER" -- any financial institution, Person, bondholder or noteholder which provides debt or equity capital, loans, credit or credit support, acts as counterparty on any interest rate or currency hedging arrangements or provides other financing to Seller in respect of the acquisition, ownership, construction, operation or maintenance of the Facility; such term also includes any such financial institution, Person, bondholder or noteholder which acts in the capacity of "Lender" in connection with any refinancing by Seller of its then outstanding debt obligation. "LOAD SERVING ENTITY" -- any entity (or the duly designated agent of such entity), including a load aggregator or power marketer, (i) serving end-users within the PJM control area, and (ii) that has been granted the authority or has an obligation pursuant to state or local law, regulation or franchise to sell electric energy to end-users located within the PJM control area. "LOCATIONAL MARGINAL PRICE" OR "LMP" -- the hourly integrated market clearing marginal price (exclusive of any price for Unforced Capacity from Capacity Resources), expressed in $/MWh, for electric energy at a location where energy is delivered or received, calculated pursuant to the terms of the PJM Agreement. In the event that LMP becomes unavailable or ceases to be made available, the Parties shall use good faith efforts to agree upon a Replacement Price. If the parties cannot agree on a substitute methodology to determine price by the end of the first month for which the Replacement Price could not be determined, then Williams and Seller shall each prepare a list of three alternative published reference postings of spot prices for Net Electric Energy delivered in the same geographic area as the Primary Delivery Point. Each list shall set forth the highest priority posting first. Each Party shall submit its list to the other within ten (10) days after the end of the first month for which the price could not be determined. The first posting appearing on Seller's list that also appears on Williams' list shall constitute the new price effective as of the date that the Parties ceased using LMP. "LOSS" -- has the meaning given such term in Section 14.1. "MAINTENANCE OUTAGE" -- the Scheduled removal of the Facility, or a portion thereof, from service in order to perform necessary repairs on specific components of the Facility where removal of the Facility could be postponed to the weekend past the immediately succeeding weekend. In the case of conflict, the definition of "Generator Maintenance Outage" as defined in the PJM Agreement shall control. "MAJOR MAINTENANCE RESERVE ACCOUNT" -- has the meaning given such term in Section 10.8(b). 10 "MINIMUM UTILIZATION CHARGE" -- has the meaning given such term in Appendix 1, Section II, A.2. "MOODY'S" -- Moody's Investors Services, Inc., and its successors. "MMBtu" -- One Million Btus "MW" -- megawatt. "MWh" -- megawatt-hour. "NATURAL GAS" -- merchantable Natural Gas that meets the quality specifications set forth in the applicable Transporter's tariff. "NATURAL GAS DELIVERY POINT" -- each of the physical point(s) identified on Appendix 4.A at which Natural Gas is delivered and measured. "NATURAL GAS INTERCONNECTION FACILITIES" -- has the meaning given such term in Section 7.3. "NATURAL GAS METERING EQUIPMENT" -- gas meters and associated equipment utilized in determining (i) the amount of Natural Gas delivered to Seller by Williams under this Agreement, and (ii) the amount of Natural Gas consumed by the Facility. "NET ELECTRIC ENERGY" -- the gross amount of electric energy generated by the Facility at Williams' direction, less station service requirements and any transformation and transmission line Losses to the Primary Delivery Point and delivered by Seller to the Host Utility's electric system at the Primary Delivery Point. "NEW TAXES" -- (i) any Taxes or modifications therein enacted and effective after the Execution Date, including, without limitation, that portion of any Taxes or New Taxes that constitutes an increase in the rate thereof (but excluding an increase in the value of the base upon or from which computed), or (ii) any law, order, rule or regulation, or official interpretation thereof; enacted and effective after the Execution Date resulting in application of any Taxes to a new or different class of Persons. "NON-DISPATCH COST" -- has the meaning given such term in Appendix 1, Section V. "NON-DISPATCH PAYMENT" -- has the meaning given such term in Appendix 1, Section V. "NON-PEAK PERIOD" -- the months other than the months comprising the Summer Peak Period and Winter Peak Period. 11 "PARTIALLY AVAILABLE" -- has the meaning given such term in Appendix 1, Section V. "PEAK HOURS" -- 7:00 AM Eastern Prevailing Time to 11:00 PM Eastern Prevailing Time, Monday through Friday except for non-Business Days. "PERMITTED LIEN" -- any Lien (i) for current Taxes not delinquent, (ii) for an immaterial amount or in connection with any immaterial matter, in either case arising in the ordinary course of business and which, together with all other Liens described in this clause (iii), does not materially affect or interfere with the present or intended value or use of the affected property or (iv) securing the loans to Seller permitted by this Agreement with respect to the construction, ownership and operation of the Facility or any permitted refinancings thereof. "PERSON" -- any individual, corporation, limited liability company, partnership, limited partnership, trust, association or other entity. "PJM" -- the PJM Interconnection, L.L.C., acting in accordance with the PJM Agreement or the applicable successor entity. "PJM AGREEMENT" -- that certain Amended and Restated Operating Agreement of PJM Interconnection, L.L.C., dated as of June 2, 1997, and applicable portions of the PJM Manuals, as further amended, revised or superseded from time to time. "PJM MANUALS" -- the instructions, rules, procedures and guidelines established by PJM for the operation, planning and accounting requirements of the PJM control area and the PJM energy market. "PJM TARIFF" -- the PJM Open Access Transmission Tariff as on file with FERC and in effect from time to time, including any Schedules, appendices, or exhibits attached thereto. "PLANNED OUTAGE" -- a complete or partial outage of the Facility that has been Scheduled in accordance with Section 9.4(b) hereof. "POSITION NOTICE" -- has the meaning given such term in Section 11.1(a). "PRIMARY DELIVERY POINT" -- the physical points set forth as Appendix 4.B at which Net Electric Energy and/or Ancillary Services are to be delivered and measured. "PRIME RATE" -- the prime commercial lending rate announced by Citibank, N.A., as in effect from time to time. "PROTECTIVE APPARATUS" -- such equipment and apparatus on Seller's side of the Primary Delivery Point, including, but not limited to, protective relays, circuit breakers 12 and the like, necessary or appropriate to isolate the Facility from the Host Utility's electrical system consistent with Accepted Electrical Practices. "PROTECTIVE GAS APPARATUS" -- such equipment and apparatus on Seller's side of the Natural Gas Delivery Point necessary to maintain the safety of the Facility consistent with standard gas industry practices. "PUC" -- New Jersey Department of Public Utilities or any successor agency thereto. "RATING AGENCY" -- Standard & Poor's, Moody's and each other credit Rating Agency from which Seller seeks to obtain a rating on the debt it incurs to finance the construction of the Facility. "REGIONAL TRANSMISSION OWNER (RTO)" -- each entity (a) that owns, leases or otherwise has a possessory interest in facilities used for the transmission of electric energy in interstate commerce, (b) that provides transmission under the PJM Tariff and (c) that is a party to the PJM Transmission Owners Agreement and PJM Operating Agreement. "RELIABILITY ASSURANCE AGREEMENT" -- that certain Reliability Assurance Agreement Among Load Serving Entities in the PJM Control Area, dated as of June 2, 1997, as amended, revised or superseded from time to time, including applicable portions of the PJM Manuals. "REPLACEMENT PRICE" -- has the meaning given such term in Appendix 1, Section V. "ROLLING TWELVE MONTH PERIOD" -- the most recent twelve months (or portions thereof) immediately preceding each Billing Month. "SCHEDULE OR SCHEDULED" -- the act of Williams, Seller, the Host Utility or Transporter timely notifying, requesting, pre-scheduling, nominating and confirming to each other, consistent with Transporter's tariff or procedures or with the Interconnection Agreement and PJM procedures, as may be applicable, the quantity of Ancillary Services, Net Electric Energy or Natural Gas to be delivered hereunder in any given hour. As between the Parties, Williams shall be the exclusive scheduler of any Natural Gas upstream of the Natural Gas Delivery Point and shall also be the exclusive scheduler of any Net Electric Energy and Ancillary Services downstream of the Primary Delivery Point. "SECOND PAID EXTENSION OPTION" -- has the meaning given such term in Section 2.2(c). "SHUTDOWN" -- an actual Shutdown of a Unit, as evidenced by the opening of the Unit's combustion turbine breaker, or the Facility, as evidenced by the opening of all of 13 its breakers, immediately following the Ending Requested Dispatch Hour of a Dispatch Period or pursuant to an Early Shutdown Notice. "SITE" -- the location of the Facility in Sayreville, New Jersey, identified as Lot 1, Block 49.01 as designated on the Tax Maps of the Borough of Sayreville. "STANDARD & POOR'S" -- Standard & Poor's Rating Group, a division of the McGraw-Hill Companies, Inc., and its successors. "START-UP" -- a Start-Up of the Facility, one Unit or two Units necessary to comply with the Schedule or request by Williams for a Dispatch Period for the Facility immediately preceding a Beginning Requested Dispatch Hour. "START-UP NOTIFICATION LEAD TIME" -- a period of at least [*]. "START-UP TESTING DATE" -- has the meaning given such term in Section 7.3. "SUCCESSFUL START-UP" -- a Start-Up that results in the [*], pursuant to a Williams' Dispatch Notice, for a period of time equal to the [*], whichever is less. "SUMMER PEAK PERIOD" -- the months (or portions thereof) of June, July, August and September. "TAXES" -- any or all federal, state and/or local, municipal, ad valorem, property, occupation, severance, generation, first use, conversion, Btu or power, transmission, utility, gross receipts, privilege, sales, use, consumption, excise, lease, transaction, and other Taxes, governmental charges, license fees, permit fees, assessments, or increases in or interest on or penalties relating to any of the foregoing, other than Taxes based on net income or net worth. "TEMPERATURE ADJUSTED FACILITY CAPACITY" -- the capacity of the Facility to actually generate Net Electric Energy at any particular temperature measured at the gas turbine inlet between -20 and 100 degrees Fahrenheit corresponding to the Facility Capacity, and reflecting the effect of temperature on both the Facility Capacity while in Combined Cycle Mode and the air/gas flow into the combustion turbine. Seller will provide Williams with temperature adjusted capacity curves showing expected changes in the capacity of the Facility at such different temperatures as soon as reasonably practicable but in no event later than the Commercial Operation Date. "TEMPERATURE ADJUSTED UNFORCED CAPACITY" OR "TAUC" -- the Unforced Capacity Rating associated with the Facility adjusted to [*] degrees Fahrenheit as described in Appendix 9. 14 "TEMPERATURE ADJUSTED UNIT CAPACITY" -- the capacity of any two Units to generate Net Electric Energy at any particular temperature measured at the gas turbine inlet between -20 and 100 degrees Fahrenheit corresponding to approximately 66 percent of Facility Capacity and reflecting the effect of temperature on both the Unit Capacity while in Combined Cycle Mode and the air/gas flow into the combustion turbine. "TERM" -- Subject to Section 16.5 hereof, the Term of this Agreement commencing on the Execution Date and continuing for a period of twenty (20) Contract Years after the first Contract Anniversary Date. "THIRD PARTY ENGINEER" -- has the meaning given such term in Section 11.1. "THOMPSON BANKWATCH" -- Thompson Financial Bankwatch, a company that provides ratings, research and analysis on financial institutions. "TOTAL FIXED PAYMENT" -- has the meaning given such term in Appendix 1, Section II, A.2. "TRANSPORTER(S)" -- all Natural Gas gathering or pipeline companies, or local distribution companies, acting in the capacity of a Transporter, transporting Natural Gas for Seller or Williams to the Natural Gas Delivery Point. "TRANSPORTATION CHARGES" -- those charges associated with the delivery of Natural Gas from Transco Zone 6, New York, to the Natural Gas Delivery Point inclusive of fuel. Williams shall provide such charges as soon as reasonably practicable but in no event later than the Commercial Operation Date. "UNFORCED CAPACITY" -- has the meaning given to that term, or any successor term, in the Reliability Assurance Agreement. "UNFORCED CAPACITY RATE" -- shall have the meaning given such term in Appendix 1, Section II, A.2. "UNFORCED CAPACITY RATING" -- the amount of Unforced Capacity associated with the Facility for a Billing Month as determined pursuant to the Reliability Assurance Agreement without regard to whether the Facility is a "Capacity Resource" pursuant to the Reliability Assurance Agreement. "UNIT" -- a single independent combined cycle train, consisting of a combustion turbine and heat recovery steam generator operating together with associated equipment. "VARIABLE O&M RATE" OR "VOM" -- a rate applied to each MWh of Net Electric Energy delivered, as more fully described in Appendix 1, Section II, A.1. 15 "VARIABLE O&M PAYMENT" OR "VOMP" -- the product of the Variable O&M Rate and the Net Electric Energy for a Dispatch Period, which is to be paid by Williams to Seller as set forth in Appendix 1, Section II, A.1. "WARM START" -- the start of a Unit in Combined Cycle Mode given that all of the breakers of that Unit's combustion turbine generator have been open for more than [*] but less than [*] hours. "WINTER PEAK PERIOD" -- the months (or portions thereof) of December, January and February. SECTION 1.2 Interpretation Unless a different interpretation arises from the context: (a) the reference to any article, section, paragraph or appendix is a reference to an article, section, paragraph or appendix of this Agreement, (b) with respect to the definitions set forth in Article I, whenever applicable the singular shall include the plural and vice-versa; and (c) the words "includes" or "including" mean "including, but not limited to" and are not limiting. Any conflict between an article or section of this Agreement and any provision of an appendix shall be resolved by reference to the article or section of this Agreement. ARTICLE II: TERM SECTION 2.1 Term Subject to the terms hereof, including those of Section 16.5, the Term of this Agreement shall commence on the Execution Date and shall continue for a period of twenty (20) Contract Years after the first Contract Anniversary Date. SECTION 2.2 Commercial Operation Date (a) Seller shall cause the Commercial Operation Date to occur no later than December 31, 2001 (the "Anticipated Commercial Operation Date"). If the Commercial Operation Date has not occurred by December 31, 2001, for any reason whatsoever, including without limitation the continued existence of, or delay caused by, a Force Majeure event affecting Seller (other than any delay caused by, an inability of Seller to obtain Natural Gas for the testing or operation of the Facility, or by any act or failure to act by Williams or an Affiliate of Williams, where such action is required under this Agreement), Williams shall (notwithstanding anything in this Agreement or otherwise to the contrary except this Section 2.2(a)) have the absolute right to terminate this Agreement upon written notice to Seller without any liability or responsibility [*]. 16 [*] (b) In the event Seller qualifies for the [*] Option but the Commercial Operation Date is not achieved by June 30, 2002, (i) Seller may elect to extend its obligation to achieve the Commercial Operation Date up to and including June 30, 2003 by paying Williams the amounts, and in accordance with the procedures, specified in Section 2.2(c) and (ii) Seller shall pay to Williams an amount equal to the lesser of (x) any actual damages Williams suffers or incurs after June 30, 2002 as the result of Williams' reliance upon the delivery by such date of Unforced Capacity, Ancillary Services and Fuel Conversion Services hereunder, to the extent said damages cannot be mitigated fully, and (y) [*]. Seller agrees that the damages Williams may suffer under these circumstances will be any and all reasonable costs incurred by Williams in excess of costs that would have been incurred had the Commercial Operation Date occurred on or before December 31, 2001. (c) In the event Seller qualifies for the [*] Option or elects the First Paid Extension Option, if the Commercial Operation Date has not occurred by June 30, 2002, (the "Final CO Date") for any reason whatsoever (other than as a result of an inability of Seller to obtain Natural Gas for the testing or operation of the Facility, or any act or failure to act by Williams or an Affiliate of Williams, where such action is required under this Agreement), including without limitation the continued existence of or delay caused by a Force Majeure event affecting Seller, Williams shall (notwithstanding anything contained in this Agreement or otherwise to the contrary) have the absolute right to terminate this Agreement upon written notice to Seller without any liability or responsibility, provided, however, that notwithstanding the preceding provisions of this sentence, Seller shall have the right to extend the Final CO Date to and including June 30, 2003 by giving Williams written notice of the estimated extension required no later than April 30, 2002 and paying to Williams the amount of [*]/Day for each of the first 60 Days beyond June 30, 2002, [*]/Day for each Day of delay between and including 61 and 120 Days after June 30, 2002; and [*]/Day for each Day of delay between and including 121 and 365 Days after June 30, 2002 (the "Second Paid Extension Option"). At the end of each month during such extension period Seller shall calculate the amounts owed to Williams under the terms of this Section 2.2(c) for such month and shall pay such amounts to Williams within ten (10) Days after the end of such month. (d) In the event that Seller elects the Second Paid Extension Option and the Commercial Operation Date does not occur by June 30, 2003 for any reason whatsoever (other than as a result of an inability of Seller to obtain Natural Gas for the testing or operation of the Facility, or any act or failure to act by Williams or an Affiliate of 17 Williams, where such action is required under this Agreement), including without limitation the continued existence of or delay caused by a Force Majeure event affecting Seller, Williams shall (notwithstanding anything contained in this Agreement or otherwise to the contrary) have the absolute right to terminate this Agreement upon five (5) Days written notice to Seller without any liability or responsibility; such right to terminate, however, shall lapse if not exercised prior to the Commercial Operation Date. ARTICLE III: PURCHASE OF FUEL CONVERSION SERVICES SECTION 3.1 Delivery of Natural Gas Consistent with any Dispatch Notice or as otherwise instructed by Seller, Williams shall deliver or cause to be delivered to Seller at the Natural Gas Delivery Point on an exclusive basis all quantities of Natural Gas required by Seller (i) to generate Net Electric Energy and/or Ancillary Services, (ii) to perform Start-Ups, (iii) to perform Shutdowns, and (iv) to operate the Facility during any period other than a Start-Up, Shutdown or Dispatch Period for any reason. Williams shall at all times retain title to all quantities of Natural Gas delivered pursuant to clauses (i) -- (iii) of this Section 3.1, and title to Natural Gas delivered pursuant to clause (iv) of this Section 3.1 shall transfer to Seller at the Natural Gas Delivery Point. To the extent of any failure by Williams to deliver the Natural Gas required pursuant to clauses (i) -- (iii), Seller shall be excused, without any penalty, from its obligation to provide Fuel Conversion Services and to deliver the related Net Electric Energy or Ancillary Services under this Agreement. SECTION 3.2 Fuel Conversion Services Subject to the terms and conditions set forth in this Agreement, during the Term, commencing with the Commercial Operation Date, Seller shall perform for Williams on an exclusive basis, and Williams shall purchase and pay for, Fuel Conversion Services. SECTION 3.3 Fuel Conversion Option Demand Payment Subject to the terms and conditions set forth in this Agreement, Williams shall pay Seller a Fuel Conversion Option Demand Payment for Fuel Conversion Services and Ancillary Services as set forth in Appendix 1, Section II, A.2. SECTION 3.4 Costs and Expenses Except as provided in Section 6.2, Williams shall be solely responsible for all costs and expenses related to the supply and transportation of Natural Gas to the Natural Gas Delivery Point. 18 SECTION 3.5 Energy Exercise Fee Subject to the terms and conditions set forth in this Agreement, Williams shall pay Seller an Energy Exercise Fee for Net Electric Energy and/or Ancillary Services received hereunder as set forth in Appendix 1, Section II, A.3. SECTION 3.6 Adjustments Adjustments to the Fuel Conversion Option Demand Payments will be made pursuant to Appendix 1, Section IV,C. SECTION 3.7 Variable O&M Payments Subject to the terms and conditions set forth in this Agreement, Williams shall pay Seller a Variable O&M Payment as set forth in Appendix 1, Section II, A.1. SECTION 3.8 Facility Heat Rate Bonus or Credits Subject to the terms and conditions set forth in this Agreement, Williams shall pay Seller a Heat Rate bonus or Seller shall provide Williams a Heat Rate credit pursuant to Appendix 1, Section III. SECTION 3.9 Alternative Delivery Point Unless Seller has declared an Emergency, Forced Outage, Maintenance Outage or Planned Outage, Seller shall deliver the Energy and/or Ancillary Services to be sold to Williams pursuant to its Dispatch Notice. In the event Seller has not declared an Emergency, Forced Outage, Maintenance Outage or Planned Outage and is unable or unwilling to tender delivery at the Primary Delivery Point, Seller may elect to fulfill its delivery obligations through one of the following options: (a) Seller may tender delivery of all or a portion of the Energy and Ancillary Services pursuant to a Dispatch Notice to an Alternative Delivery Point subject to the following: (i) Seller must notify Williams it intends to deliver Energy and/or Ancillary Services at an Alternative Delivery Point and Williams must respond to such notice of an Alternative Delivery Point at least two (2) hours after said notice is received indicating if it will accept delivery at the Alternative Delivery Point; (ii) Seller may not elect to deliver Energy and/or Ancillary Services to an Alternative Delivery Point during any Dispatch Period in which Seller has already begun delivery of Energy and/or Ancillary Services to the Primary Delivery Point, unless the Parties agree otherwise; (iii) Seller agrees to pay Williams the positive difference, if any, in each hour, of the Locational Marginal Price at the Primary Delivery Point minus 19 the Locational Marginal Price at the Alternative Delivery Point multiplied by the quantity of Energy and Ancillary Services requested pursuant to the Dispatch Notice for each hour that Energy and Ancillary Services are delivered to the Alternative Delivery Point; and (iv) [*] (v) [*] (vi) Deliveries at the Alternative Delivery Point shall be settled pursuant to the then existing settlement procedures as commonly practiced in the PJM market. (b) Seller may pay Williams a Non-Dispatch Payment as described in Appendix 1, Section V. ARTICLE IV: PURCHASE AND SALE OF UNFORCED CAPACITY SECTION 4.1 Sale of Temperature Adjusted Unforced Capacity (a) Subject to the terms and conditions set forth in this Agreement, during the Term, commencing with the Commercial Operation Date, Seller shall sell and make available to Williams on an exclusive basis, and Williams shall purchase and pay for, Temperature Adjusted Unforced Capacity. (b) The payment for Temperature Adjusted Unforced Capacity in a Billing Month shall be calculated by multiplying the Temperature Adjusted Unforced Capacity by the applicable Unforced Capacity Rate as set forth in and subject to the provisions of Appendix 1 to this Agreement. SECTION 4.2 Additional and Expansion Capacity (a) In the event that it is demonstrated during Initial Start-Up Testing, or during a subsequent demonstration of capacity for PJM purposes, that the Facility Capacity is greater than 764.3 MW [*], this Agreement and Appendix 1 to this 20 Agreement shall be amended to reflect the sale of such additional capacity to Williams as mutually agreed to by the Parties. (b) Seller will not add Expansion Capacity to the Site, except with the consent of Williams, which may be withheld in Williams' sole and absolute discretion if such Expansion Capacity would have an adverse effect on the economic benefit (including cashflow and profit) to be derived by Williams from the Facility. ARTICLE V: PROJECT DEVELOPMENT SECTION 5.1 Progress Reporting (a) After the date hereof, Seller shall furnish to Williams, for information purposes only, updated quarterly (on a calendar year basis) Schedules and status reports showing and describing the progress of the engineering, permitting, purchasing and construction of the Facility. The receipt and/or review by Williams of any such Schedules submitted by Seller shall not be asserted or construed by Seller at any time to be (i) Williams' endorsement or approval of the Schedules, (ii) Williams' endorsement or approval of the design of the Facility or its appurtenant equipment, (iii) Williams' assumption of any responsibility for the Facility or its appurtenant equipment and/or (iv) any waiver of any obligation of Seller under this Agreement. The updated Schedules and reports provided by the Seller pursuant to this Section 5.1 shall include, in reasonably sufficient detail, explanations of any delays in meeting Scheduled dates for commencement or completion of any listed item. (b) Williams shall furnish Seller with updated quarterly (on a calendar year basis) Schedule reports showing and describing the progress of the engineering, permitting and construction of the Natural Gas Interconnection Facilities. SECTION 5.2 Establishing Facility Capacity Seller shall provide to Williams not later than ten (10) Days after the completion of Initial Start-Up Testing, pertinent written data substantiating the Facility's capability to provide Facility Capacity. Seller shall provide to Williams no later than thirty (30) Days prior to the Commercial Operation Date written data based on design calculations depicting the Facility's Temperature Adjusted Facility Capacity and Temperature Adjusted Unit Capacity as a function of temperature between -20 and 100 degrees Fahrenheit, to the extent such information is reasonably available from the Facility engineering, procurement and construction contractor for such range. Such written data shall be adjusted by the Parties, as necessary, based upon actual performance of the Facility during normal operations subsequent to the Commercial Operation Date. 21 SECTION 5.3 Required Permits and Approvals Seller shall, at its own cost and expense, obtain as and when required all approvals, permits, licenses and other authorizations from governmental authorities as may be required for it to construct, operate and maintain the Facility, the Interconnection Facilities and Protective Gas Apparatus and to perform its obligations hereunder and, during the Term hereof, Seller shall obtain all such additional governmental approvals, permits, licenses and authorizations as may be required with respect to the Facility as soon as practicable. SECTION 5.4 Access to Site (a) Upon reasonable advance notice to Seller, Seller agrees to provide reasonable access to the Site to Williams and its contractors, for the purpose of their construction of the Natural Gas Interconnection Facilities and to take such other action as may be reasonably necessary for such Natural Gas Interconnection Facilities to be constructed and connected to the Facility. (b) While on the Site, Williams shall ensure that its employees and its contractors comply with all safety rules of Seller and its contractors and the directions of Seller regarding areas of restricted acceSection Williams shall notify Seller of and remove, transport and dispose of, in accordance with Environmental Law, any Hazardous Materials transported or released onto the Site by Williams and its contractors. ARTICLE VI: INITIAL START UP TESTING, TESTING AND COMMERCIAL OPERATION SECTION 6.1 Other Sales of Energy (a) Beginning on the date of initial delivery of Net Electric Energy from Seller to Williams and during any period when there is a demonstration of Facility Capacity during a period other than a Dispatch Period, or during any other Facility test operation during a period other than a Dispatch Period, Seller will sell at the Primary Delivery Point any available Net Electric Energy to Williams [*], unless Williams has declared a Dispatch Period. (b) Notwithstanding the foregoing, if, due to the actions of Seller, Net Electric Energy is made available at the Primary Delivery Point during a period other than a Dispatch Period without the authorization of PJM, the Host Utility or FERC, Williams shall be obligated to pay only the lesser of the Locational Marginal Price or the actual price for such Net Electric Energy and Seller shall be solely responsible for any fines or penalties resulting from the unauthorized delivery of such Net Electric Energy at the Primary Delivery Point. 22 SECTION 6.2 Purchase of Natural Gas For Facility Testing or any period other than a Dispatch Period, upon [*] notice from Seller or other amount of time as mutually agreed to by the Parties, Williams agrees to sell and deliver, or cause to be sold and delivered, on a firm basis and Seller agrees to purchase and receive at the Natural Gas Delivery Point on an exclusive basis, solely for consumption at the Facility, such quantities of Natural Gas as requested by Seller for such purposes. Seller shall inform Williams if the Natural Gas to be sold and purchased is to be used for Facility Testing. The price for the above referenced Natural Gas shall be set forth in Section 6.3 below. SECTION 6.3 Gas Price Subject to Section 6.4, during any period mentioned in Section 6.2 above, Seller shall purchase Natural Gas from Williams at the Gas Price. The Gas Price includes, and Seller is under no obligation to make additional payments for, all royalties, Taxes, expenses and costs arising from or attributable to the Natural Gas prior to its delivery at the Natural Gas Delivery Point. Williams assumes the obligation, if any, to pay proceeds due royalty owners or any other Persons entitled thereto. SECTION 6.4 Replacement Index In the event that GAS DAILY, or its successor, ceases publication or the Daily Gas Index otherwise becomes unavailable, the Parties shall use good faith efforts to agree upon a replacement index. If the Parties cannot agree on a substitute methodology and/or publication by the end of the first month for which the replacement index could not be determined, then Williams and Seller shall each prepare a list of three alternative published reference postings of spot prices for Natural Gas delivered in the same geographic area as the Natural Gas Delivery Point. Each list shall set forth the highest priority index first. Each Party shall submit its list to the other within ten (10) days after the end of the first month for which the Gas Price could not be determined. The first index appearing on Williams' list that also appears on Seller's list shall constitute the new replacement index effective as of the date that the Parties ceased using GAS DAILY'S Daily Gas Index Price. SECTION 6.5 Notice of Commercial Operation Date Seller shall provide to Williams (i) written notice, at least thirty (30) Days in advance, of the expected Commercial Operation Date, and (ii) a copy of the notice of Commercial Operation within five (5) Days after the Commercial Operation Date. Williams shall have the right to be present at Initial Start-Up Testing of the Facility. SECTION 6.6 Demonstration of Facility Capacity During Initial Start-Up Testing and thereafter, Seller shall demonstrate, in accordance with the then-applicable criteria of PJM (or the most recent such criteria if 23 current PJM criteria no longer exist), applicable generally to independent power and utility generating facilities in the PJM control area of similar technology, the capability of the Facility to produce and maintain, as required for such demonstration, the Facility Capacity. The demonstration of Facility Capacity shall be Scheduled by Seller and consistent with PJM requirements. Seller shall be responsible for all costs, including transmission costs, it incurs in connection with the demonstration of Facility Capacity; and Seller shall have the obligation to obtain or maintain any transmission service beyond the Primary Delivery Point that may be required for such demonstration of Facility Capacity prior to the Commercial Operation Date. Seller shall not have the obligation to secure transmission service after the Commercial Operation Date to sell such Facility Capacity. ARTICLE VII: INTERCONNECTION AND METERING EQUIPMENT SECTION 7.1 Responsibility for Interconnection Facilities At its sole cost and expense, Seller shall own, design, construct, install and maintain, or be responsible for the design, construction, installation and maintenance of the Facility, the Interconnection Facilities and Protective Gas Apparatus needed to generate and deliver Net Electric Energy and Ancillary Services to the Primary Delivery Point in order to fulfill its obligations as specified herein, including all Interconnection Facilities and Protective Gas Apparatus that may be located at any switchyard and/or substation to be built at the Facility. Not later than ninety (90) Days after the Execution Date, Seller shall prepare and submit to Williams a preliminary one-line interconnection diagram depicting the Primary Delivery Point, which diagram shall be incorporated by reference herein as Appendix 4.B. The Facility, Interconnection Facilities and Protective Gas Apparatus shall be designed, constructed and completed in a good and workmanlike manner and in accordance with Accepted Electrical Practices (with respect to the Facility and Interconnection Facilities) or in accordance with standard gas industry practices (with respect to Protective Gas Apparatus), such that the expected useful life of the Facility, the Interconnection Facilities and Protective Gas Apparatus shall be not less than the Term of this Agreement. SECTION 7.2 Amendment of Interconnection Agreement (a) Seller shall not enter into any modification or amendment of the Interconnection Agreement with Host Utility, or any successor entity thereto, without the prior written consent of Williams (such consent not to be unreasonably withheld) unless such modification or amendment is required to comply with the Host Utility's or PJM's requirements and procedures or Accepted Electric Practices. (b) Should the Host Utility, or any successor entity thereto, notify Seller of Host Utility's intent to unilaterally modify or amend the Interconnection Agreement, Seller shall provide to Williams written notice of the aforementioned modification or 24 amendment within [*] after Seller's receipt of such notice from Host Utility. SECTION 7.3 Gas Interconnection (a) Williams shall be responsible for the construction of all Natural Gas Interconnection Facilities necessary for delivery of Natural Gas up to and including the Natural Gas Delivery Point (including the Natural Gas Metering Equipment but excluding compressors ("Natural Gas Interconnection Facilities")) and shall use all commercially reasonable efforts to expeditiously construct or contract for the expeditious construction of such Natural Gas Interconnection Facilities in order to make Natural Gas available to Seller at the Natural Gas Delivery Point no later than [*] prior to the Anticipated Commercial Operation Date. In the event that such Natural Gas Interconnection Facilities have not been constructed and/or Williams is unable for any reason to deliver Natural Gas to the Facility by the date that the Facility would otherwise be prepared to begin Initial Start-Up Testing, but in no event prior to the date Scheduled therefor, (the "Start-Up Testing Date"), and but for the failure to provide such Natural Gas the Facility is otherwise ready, or would otherwise have been ready, to begin such testing (as reasonably determined by a Third Party Engineer chosen in accordance with the provisions of this Agreement), then [*]. (b) Seller shall ensure that sufficient area is preserved at the Site to allow for the construction of all Natural Gas Interconnection Facilities. Such area shall not exceed 150 feet by 100 feet in dimension. (c) Upon the expiration of this Agreement or any termination of this Agreement as the result of a Williams' event of default thereunder, Seller shall have the right to purchase the Natural Gas Interconnection Facilities from Williams, free and clear of all liens, other than Permitted Liens, and encumbrances, for an amount [*] Natural Gas Interconnection Facilities, or in the event that Williams does not own such Natural Gas Interconnection Facilities, Williams shall assign to Seller all of its rights to transportation services using such Natural Gas Interconnection Facilities, free and clear of any obligations of Williams to the transportation services provider incurred or arising prior to the date of such assignment. 25 ARTICLE VIII: OPERATION AND DISPATCH SECTION 8.1 Operation Standards The Facility and the Interconnection Facilities shall be operated in accordance with Accepted Electrical Practices and the applicable requirements and guidelines of the Host Utility pursuant to the Interconnection Agreement. The Protective Gas Apparatus shall be operated in accordance with standard gas industry practices. In the event of a conflict between the terms and conditions of this Agreement and Host Utility requirements, the Host Utility requirements shall control. SECTION 8.2 Parallel Operation Seller shall operate the Facility in parallel with the Host Utility's electrical system pursuant to the Interconnection Agreement. SECTION 8.3 Disconnection by Host Utility (a) Notwithstanding anything contained in this Agreement to the contrary, the Parties acknowledge that under the Interconnection Agreement the Host Utility shall have the right to require Seller to disconnect the Facility from the Host Utility's electrical system (or otherwise curtail, interrupt, reduce or modify deliveries of Net Electric Energy and Ancillary Services) in accordance with the terms of the Interconnection Agreement. When the Host Utility disconnects the Facility in accordance with the terms of the Interconnection Agreement, Williams shall not be responsible for any costs incurred by Seller due to such disconnection. Notwithstanding any other provision of this Agreement to the contrary, [*] 26 [*] (b) Seller shall use commercially reasonable efforts to correct promptly any condition at the Facility which necessitates the disconnection of the Facility from the Host Utility's electrical system or the reduction, curtailment or interruption of electrical output of the Facility. (c) Seller shall notify Williams as soon as reasonably practicable of receipt by Seller of a notice from the Host Utility of Host Utility's intent to disconnect the Facility from the Host Utility's electrical system or otherwise curtail, interrupt, reduce or modify deliveries of Net Electric Energy and Ancillary Services. SECTION 8.4 Automatic Regulation (a) When Dispatched by Williams, Seller shall operate the Facility and each Unit with Automatic Regulation equipment in service. (b) Seller shall provide to Williams response rates greater than the 5 MW/minute minimum criteria for Automatic Regulation, when such faster response rates are within the equipment supplier's operating guidelines and the Facility control systems are technically sufficient for such faster response rates. SECTION 8.5 Energy and Ancillary Nominations and Confirmations Prior to the date and time of flow at the Primary Delivery Point, the Parties shall Schedule Net Electric Energy and/or Ancillary Services which will be delivered or received. Such confirmation between the Parties shall be made verbally, unless otherwise mutually agreed to by the Parties. SECTION 8.6 Right to Energy and Ancillary Services (a) Williams shall at all times have the exclusive right to utilize the Net Electric Energy and Ancillary Services associated with the Temperature Adjusted Facility Capacity, subject to the terms and conditions specified herein and the obligations of the Parties under the PJM Agreement. (b) Williams shall have the exclusive right to Schedule the Contract Quantity pursuant to a Dispatch Notice issued in accordance with the provisions of this Agreement; provided, however, that such Scheduling also shall be consistent with the design and operating limitations of the Facility, applicable law, regulations and permits, and the obligations of the Parties under the PJM Agreements and the PJM Manuals. (c) If there is a difference in the Locational Marginal Price between the two delivery buses that comprise the Primary Delivery Point, Williams may request a partial Dispatch of the Facility on a per bus basis. Seller shall use its good faith efforts, 27 consistent with design and operating limitations of the Facility and the Interconnection Facilities and Accepted Electrical Practices, to comply with such a Dispatch Notice. Seller shall advise Williams' of its ability to comply with such request within fifteen (15) minutes of its receipt and promptly notify Williams of any change in its ability to comply with such request during the Dispatch Period. [*] (d) Williams, in the absence of an Emergency, shall not Schedule a Dispatch Period of less than [*] hours unless the Facility was operated (or was requested to so operate) within the [*] hours prior to the requested Dispatch Period. (e) When a Dispatch Period will involve a Start-Up, Williams shall provide Seller, in the absence of an Emergency, with at least the advance notice of a Dispatch Period consistent with the Start-Up Notification Lead Time and such Dispatch Period shall begin after the applicable Allocated Start-Up Duration. When a Dispatch Period, including revisions to a previously Scheduled Dispatch Period, does not involve a Start-Up, Williams, in the absence of an Emergency, shall provide Seller, with at least [*] minutes advance notice of such Dispatch Period or revised Dispatch Period. SECTION 8.7 Facility Availability Status (a) Seller shall no later than [*] minutes after Seller's receipt of a Dispatch Notice notify Williams of (i) the Facility's expected availability during the Dispatch Period identified in such Dispatch Notice and (ii) if the Facility is to be available, the expected volume of Natural Gas required to comply with the Dispatch Notice. To the extent Seller does not notify Williams within such [*] minute period, the Facility shall be deemed Fully Available. (b) When a Dispatch Period has been requested by Williams and accepted by Seller, Seller shall have until the end of the Allocated Start-Up Duration to produce the requested output level. (c) If, at the end of the Allocated Start-Up Duration, the Facility is unable to produce the requested output level or if Seller notifies Williams pursuant to Section 8.7(a) above that the Facility or any portion thereof is unavailable, the Facility shall then be considered to be in a Total or Partial Forced Outage. The Facility will remain in this status until such time as Williams is notified by the Seller that the Facility is again Fully Available for Dispatch and, at Williams' option can demonstrate this availability over a two hour period. At the end of the fully or partially successful demonstration, the Facility will be considered to be Fully or Partially Available, respectively. If, however, Williams elects not to dispatch the Facility when Seller 28 notifies Williams of the Facility's availability, then Seller may choose to demonstrate Facility Availability as specified above, subject to the Seller being responsible for any costs, providing however, that the Host Utility is able to accept the energy produced. If Seller chooses not to test or if the Host Utility, in its sole judgment, would not be able to accept the Energy produced during such a demonstration, then Williams shall recognize the Facility as being available; provided, however, that if the Facility is unavailable at the next Scheduled Dispatch Period request, the Facility will then be considered to be continuously unavailable from the time of the original request. SECTION 8.8 Combined Cycle Operation Williams shall have no right to require operation of the Facility except in Combined Cycle Mode, unless otherwise mutually agreed to by the Parties. SECTION 8.9 O&M Contractor In the event Seller or an Affiliate of Seller does not directly operate the Facility, Seller shall, prior to the Commercial Operation Date, enter into, and during the Term hereof shall maintain in effect, an agreement with a reputable firm or firms providing for the operation and maintenance of the Facility pursuant to the terms and conditions of this Agreement at all times during the Term of this Agreement. The choice of such firm by Seller shall be subject to the prior review and acceptance by Williams, which acceptance shall not be unreasonably withheld or delayed; provided that it shall not be unreasonable for Williams to withhold such acceptance if such operator is a FERC authorized power marketer or an Affiliate of such an entity. Seller shall provide Williams with a copy of such agreement and all amendments and supplements thereto promptly after execution thereof. SECTION 8.10 Delivery to Facility Seller shall be responsible for all costs and expenses related to the transportation, gathering or Taxes of Natural Gas or its use or possession at and after the Natural Gas Delivery Point to the Facility. SECTION 8.11 Natural Gas Nominations and Scheduling Williams shall be solely responsible for scheduling the Natural Gas that will be delivered to the Natural Gas Delivery Point pursuant to Section 3.1. SECTION 8.12 Imbalance Prevention The Parties intend that the quantity of Natural Gas actually delivered and received each hour will, as nearly as practicable, equal the Scheduled quantity. Any Imbalance created, when the actual physical flow is different than the Scheduled quantity, will be the "Imbalance", which will be the responsibility of the Parties to use commercially reasonable efforts to eliminate. Estimated quantities flowing at the Natural Gas Delivery 29 Point shall be used on an hourly basis during any delivery period to determine the estimated Imbalance. Physical flow adjustments are to be made during that delivery period as mutually agreed to by both Parties to attempt to maintain or achieve an Imbalance of zero at the Natural Gas Delivery Point. During a Dispatch Period, Seller shall notify Williams promptly of any change in the operation of the Facility that will increase or decrease the expected levels of Natural Gas that will be consumed. SECTION 8.13 Transporter Penalties Each Party shall perform its obligations under this Agreement so as to avoid the creation of penalties, cashout obligations or other similar charges imposed by the Transporter. Each Party shall promptly notify the other whenever either has knowledge of an actual or potential Imbalance condition that must be corrected to avoid the creation of Imbalance penalties or cashout obligations of the Transporter. Each Party shall also comply with any curtailment or allocation requirements of the Transporter provided timely notice of such requirements has been given. Seller shall be responsible for any penalties, cashout obligations or other similar charges caused by Seller. Williams shall be liable for all other penalties, cashout obligations or other similar charges. SECTION 8.14 Actual Flow of Natural Gas (a) The actual measured quantity of Natural Gas at the Natural Gas Delivery Point each month shall be determined and communicated by the monthly statement of the Transporter at the Natural Gas Delivery Point. The actual measured quantity shall be determined pursuant to the applicable provisions of the Transporter's tariff or applicable measurement procedures. Imbalances shall be calculated by using Transporter's monthly statements. (b) Williams shall, consistent with the terms of Transporter's tariff, mitigate any Imbalances to minimize any Imbalance charge under such tariff. Seller shall be responsible for an Imbalance charge under the Transporter's tariff only to the extent any Imbalance remaining after Williams efforts to mitigate such Imbalance is attributable to either (i) a difference caused by Seller greater than the allocable tolerance in the Transporter's tariff or balancing requirements between the volumes of Natural Gas actually consumed and the levels identified by Seller pursuant to Section 8.7 or (ii) a failure of Seller to promptly notify Williams of a change in the operation of the Facility pursuant to Section 8.12. [*] ARTICLE IX: MAINTENANCE SECTION 9.1 Maintenance Standards (a) At all times during the Term of this Agreement, Seller shall, at its sole cost and expense, maintain the Facility and the Interconnection Facilities in accordance with 30 Accepted Electrical Practices, the requirements of the Interconnection Agreement and engineering, procurement and construction contractors' recommended maintenance procedures. (b) At all times during the Term of this Agreement, Seller shall, at its sole cost and expense, maintain the Protective Gas Apparatus in accordance with standard gas industry practice and engineering, procurement and construction contractors' recommended maintenance procedures. (c) Seller shall have full and complete responsibility for and control over maintenance of the Facility, the Interconnection Facilities and Protective Gas Apparatus except for the Parties' rights to test Electric Metering Equipment. SECTION 9.2 Maintenance Certification Seller shall furnish to Williams, in writing, by no later than each February 15 following the Commercial Operation Date, a certificate together with supporting documentation demonstrating that Seller has performed or caused to be performed during the prior year all (i) engineering, procurement and construction contractor-recommended maintenance and testing of the Interconnection Facilities and Protective Gas Apparatus and (ii) maintenance of the Facility necessary to conform with Accepted Electrical Practices. Seller shall provide Williams with at least thirty (30) Days prior written notice of any test of the Interconnection Facilities and Protective Gas Apparatus and, to the extent consistent with the terms of the Interconnection Agreement, Williams personnel or its representatives may observe such testing. SECTION 9.3 Records of Outage Statistics Seller shall maintain and classify outage statistics for the Facility in accordance with outage classification procedures adopted by PJM and shall supply such statistics to Williams upon Williams' reasonable request. SECTION 9.4 Operations Forecasts (a) Williams shall furnish to Seller by the date which is [*] months prior to the Anticipated Commercial Operation Date and by [*] of each year following the Commercial Operation Date a forecast of the Dispatch of the Facility for the following [*] in order to provide Seller with planning information to support Seller's scheduling of Planned Outages. Williams shall provide updates to the forecast in a timely manner if Williams' expectations of Facility Dispatch are revised. (b) Seller shall furnish Williams with an annual forecast no later than [*] of each year, or such other time as may be necessary to be consistent with regional reliability planning procedures, setting forth the expected dates and anticipated duration of each Planned Outage for the succeeding [*]. Subject to the 31 requirements of the PJM Agreement, Reliability Assurance Agreement and PJM Tariff, Seller and Williams shall mutually agree on the scheduling of all Planned Outages, but in no event should the Planned Outages be Scheduled during Summer Peak Periods or Winter Peak Periods. Any requested revision to a Schedule for a previously approved Planned Outage or a need for a Planned Outage which arises after a submission of the most recent annual forecast shall be submitted by either Party to the other as soon as reasonably practicable, but in no event less than [*] months in advance of the Planned Outage, provided however, that the [*] month advance notice requirement for the request shall be waived if the Facility becomes unavailable due to a Force Majeure event within the [*] months immediately preceding the Planned Outage. The non-requesting Party shall approve or reject said request within [*] Days of its receipt and, if it rejects said request shall propose an alternate Schedule with dates as close in time as practicable to the dates originally proposed. Except as set forth in the last sentence of this Section 9.4(b), neither Party shall unreasonably withhold or delay its approval of any requested revision(s) to the previously established Planned Outage Schedule. Any reasonable costs associated with a change requested by Williams to the previously established Planned Outage Schedule shall be agreed to and allocated by the Parties at the time of Seller's consideration of Williams' requested change. Planned major maintenance shall normally be Scheduled as a Planned Outage. Williams shall have no right to require Seller to change the time of a previously Scheduled Planned Outage if, in the reasonable judgment of Seller, said change is imminently likely to cause significant physical damage to the Facility or appurtenant equipment. (c) Seller shall notify Williams as soon as practicable of Seller's intent to remove the Facility from service for maintenance and its intent to return the Facility to service following the completion of maintenance. Seller shall coordinate the scheduling of all Maintenance Outages with Williams. (d) Seller shall also notify Williams as soon as possible concerning the cause and anticipated duration of any Maintenance Outage or Forced Outage. ARTICLE X: METERING, BILLING, PAYMENT AND TAXES SECTION 10.1 Generally All Electric Metering Equipment and Natural Gas Metering Equipment whether owned by Seller, Williams or by a third party, shall be operated, maintained and tested in accordance with Accepted Electrical Practices, in the case of the Electric Metering Equipment, and in accordance with applicable industry standards, in the case of the Natural Gas Metering Equipment. SECTION 10.2 Metering of Net Electric Energy Net Electric Energy delivered by Seller to Williams shall be metered at the Primary Delivery Point, using the Host Utility's Electric Metering Equipment on an hour- 32 by-hour basis, or such shorter intervals as may be necessary to implement this Agreement, as are technically feasible using such metering equipment and are agreed to by the Host Utility. It is the assumption of the Parties that the Host Utility will agree to own the electric meters at the Primary Delivery Point and to provide the necessary metering services. In the event the Host Utility elects not to do so, the Parties will amend this Agreement to reflect that Williams shall own the electric meters at the Primary Delivery Point and shall provide the necessary metering services, provided, however, that Seller shall have the right to install check meters for auditing purposes. Seller shall use reasonable efforts to ensure that Williams shall have the right to receive data in electronic form in real time on a continuous basis from the Host Utility's Electric Meter Equipment; provided, however, that Williams shall be responsible for any incremental costs incurred to provide such real time information. SECTION 10.3 Metering of Natural Gas Williams at its sole cost and expense shall inspect and calibrate, or cause to be inspected and calibrated, all Natural Gas Metering Equipment periodically, but not less frequently than annually. In addition, either Party from time to time with reasonable advance notice to the other Party may request that the Natural Gas Metering Equipment be tested. When any test shall show a measurement error of more than two percent (2%) or such lower percentage as may be established by applicable tariff, correction shall be made for the period during which the measurement instruments were in error, first, by using the registration of Seller's check meter, if installed and registering accurately; if no check meter is installed and registering accurately, or if the period cannot be ascertained, correction shall be made for one-half (1/2) of the period elapsed since the date of the last test of such meter; and such meter shall be adjusted immediately to measure accurately. In the event that any test requested by a Party pursuant to the second sentence of this Section 10.3 shows a measurement error as set forth above, the owner of the tested equipment shall pay for such test and calibration. In the event that no such error is shown, the Party requesting such test shall pay for such test. SECTION 10.4 Monthly Statements (a) Seller shall provide to Williams a monthly statement, included herein as Appendix 8, using the Host Utility's meters and statements, or Back-Up Electric Metering Equipment installed by Seller in the event that the Host Utility's electric meters are not functional, not later than thirty (30) calendar Days after the end of each Billing Month, unless such thirtieth (30th) Day is not a Business Day. If such thirtieth (30th) Day is not a Business Day, Seller shall provide the statement on the next succeeding Business Day. Such statement shall set forth the amount of Net Electric Energy and Ancillary Services delivered by Seller to Williams in each hour and Seller's computation of the amount due from Williams to Seller and such other amounts as may then be due and payable by Williams to Seller hereunder. Williams shall pay Seller the net amount shown to be due to Seller on the monthly statement by wire transfer to an account specified by Seller not later than ten (10) calendar Days following Williams' receipt of the monthly statement, unless such tenth (10th) Day is not a Business Day. If such monthly statement shall reflect a net amount due to Williams from Seller, Seller shall make payment of the net amount shown to be due to Williams in the monthly statement by wire transfer to an account specified by Williams not later than ten (10) calendar Days following Williams receipt of the 33 monthly statement, unless such tenth (10th) Day is not a Business Day. If such tenth (10th) Day is not a Business Day, Williams or Seller, whichever the case may be, shall render payment on the next Business Day. All said payments shall be deemed to be made when such wire transfer is received by Seller or Williams. Overdue payments shall accrue interest from, and including, the due date to, but excluding, the date of payment at the Late Payment Interest Rate. If either Party, in good faith, disputes a monthly statement, such Party shall provide to the other Party a written explanation of the basis for the dispute and shall make payment of the portion of such monthly statement not disputed no later than the due date. To the extent any disputed amount is later determined to be properly due and payable, it shall be paid within ten (10) Days of such determination, together with interest accrued at the Late Payment Interest Rate from the due date to the date payment is made, if made within ten (10) Days of such determination, and if not paid within ten (10) Days of such determination, together with interest accrued after such ten (10) Days period to the date payment is made at the Late Payment Interest Rate plus one (1) percent per annum. If a Party does not receive written notice of an objection by the other Party to a monthly statement within ninety (90) days of receipt thereof by such Party, such monthly statement shall be deemed conclusive and binding absent manifest error. (b) Williams shall supply Seller with a monthly invoice for Natural Gas consumed during any period other than a Dispatch Period. Williams shall additionally supply Seller with a monthly statement reflecting the actual quantities of Natural Gas delivered to the Natural Gas Delivery Point. (c) In the event adjustments or corrections to monthly statements are required as a result of inaccurate Electric Metering Equipment or Natural Gas Metering Equipment or other errors in computation or billing, the Parties shall promptly recompute amounts due from or to each other hereunder during the period of inaccuracy and otherwise correct any errors in such monthly statement. If the total amount, as recomputed, due from a Party for the period of inaccuracy varies from the total amount due as previously computed, and the payment of the previously computed amount has been made, the difference shall be paid to the Party entitled to it within ten (10) Days after correction of the erroneous invoice(s), together with interest on such difference from, and including, the date on which previously paid to, but excluding, the date the difference shall be paid to the Party entitled to it at the Late Payment Interest Rate. (d) Each Party has the right, at its sole expense, upon reasonable notice and during normal working hours, to examine and copy the records of the other Party to the extent reasonably necessary to verify the accuracy of any statement, charge or computation made pursuant to this Agreement. If requested, a Party shall provide to the other Party statements evidencing the amounts of Net Electric Energy delivered at the 34 Primary Delivery Point. If any such examination reveals any inaccuracy in any statement, the necessary adjustments in such statement and the payments thereof will be promptly made and shall bear interest calculated at the Late Payment Interest Rate from the date the overpayment or underpayment was made until paid; provided, however, that no adjustment for any statement or payment will be made unless objection to the accuracy thereof was made prior to the lapse of two years from the rendition thereof; and provided further that this Section 10.2(c) will survive any termination of the Agreement for a period of two (2) years from the date of such termination for the purpose of such statement and payment objections. (e) Seller shall give reasonable notice to Williams of the time when any Electric Metering Equipment test or Back-Up Electric Metering Equipment test shall take place, and Williams may have representatives present during such test(s). To the extent practicable, Seller shall provide at least forty-eight (48) hours notice to Williams prior to any test it or the Host Utility may perform on any Electric Metering Equipment or Back-Up Electric Metering Equipment. In any case, Seller shall provide Williams with a copy of the test data and results. (f) If the Electric Metering Equipment fails to register, or if the measurement made by said meter during a test varies by more than one percent (1%) (i.e., varies by more than one percent (1%) either above or below the measurement made by the standard meter used in the test), an adjustment in payments to Seller or credits to Williams shall be made utilizing the Back-Up Electric Metering Equipment provided it meets the 1% accuracy requirement stated above, for the actual period during which inaccurate measurements were made if the period can be reasonably determined or, if the period of the inaccuracy cannot be reasonably determined, for no more than one-half the period since the last meter test. (g) If, at any time, both the primary and Back-Up Electric Metering Equipment fail to register, or the registration thereof becomes so erratic as to be meaningless (i.e., the recording of the measurement is obviously in error), the Net Electric Energy delivered to Williams shall be determined from the best information available, including, but not limited to, Seller's additional electric meters and operator's logs. SECTION 10.5 Record Retention Seller shall, for a period of two (2) years, keep and maintain accurate and complete records for the Facility in a manner consistent with Accepted Electrical Practice, applicable statutes, codes, regulations, standards and guidelines adopted by governmental authorities, from time to time, including such information relating to the operation and maintenance of the Facility and all associated equipment as is appropriate. Seller shall make such records available to Williams for inspection from time to time as Williams may reasonably request. If Seller shall propose to discard any records theretofore required to be retained by this Article X it shall give Notice thereof to 35 Williams, and Williams may within thirty (30) Days elect to take possession of such records by Notice to Seller; in such case Seller shall promptly deliver such records to Williams at Williams' expense. If Williams does not respond within thirty (30) Days, Seller may discard such records without any further obligation hereunder. SECTION 10.6 Maintenance and Testing of Gas Metering Equipment (a) Seller shall cooperate in the maintenance and testing of all Gas Metering Equipment owned by Williams or third parties as may be required to implement this Agreement. All Gas Metering Equipment owned by Seller used to support billing under this Agreement shall be operated, maintained and tested by and/or on behalf of Seller in accordance with applicable industry standards and Transporter's Tariff. If, at any time, any Gas Metering Equipment is out of service or fails to register, or the registration thereof becomes manifestly erroneous, the quantity of Natural Gas delivered to the Facility shall be determined: (i) by using the registration of any check meter(s) if installed and accurately registering or, in the absence of said check meter(s), (ii) by correcting the error or the percentage of error if ascertainable by calibration, test or mathematical calculation or, in the absence of this subparagraph and subparagraph (i) above, (iii) by estimating the quantity of receipts and deliveries during periods under similar conditions when the meter was registering accurately. (b) Each Party shall have the right to be present at the time of installing, reading, cleaning, changing, repairing, inspecting, testing, calibrating or adjusting performed in connection with Gas Metering Equipment involved in billing and used in measuring or checking the measurement of receipts and deliveries, including any Gas Metering Equipment involving the accurate measurement of the Natural Gas delivered to the Facility. SECTION 10.7 Responsibility for Taxes (a) The payments by Williams to Seller do not include reimbursement for, and Williams is liable for and shall pay, cause to be paid, or reimburse Seller if Seller has paid, all Taxes imposed on or with respect to Natural Gas or the use or consumption or transportation thereof (other than any of such Taxes for which Seller is liable under Section 10.7(b)) or on Net Electric Energy and Ancillary Services or the use and consumption thereof after the Primary Delivery Point. Williams shall indemnify, defend and hold harmless Seller from any liability for such Taxes. (b) The payments by Williams to Seller include full reimbursement for, and Seller shall be liable for and shall pay, or cause to be paid, or reimburse Williams if Williams has paid, all Taxes, except as provided in Sections 10.7(a) or 10.7(d), applicable 36 to the sale to Williams of Net Electric Energy, Unforced Capacity and Ancillary Services, payments made to Seller in respect of the performance of Fuel Conversion Services or otherwise relating to or arising out of this Agreement or the transactions contemplated hereby, including all Taxes imposed on or with respect to the Facilities, the operation or control thereof, and the associated electric energy and Natural Gas to which Seller takes title pursuant to Section 3.1(iv) therewith. If Williams is required to remit any Tax for which Seller is responsible, the amount shall be deducted from any sums due to Seller. Seller shall indemnify, defend and hold harmless Williams from any liability for such Taxes. (c) Either Party, upon written request of the other, shall provide a certificate of exemption or other reasonably satisfactory evidence of exemption if either Party is exempt from any Taxes, and shall use all reasonable efforts to obtain or maintain, or to enable the other Party to obtain or maintain, any exemption from or reduction of any Tax, whether currently available or becoming available in the future. Without limiting the generality of the foregoing, the Parties agree that, if beneficial to the efforts of either Party to obtain or maintain any exemption from or reduction of any Tax, whether currently available or becoming available in the future, the Parties will cooperate to restructure the transactions contemplated by this Agreement so as to enable either Party to obtain or maintain such exemption or reduction, as the case may be; provided, however, that any such restructuring shall not affect adversely the economic interests of either Party under this Agreement. (d) (i) Notwithstanding any other provision of this Agreement to the contrary, if (A) a New Tax is imposed and Williams or Seller would be responsible for such New Tax and (B) such New Tax is (x) imposed on or applicable to the transactions contemplated by this Agreement, including without limitation, the sale of Unforced Capacity or the performance of Fuel Conversion Services, and not imposed on and generally applicable to the sale of capacity or the use of Natural Gas to generate electricity or to provide Fuel Conversion Services in the State of New Jersey, Seller shall pay or cause to be paid, or reimburse Williams if Williams shall have paid, all such New Taxes and Seller shall indemnify, defend and hold harmless Williams from any liability for such New Taxes, or (y) imposed on and generally applicable to the sale of capacity or the use of Natural Gas to generate electricity or to provide Fuel Conversion Services in the State of New Jersey, then Williams shall pay or cause to be paid, or reimburse Seller if Seller shall have paid, all such New Taxes and Williams shall indemnify, defend and hold harmless Seller from any liability for such New Taxes. (ii) If a New Tax is imposed and the Parties shall disagree as to whether such New Tax is described in Section 10.7(d)(i)(B)(x), on the one hand, or Section 10.7(d)(i)(B)(y), on the other, or if such New Tax is not described in either such clause, the characterization of such New Tax under Section 10.8(d)(i)(B)(x) or Section 10.7(d)(i)(B)(y) or the allocation of responsibility for such New Tax to one of; or between, the Parties shall be determined pursuant to Section 11.2. The arbitrators selected pursuant to such section, in selecting the proposal most fairly resolving the Parties' disagreement, shall do so by selecting the proposal most fairly resolving the question consistent with the principles of this Section 10.7. SECTION 10.8 Fuel Conversion Volume Rebate and Non-Dispatch Payments (a) Williams shall be entitled (i) to a Fuel Conversion Volume Rebate ("FCVR"), calculated by Seller in accordance with Appendix 1, Section II.B to this Agreement, and (ii) Non-Dispatch Payments, to the extent such payments are due, as defined in and calculated by Seller in accordance with Appendix 1, Section V to this Agreement. [*]. FCVR payments and Non-Dispatch Payments shall be paid to Williams within twenty (20) Days after the date payments are to be made to Lenders in accordance with Seller's financing documents for the FCVR payments and Non-Dispatch Payments earned prior to those payments to Lenders but not yet paid to Williams hereunder. Seller shall use reasonable efforts to arrange payments to the Lenders on a quarterly basis. FCVR payments and any Non-Dispatch Payments owed to Williams and not paid when due shall be paid, together with interest thereon at the Late Payment Interest Rate, immediately when funds become available to Seller and prior to any distribution to holders of equity interests in Seller. Seller represents and warrants that its financing documents will contain provisions that give effect to the foregoing provisions, and Seller covenants that none of such provisions in its financing documents will be amended, modified, waived or terminated without the prior written consent of Williams. (b) Seller represents and warrants that its financing documents will require Seller to maintain a separate account (the "Major Maintenance Reserve Account") with a trustee for its Lenders into which Seller must deposit on a monthly basis, from cash flow generated by Seller, after deposits of amounts into the Major Maintenance Reserve Account established pursuant to Seller's financing documents, but prior to distributions to Seller or its members, any applicable and unpaid Non-Dispatch Payment and a PRO RATA amount of the maximum FCVR amount that Williams may earn prior to the next payment to the Lenders. Amounts held in the Major Maintenance Reserve Account shall be used to pay, to the extent owed, the FCVR and any Non-Dispatch Payments (provided that if there shall be insufficient funds in the Major Maintenance Reserve Account to pay the full-amount of any FCVR and any Non-Dispatch Payments then owed, Seller shall not be relieved of its obligation to pay such FCVR or Non-Dispatch Payments). Seller covenants that the foregoing provisions in its financing documents will not be amended, modified, waived or terminated without the prior written consent of Williams. 38 ARTICLE XI: DISPUTE RESOLUTION SECTION 11.1 Third Party Engineer (a) If Seller and Williams are in dispute with respect to any matter addressed in Sections 2.2, 5.4, Article IX, Section 10.2 or 10.3 and Seller and Williams do not resolve the dispute within seven (7) Days of Seller or Williams notifying the other Party in writing of the existence of such dispute, a committee consisting of two officers of Seller and two officers of Williams shall meet and attempt in good faith to resolve such dispute. If such committee does not resolve the dispute within seven (7) Days following their initial meeting, then a single third party engineer (the "Third Party Engineer") shall be designated to consider and decide the issues raised by such dispute unless both Parties determine that further discussions by the committee are merited. The selection of such Third Party Engineer shall be made from the list of engineers set forth in Appendix 7 hereto (as supplemented or otherwise modified from time to time pursuant to paragraphs (e) and (f) below). In selecting the Third Party Engineer, each Party (starting with Seller for the first dispute and alternating between Seller and Williams for each dispute thereafter) shall alternate in deleting one name from the list of engineers until only one such engineer shall remain, which remaining engineer shall be the Third Party Engineer. The Third Party Engineer shall be designated from such list not later than the third (3rd) Business Day following the expiration of the second seven (7) Day period described above and such designation shall become effective on the third (3rd) Business Day following such designation. Within ten (10) Business Days of the effectiveness of the designation of a Third Party Engineer, each of Seller and Williams shall submit to the Third Party Engineer a confidential notice (a "Position Notice") setting forth in detail such Party's position in respect of the issues in dispute. Such Position Notice shall include supporting documentation, if appropriate. (b) The Third Party Engineer shall complete all proceedings and issue its decision with regard to the issues in dispute as promptly as reasonably possible, but in any event within ten (10) Business Days of the date on which both Position Notices are submitted unless the Third Party Engineer reasonably determines that additional time is required in order to give adequate consideration to the issues raised. In such case the Third Party Engineer shall state in writing his reasons for believing that additional time is needed and shall specify the additional period required, which period shall not exceed ten (10) Days without Seller's and Williams' agreement. (c) In resolving a dispute, the Third Party Engineer shall consider all facts and circumstances it deems reasonable given the nature of the dispute. (d) The Third Party Engineer shall choose either Seller's position or Williams' position as set forth in their respective Position Notices. If the Third Party Engineer determines that the position set forth in Seller's Position Notice is correct, it shall so state and shall state the appropriate actions to be taken by Williams. In such case, Williams shall promptly take such action. If the Third Party Engineer determines that the position 39 set forth in Williams' Position Notice is correct, he shall so state and shall state the appropriate actions to be taken by Seller. In such case, Seller shall promptly take such actions. The decision of the Third Party Engineer shall be final and non-appealable. The Seller and Williams shall each bear one-half of all reasonable costs incurred by the Third Party Engineer in connection with a dispute under this Section 11.1. (e) The list of engineers referred to in paragraph (a) above shall contain qualified engineers with experience in the design, operation and maintenance of electric generating facilities. The initial such list shall be proposed by Seller no later than sixty (60) Days after the Execution Date and upon agreement of the Parties shall be incorporated into this Agreement as Appendix 7. A Party may at any time remove a particular engineer from the list by obtaining the other Party's reasonable consent to such removal. However, neither Party may remove a name or names from the list if such removal would leave the list without at least three (3) names after giving effect to any concurrent addition of names pursuant to paragraph (f) below. (f) During January of each year, each of Seller and Williams shall review the current list of Third Party Engineers and give notice to the other of any proposed additions to the list and any intended deletions. Intended deletions shall automatically become effective thirty (30) Days after notice is received by the other Party unless written objection is made by the other Party within such thirty (30) Days and provided that such deletions do not leave the list without at least three (3) names after giving effect to any concurrent addition of names pursuant to this paragraph (f). Proposed additions to the list shall automatically become effective thirty (30) Days after notice is received by the other Party unless written objection is made by such other Party within thirty (30) Days. By mutual agreement between Seller and Williams, a new name or names may be added to the list of Third Party Engineers at any time. SECTION 11.2 Designated Representatives (a) Each of Seller and Williams shall designate in writing to the other Party from time to time a representative who shall be authorized to resolve any dispute relating to the subject matter of this Agreement not subject to the provisions of Section 11.1 and, unless otherwise expressly provided herein, to exercise the authority of such Party to make decisions by mutual agreement. (b) The Parties agree (i) to attempt to resolve all disputes arising hereunder promptly, equitably and in a good faith manner, and (ii) to provide each other with reasonable access during normal business hours to any and all non-privileged records, information and data pertaining to any such dispute. (c) If any dispute is not resolved between the Parties pursuant to this Section 11.2 within thirty (30) Days from the date on which a Party provided to the other Party a written notice of such dispute, then such dispute shall be settled exclusively and finally by arbitration in accordance with Section 11.3, except for technical disputes, as described in Section 11.1 above, which shall be resolved in accordance with that Section. 40 SECTION 11.3 Arbitration (a) It is specifically understood and agreed that any dispute, controversy or claim under this Agreement that cannot be resolved between the Parties within the time period specified in Section 11.2(c), including any matter relating to the interpretation of this Agreement but excluding any matter to be submitted to the Third Party Engineer pursuant to Section 11.1, shall be submitted to arbitration irrespective of the magnitude thereof, the amount in dispute or whether such dispute would otherwise be considered justifiable or ripe for resolution by any court or arbitral tribunal. (b) Each arbitration between the Parties shall be finally settled in Washington, D.C. conducted pursuant to the then applicable Commercial Arbitration Rules of the American Arbitration Association. (c) The arbitration shall be conducted before a tribunal composed of three arbitrators. Each Party shall appoint an arbitrator, obtain its appointee's acceptance of such appointment and deliver written notification of such appointment and acceptance to the other Party within fifteen (15) Days after the expiration of the thirty (30) Day period specified in Section 11.2(c). The two Party-appointed arbitrators shall jointly appoint the third (who shall be the chairperson), obtain the acceptance of such appointment and deliver written notification of such appointment within fifteen (15) Days after their appointment and acceptance. The arbitrators shall have the power and authority to determine the arbitrability of any dispute arising under or relating to this Agreement or the subject matter hereof. (d) Any arbitration commenced hereunder shall be completed within one-hundred twenty (120) Days of the appointment of the arbitral tribunal, absent agreement of the Parties to an extension of such period. The Parties shall be entitled to no discovery, provided, however, that the tribunal may permit document discovery upon a showing of good cause. All direct testimony shall be offered by way of affidavit. The Party submitting an affidavit shall make the affiant available for cross-examination before the tribunal. The Parties waive any claim to any damages in the nature of special, punitive, exemplary, consequential or statutory damages in excess of compensatory damages, and the tribunal is specifically divested of any power to award such damages. All decisions of the tribunal shall be pursuant to a majority vote. Any interim or final award shall be rendered by written decision. The judgment of the tribunal shall be final and binding (i.e., not subject to appeal) on the Parties. The Parties agree that a judgment upon any arbitration award may be entered by any court having jurisdiction thereof. (e) If a Party fails to appoint its arbitrator within a period of fifteen (15) Days after receiving notice of the arbitration, or if the two arbitrators appointed cannot agree upon the third arbitrator within a period of fifteen (15) Days after appointment of the second arbitrator, then such arbitrator shall be appointed by the American Arbitration Association. 41 (f) No arbitrator shall be a past or present employee or agent of; or consultant or counsel to, either Party or any Affiliate of either Party, unless such restriction is waived in writing by the other Party. (g) Each Party shall pay the costs of its designated arbitrator (or the arbitrator designated upon its failure to designate an arbitrator pursuant to Section 11.3(f)) and one-half of the costs of the third arbitrator and out-of-pocket third party costs and expenses of an arbitration under this Section 11.3. SECTION 11.4 Survival of Article This Article XI shall survive the termination or expiration of this Agreement. ARTICLE XII: REPRESENTATIONS, WARRANTIES AND COVENANTS SECTION 12.1 By Seller Seller hereby represents, warrants and covenants as follows: (a) Seller is a limited liability company duly organized and validly existing under the laws of the State of Delaware. (b) Seller has all requisite power and authority to carry on the business to be conducted by it under this Agreement and to enter into and perform its obligations under this Agreement. (c) The execution and delivery of this Agreement and the performance of Seller's obligations hereunder have been duly authorized by all necessary action on the part of Seller and do not and will not conflict with or result in a breach of Seller's certificate of formation or limited liability company agreement or any indenture, mortgage, other agreement or instrument or any statute or rule, regulation, order, judgment or decree of any judicial or administrative body to which Seller is a party or by which Seller or any of its properties is bound or subject. (d) This Agreement is the valid and binding obligation of Seller, enforceable with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency or similar laws from time to time in effect that affect creditors' rights generally or by general principles of equity. (e) Seller is in compliance with the material provisions of all laws which are applicable to it or its operations, non-compliance with which could reasonably be expected to have a material adverse effect on the ability of Seller to perform its obligations under this Agreement including, without limitation, Environmental Laws. (f) Other than those identified in Paragraph (g) below, there are no enforcement, clean-up, removal, mitigation or other governmental or regulatory actions, 42 claims or proceedings, including but not limited to any proceedings relating to damage, contribution, cost recovery, compensation, Loss or injury, pending or to Seller's knowledge threatened, under any Environmental Law affecting the Facility or the Site, which would reasonably be expected to have a material adverse effect on the ability of Seller to perform its obligations under this Agreement. (g) Seller has identified soil contamination at the Site which is currently being addressed in accordance with the New Jersey Department of Environmental Protection requirements. The aforementioned soil contamination is not reasonably expected to have a material adverse effect on the ability of Seller to perform its obligations under this Agreement. SECTION 12.2 By Williams Williams hereby represents, warrants and covenants as follows: (a) Williams is a corporation duly organized and validly existing under the laws of the State of Delaware. (b) Williams has all requisite power and authority to carry on the business to be conducted by it under this Agreement and to enter into and perform its obligations under this Agreement. (c) The execution and delivery of this Agreement and the performance of Williams' obligations hereunder have been duly authorized by all necessary action on the part of Williams and do not and will not conflict with or result in a breach of Williams' charter documents or by-laws or any indenture, mortgage, other agreement or instrument of any statute or rule, regulation, order, judgment or decree of any judicial or administrative body to which Williams is a party or by which Williams or any of its Affiliates is bound or subject. (d) This Agreement is the valid and binding obligation of Williams, enforceable with its terms except as such enforceability may be limited by applicable bankruptcy, insolvency or similar laws from time to time in effect that affect creditors' rights generally or by general principles of equity. (e) Williams is in compliance with the material provisions of all laws which are applicable to it or its operations, non-compliance with which could reasonably be expected to have a material adverse effect on the ability of Williams to perform its obligations under this Agreement including, without limitation, Environmental Laws. 43 ARTICLE XIII: LIABILITY, DEDICATION SECTION 13.1 Third Parties Nothing in this Agreement shall be construed to create any duty, standard of care or liability to any Person not a Party to this Agreement. SECTION 13.2 Limitation of Liability Notwithstanding anything contained in this Agreement, except with respect to indemnified third party claims, in respect of which this Section 13.2 shall not apply, neither Party shall be liable to the other Party, its Affiliates, directors, officers, partners, agents, employees, successors or assigns, for claims for incidental, special, punitive, indirect or consequential damages of any nature arising out of; connected with or resulting from performance or nonperformance of this Agreement, including, without limitation, claims in the nature of lost revenues, income or profits (other than payments specifically provided for and properly due under this Agreement) or Losses, damages or liabilities under any financing, lending or construction contracts, agreements or arrangements to which Seller may be party irrespective of whether such claims are based upon warranty, negligence, strict liability, contract, operation of law or otherwise. The provisions of this Section 13.2 shall survive the termination or expiration of this Agreement. SECTION 13.3 No Dedication to the Public No undertaking by either Party under any provision of this Agreement shall constitute the dedication of that Party's electrical reserves, system, equipment, or facilities, or any portion thereof; to the other Party or to the public. ARTICLE XIV: INDEMNITY SECTION 14.1 Indemnity Subject to the provisions of Section 14.3, each Party shall indemnify, hold harmless and defend the other Party, its Affiliates, directors, officers, partners, agents and employees from and against any and all Loss, liability, damage, cost or expense, including damage and liability for bodily injury to or death of third Persons or damage to property of third Persons (collectively, "Loss"), to the extent arising out of; in connection with or resulting from the indemnifying Party's breach of any of the representations or warranties made in, or the indemnifying Party's failure to perform any of its obligations under, this Agreement, or the indemnifying Party's design, installation, construction, ownership, operation, repair, relocation, replacement, removal or maintenance of; or the failure of; any of such Party's equipment and/or facilities, including, but not limited to, the Interconnection Facilities, the Facility, Natural Gas Interconnection Facilities and 44 Protective Gas Apparatus and any Natural Gas facilities, and/or any appurtenances thereto, and any electric transmission facilities used in connection with this Agreement; provided, however, that neither Party shall have any indemnification obligations hereunder in respect of any Loss to the extent caused by such other Party's gross negligence, bad faith or willful misconduct. Each Party hereto shall furnish the other Party with written notification after such Party becomes aware of any event or circumstances, or the threat thereof; (but in no event later than ten (10) Days prior to the time any response is required by law) which might give rise to such indemnification. At the indemnified Party's request, the indemnifying Party shall defend any suit asserting a claim covered by this indemnity and shall pay any and all costs and expenses (including reasonable attorney's fees and expenses) that may be incurred, including any and all costs and expenses which may be incurred by the indemnified Party, in enforcing this indemnity. The indemnified Party may, at its own expense, retain separate counsel and participate in the defense of any such suit or action. SECTION 14.2 Environmental Indemnity (a) Subject to the terms and provisions of this indemnity and the provisions of Sections 14.1, Seller shall protect, defend, indemnify and save harmless Williams, its officers, directors, shareholders, agents, employees, successors, assigns and attorneys (collectively, the "Indemnified Parties") from, against and in respect of, any and all Losses, costs, damages, liabilities, obligations, claims, causes of action, fines, penalties or expenses (including reasonable attorney's fees, expenses and litigation costs and sums paid in settlements of claims and any such fees and expenses incurred in enforcing this indemnity or collecting any sums due hereunder) and reasonable expenses for accounting, consulting, engineering, investigation, cleanup, response, removal and/or disposal and other remedial costs, directly or indirectly imposed upon, incurred by or asserted against any Indemnified Party arising out of or in connection with any claim or claims by any other party or parties (including, without limitation, a governmental authority), arising out of or in connection with (i) the use, generation, refining, manufacture, transportation, transfer, production, processing, storage, handling, or treatment of any Hazardous Materials, on, under or from the Facility; (ii) a release, or threatened release of any Hazardous Materials on, under or from the Facility (other than such a release resulting from an action of Williams, its contractors or its Transporters) (iii) the cleanup, removal and/or disposal of any Hazardous Materials (other than Hazardous Materials released by Williams, its contractors or its Transporters) on, under or from the Facility required by any Environmental Law or any governmental authority; (iv) any personal exposure or injury (including wrongful death) or property damage (real or personal) arising out of or related to such Hazardous Materials, including any damage arising out of any cleanup required by the governmental authorities or Environmental Laws; (v) any lawsuit brought or threatened, settlement reached, or government order relating to such Hazardous Materials; or (vi) any violation of laws, orders, rules, regulations, requirements, guidelines, or demands of governmental authorities, including permits and licenses under Environmental Laws, which are based upon or in any way related to such Hazardous Materials including, without limitation, the costs and expenses of any remedial action, 45 reasonable attorney and consultant fees, investigation and laboratory fees, court costs and litigation expenses; or (vii) a misrepresentation or inaccuracy in any representation or warranty made by Seller in Section 12.1 of this Agreement. (b) Subject to the terms and provisions of this indemnity and the provisions of Sections 14.1, Williams shall protect, defend, indemnify and save harmless Seller, its officers, directors, shareholders, agents, employees, successors, assigns and attorneys (collectively, the "Indemnified Parties") from, against and in respect of, any and all Losses, costs, damages, liabilities, obligations, claims, causes of action, fines, penalties or expenses (including reasonable attorney's fees, expenses and litigation costs and sums paid in settlements of claims and any such fees and expenses incurred in enforcing this indemnity or collecting any sums due hereunder) and reasonable expenses for accounting, consulting, engineering, investigation, cleanup, response, removal and/or disposal and other remedial costs, directly or indirectly imposed upon, incurred by or asserted against any Indemnified Party arising out of or in connection with any claim or claims by any other party or parties (including, without limitation, a governmental authority), arising out of or in connection with (i) the use, generation, refining, manufacture, transportation, transfer, production, processing, storage, handling, treatment or release or threatened release of any Hazardous Materials resulting from the actions of Williams, its contractors or its Transporters related to this Agreement or otherwise, on, under or from the Facility; (ii) the cleanup, removal and/or disposal of any Hazardous Materials released by Williams, its contractors or its Transporters on, under or from the Facility required by any Environmental Law or any governmental authority; (iii) any personal exposure or injury (including wrongful death) or property damage (real or personal) arising out of or related to such Hazardous Materials, including any damage arising out of any cleanup required by the governmental authorities or Environmental Laws; (iv) any lawsuit brought or threatened, settlement reached, or government order relating to such Hazardous Materials; or (v) any violation of laws, orders, rules, regulations, requirements, guidelines, or demands of governmental authorities, including permits and licenses under Environmental Laws, which are based upon or in any way related to such Hazardous Materials including, without limitation, the costs and expenses of any remedial action, reasonable attorney and consultant fees, investigation and laboratory fees, court costs and litigation expenses. SECTION 14.3 Claims by Employees The indemnity in Section 14.1 shall apply to all claims against each Party including, but not limited to, all claims made or threatened by, or in the name of or on behalf of each Party's employees for personal injuries (including death) which arise in the course of their employment. Seller hereby waives any defense it may otherwise have under applicable workers' compensation laws. 46 SECTION 14.4 Risk of Loss As between the Parties, Williams shall be deemed to be in exclusive possession and control (and responsible for any damages or injury resulting therefrom or caused thereby) of Natural Gas prior to the Natural Gas Delivery Point and Net Electric Energy and Ancillary Services at and from the Primary Delivery Point, and Seller shall be deemed to be in exclusive possession and control (and responsible for any damages or injury resulting therefrom or caused thereby) of Natural Gas at and from the Natural Gas Delivery Point and Net Electric Energy and Ancillary Services prior to the Primary Delivery Point. Risk of Loss related to Natural Gas shall transfer from Williams to Seller at the Natural Gas Delivery Point and Risk of Loss related to the Net Electric Energy and Ancillary Services shall transfer from Seller to Williams at the Primary Delivery Point. Williams shall indemnify, defend and hold harmless Seller from and against any Loss arising out of or in any way relating to Williams' possession or control of Natural Gas prior to the Natural Gas Delivery Point or its possession and control of the Net Electric Energy and Ancillary Services at and after the Primary Delivery Point, and Seller shall indemnify, defend and hold harmless Williams from and against any Loss arising out of or in any way relating to Seller's possession or control of Natural Gas at and after the Natural Gas Delivery Point or the Net Electric Energy and Ancillary Services prior to the Primary Delivery Point. SECTION 14.5 Survival of Article The Parties expressly acknowledge and agree that this Article XIV shall survive the termination or expiration of this Agreement. ARTICLE XV: INSURANCE SECTION 15.1 Insurance Generally Seller and the operator of the Facility (including their respective successors and assigns) shall each procure and shall maintain the following insurance coverage for the Facility so long as such insurance is available on commercially reasonable terms. The limits set forth below are minimum limits and will not be construed to limit Seller's or operator's liability: (a) Workers' Compensation insurance complying with the laws of the state or states having jurisdiction over each employee, and Employer's Liability with limits of $1,000,000 each accident, $1,000,000 disease each employee, and $1,000,000 disease policy limit. (b) Commercial or Comprehensive General Liability insurance on an occurrence form with a combined single limit of $1,000,000 each occurrence, and annual aggregates of $1,000,000, for bodily injury and property damage, including coverage for blanket contractual liability, broad form property damage, personal injury liability, 47 independent contractors, products/completed operations, sudden and accidental pollution liability and the explosion, collapse and underground exclusion will be deleted. (c) Automobile Liability insurance with a combined single limit of $1,000,000 each occurrence for bodily injury and property damage to include coverage for all owned, non-owned, and hired vehicles. (d) Excess or Umbrella Liability insurance with a combined single limit of $10,000,000 each occurrence, and annual aggregates of $10,000,000 for bodily injury and property damage covering excess of Employers Liability and the insurance described in (b) and (c) above. SECTION 15.2 Risk Insurance Seller shall purchase and maintain all risk property insurance, including the perils of flood and earthquake covering all property, material and equipment comprising the facility, during construction, while in transit, during loading and unloading, while in storage, while at another location for repair and during installation in an amount not less than the total cost to replace the Facility with like kind and quality on a new or old basis per occurrence for property damage. This insurance shall include boiler and machinery insurance and coverage for delayed startup of business, business interruption and expediting expense. This insurance shall include the interests of the Seller's Subsidiaries, operator and Williams. SECTION 15.3 Copies (a) Not less than ten (10) Days prior to the commencement of construction of the Facility, Seller shall provide and shall continue to provide to Williams annually during the Term of this Agreement certificates of insurance evidencing coverage required by this Article 15 on a form satisfactory to Williams with insurance companies rated A IX or better by A.M. Best. Certificates shall provide at minimum the following information: (i) Name of insurance company, policy number and expiration date; (ii) The coverage required and the limits on each, including the amount of deductibles or self insured retentions; (iii) Thirty (30) Days prior written notice of cancellation with respect to all insurance policies required hereunder, except in respect of cancellation for non payment of premiums for which such prior written notice shall be ten (10) days; (iv) For all insurance policies except Workers' Compensation insurance, endorsements indicating that Williams has been named as an additional insured; 48 (v) All policies shall include a waiver of rights or subrogation clause in favor of Williams. (b) Irrespective of the insurance requirements above, the insolvency, bankruptcy, or failure of any such insurance company providing insurance for Seller's Subsidiaries, or the failure of any such insurance company to pay claims that occur will not be held to waive any of the provisions hereof. (c) In the event any Lender requires higher limits, broader coverage or lower retentions Williams will also receive the benefit of such insurance coverages. ARTICLE XVI: FORCE MAJUERE SECTION 16.1 Excused Performance (a) A Party shall be excused from performing its obligations under this Agreement and shall not be liable in damages or otherwise to the other Party if and to the extent such Party declares that it is unable to perform or is prevented from performing an obligation under this Agreement by a Force Majeure condition, except for any obligations and/or liabilities under this Agreement to pay money, which shall not be excused, and except to the extent an obligation accrues prior to the occurrence or existence of a Force Majeure condition, provided that: (i) the Party declaring its inability to perform by virtue of Force Majeure, as promptly as practicable after the occurrence of the Force Majeure condition, but in no event later than five (5) Days thereafter, gives the other Party written notice describing, in detail, the nature, extent and expected duration of the Force Majeure condition; (ii) the suspension of performance is of no greater scope and of no longer duration than is reasonably required by the Force Majeure condition; (iii) the Party declaring Force Majeure uses all commercially reasonable efforts to remedy its inability to perform; and (iv) as soon as the Party declaring Force Majeure is able to resume performance of its obligations excused as a result of the Force Majeure condition, it shall give prompt written notification thereof to the other Party. (b) Irrespective of whether the Force Majeure condition is declared by Williams or Seller, the time period of a Force Majeure that prevents Seller from delivering or providing Net Electric Energy, Unforced Capacity or Ancillary Services hereunder shall be excluded from the calculation of all payments under Appendix 1 and Williams shall be under no obligation to pay Seller any of the payments described in Appendix 1 for such time period except that, if Williams declares a Force Majeure, it 49 shall, subject to Section 16.4 and subject to the limitation in Section 8.3(a) continue to pay Seller only the applicable monthly Total Fixed Payment as described in Section II.A.2 of Appendix 1, until the earlier of (i) the termination of the Force Majeure condition or (ii) the termination of this Agreement, and provided further that in the event of a Force Majeure declared by Seller due to an action or inaction of the Host Utility that prevents Seller from delivering Net Electric Energy to the Primary Delivery Point, [*]. SECTION 16.2 Exclusions from Force Majeure Notwithstanding anything to the contrary contained in this Agreement, except as may expressly be provided herein, the term Force Majeure shall not include or excuse a Party's performance in the following circumstances: (a) Except as otherwise set forth in Section 2.1, the failure to complete the Facility by or to achieve the Commercial Operation Date as extended pursuant to Section 2.1 and Section 18.4, which failure is caused by, arises out of or results from the acts or omissions of Seller, and/or from the acts or omissions of any third party, unless, and then only to the extent that, any such acts or omissions of such third party (i) would itself be excused hereunder by virtue of a Force Majeure condition, or (ii) is the result of Williams' failure to provide Natural Gas to the Facility; (b) Any reduction, curtailment or interruption of generation or operation of the Facility, or of the ability of Williams to accept or transmit Net Electric Energy, whether in whole or in part, which reduction, curtailment or interruption is caused by or arises from the acts or omissions of any third party providing services or supplies to the Party claiming Force Majeure, including any vendor or supplier to either Party of materials, equipment, supplies or services, or any inability of the Host Utility to deliver Net Electric Energy to Williams, unless, and then only to the extent that, any such acts or omissions would itself be excused hereunder as a Force Majeure; (c) Any outage, whether or not due to the fault or negligence of Seller, of the Facility attributable to a defect or inadequacy in the manufacture, design or installation of the Facility that prevents, curtails, interrupts or reduces the ability of the Facility to generate Net Electric Energy or the ability of Seller to perform its obligations hereunder; (d) To the extent that the Party claiming Force Majeure failed to prevent or remedy the Force Majeure condition by taking all commercially reasonable acts (short of litigation, if such remedy requires litigation) and, except as otherwise provided in Section 16.3 below, failed to resume performance hereunder with reasonable dispatch after the termination of the Force Majeure condition; (e) To the extent that the claiming Party's failure to perform was caused by lack of funds; 50 (f) Any inability of a Party to perform its obligations hereunder because of an increase or decrease in the market price of Energy/capacity, Natural Gas, or because it is uneconomic for such Party to perform such obligations; and (g) To the extent Williams is unable to perform due to a shortage of Natural Gas not caused by an event of Force Majeure. SECTION 16.3 Labor Disputes Notwithstanding anything contained in this Article XVI to the contrary, neither Party shall be required to settle any strike, walkout, lockout or other labor dispute on terms which, in the sole judgment of the Party involved in the dispute, are contrary to its interest, it being understood and agreed that the settlement of strikes, walkouts, lockouts or other labor disputes shall be entirely within the discretion of the Party having such dispute. SECTION 16.4 Termination from Force Majeure Notwithstanding anything contained in this Article XVI to the contrary, Williams shall have the right to terminate this Agreement, without any liability or responsibility whatsoever, except to the extent accruing (and not excused) prior to such termination, in the event Force Majeure has been declared by Seller and the effect of said Force Majeure has not been fully corrected or alleviated within [*] months after the date said Force Majeure was declared; provided, however, that Williams shall not have the right to terminate this Agreement in the event that the Force Majeure event was caused by Williams, or if the Force Majeure event does not prevent or materially limit Williams' ability to sell Unforced Capacity from the Facility into or through the PJM market or to a third party. SECTION 16.5 Extension from Force Majeure Upon notice from Williams to Seller no later than ninety (90) days prior to the end of the initial Term, the Term shall be extended for a period of up to a total of [*] for each hour of such initial Term during which Seller is unable to deliver Energy and/or Ancillary Services because of an event of Force Majeure (other than an inability of Seller to obtain Natural Gas to operate the Facility) that occurs after the Commercial Operation Date. ARTICLE XVII: EVENTS OF DEFAULT; TERMINATION, REMEDIES SECTION 17.1 Events of Default The following shall constitute events of default under this Agreement: 51 (a) A breach of any term or condition of this Agreement, including, but not limited to, (i) any failure to maintain or to renew any security as required by Article 18 of this Agreement, (ii) any breach of a representation, warranty or covenant made in this Agreement including the Appendices hereto, or (iii) failure of either Party to make a required payment to the other Party of amounts due hereunder. (b) The Facility is not available to provide the Fuel Conversion Services or Ancillary Services to Williams during any period of [*] consecutive Days after the occurrence of the Commercial Operation Date for any reason, except as may be excused by Force Majeure, the absence of available Natural Gas, or such non-availability is caused by an act or failure to act by Williams where such action is required by this Agreement. (c) Seller sells or supplies Net Electric Energy, Ancillary Services or Unforced Capacity from the Facility, or agrees to do the same, to any Person or entity other than Williams, without the prior approval of Williams. (d) Without duplication of the [*] Day period in Section 17.2, Seller fails for [*] consecutive Days, after notification from Williams providing a reasonable opportunity to cure, to perform regular and required maintenance, testing or inspection of the Interconnection Facilities, the Facility and/or other electric equipment and facilities as required by this Agreement where such failure is material. (e) Without duplication of the [*] Day period in Section 17.2, Seller fails for [*] consecutive Days, after notification from Williams providing a reasonable opportunity to cure, to correct or resolve a material violation of any code, regulation and/or statute applicable to the construction, installation, operation or maintenance of the Facility, the Interconnection Facilities, Protective Gas Apparatus or any other electric equipment and facilities required to be constructed and operated under this Agreement when such violation impairs the continued ability of Seller to perform its obligations under this Agreement. (f) A receiver or liquidator or trustee of either Party or of any of its property shall be appointed by a court of competent jurisdiction, and such receiver, liquidator or trustee shall not have been discharged within [*] Days or by decree of such a court a Party shall be adjudicated bankrupt or insolvent or any substantial part of its property shall have been sequestered, and such decree shall have continued undischarged and unstayed for a period of [*] Days after the entry thereof or a petition to declare bankruptcy or to reorganize a Party pursuant to any of the provisions of the Federal Bankruptcy Code, as now in effect or as it may hereafter be amended, or pursuant to any other similar state statute as now or hereafter in effect, shall be filed against a Party and shall not be dismissed within [*] Days after such filing. (g) A Party shall file a voluntary petition in bankruptcy under any provision of any federal or state bankruptcy law or shall consent to the filing of any bankruptcy or reorganization petition against it under any similar law; or, without limiting the generality 52 of the foregoing, a Party shall file a petition or answer or consent seeking relief or assisting in seeking relief in a bankruptcy under any provision of any federal or state bankruptcy law or shall consent to the filing of any bankruptcy or reorganization petition against it under any similar law; or, without limiting the generality of the foregoing, a Party shall file a petition or answer or consent seeking relief or assisting in seeking relief in a proceeding under any of the provisions of the Federal Bankruptcy Code, as now in effect or as it may hereafter be amended, or pursuant to any other similar state statute as now or hereafter in effect, or an answer admitting the material allegations of a petition filed against if in such a proceeding; or a Party shall make an assignment for the benefit of its creditors; or a Party shall submit in writing its inability to pay its debts generally as they become due; or a Party shall consent to the appointment of a receiver, trustee, or liquidator of it or of all or any part of its property. (h) Any modifications, alterations or other changes to the Facility by or on behalf of Seller which prevent Seller from fulfilling, or materially diminish Seller's ability to fulfill, its obligations, duties, rights and responsibilities hereunder and which, after reasonable notice and opportunity to cure, are not corrected. (i) The AES Corporation shall cease to own, directly or indirectly, beneficially and of record, at least fifty (50) percent of the equity interests in Seller, or shall cease to possess the power to direct or cause the direction of the management or policies of Seller, or any Person (other than The AES Corporation or an Affiliate) authorized to act as a power marketer by FERC or any Affiliate of such a Person shall own, directly or indirectly, beneficially or of record, any of the equity interests in Seller. (j) There shall be outstanding for more than [*] Days any unsatisfied final, non-appealable judgment against Seller in an amount exceeding [*], unless the existence of such unsatisfied judgment shall not materially affect Seller's ability to perform its obligations under this Agreement. SECTION 17.2 Cure and Termination (a) Upon the occurrence of any event of default described in Section 17.1 (other than an event of default under Section 17.1(f) or (g) hereof for which no notice shall be required or opportunity to cure permitted), the Party not in default, to the extent such Party has actual knowledge of the occurrence of such event of default, shall give prompt written notice of the default to the defaulting Party. Such notice shall set forth, in reasonable detail, the nature of the default and, where known and applicable, the steps necessary to cure such default. The defaulting Party shall have [*] Days ([*] Business Days in the case of a default under Section 17.1 (a)(iii)) following receipt of such notice either to (i) cure such default or (ii) commence in good faith all such steps as are necessary and appropriate to cure such default in the event such default cannot be completely cured within such [*] Day period. (b) If the defaulting Party fails to cure such default or take such steps as provided under subparagraph (a) above, and immediately upon the occurrence of any 53 event of default described in Section 17.1(g) hereof, this Agreement may be terminated by the non-defaulting Party, without any liability or responsibility whatsoever, by written notice to the Party in default hereof. This Agreement shall thereupon terminate and the non-defaulting Party may exercise all such rights and remedies as may be available to it to recover damages caused by such default. (c) Notwithstanding the foregoing, upon the occurrence of any such event of default, the non-defaulting Party shall be entitled to (i) commence an action to require the defaulting Party to remedy such default and specifically perform its duties and obligations hereunder in accordance with the terms and conditions hereof and (ii) exercise such other rights and remedies as it may have in equity or at law subject, however, to the limitation of liability provided in Article 13.2 hereof. ARTICLE XVIII: SECURITY SECTION 18.1 Indemnity for Delay Without limiting the general applicability of the provisions of Article II, or this Article, if the Commercial Operation Date does not occur by the Final CO Date, as such date may be extended pursuant to the provisions of Section 2.1 and Section 18.4, Seller agrees to compensate Williams for any actual damages it suffers or incurs as the result of Williams' reliance upon the delivery of Facility Capacity, Ancillary Services and Fuel Conversion Services hereunder, to the extent said damages cannot be mitigated fully. Seller further agrees that the damages Williams may suffer under these circumstances will be any and all reasonable costs incurred by Williams in excess of costs that would have been incurred had the Commercial Operation Date occurred on or before December 31, 2001, as such date may be extended pursuant to Section 2.1 and Section 18.4. SECTION 18.2 Seller's Guaranty (a) In order to provide reasonable assurances to Williams that a Person or entity on behalf of Seller shall fulfill Seller's potential liability under this Article and otherwise under this Agreement, Seller shall provide to Williams on the same day the Seller provides a Notice to Bind, (i) a guaranty of Seller's performance and payment obligations under this Agreement from The AES Corporation ("AES"), in the form attached hereto as Appendix 5 and made a part hereof, in the amount of $[*] ("Guaranty Amount"), which Guaranty Amount shall reduce to $[*] on the Commercial Operation Date and shall remain in effect during the Term, or (ii) at any time at Seller's option, such financial security for the Guaranty Amount as specified in Section 18.2(b) hereof. (b) If Seller secures payment of the Guaranty Amount through financial security other than the guaranty of AES, Seller shall provide to Williams security in the form of a single letter of credit, satisfactory to Williams in form and substance, upon which Williams 54 may draw if the Facility does not achieve the Commercial Operation Date by the date specified in Section 2.2, as such date may be extended pursuant to such Section and as such date may be extended by Section 18.4. In the event said security contains an expiration date, either express or implied, Seller shall renew said security not later than [*] Days prior to said expiration date and shall contemporaneously therewith provide written notice of said renewal to Williams. In the event Seller fails to renew said security as set forth above, Williams shall be entitled to demand and receive payment thereunder on or after [*] Days after written notice of such failure is provided to Seller and in such event the amount so drawn shall be deposited in an interest bearing escrow account and shall be returned to Seller at the Commercial Operation Date unless otherwise drawn on by Williams in satisfaction of Seller's obligations under Section 18.1 of this Agreement. (c) The letter of credit referred to in paragraph (b) above shall be issued by a financial institution that meets and at all times during the term of such letter of credit maintains the following criteria: (i) A U.S. or foreign bank rated "C" or better by Thompson Bankwatch; or (ii) A U.S. or foreign bank, surety company or financial institution whose senior debt has the rating listed below by two (2) of the three (3) rating agencies:
Standard & Poor's: "A-" or better Moody's: "A3" or better Duff & Phelps: "A-" or better
If such bank, surety company or financial institution fails to maintain such criteria, then upon thirty (30) Days written notice from Williams, Seller shall obtain equivalent security from another bank, surety company or financial institution meeting the above stated criteria. The form and substance of any such letter of credit shall be reasonably satisfactory to Williams. (d) Seller shall execute any and all documents reasonably necessary to assure that Williams' claim to and interest in said security is perfected. SECTION 18.3 Williams Guaranty (a) If Williams provides a Notice to Proceed pursuant to Section 18.4, Williams shall provide [*], no later than [*] prior to the anticipated financial closing, such date to be provided by Seller, a guaranty of Williams' performance and payment obligations under this Agreement in the form attached hereto as Appendix 6 and made a part hereof and issued by The Williams Companies, Inc. ("TWC"), provided that the long term senior unsecured debt of TWC is at such time rated Investment Grade or if the long term senior unsecured debt of TWC is at such time not rated Investment Grade, issued by an Affiliate of Williams whose long term senior 55 unsecured debt at such time is rated Investment Grade (TWC and any such other guarantor hereinafter referred to as "Guarantor"). (b) [*] 56 [*] ARTICLE XIX: SEVERAL OBLIGATIONS SECTION 19.1 Several Obligations Except where otherwise specifically stated in this Agreement, the duties, obligations and liabilities of the Parties are intended to be several, not joint or collective. Nothing contained in this Agreement shall ever be construed to create an association, trust, partnership or joint venture or impose a trust or partnership duty, obligation or liability on or with regard to either Party. Each Party shall be individually and severally liable for its own obligations under this Agreement. ARTICLE XX: WAIVER SECTION 20.1 No Continuing Waiver Any waiver at any time by either Party of its rights, duties, and/or obligations with respect to any default under this Agreement, or with respect to any other matter arising out of or in connection with this Agreement, shall not be deemed a continuing waiver nor a waiver with respect to any subsequent default or other matter. ARTICLE XXI: ASSIGNMENT SECTION 21.1 Assignment (a) Neither this Agreement nor any rights, duties, interests or obligations hereunder may be assigned, transferred, pledged or otherwise encumbered or disposed of by operation of law or otherwise without the prior written consent of the other Party; except that (i) Williams, at any time after reasonable advance notice to Seller and without the consent of Seller, may assign this Agreement and any of its rights, interests, duties or obligations hereunder to any Affiliate of Williams or any other entity, provided that such Affiliate of Williams or such other entity's long term unsecured debt at such time is rated Investment Grade by Standard & Poor's and Moody's or that such Affiliate of Williams or 57 such other entity's obligations under this Agreement are guaranteed by an Affiliate whose long term unsecured debt at such time is rated Investment Grade by Standard & Poor's and Moody's and so long as any assignee shall agree to be bound by all of the terms and conditions hereof to the same extent as Williams; (ii) Seller, at any time, and from time to time, after reasonable advance notice to Williams and without the consent of Williams, may assign this Agreement and any of its rights, interests, duties or obligations hereunder as collateral security to any Lender so long as the assignee shall agree to be bound by all of the terms and conditions hereof to the same extent as Seller in the event the Lender exercises its rights under such assignment; and (iii) Seller shall have the right at any time without the consent of Williams to assign this Agreement and its rights, interests, duties and obligations hereunder to any Affiliate, provided that such Affiliate assumes in writing all of the obligations and duties of Seller hereunder and the guaranty/security required pursuant to Section 18.2 remains in effect. This Agreement shall inure to the benefit of and bind the parties hereto, including any permitted assignee or successor. (b) Except as otherwise specified in this Article XXI, no assignment or disposition of rights hereunder shall (i) relieve or in any way discharge Seller or Williams from the performance of their respective obligations and liabilities under this Agreement or (ii) alter, amend, diminish or otherwise impair Williams' or Seller's rights under this Agreement. SECTION 21.2 Transfer of Facility Seller hereby agrees that it shall not sell, transfer, assign, lease or otherwise dispose of the Facility or any substantial portion thereof or interest therein necessary to perform Seller's obligations hereunder to any Person that is a FERC authorized power marketer or an Affiliate of such an entity without the prior written consent of Williams, which consent shall not be unreasonably withheld. SECTION 21.3 Void Assignments or Transfers Except as specifically provided for in this Article XXI, any assignment or transfer of this Agreement or any rights, duties or interests hereunder or any disposition of the Facility or any portion thereof or interest therein by any Party without the written consent of the other Party as provided herein shall be void and of no force or effect. SECTION 21.4 Cost Reimbursement Each Party shall reimburse the other for the reasonable costs and expenses (including reasonable legal fees and expenses) incurred in connection with a Party's agreement to review, execute and deliver any instruments, agreements or documents that may be used in connection with any assignment requested by a Party or otherwise permitted hereunder. 58 ARTICLE XXII: NOTICES SECTION 22.1 Notice Requirements All notices, demands, requests or other correspondence required or permitted under this Agreement shall be in writing and shall be personally delivered or sent by certified United States mail (postage prepaid, return receipt requested), overnight express mail, courier service or facsimile transmission (with the original transmitted by any of the other aforementioned delivery methods) addressed as follows: If to Seller to: AES Red Oak, L.L.C. 1001 N. 19th Street Arlington, VA 22209 Attention: Project Manager (Facsimile): 703-528-4510 If to Williams to: Williams Energy Marketing & Trading Company One Williams Center Tulsa, OK 74172 Attention: Contract Management (Facsimile): 918-594-1935 Attention: Dispatch and Technical Services (Facsimile): 918-573-8754 or to such other Person at such other address as a Party shall designate by like notice to the other Party. SECTION 22.2 Timing Unless otherwise provided herein, all notices hereunder shall be deemed to be given when received or personally delivered. ARTICLE XXIII: GRATUITIES SECTION 23.1 No Gratuities Each Party shall prohibit their employees from using their official position for personal financial gain or from accepting any personal advantage from anyone under circumstances which might reasonably be interpreted as an attempt to influence the recipients in the conduct of their official duties. Neither Party, nor their employees or representatives shall, under circumstances which might reasonably be interpreted as an attempt to influence the recipients in the conduct of their duties, extend any gratuity or special favor to employees of the other Party. 59 ARTICLE XXIV: CAPTIONS SECTION 24.1 Captions All indices, titles, subject headings, section titles and similar items in this Agreement are provided for the purpose of reference and convenience only and are not intended to be inclusive, definitive or to affect the meaning of the contents or scope of this Agreement. ARTICLE XXV: CHOICE OF LAWS SECTION 25.1 Choice of Laws (a) This Agreement shall be governed by, and construed in accordance with, the law of the State of New York, exclusive of conflicts of laws provisions. (b) Each of the Parties hereby submits for itself and its property to the exclusive jurisdiction of the courts of the State of New York, the courts of the United States for the Southern District of New York, and appellate courts from any thereof for the purposes of all legal proceedings arising out of or relating to this Agreement, the transactions contemplated by this Agreement, or for recognition and enforcement of any judgment in respect thereof. Each Party consents and agrees that any such action or proceeding may be brought in and only in such courts and irrevocably waives, to the fullest extent permitted by applicable law, any objection which it may now or hereafter have to the laying of the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum and agrees not to plead or claim the same. (c) Each Party agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to the other party at its address set forth in Section 22.1, or at such other address of which the other party shall have been notified pursuant thereto. (d) Each Party hereby agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law. (e) Each Party hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this agreement or the transactions contemplated by this Agreement. 60 ARTICLE XXVI: MISCELLANEOUS PROVISIONS SECTION 26.1 Access and Confidentiality (a) During the Term of this Agreement hereof and consistent with this Agreement, Seller shall provide, upon reasonable advance notice, Williams' employees and/or agents reasonably acceptable to Seller continuing and unrestricted access to the Facility, the Site, the Interconnection Facilities (on terms consistent with the Interconnection Agreement) and all other appurtenant electrical equipment at all times and for any duration for the purpose of (i) verifying, reviewing, and/or monitoring the operation of the Facility, the Interconnection Facilities and all other appurtenant electrical equipment for the purpose of determining Seller's compliance with this Agreement; and (ii) inspecting, examining and testing such equipment and facilities as specifically authorized under this Agreement. Williams' employees and/or agents shall be subject to all reasonable rules applicable to the Facility and the Site with respect to such matters as safety, operations and confidentiality provided that such rules are applied in a nondiscriminatory manner. Williams' employees and/or agents shall conduct themselves so as to not hamper or impede the Facility's operations. (b) The Parties agree that all information relating to this Agreement, and the administration or performance hereof by the Parties, including, but not limited to, any information and records provided to Williams by Seller under this Section 26.1: (i) shall not be used for any purposes other than as contemplated by this Agreement and shall be kept confidential pursuant to and in accordance with the Confidentiality Agreement attached hereto as Appendix 2; and (ii) except as provided in the Confidentiality Agreement, shall neither be removed from Seller's premises nor be duplicated, electronically recorded, or recreated in any other manner without Seller's prior written consent, which consent shall not be unreasonably withheld or delayed, and shall not be released to any third parties, other than Williams' Affiliates, without Seller's prior written consent, which consent shall not be unreasonably withheld or delayed. SECTION 26.2 Survival The provisions of Article XI, Section 13.2, Article XIV, and Section 26.1 (including the Confidentiality Agreement attached hereto as Appendix 2), including the rights and obligations of the Parties therein provided, shall survive the termination or expiration of this Agreement and the performance by the Parties of their obligations hereunder. 61 SECTION 26.3 Cost Responsibility Whether or not the transactions contemplated by this Agreement are consummated, except as otherwise specifically provided for in this Agreement, all costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the Party incurring such expenses. SECTION 26.4 No Third Party Rights This Agreement is not intended to confer upon any Person other than the Parties hereto any rights or remedies hereunder. SECTION 26.5 Announcements Except as otherwise required by law or the rules of the New York Stock Exchange, for so long as this Agreement is in effect, neither Seller nor Williams shall, nor shall they permit any of their Affiliates to, issue or cause the publication of any press release or other public announcement with respect to any material aspect of the transactions contemplated by this Agreement the disclosure of which could reasonably be expected to result in an adverse effect on the competitive position of the other Party without the consent of the other Party, which consent shall not be unreasonably withheld or delayed. SECTION 26.6 Support of Financing Williams shall use its commercially reasonable efforts to assist Seller in achieving the closing of financing for the Facility by Seller, including the execution of a consent in favor of the Lenders of Seller's collateral assignment to such Lenders of this Agreement, such consent to be mutually agreed to by Williams, Seller and the Lenders. SECTION 26.7 Right to Purchase Facility Seller shall use its commercially reasonable efforts to include in its financing documents a provision granting Williams the initial right to purchase the Facility from the holders of Seller's debt for an amount equal to the greater of (i) the Fair Market Value of the Facility and (ii) all amounts then due and owing to such debt holders under Seller's financing documents, in the event that such debt holders declare an event of default and accelerate amounts due under Seller's financing documents as a result of an event of default under such documents that is not caused by a default by Williams under this Agreement. SECTION 26.8 Assignment of Third Party Agreements Seller shall assign to Williams all rights, interests, benefits, duties and liabilities associated with any agreement executed between Seller and any other Person in which Seller is compensated for products produced by the facility that prevent Seller from 62 providing Williams with the Net Electric Energy, Ancillary Services or Facility Capacity to which Williams is entitled under this Agreement. To the extent such assignment is not permitted by law, Seller will maintain for Williams the value of this Agreement absent such other agreement. SECTION 26.9 Examination of Records Each party shall have the right, upon reasonable notice, at its sole expense and during normal working hours, to examine and copy the records of the other party to the extent reasonably necessary to verify the accuracy of any statement, charge or computation made hereunder. If any such examination reveals any inaccuracy in any statement, the necessary adjustments in such statement and the payments thereof will be promptly made. This Section 26.8 will survive termination of the Agreement or any transaction hereunder for a period of two (2) years following the end of the calendar year in which such termination occurs. SECTION 26.10 Successors and Assigns This Agreement shall inure to the benefit of and be binding upon Williams and Seller and to the extent permitted hereunder, their respective successors and assigns. SECTION 26.11 Counterparts This Agreement may be executed in separate counterparts by the Parties hereto, each of which when so executed and delivered shall be an original, but all of which shall constitute one and the same instrument. SECTION 26.12 Entire Agreement This Agreement, including all appendices hereto, constitutes the entire agreement between the Parties hereto with respect to the matters contained herein, and all prior agreements with respect to the matters covered herein are superseded, and each Party confirms that it is not relying upon any representations or warranties of the other Party, except as specifically set forth herein or incorporated by reference hereto. SECTION 26.13 Severability Should any provision of this Agreement be held to be invalid or unenforceable, such provision shall be invalid or unenforceable only to the extent of such invalidity or unenforceability without invalidating or rendering unenforceable any other provision hereof. SECTION 26.14 Modification in Writing This Agreement may not be amended or modified except by a written instrument signed by each of the Parties hereto. 63 SECTION 26.15 Emissions Allowances The Parties agree to negotiate in good faith the issue of emission allowance management (i.e. NO(x) allowances) no later than [*] prior to the Commercial Operation Date. SECTION 26.16 Williams' Right to Intertie Williams shall have the right, consistent with the design and operating limitations of the Facility and the provisions of the Interconnection Agreement, at Williams' sole cost and expense, to intertie bus bar 1 (two (2) gas turbines and one (1) station auxiliary) to bus bar 2 (one (1) gas turbine, one (1) steam turbine and one (1) station auxiliary); provided that this option shall not have a negative impact on Seller's ability to perform under this Agreement [Remainder of this page intentionally left blank.] 64 IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed by their duly authorized representatives as of the date first set forth above. AES RED OAK, L.L.C. By: /s/ Charles Falter ________________________________________ Name: Charles Falter Title: Vice President WILLIAMS ENERGY MARKETING & TRADING COMPANY By: /s/ Philip J. Scalzo ________________________________________ Name: Philip J. Scalzo Title: Vice President 65 APPENDIX 1 PRICING TABLE OF CONTENTS -----------------
PAGE ---- I. Pricing Terms.....................................................................................1-1 II. Monthly Pricing Provisions........................................................................1-1 A. Payments and Credits........................................................................1-1 1. Variable Operations & Maintenance Payment.............................................1-1 2. Total Fixed Payment...................................................................1-2 3. Energy Exercise Fee..................................................................1-3 4. Gross Domestic Product Implicit Price Deflator (GDPIPD) Adjustment..................................................................1-4 B. Fuel Conversion Volume Rebate...............................................................1-5 III. Facility Heat Rate Bonus or Penalty...............................................................1-6 A. Facility Heat Rate..........................................................................1-6 B. Heat Rate Bonus or Penalty..................................................................1-7 IV. Availability Adjustments..........................................................................1-8 A. Calculation of Equivalent Availability Factor...............................................1-8 1. Period Availability..................................................................1-8 2. Monthly Availability.................................................................1-9 B. Period Availability Adjustment.............................................................1-10 C. Period Availability Credit.................................................................1-11 V. Non-Dispatch Payments............................................................................1-13
APPENDIX 1 PRICING This Appendix is intended to implement certain provisions of the Agreement. All calculations will be performed with the proper units. Capitalized terms used in this Appendix and not defined herein shall have the meanings given such terms in the Agreement. I. PRICING TERMS Williams shall pay Seller for Fuel Conversion Services, Temperature Adjusted Unforced Capacity, and Ancillary Services in accordance with the terms and conditions set forth in this Appendix and the Agreement. In the event the Reliability Assurance Agreement is amended to eliminate the Capacity Resource requirement imposed as of the date hereof on Load Serving Entities and such a requirement is not otherwise imposed within the PJM control area so that there is no longer an independent market for Unforced Capacity, the Parties agree to negotiate in good faith any amendments necessary to this Agreement for the Parties to maintain, to the extent possible, the original value of this Agreement to both of them; provided, however, that Seller shall be under no obligation to agree to any change to this Agreement that adversely affects its ability to repay the Lenders. II. MONTHLY PRICING PROVISIONS A. PAYMENTS AND CREDITS For each Billing Month "M" of the Term of the Agreement commencing with the Commercial Operation Date, Williams shall make payments to Seller. [*] in accordance with the procedures set forth in Sections II.A.1, II.A.2, and II.A.3 below. 1. VARIABLE OPERATIONS & MAINTENANCE PAYMENT The Variable Operations & Maintenance Payment ("VOMP") for each Billing Month "M" shall be calculated as: [*] where 1-1 NEE(M) = [*] VOM(n) = [*] 2. TOTAL FIXED PAYMENT The Total Fixed Payment ("TFP(M)") for each Billing Month "M" shall be made by Williams to the Seller and calculated as follows: [*] [*] where, UCR(n) = [*] TAUC(M) = [*] FCODC(M) = [*] MUC(M) = [*] FC(M) = [*] [*] FC(H) = [*] Hours(M) = [*] 1-2 TABLE I FUEL CONVERSION OPTION DEMAND CHARGE
------------------------------ ----------------------------------- FUEL CONVERSION OPTION DEMAND Month CHARGE (IN $/KW-MONTH) ------------------------------ ----------------------------------- JANUARY [*] ------------------------------ ----------------------------------- FEBRUARY [*] ------------------------------ ----------------------------------- MARCH [*] ------------------------------ ----------------------------------- APRIL [*] ------------------------------ ----------------------------------- MAY [*] ------------------------------ ----------------------------------- JUNE [*] ------------------------------ ----------------------------------- JULY [*] ------------------------------ ----------------------------------- AUGUST [*] ------------------------------ ----------------------------------- SEPTEMBER [*] ------------------------------ ----------------------------------- OCTOBER [*] ------------------------------ ----------------------------------- NOVEMBER [*] ------------------------------ ----------------------------------- DECEMBER [*] ------------------------------ -----------------------------------
3. ENERGY EXERCISE FEE An Energy Exercise Fee ("EEF(M)") for each Unit for each Billing Month "M" shall be made by Williams to Seller to compensate Seller for each Successful Start-Up in accordance with the following: [*] where the above summation is over all Unit Successful Start-Ups during Billing Month "M" and where start-up equivalent operating hours ("SEOH") are calculated as: [*] [*] [*] [*] 1-3 UISO(M) = [*] VOM(n) = [*] Seller shall identify which Unit was started and maintain a current count of cumulative Successful Start-Ups and associated Shutdowns per Unit. Natural gas volumes for hot, warm, and cold Successful Start-Ups and associated Shutdowns are to be based on the engineering, procurement, and construction contractor's guidelines as stated in Appendix 9 for the first two Contract Years. For Contract Years 3-20, required fuel volumes to be provided by Williams for each of hot, warm and cold Successful Start-Ups and associated Shutdowns will be calculated [*] 4. GROSS DOMESTIC PRODUCT IMPLICIT PRICE DEFLATOR (GDPIPD) ADJUSTMENT The GDPIPD for a subject Contract Year (year "n" in this example) is computed as the [*]. [*] In the event that the publication of the Gross Domestic Product Implicit Price Deflator is discontinued, the Parties agree to use a mutually acceptable substitute index that represents a similar measure of general U.S. inflation. 1-4 B. FUEL CONVERSION VOLUME REBATE Where the Facility has achieved a Utilization Factor ("UF") of greater than or equal to [*] of the Facility available hours for the Rolling Twelve Month Period, Williams shall be entitled to a Fuel Conversion Volume Rebate ("FCVR") of [*]. The FCVR amount shall be determined monthly following each Rolling Twelve Month Period. [*] where, [*] where, Hours(p) = [*] Dispatch Hours(p) = [*] EAF(p) = [*] PMH(p) = [*] TAFC(p) = [*] [*] where, [*] [*] 1-5 [*] where, [*] where, TAFC(M)=[*] [*] EAF(M) = [*] VOM(n) = [*] VOMP(M) = [*] TAFC(H) = [*] III. FACILITY HEAT RATE BONUS OR PENALTY A. FACILITY HEAT RATE A Facility Heat Rate ("FHR") calculation per kWh (in HHV) shall be made for each Dispatch Period "D" of each Billing Month "M" based upon (a) total Natural Gas consumed during Dispatch Periods, and (b) total Net Electric Energy delivered from the Facility during Dispatch Periods. where, [*] where, NGBTU(D)=[*] 1-6 NEEG(D) = [*] During periods of operation, Seller shall maintain an operating log, or some other suitable and auditable tracking system which shall track the amount of Natural Gas consumed in each hour of a Start-Up, Shutdown, Dispatch Period at full load, or Dispatch Period at lower loads along with the average load for each hour of the Dispatch Period. The operating log shall indicate whether the Facility was engaged in a Start-Up, Shutdown, Dispatch Period at full load, or Dispatch Period at lower loads along with the average load for each hour of the Dispatch Period. B. HEAT RATE BONUS OR PENALTY A monthly Heat Rate Bonus or Penalty ("HRB" or "HRP") will be determined by summing HRB and HRP for each Dispatch Period "D" of each Billing Month. Any HRB shall be paid by Williams to Seller. Any HRP shall be paid by Seller to Williams. [*] The HRB or HRP will be calculated as the sum of the benefit or penalty for each Dispatch Period "D" of Billing Month "M": HRB(M) = [*] HRP(M) = [*] where NEEG(D) = [*] SF(D) = [*] [*] [*] 1-7 HRT(D) = [*] IV. AVAILABILITY ADJUSTMENTS A. CALCULATION OF EQUIVALENT AVAILABILITY FACTOR 1. PERIOD AVAILABILITY An Equivalent Availability Factor ("EAF") for the Facility will be calculated for each Period "p," including the Summer Peak Period, the Winter Peak Period, the Rolling Twelve Month Period and the Non-Peak Period as follows: [*] where FAM(p) = [*] [*] sum(p) AC(H) = [*] 1-8 [*] TAFC(p) = [*] [*] PMH(p) = [*] EASOH(p) = [*] Hours(p) = [*] 2. MONTHLY AVAILABILITY An Equivalent Availability Factor for the Facility will be calculated for each Billing Month "EAF(M)" in a manner similar to that as described in Section IV.A.1, herein, with the various components of the of the formulas measured for Billing Month "M" rather than Period "p." 1-9 B. PERIOD AVAILABILITY ADJUSTMENT Following the Commercial Operation Date, a Period Availability Adjustment ("PAA") will be calculated for each Summer Peak Period, Winter Peak Period, and Non-Peak Period when the Equivalent Availability Factor for the corresponding Period equals or exceeds [*]. The calculation of PAA is to be made and payment, if any, is to be given to Seller in the first Billing Month after the end of the Period. The Period Availability Adjustment will be based on the product of the Benefit Factors ("BF(p)") and the Availability Benefit ("AB(A)") associated with all available hours during Period "p." [*] [*] where, for the Equivalent Availability Factor for a Period, the Benefit Factor is: [*]
1-10 where, AB(A) = [*] [*] where, Electric Index(A) = [*] Gas Price(A) = [*] HRT(A) = [*] VOM(A) = [*] TAFC(A) = [*] [*] TAFC(p) = [*] [*] C. PERIOD AVAILABILITY CREDIT Following the Commercial Operation Date, a Period Availability Credit ("PAC") will be calculated for each Summer Peak Period, Winter Peak Period and a Non-Peak Period. The Period Availability Credit will be the product of (i) the Period Factors ("PF") for either the Summer Peak Period, Winter Peak Period or the Non-Peak Period and (2) the Fuel Conversion Option Demand Payments ("FCODP"): 1-11 [*] where, FCODP(p) = [*] [*] [*] [*] [*]
The PF(p) for the Summer Peak Period or the Winter Peak Period in Contract Years 2 - 20 based on the applicable EAF(p) = [*] [*] [*] [*]
The PF(p) for the Non-Peak Period in Contract Years 2 - 20 based on the applicable EAF(p) = [*] 1-12 [*] [*] [*]
The calculation of PAC(p) is to be made and credit, if any, is to be given to Williams in the first Billing Month after the end of a Period. V. NON-DISPATCH PAYMENTS [*] [*] "Replacement Price" [*] 1-13 APPENDIX 2 CONFIDENTIALITY AGREEMENT THIS CONFIDENTIALITY AGREEMENT (this AGREEMENT"), dated as of ____________ 1999, by and between AES Red Oak, L.L.C., a Delaware limited liability company ("SELLER"), and Williams Energy Marketing & Trading Company, a corporation organized and existing under the laws of the State of Delaware ("WILLIAMS"), (Seller and Williams hereinafter referred to individually as a "Party" and collectively as the "Parties"). RECITALS WHEREAS, the Parties are entering into a Fuel Conversion Services, Capacity and Ancillary Services Purchase Agreement (the "Fuel Conversion Services Agreement"), dated as of the date hereof, pursuant to which Williams will deliver fuel to Seller's electric generating facility (the "FACILITY") and Seller will sell and Williams will purchase capacity, ancillary services and fuel conversion services from the Facility. WHEREAS, the Parties agree that, subject to the provisions of this Agreement, the Fuel Conversion Services Agreement is to be kept confidential. WHEREAS, the Parties understand that, during the course of the administration and performance of the Fuel Conversion Services Agreement, they may wish to exchange information related to the Fuel Conversion Services Agreement that the Party providing the information desires to keep confidential. NOW, THEREFORE, in consideration of the mutual covenants and promises set forth below, the Parties hereto, intending to be legally bound, hereby covenant, promise and agree as follows: 1. CONFIDENTIAL MATERIALS. When a Party deems information that it provides to the other Party to be confidential, the Party providing such information shall mark the information in a manner to indicate that it is considered to be confidential or, if the information is provided orally, the Party providing the information shall clearly identify the information as being confidential at the time it is provided and promptly confirm to the other Party in writing that such oral information is confidential (all such information that has been so marked or identified as confidential, including the Fuel Conversion Services Agreement, being "CONFIDENTIAL MATERIAL"). Except as set forth in Section 4 below, each Party and its Representatives (as hereinafter defined) agree to treat confidentially any Confidential material provided to it by the other Party, together with all notes, analyses, compilations or studies prepared by such Party or its Representatives that contain or otherwise reflect such Confidential Material. For purposes of this Agreement, "REPRESENTATIVES" shall mean a Party's, or its 2-1 Affiliates' (as such term is defined in the Fuel Conversion Services Agreement) directors, officers, employees, and outside counsel, accountants and lenders. Each Party and its Representatives shall protect the Confidential Material against disclosure using the same degree of care, but no less than a reasonable degree of care, as it would use to protect its own confidential information of a like nature. 2. EXCLUDED MATERIALS. The term Confidential Material shall not include information of the disclosing Party which (i) at the time of disclosure is generally available to the public other than as a result of a disclosure by the receiving Party or its Representatives, (ii) was available to the receiving Party on a non-confidential basis prior to its receipt from the disclosing Party, (iii) has become available to the receiving Party on a non-confidential basis from a source other than the disclosing party or its Representatives, but only if such source is, to the best of the receiving Party's knowledge, lawfully entitled to make such disclosure and is not bound by a confidentiality agreement with such disclosing Party, or (iv) which has been independently developed by the receiving Party or its Representatives without violation of this Agreement. 3. DISCLOSURE TO REPRESENTATIVES. Each Party may disclose the Confidential Material to those of its Representatives who require such material for the purpose of administering or performing the Fuel Conversion Services Agreement or developing, constructing, financing or operating the Facility, provided that, except as set forth in Section 4 below, such Representatives agree to be bound by the terms of this Agreement. Each Party agrees that the Confidential Material will be kept confidential by it and, except as set forth in Section 4 below, its Representatives and, except with the specific prior written consent of an officer of the other Party, will not be disclosed by it or its Representatives except as permitted hereby. In any event, each Party shall be responsible for any breach of this Agreement by it or by any of its Representatives, and each Party shall, at its sole expense, take all reasonable measures to restrain its Representatives from prohibited or unauthorized disclosure or use of the Confidential Material. 4. CONFIDENTIAL TREATMENT OF FUEL CONVERSION SERVICES AGREEMENT. Notwithstanding any other provision of this Agreement, Seller shall be permitted to (a) include a summary of the material terms of the Fuel Conversion Services Agreement in offering documents provided to potential purchasers and purchasers of the Project's debt (collectively, "OFFEREES") pursuant to Rule 144A under the Securities Act of 1933, as amended (together with any similar rule or regulation, "RULE 144A"), and (b) make available to such Offerees for their review copies of the Fuel Conversion Services Agreement and provide to such Offerees, upon request, copies of the Fuel Conversion Services Agreement; PROVIDED, HOWEVER, that prior to the distribution of the summary referred to in clause (a) above to any Rating Agency (as such term is defined in the Fuel Conversion Services Agreement) or any Offeree, Seller shall (i) provide Williams a copy thereof and Williams shall have a reasonable period of time to review and provide comments thereon to Seller, (ii) give due consideration to such comments in finalizing the summary in light of Williams' interest in protecting its proprietary information and in 2-2 light of Seller's disclosure obligations under applicable securities laws, and (iii) together with Williams, attempt in good faith to resolve any disagreements concerning information to be included in such summary, and PROVIDED, FURTHER, that Seller shall use its commercially reasonable efforts to have such Offerees execute confidentiality agreements with respect to the Fuel Conversion Services Agreement and shall not provide the Fuel Conversion Services Agreement to any Offeree if such Offeree or any of its Affiliates (as such term is defined in the Fuel Conversion Services Agreement) is a Federal Energy Regulatory Commission ("FERC") authorized power marketer or has applied for such authorization. Williams also recognizes that in the event that Seller files a registration statement with the Securities and Exchange Commission ("SEC") in respect of any debt offering, it will be required to submit a copy of the Fuel Conversion Services Agreement to the SEC. Seller shall use its commercially reasonable efforts to obtain confidential treatment of the Fuel Conversion Services Agreement by the SEC, in the event it is filed with the SEC, in accordance with SEC rules. In the event that Seller is required to file a copy of the Fuel Conversion Services Agreement with FERC, Seller shall use its commercially reasonable efforts to seek confidential treatment by FERC, in accordance with FERC's rules, of those portions of the Fuel Conversion Services Agreement for which Williams requests such confidential treatment. 5. DEFENSE OF CONFIDENTIALITY. In the event that a Party or any of its Representatives is requested or required in any legal proceeding (deposition, interrogatory, request for documents, subpoena, civil investigation demand or similar process) to disclose any of the Confidential Material, it is agreed that such Party will provide the other Party with prompt notice of such request(s) so that the other Party may seek an appropriate protective order or other appropriate remedy and/or waive compliance with the provisions of this Agreement. In the event that such protective order or other remedy is not obtained, or a waiver is not granted hereunder, only that portion of the Confidential Material which, in the written opinion of counsel for the disclosing Party, is legally compelled to be disclosed shall be disclosed without liability hereunder and such Party will exercise its best efforts to obtain reliable assurance that confidential treatment will be accorded any Confidential material so furnished. 6. RETURN OF CONFIDENTIAL MATERIALS. Upon the written request of a Party, the other Party and its Representatives will promptly deliver to the requesting Party all Confidential Material (other than the Fuel Conversion Services Agreement) received from that Party in written and/or tangible form, including copies, reproductions or written materials containing confidential Material. In the event of such request, all other notes, analyses, compilations or studies constituting Confidential Material in the possession of the other Party or its Representatives will be destroyed, with any such destruction certified by in writing; provided that a Party shall be entitled to retain one (1) copy of all Confidential Material, subject to the confidentiality requirements of this Agreement and under the control of the office of the General Counsel of such Party. 7. INDEMNITY. Each Party hereby agrees to indemnify and hold harmless the other Party from any damage, loss, cost or liability (including reasonable legal fees 2-3 and the cost of enforcing this indemnity) arising out of or resulting from any use or disclosure by a Party or its Representatives of the Confidential Material not authorized under this Agreement. The Parties acknowledge the representations of the other Party that the Confidential Material is of a special, unique, unusual and extraordinary character and agree that money damages would be an insufficient remedy for any breach of this Agreement and that any such breach would cause irreparable harm. Accordingly, the Parties also agree that in the event of any breach or threatened breach of this Agreement, the injured Party, in addition to any other remedies it may have at law or in equity, shall be entitled, without the requirement of posting a bond or any other security, to equitable relief, including injunctive relief and specific performance against the other Party or its Representatives. 8. NO WAIVER. It is understood and agreed that no failure or delay by a Party in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any right, power or privilege hereunder. 9. EFFECTIVE DATE AND TERM. This Agreement shall be effective as of the date first written above, and shall remain in effect for a period of [*] after the expiration, termination or cancellation of the Fuel Conversion Services Agreement. 10. SEVERABILITY. If any provision of this Agreement shall be held or deemed to be or shall, in fact, be illegal, inoperative or unenforceable, the same shall not affect any other provision or provisions herein contained or render the same invalid, inoperative or unenforceable to any extent whatsoever. 11. AMENDMENT. The terms and conditions set forth in this Agreement may be modified or waived only by a written instrument executed by a duly authorized officer of each of the Parties hereto. In addition, this Agreement shall be binding upon and inure to the benefit of the Parties hereto and their respective successors and permitted assigns. 12. NOTICES. Any notice, request, consent, waiver or other communication required or permitted hereunder shall be effective only if it is in writing and personally delivered or sent by certified or registered mail, postage prepaid, or by nationally recognized overnight courier, addressed as set forth below: If to Williams: Williams Energy Marketing & Trading Company One Williams Center Tulsa, OK 74172 Attention: Contract Management Facsimile: 918-594-1935 If to Seller: 2-4 AES Red Oak, L.L.C. 1001 North 19th Street Arlington, VA 22209 Attention: General Counsel Telephone: (703) 522-1315 Facsimile: (703) 528-4510 or to such other person or address as the addressee may have specified in a notice duly given to the sender as provided herein. Such notice or communication shall be deemed to have been given as of the date received by the recipient thereof. 13. GOVERNING LAW. This Agreement shall be governed by and construed and interpreted in accordance with the laws of the State of New York, without regard to any conflict of laws provisions of such laws. 14. COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument. 15. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement of the Parties with respect to the matters contained herein and all prior agreements of the Parties with respect to the matters contained herein are superseded. IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed by their duly authorized representatives as of the date first set forth above. AES RED OAK, L.L.C. By: /s/ Charles Falter --------------------------------- Name: Charles Falter Title: Vice President WILLIAMS ENERGY MARKETING & TRADING COMPANY By: /s/ Philip J. Scalzo ---------------------------------- Name: Philip J. Scalzo Title: Vice President 2-5 APPENDIX 3 FUEL CONVERSION SERVICES, CAPACITY AND ANCILLARY SERVICES PURCHASE AGREEMENT EXEMPT WHOLESALE GENERATOR CERTIFICATION [To be provided by Seller as soon as reasonably practicable after the Execution Date but in no event later than the Commercial Operation Date] APPENDIX 4.A. FUEL CONVERSION SERVICES, CAPACITY AND ANCILLARY SERVICES PURCHASE AGREEMENT PRELIMINARY SINGLE-LINE DIAGRAM SHOWING NATURAL GAS DELIVERY POINTS [To be provided by Williams as soon as reasonably practicable after the Execution Date but in no event later than the Commercial Operation Date] APPENDIX 4.B. FUEL CONVERSION SERVICES, CAPACITY AND ANCILLARY SERVICES PURCHASE AGREEMENT PRELIMINARY SINGLE-LINE DIAGRAM SHOWING ELECTRIC DELIVERY [To be supplied after Execution Date] APPENDIX 5 GUARANTY BY THE AES CORPORATION GUARANTY (this "GUARANTY"), dated as of [ ], by The AES Corporation, a Delaware corporation (the "GUARANTOR"), in favor of Williams Energy Marketing & Trading Company, a Delaware corporation ("GUARANTEED PARTY"), pursuant to Section 18.2 of that certain Fuel Conversion Services, Capacity and Ancillary Services Agreement, dated as of [ ], by and between Guaranteed Party and AES Red Oak, L.L.C., a Delaware limited liability company (the "COMPANY"), as modified or supplemented from time to time (the "AGREEMENT"). RECITALS WHEREAS, Guaranteed Party has agreed to enter into the Agreement in reliance upon the Guarantor's agreement, pursuant to the terms and conditions set forth below, to provide this Guaranty to Guaranteed Party; and WHEREAS, Guarantor is willing to provide this Guaranty to Guaranteed Party, on the terms and conditions set forth below, as an inducement to Guaranteed Party to enter into the Agreement with the Company. NOW, THEREFORE, in consideration of the above premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be bound hereby, the Guarantor agrees as follows: 1. OBLIGATIONS OF GUARANTOR. Subject to the Guaranty Cap set forth in Section 2 of this Guaranty, the Guarantor unconditionally and irrevocably guaranties, as primary obligor and not merely as surety, to and for the benefit of Guaranteed Party, prompt and complete payment of all damage amounts due and payable to Guaranteed Party by the Company under and pursuant to Section 18.1 of the Agreement, together with any and all reasonable expenses (including reasonable attorneys' fees and expenses) incurred by Guaranteed Party in enforcing this Guaranty, (collectively, the "OBLIGATIONS"). Subject to the Guaranty Cap set forth in Section 2 of this Guaranty, the Guarantor agrees, that upon the failure of the Company to pay any of the Obligations when they become due, the Guarantor will pay, or cause to be paid, to Guaranteed Party any and all such unpaid Obligations. 2. MAXIMUM GUARANTEED AMOUNT. The aggregate liability of the Guarantor under this Guaranty and Guaranteed Party's right to recovery hereunder is limited to a total aggregate amount of [*] (the "GUARANTY CAP"). 5-1 3. NATURE OF OBLIGATIONS. The Guarantor guaranties that the Obligations shall be paid strictly in accordance with the terms of the Agreement, regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of Guaranteed Party with respect thereto. The duties of the Guarantor under this Guaranty are independent of the Obligations, and a separate action or actions may be brought and prosecuted against the Guarantor to enforce this Guaranty, irrespective of whether any action is brought against the Company or whether the Company is joined in any such action or actions. Guaranteed Party shall not be obligated to file any claim relating to the obligations if the Company becomes subject to a bankruptcy, reorganization or similar proceeding and neither the failure of Guaranteed Party to so file, nor the existence of any such proceeding, shall affect the Guarantor's obligations hereunder. The liability of the Guarantor under this Guaranty as specified in Section 1 of this Guaranty shall, to the fullest extent permitted by law, be absolute and unconditional irrespective of: (i) any change in the time, manner or place of payment of, or in any other term of, all or any of the Obligations, or any other amendment or waiver of or any consent to departure from the Agreement, including, without limitation, any increase in the Obligations; provided, however, no action taken pursuant to this Section 3(i) shall be construed to extend the term of this Guaranty or increase the amount of the Guaranty Cap; (ii) any manner of sale or other disposition of assets of the Company or any of its Affiliates (as such term is defined in the Agreement); or (iii) any change, restructuring or termination of the structure or existence of the Company or any of its Affiliates. The Guarantor shall not contest the amount, Guaranteed Party's right to collect, or Guaranteed Party's collection of, the Obligations (as they may be revised from time to time as provided for herein) in any future proceeding including, without limitation, civil, criminal, regulatory, administrative, judicial, equitable, or appellate, on the basis that the Obligations constitute a penalty, are or will result in a forfeiture, or are otherwise unlawful; provided, however that, notwithstanding anything to the contrary contained herein, the Guarantor may assert that Guaranteed Party's actual damages are less than the Obligations, contest liability or assert any other claim or defense that the Company could assert, except as expressly limited herein, so long as the Guarantor does not duplicate or reassert any claims or initiate any proceedings that were resolved or concluded previously by the Company. The Guarantor agrees that the obligations of the Guarantor set forth in this Guaranty shall be direct obligations of the Guarantor, and such obligations shall be absolute and unconditional and shall not be subject to any counterclaim, set-off, 5-2 deduction, diminution, abatement, recoupment, suspension, deferment, reduction or defense (other than full and strict compliance by the Guarantor with its obligations hereunder) based upon any claim the Guarantor or any other Person (as such term is defined in the Agreement) may have against Guaranteed Party or the Company. This Guaranty shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any of the Obligations is rescinded or must otherwise be returned upon the insolvency, bankruptcy or reorganization of the Company or otherwise, all as though such payment had not been made. 4. WAIVER. The Guarantor hereby waives demand, promptness, diligence, presentment, notice of acceptance, notice of protest for non-payment and any other notice or similar action with respect to any of the Obligations and this Guaranty and any requirement that Guaranteed Party exhaust any right or take any action against the Company or any other Person. 5. SUBROGATION. The Guarantor shall not exercise any rights which it may acquire by way of subrogation under this Guaranty, by any payment made hereunder or otherwise, until all Obligations and all other amounts payable under this Guaranty shall have been paid in full to Guaranteed Party. If any amount shall be paid to the Guarantor on account of any subrogation rights at any time prior to the payment in full of the Obligations and all other amounts payable under this Guaranty, such amount(s) shall be paid immediately to Guaranteed Party to be credited and applied to the Obligations, whether matured or unmatured, in accordance with the terms hereof and the Agreement. Upon full payment of the Obligations and all other amounts payable under this Guaranty, Guarantor shall be subrogated to the rights of Guaranteed Party, and Guaranteed Party shall take all such reasonable actions, at the Guarantor's sole expense, as Guarantor shall reasonably request to effect such subrogation rights. 6. CERTAIN RIGHTS AND POWERS OF GUARANTEED PARTY. Guaranteed Party shall have all of the rights and remedies available under applicable law and may proceed by appropriate court action to enforce the terms hereof and to recover damages for the breach hereof. Each and every remedy of Guaranteed Party shall, to the extent permitted by law, be cumulative and shall be in addition to any other remedy now or hereafter existing at law or in equity. At the option of Guaranteed Party and upon notice to the Guarantor, the Guarantor may be joined in any action or proceeding commenced by Guaranteed Party against the Company in respect of any Obligation, and recovery may be had against the Guarantor in such action or proceeding or in any independent action or proceeding against the Guarantor, without any requirement that Guaranteed Party first assert, prosecute or exhaust any remedy or claim against the Company. 7. REPRESENTATIONS AND WARRANTIES. The Guarantor represents and warrants to Guaranteed Party as follows: 5-3 (a) ORGANIZATION AND GOOD STANDING. The guarantor is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and each jurisdiction in which it currently conducts its business. The Guarantor has all requisite corporate power and authority to carry on its business as it is now conducted and as contemplated by this Guaranty, and to enter into and perform its obligations hereunder. (b) DUE AUTHORIZATION; NO CONFLICTS. The execution, delivery and performance by the Guarantor of the Guaranty has been duly and effectively authorized by all necessary corporate action of the Guarantor. No other corporate proceedings are necessary to authorize the execution and delivery by the Guarantor of this Guaranty; and this Guaranty is the valid and binding obligation of Guarantor, enforceable in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency or similar laws from time to time in effect that affect creditors' rights generally or by general principles of equity. Neither the execution and delivery of this Guaranty nor compliance by the Guarantor with any of the provisions hereof will (i) violate, or conflict with, or result in a breach of any provisions of, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, or result in the termination of, or accelerate the performance required by, or result in the creation of any lien upon any of the properties or assets of the Guarantor under any of the terms, conditions or provisions of the Certificate of Incorporation or By-Laws of the Guarantor in effect on the date of this Guaranty (hereinafter, the "EFFECTIVE DATE") or any agreement or other instrument or obligation to which the Guarantor is a party at the Effective Date, or by which the Guarantor or any of its properties or assets or may be bound or affected as of the Effective Date, or (ii) violate any order, writ, injunction decree, arbitration award, statute, rule or regulation applicable at the Effective Date to the Guarantor or any of its properties or assets. (c) NO CONSENT REQUIRED. No permit, authorization, consent, approval, waiver, exception, variance, ruling, order decree, exemption, filing, recording, registration, notice or declaration (collectively, "Governmental Approval"), is required or to be made on the Guarantor's behalf with any federal, state, county, municipal, regional, local, territorial or other governmental department, regulatory body, commission, board, bureau, agency, taxing authority or other instrumentality (collectively, "GOVERNMENTAL AUTHORITY") to authorize the execution and delivery of this Guaranty or the taking of any future action contemplated hereby, except for those Governmental Approvals (i) which have already been obtained or (ii) the failure of which to obtain would not have an adverse effect on the ability of the Guarantor to perform and satisfy its obligations hereunder. (d) NO DEFAULT UNDER OTHER AGREEMENTS. The guarantor is not in default, and no condition exists that with notice or lapse of time or both would constitute a default, under any mortgage, deed of trust, indenture or other instrument or agreement to which it is a party or by which it or any of its properties or assets may be bound, that would have a material adverse effect on the Guarantor's ability to perform under this Guaranty; and the Guarantor is not in violation of any federal, state, or local rules, ordinances, judgments, 5-4 decrees, injunctions, writs, interpretations, licenses and permits or orders of any court, arbitrator (collectively, "REQUIREMENTS OF LAW"), or Governmental Authority that could have a material adverse effect on the Guarantor's ability to perform under this Guaranty. (e) LITIGATION. There is no litigation, proceeding, arbitration or government investigation pending or, so far as known to the Guarantor, threatened with respect to or otherwise relating to the Guarantor which if adversely determined could, in any one case or in the aggregate, have a material adverse effect on the ability of the Guarantor to comply with its obligations under this Guaranty. (f) COMPLIANCE WITH LAW. (i) The Guarantor has complied in all material respects with all Requirements of Law relating to this Guaranty, the Guarantor has received no written notice to the effect that, or otherwise been advised in writing that, it is not in compliance with any requirement of law or governmental approval relating to this Guaranty, and the Guarantor has no reason to believe that any currently existing circumstances are likely to result in violations by the Guarantor of any such requirement of law which could in any one case or in the aggregate, have a material adverse effect on the ability of the Guarantor to perform under this Guaranty; and (ii) to the best of the knowledge of the Guarantor, there is not now pending any proceeding, hearing or investigation with respect to the adoption of amendments or modifications to any existing requirement of law or governmental approval with respect to such matters which, if adopted, would have a material adverse effect on the ability of the Guarantor to comply with its obligations under the Guaranty. 8. COVENANTS. The Guarantor covenants and agrees that, so long as any part of the Obligations shall remain unpaid, the Guarantor shall: (a) PERFORMANCE AND COMPLIANCE WITH OTHER AGREEMENTS. Perform and comply with each of the material provisions of each material indenture, credit agreement, contract or other agreement by which the Guarantor is bound, non-performance or non-compliance with which would have a material adverse effect on its ability to perform its obligations hereunder, except material contracts or other agreements being contested in good faith. (b) PRESERVATION OF CORPORATE EXISTENCE, ETC. Preserve and maintain its corporate existence and preserve its material rights, franchises and privileges to conduct its business substantially as conducted on the date hereof. (c) COMPLIANCE WITH LAWS, ETC. Comply with all Requirements of Law and Governmental Approvals, non-compliance with which would have a material adverse effect on its ability to perform its obligations herein, except laws, rules, regulations and orders being contested in good faith. 5-5 (d) NOTICE OF BREACH. Provide, as soon as possible and in any event within three (3) business days after the occurrence of any default or breach of the obligations applicable to the Guarantor hereunder, a statement of the Chief Financial Officer or Vice-President and Treasurer of the guarantor setting forth details of the circumstances leading to such breach or default hereof and the action which the Guarantor proposes to take with respect thereto. (e) MERGERS, ETC. Not merge with any person, corporation, partnership, or other entity unless: (i) the surviving and resulting entity agrees in writing to be bound hereby to the same extent as the Guarantor, and (ii) immediately after giving effect thereto, no event of default or breach of this Guaranty shall have occurred and be continuing. 9. NO WAIVER. No failure on the part of Guaranteed Party to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. 10. CONTINUING GUARANTY. This guaranty is a continuing guaranty and shall (i) remain in full force and effect until the payment in full of all amounts payable under this Guaranty, (ii) be binding upon the Guarantor, its successors and assigns, and (iii) inure to the benefit of, and be enforceable by, Guaranteed Party and its successors, transferees and assigns. 11. WAIVER OF NOTICES. The Guarantor hereby unconditionally and irrevocably waives all notices to and demands upon Red Oak or the Guarantor and all other formalities, the omission of any of which or delay in performance of which, might, but for the provisions of this paragraph, by rule of law, under equitable principles or otherwise, constitute grounds for relieving or discharging the Guarantor in whole or in part from its obligations hereunder. 12. NO CONSEQUENTIAL DAMAGES. Neither Party shall be liable to the other under this Guaranty or otherwise for any exemplary, consequential, special, or punitive losses or damages that may be incurred by either Party as a result of their execution of and performance under this Guaranty. 13. FURTHER ASSURANCES. The Guarantor, at its sole cost and expense, shall cause to be promptly and duly taken, executed, acknowledged and delivered, such further documents and instruments as Guaranteed Party may from time to time reasonably request in order to carry-out more effectively the intent and purposes of this Guaranty. 14. SEVERABILITY. If any provision of this Guaranty shall be held or deemed to be or shall, in fact, be illegal, inoperative or unenforceable, the same shall not affect any 5-6 other provision or provisions herein contained or render the same invalid, inoperative or unenforceable to any extent whatsoever. 15. COUNTERPARTS; EFFECTIVENESS. This guaranty may be executed in any number of counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument. The Effective Date of this Guaranty for all purposes shall be the date on which a Notice to Proceed is provided to AES Red Oak L.L.C. in accordance with the Agreement. 16. AMENDMENT; WAIVER; REQUIREMENT OF WRITING. This Guaranty cannot be amended, changed, modified, released or discharged except by a writing signed by the party against whom enforcement of the amendment, change, modification or waiver is sought. 17. ADDRESS FOR NOTICES. Any notice, request, consent, waiver or other communication required or permitted hereunder shall be effective only if it is in writing and personally delivered or sent by certified or registered mail, postage prepaid, or by nationally recognized overnight courier, addressed as set forth below: If to Guaranteed Party: Williams Energy Marketing and Trading Company One Williams Center Tulsa, OK 74172 Attention: Credit Telephone: (918) 573-3792 Facsimile: (918) 573-8881 If to Guarantor: The AES Corporation 1001 North 19th Street Arlington, VA 22209 Attention: General Counsel Telephone: (703) 522-1315 Facsimile: (703) 528-4510 or to such other person or address as the addressee may have specified in a notice duly given to the sender as provided herein. Such notice or communication shall be deemed to have been given as of the date received by the recipient thereof. 18. GOVERNING LAW. This Guaranty shall be construed in accordance with and governed by the laws of the State of New York, without regard to the conflict of laws provisions of such laws. 5-7 19. SUBMISSION TO JURISDICTION. Each of Guaranteed Party and the Guarantor hereby irrevocably and unconditionally: (a) submits for itself and its property in any legal action or proceeding relating to this Guaranty, or for recognition and enforcement of any judgment in respect thereof, to the exclusive general jurisdiction of the courts of the State of New York, the courts of the United States of the Southern District of New York, and appellate courts with jurisdiction over any appeals therefrom; (b) consents and agrees that any such action or proceeding may be brought in and only in such courts and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same; (c) agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to its address set forth in Section 17 of this Guaranty, or at such other address of which the other party shall have been notified pursuant thereto; and (d) agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law. 20. ASSIGNMENT; TERMINATION. This Guaranty may be assigned by the Guarantor only with the prior written consent of Guaranteed Party, which consent shall not be unreasonably withheld. Guaranteed Party may assign this Guaranty only as permitted under the Agreement with respect to assignments by Guaranteed Party of its rights thereunder. This Guaranty shall be binding upon, and inure to the benefit of, the parties hereto and their respective successors and permitted assigns. this Guaranty shall terminate, and Guarantor shall have no further liability or obligations hereunder on the earlier of, [*]. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 5-8 IN WITNESS WHEREOF, the Guarantor and Guaranteed Party have each caused this Guaranty to be executed on its behalf by its duly authorized office as of the date shown above. THE AES CORPORATION as Guarantor By: -------------------------------------- Name: Title: ACCEPTED AND ACKNOWLEDGED: WILLIAMS ENERGY MARKETING & TRADING COMPANY By: -------------------------------------- Name: Title: 5-9 APPENDIX 6 GUARANTY BY THE WILLIAMS COMPANIES, INC. GUARANTY (this "GUARANTY"), dated as of [ ], by The Williams Companies, Inc., a Delaware corporation (the "GUARANTOR"), in favor of AES Red Oak, L.L.C., a Delaware limited liability company ("GUARANTEED PARTY"), pursuant to Section 18.3 of that certain Fuel Conversion Services, Capacity and Ancillary Services Agreement, dated as of [ ], by and between Guaranteed Party and Williams Energy Marketing & Trading Company, a Delaware corporation and a subsidiary of Guarantor (the "COMPANY"), as modified or supplemented from time to time (the "AGREEMENT"). RECITALS WHEREAS, Guaranteed Party has agreed to enter into the Agreement in reliance upon the Guarantor's agreement, pursuant to the terms and conditions set forth below, to provide this Guaranty to Guaranteed Party; and WHEREAS, Guarantor is willing to provide this Guaranty to Guaranteed Party, on the terms and conditions set forth below, as an inducement to Guaranteed Party to enter into the Agreement with the Company. NOW, THEREFORE, in consideration of the above premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be bound hereby, the Guarantor agrees as follows: 1. OBLIGATIONS OF GUARANTOR. Subject to the Guaranty Cap set forth in Section 2 of this Guaranty, the Guarantor unconditionally and irrevocably guaranties, as primary obligor and not merely as surety, to and for the benefit of Guaranteed Party, the prompt payment and performance when due of all present and future obligations (i) of the Company to make Fixed Payments pursuant to, and as such term is defined in, the Agreement and (ii) to pay damages arising under the Agreement in respect of the Company's obligation to make Total Fixed Payments under the Agreement (including damages related to the loss of the Company's Total Fixed Payments arising from any breach by the Company of the Agreement or a termination of the Agreement for cause by Guaranteed Party) together with any and all reasonable expenses (including reasonable attorneys' fees and expenses) incurred by Guaranteed Party in enforcing this Guaranty (the obligations referred to in clauses (i) and (ii) collectively and individually, the "OBLIGATIONS"). Subject to the Guaranty Cap set forth in Section 2 of this Guaranty, the Guarantor agrees, that upon the failure of the Company to pay any of the Obligations when they become due, the Guarantor will pay, or cause to be paid, to Guaranteed Party any and all such unpaid Obligations. 6-1 2. Maximum Guaranteed Amount. (a) The aggregate liability of the Guarantor under this Guaranty and Guaranteed Party's right of recovery hereunder is limited to a total aggregate amount of [*], as reduced from time to time as provided for in the following paragraph (the "GUARANTY CAP"). (b) [*] 3. NATURE OF OBLIGATIONS. The Guarantor guaranties that the Obligations shall be paid strictly in accordance with the terms of the Agreement, regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of Guaranteed Party with respect thereto. The duties of the Guarantor under this Guaranty are independent of the Obligations, and a separate action or actions may be brought and prosecuted against the Guarantor to enforce the Guaranty, irrespective of whether any action is brought against the Company or whether the Company is joined in any such action or actions. Guaranteed Party shall not be obligated to file any claim relating to the Obligations if the Company becomes subject to a bankruptcy, reorganization or similar proceeding and neither the failure of Guaranteed Party to so file, nor the existence of any such proceeding, shall affect the Guarantor's obligations hereunder. The liability of the Guarantor under this Guaranty as specified in Section 1 of this Guaranty shall, to the fullest extent permitted by law, be absolute and unconditional irrespective of: (i) any change in the time, manner or place of payment of, or in any other term of, all or any of the Obligations, or any other amendment or waiver of or any consent to departure from the Agreement, including, without limitation, any increase in the Obligations; provided, however, no action taken pursuant to this Section 3(i) shall be construed to extend the term of this Guaranty or increase the amount of the Guaranty Cap; (ii) any manner of sale or other disposition of assets of the Company or any of its Affiliates (as such term is defined in the Agreement); or 6-2 (iii) any change, restructuring or termination of the structure or existence of the Company or any of its Affiliates. The Guarantor shall not contest the amount, Guaranteed Party's right to collect, or Guaranteed Party's collection of, the Obligations (as they may be revised from time to time as provided for herein) in any future proceeding including, without limitation, civil, criminal, regulatory, administrative, judicial, equitable, or appellate, on the basis that the Obligations constitute a penalty, are or will result in a forfeiture, or are otherwise unlawful; provided, however, that, notwithstanding anything to the contrary contained herein, the Guarantor may assert that Guaranteed Party's actual damages are less than the Obligations, contest liability or assert any other claim or defense that the Company could assert, except as expressly limited herein, so long as the Guarantor does not duplicate or reassert any claims or initiate any proceedings that were resolved or concluded previously by the Company. The guarantor agrees that the obligations of the Guarantor set forth in this Guaranty shall be direct obligations of the Guarantor, and such obligations shall be absolute and unconditional and shall not be subject to any counterclaim, set-of, deduction, diminution, abatement, recoupment, suspension, deferment, reduction or defense (other than full and strict compliance by the Guarantor with its obligations hereunder) based upon any claim the Guarantor or any other Person (as such term is defined in the Agreement) may have against Guaranteed Party or the Company. This Guaranty shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any of the Obligations is rescinded or must otherwise be returned upon the insolvency, bankruptcy or reorganization of the Company or otherwise, all as though such payment had not been made. 4. WAIVER. The Guarantor hereby waives demand, promptness, diligence, presentment, notice of acceptance, notice of protest for non-payment and any other notice or similar action with respect to any of the Obligations and this Guaranty and any requirement that Guaranteed Party exhaust any right or take any action against the Company or any other Person. 5. SUBROGATION. The Guarantor shall not exercise any rights which it may acquire by way of subrogation under this Guaranty, by any payment made hereunder or otherwise, until all Obligations and all other amounts payable under this Guaranty shall have been paid in full to Guaranteed Party. If any amount shall be paid to the Guarantor on account of any subrogation rights at any time prior to the payment in full of the Obligations and all other amounts payable under this Guaranty, such amount(s) shall be paid immediately to Guaranteed Party to be credited and applied to the Obligations, whether matured or unmatured, in accordance with the terms hereof and the Agreement. Upon full payment of the Obligations and all other amounts payable under this Guaranty, Guarantor shall be subrogated to the rights of Guaranteed Party, and Guaranteed Party shall take all such reasonable actions, at the Guarantor's sole expense, as Guarantor shall reasonably request to effect such subrogation rights. 6. CERTAIN RIGHTS AND POWERS OF GUARANTEED PARTY. Guaranteed Party shall have all of the rights and remedies available under applicable law and may proceed by appropriate court 6-3 action to enforce the terms hereof and to recover damages for the breach hereof. Each and every remedy of Guaranteed Party shall, to the extend permitted by law, be cumulative and shall be in addition to any other remedy now or hereafter existing at law or in equity. At the option of guaranteed Party and upon notice to the Guarantor, the Guarantor may be joined in any action or proceeding commenced by Guaranteed Party against the Company in respect of any Obligation, and recovery may be had against the Guarantor in such action or proceeding or in any independent action or proceeding against the Guarantor, without any requirement that Guaranteed Party first assert, prosecute or exhaust any remedy or claim against the Company. 7. REPRESENTATIONS AND WARRANTIES. The Guarantor represents and warrants to Guaranteed Party as follows: (a) ORGANIZATION AND GOOD STANDING. The guarantor is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and each jurisdiction in which it currently conducts its business. The Guarantor has all requisite corporate power and authority to carry on its business as it is now conducted and as contemplated by this Guaranty, and to enter into and perform its obligations hereunder. (b) DUE AUTHORIZATION; NO CONFLICTS. The execution, delivery and performance by the Guarantor of the Guaranty has been duly and effectively authorized by all necessary corporate action of the Guarantor. No other corporate proceedings are necessary to authorize the execution and delivery by the Guarantor of this Guaranty; and this Guaranty is the valid and binding obligation of Guarantor, enforceable in accordance with its items, except as such enforceability may be limited by applicable bankruptcy, insolvency or similar laws from time to time in effect that affect creditors' rights generally or by general principles of equity. Neither the execution and delivery of this Guaranty nor compliance by the Guarantor with any of the provisions hereof will (i) violate, or conflict with, or result in a breach of any provisions of, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, or result in the termination of, or accelerate the performance required by, or result in the creation of any lien upon any of the properties or assets of the Guarantor under any of the terms, conditions or provisions of, the Certificate of Incorporation or By-Laws of the Guarantor in effect on the date of this Guaranty (hereinafter, the "Effective Date") or any agreement or other instrument or obligation to which the Guarantor is a party at the Effective Date, or by which the Guarantor or any of its properties or assets or may be bound or affected as of the Effective Date, or (ii) violate any order, writ, injunction decree, arbitration award, statute, rule or regulation applicable at the Effective Date to the Guarantor or any of its properties or assets. (c) NO CONSENT REQUIRED. No permit, authorization, consent, approval, waiver, exception, variance, ruling, order decree, exemption, filing, recording, registration, notice or declaration (collectively, "GOVERNMENTAL APPROVAL"), is required or to be made on the Guarantor's behalf with any federal, state, county, municipal, regional, local, territorial or other governmental department, regulatory body, commission, board, bureau, agency, taxing authority or other instrumentality (collectively, "GOVERNMENTAL AUTHORITY") to authorize the execution and delivery of this Guaranty or the taking of any future action contemplated hereby, except for those 6-4 Governmental Approvals (i) which have already been obtained or (ii) the failure of which to obtain would not have an adverse effect on the ability of the Guarantor to perform and satisfy its obligations hereunder. (d) NO DEFAULT UNDER OTHER AGREEMENTS. The Guarantor is not in default, and no condition exists that with notice or lapse of time or both would constitute a default, under any mortgage, deed of trust, indenture or other instrument or agreement to which it is a party or by which it or any of its properties or assets may be bound, that would have a material adverse effect on the Guarantor's ability to perform under this Guaranty; and the Guarantor is not in violation of any federal, state, or local rules, ordinances, judgments, decrees, injunctions, writs, interpretations, licenses and permits or orders of any court, arbitrator (collectively, "REQUIREMENTS OF LAW"), or Governmental Authority that could have a material adverse effect on the Guarantor's ability to perform under this Guaranty. (e) LITIGATION. There is no litigation, proceeding, arbitration or government investigation pending or, so far as known to the Guarantor, threatened with respect to or otherwise relating to the Guarantor which if adversely determined could, in any one case or in the aggregate, have a material adverse effect on the ability of the Guarantor to comply with its obligations under this Guaranty. (f) COMPLIANCE WITH LAW. (i) The Guarantor has complied in all material respects with all Requirements of Law relating to this Guaranty, the Guarantor has received no written notice to the effect that, or otherwise been advised in writing that, it is not in compliance with any requirement of law or governmental approval relating to this Guaranty, and the Guarantor has no reason to believe that any currently existing circumstances are likely to result in violations by the Guarantor of any such requirement of law which could in any one case or in the aggregate, have a material adverse effect on the ability of the Guaranty to perform under this Guaranty; and (ii) to the best of the knowledge of the Guarantor, there is not now pending any proceeding, hearing or investigation with respect to the adoption of amendments or modifications to any existing requirement of law or governmental approval with respect to such matters which, if adopted, would have a material adverse effect on the ability of the Guarantor to comply with its obligations under the Guaranty. 8. COVENANTS. The guarantor covenants and agrees that, so long as any part of the Obligations shall remain unpaid, the Guarantor shall: (a) PERFORMANCE AND COMPLIANCE WITH OTHER AGREEMENTS. Perform and comply with each of the material provisions of each material indenture, credit agreement, contract or other agreement by which the Guarantor is bound, non-performance or non-compliance with which would have a material adverse effect on its ability to perform its obligations hereunder, except material contracts or other agreements being contested in good faith. 6-5 (b) PRESERVATION OF CORPORATE EXISTENCE, ETC. Preserve and maintain its corporate existence and preserve its material rights, franchises and privileges to conduct its business substantially as conducted on the date hereof. (c) COMPLIANCE WITH LAWS, ETC. Comply with all Requirements of Law and Governmental Approvals, non-compliance with which would have a material adverse effect on its ability to perform its obligations herein, except laws, rules, regulations and orders being contested in good faith. (d) NOTICE OF BREACH. Provide, as soon as possible and in any event within three (3) business days after the occurrence of any default or breach of the obligations applicable to the Guarantor hereunder, a statement of the Chief Financial Officer or Vice-President and Treasurer of the Guarantor setting forth details of the circumstances leading to such breach or default hereof and the action which the Guarantor proposes to take with respect thereto. (e) MERGERS, ETC. Not merge with any person, corporation, partnership, or other entity unless: (i) the surviving and resulting entity agrees in writing to be bound hereby to the same extent as the Guarantor, and (ii) immediately after giving effect thereto, no event of default or breach of this Guaranty shall have occurred and be continuing. 9. NO WAIVER. No failure on the part of Guaranteed Party to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. 10. CONTINUING GUARANTY. This Guaranty is a continuing guaranty and shall (i) remain in full force and effect until the payment in full of all amounts payable under this Guaranty, (ii) be binding upon the Guarantor, its successors and assigns, and (iii) inure to the benefit of, and be enforceable by, Guaranteed Party and its successors, transferees and assigns. 11. WAIVER OF NOTICES. The Guarantor hereby unconditionally and irrevocably waives all notices to and demands upon the Company or the Guarantor and all other formalities, the omission of any of which or delay in performance of which, might, but for the provisions of this paragraph, by rule of law, under equitable principles or otherwise, constitute grounds for relieving or discharging the Guarantor in whole or in part from its obligations hereunder. 12. NO CONSEQUENTIAL DAMAGES. Neither Party shall be liable to the other under this Guaranty or otherwise for any exemplary, consequential, special, or punitive losses or damages that may be incurred by either Party as a result of their execution of and performance under this Guaranty. 13. FURTHER ASSURANCES. The Guarantor, at its sole cost and expense, shall cause to be promptly and duly taken, executed, acknowledged and delivered, such further documents and 6-6 instruments as Guaranteed Party may from time to time reasonably request in order to carry-out more effectively the intent and purposes of this Guaranty. 14. SEVERABILITY. If any provision of this Guaranty shall be held or deemed to be or shall, in fact, be illegal, inoperative or unenforceable, the same shall not affect any other provision or provisions herein contained or render the same invalid, inoperative or unenforceable to any extent whatsoever. 15. COUNTERPARTS; EFFECTIVENESS. This guaranty may be executed in any number of counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same instrument. The effective date of this Guaranty for all purposes shall be the date specified on page one (1) above. 16. AMENDMENT; WAIVER; REQUIREMENT OF WRITING. this Guaranty cannot be amended, changed, modified, released or discharged except by a writing signed by the party against whom enforcement of the amendment, change, modification or waiver is sought. 17. ADDRESS FOR NOTICES. Any notice, request, consent, waiver or other communication required or permitted hereunder shall be effective only if it is in writing and personally delivered or sent by certified or registered mail, postage prepaid, or by nationally recognized overnight courier, addressed as set forth below: If to Guaranteed Party: The AES Corporation 1001 North 19th Street Arlington, VA 22209 Attention: General Counsel Telephone: (703) 522-1315 Facsimile: (703) 528-4510 If to Guarantor: The Williams Companies, Inc. One Williams Center Tulsa, OK 74172 Attention: Treasurer Telephone: (918) 573-5551 Facsimile: (918) 573-2065 or to such other person or address as the addressee may have specified in a notice duly given to the sender as provided herein. Such notice or communication shall be deemed to have been given as of the date received by the recipient thereof. 6-7 18. GOVERNING LAW. This Guaranty shall be construed in accordance with and governed by the laws of the State of New York without regard to the conflict of laws provisions of such laws. 19. SUBMISSION TO JURISDICTION. Each of Guaranteed Party and the Guarantor hereby irrevocably and unconditionally: (a) submits for itself and its property in any legal action or proceeding relating to this Guaranty, or for recognition and enforcement of any judgment in respect thereof, to the exclusive general jurisdiction of the courts of the State of New York, the courts of the United States of the Southern District of New York, and appellate courts with jurisdiction over any appeals therefrom; (b) consents and agrees that any such action or proceeding may be brought in and only in such courts and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same; (c) agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to its address set forth in Section 17 of this Guaranty, or at such other address of which the other party shall have been notified pursuant thereto; and (d) agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law. 20. ASSIGNMENT. This Guaranty may be assigned by the Guarantor only with prior written consent of Guaranteed Party, which consent shall not be unreasonably withheld. Guaranteed Party may assign this Guaranty only as permitted under the Agreement with respect to assignments by Guaranteed Party of its rights thereunder. This Guaranty shall be binding upon, and inure to the benefit of, the parties hereto and their respective successors and permitted assigns. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 6-8 IN WITNESS WHEREOF, the Guarantor and Guaranteed Party have each caused this Guaranty to be executed on its behalf by its duly authorized office as of the date shown above. THE WILLIAMS COMPANIES, INC. as Guarantor By: -------------------------------------- Name: Title: ACCEPTED AND ACKNOWLEDGED: THE AES CORPORATION By: -------------------------------------- Name: Title: 6-9 EXHIBIT A AES Red Oak Project The Williams Companies, Inc. Guaranty Cap Reduction Schedule [*] 6-10 APPENDIX 7 FUEL CONVERSION SERVICES, CAPACITY AND ANCILLARY SERVICES PURCHASE AGREEMENT LIST OF THIRD PARTY ENGINEERS [To be provided by AES after the Execution Date pursuant to the Agreement] APPENDIX 8 SAMPLE MONTHLY BILLING INVOICE SELLER: AES Red Oak, L.L.C. 1001 N. 19th St. Arlington, Virginia 22209 BUYER: Williams Energy Marketing & Trading Company One Williams Center Tulsa, Oklahoma 74172 BILLING PERIOD: ____________________________________________________ [*] APPENDIX 9 FUEL CONVERSION SERVICES, CAPACITY AND ANCILLARY SERVICES PURCHASE AGREEMENT OPERATING SPECIFICATIONS As determined by the engineering, procurement and construction contractor and as may be revised from time to time pursuant to the Agreement [to be provided as soon as reasonably practicable after the Execution Date but in no event later than the Commercial Operation Date] EXHIBIT 1 Allowable Dispatch Curve EXHIBIT 2 Heat Rate Target EXHIBIT 3 Temperature Adjusted Unforced Capacity EXHIBIT 4 Temperature Adjusted Facility Capacity EXHIBIT 5 Natural Gas Volumes for Successful Start-ups and Associated Shutdowns EXHIBIT 6 Allocated Start-up Duration EXHIBIT 7 Estimated Reactive Capability Curve EXHIBIT 8 Estimated Range of Automatic Regulation Exhibit 10.1 AES RED OAK, L.L.C. February 21, 2000 Philip J. Scalzo, Vice President Williams Energy Marketing & Trading Company One Williams Center Tulsa, Oklahoma 74172 Re: Amendment No. 1 to the Fuel Conversion Services, Capacity and Ancillary Services Purchase Agreement Dear Phil: AES Red Oak, L.L.C. and Williams Energy Marketing & Trading Company (together, the "Parties") entered into that certain Fuel Conversion Services, Capacity and Ancillary Services Purchase Agreement, dated September 17, 1999 (the "Agreement"). The Parties hereby agree to amend the Agreement, as follows: 1. Section 1.1 shall be revised to include the following definitions: [*] "Major Maintenance Reserve Account" - an account established pursuant to Seller's financing documents that will be funded on a monthly basis in amounts necessary to cover expected costs of major maintenance required at the major maintenance intervals. 2. Section 10.8(b) shall be revised to read as follows: [*] [*] 3. [*] 4. [*] 5. In Section II.B of Appendix 1, "Section 10.9" in the first paragraph shall be changed to "Section 10.8." 6. [*] [*] Except as set forth in the Amendment No. 1, the Agreement remains unchanged and in full force and effect. Please note the agreement of Williams Energy Marketing & Trading Company with this Amendment No. 1 to the Agreement by signing below. Sincerely, /s/ Charles Falter Charles Falter for AES Red Oak, L.L.C. Acknowledged and Agreed, /s/ Philip J. Scalzo Philip J. Scalzo for Williams Energy Marketing & Trading Company EX-10.2(A) 3 ex-10_2a.txt EXHIBIT 10.2(A) EXHIBIT 10.2(a) EXECUTION COPY An asterisk ([*]) indicates that confidential information has been omitted and filed separately with the Securities and Exchange Commission as part of a Confidential Treatment Request. - -------------------------------------------------------------------------------- AGREEMENT FOR ENGINEERING, PROCUREMENT AND CONSTRUCTION SERVICES BETWEEN AES RED OAK, LLC ("OWNER") AND RAYTHEON ENGINEERS & CONSTRUCTORS, INC. ("CONTRACTOR") - -------------------------------------------------------------------------------- Dated as of October 15, 1999 TABLE OF CONTENTS
PAGE ARTICLE 1 DEFINITIONS.............................................................................. 1 1.1 Definitions....................................................................... 1 ARTICLE 2 CONTRACTOR'S SERVICES AND OTHER OBLIGATIONS.............................................. 17 2.1 Services to be Performed.......................................................... 17 2.2 Commencement of the Services...................................................... 35 2.3 Performance....................................................................... 37 2.4 Compliance with Applicable Laws, Applicable Permits and the Guaranteed Emissions Limits....................................................... 38 2.5 Safety Precautions................................................................ 39 ARTICLE 3 SUBCONTRACTS............................................................................. 40 3.1 Major Specialty Consultants, Subcontractors and Equipment Suppliers............... 40 3.2 Purchase Orders and Subcontracts.................................................. 41 3.3 Payments to Subcontractors........................................................ 41 3.4 Subcontractor Warranties.......................................................... 41 3.5 Subcontractor Insurance........................................................... 42 3.6 No Privity with Subcontractors.................................................... 42 3.7 Review and Approval not Relief of Contractor's Liability.......................... 42 3.8 Assignability of Subcontracts..................................................... 42 3.9 Quality Control................................................................... 43 ARTICLE 4 PRICE AND PAYMENT........................................................................ 43 4.1 Contract Price.................................................................... 43 4.2 Payment Schedule.................................................................. 43 4.3 Price Adjustments................................................................. 46 4.4 Payment upon Termination.......................................................... 47 4.5 No Payment in the Event of Material Breach........................................ 49 4.6 All Payments Subject to Release of Claims......................................... 49 4.7 Payment or Use Not Acceptance..................................................... 50 4.8 Set-Off........................................................................... 50 ARTICLE 5 OWNER SERVICES........................................................................... 51 5.1 Representative.................................................................... 51 5.2 Facility Site..................................................................... 51 5.3 Permits and Real Estate Rights.................................................... 51
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PAGE 5.4 Start-Up Personnel................................................................ 52 5.5 Spare Parts, Waste Disposal and Consumables....................................... 52 5.6 Utilities......................................................................... 53 5.7 Fuel.............................................................................. 53 5.8 Electrical Interconnection........................................................ 54 5.9 Owner's Failure to Meet Obligations............................................... 54 5.10 Approvals......................................................................... 54 5.11 Administration of Third Party Project Agreements.................................. 54 5.12 AES Pre-Financial Closing Guaranty................................................ 55 ARTICLE 6 COMPLETION AND ACCEPTANCE OF PROJECT..................................................... 55 6.1 Project Start-up; Mechanical Completion........................................... 55 6.2 Performance Tests................................................................. 58 6.3 Provisional Acceptance............................................................ 60 6.4 Not Used.......................................................................... 63 6.5 Final Acceptance.................................................................. 63 6.6 Reliability Run................................................................... 68 6.7 Project Completion................................................................ 69 ARTICLE 7 COMPLETION DATES......................................................................... 71 7.1 Guaranteed Completion Dates....................................................... 71 7.2 Guaranteed Completion Date Price Rebates.......................................... 71 7.3 Early Completion Bonus............................................................ 73 7.4 Rebates Reasonable; Payment of Rebates............................................ 74 7.5 Not Used.......................................................................... 74 7.6 Achievement of Construction Progress Milestones................................... 74 ARTICLE 8 PRICE REBATE FOR FAILURE TO MEET PERFORMANCE GUARANTEES.................................. 77 8.1 Performance Guarantees............................................................ 77 8.2 Rebates Reasonable................................................................ 79 8.3 Payment of Performance Rebates.................................................... 80 ARTICLE 9 LIABILITY AND DAMAGES.................................................................... 80 9.1 Limitation of Liability........................................................... 80 9.2 Consequential Damages............................................................. 81 9.3 Aggregate Liability of Contractor................................................. 81 ARTICLE 10 WARRANTIES AND GUARANTEES............................................................... 82 10.1 Warranties and Guarantees......................................................... 82 10.2 No Liens or Encumbrances.......................................................... 84 10.3 Limitation Of Warranties.......................................................... 84 ii PAGE ARTICLE 11 FORCE MAJEURE........................................................................... 85 11.1 Force Majeure Event............................................................... 85 11.2 Burden of Proof................................................................... 85 11.3 Excused Performance............................................................... 86 ARTICLE 12 SCOPE CHANGES........................................................................... 87 12.1 Further Refinement, Corrections and Detailing not Scope Changes................... 87 12.2 Scope Changes..................................................................... 87 12.3 Procedure for Scope Changes....................................................... 87 12.4 Scope Changes Due to Contractor Error............................................. 88 12.5 Scope Changes Due to Changes in Law and Permits................................... 89 12.6 Familiarity with Conditions and Documentation..................................... 89 12.7 Effect of Force Majeure Event..................................................... 91 12.8 Price Change...................................................................... 91 12.9 Continued Performance Pending Resolution of Disputes.............................. 92 12.10 Documentation..................................................................... 92 12.11 Qualitative Engineering........................................................... 92 12.12 Hazardous Materials............................................................... 93 ARTICLE 13 INDEMNIFICATION......................................................................... 93 13.1 General Indemnification........................................................... 93 13.2 Additional Indemnification........................................................ 94 13.3 Patent and Copyright Indemnification.............................................. 94 13.4 Hazardous Materials Liability..................................................... 95 13.5 Notice and Legal Defense.......................................................... 95 13.6 Failure to Defend Action.......................................................... 96 13.7 Survival.......................................................................... 96 ARTICLE 14 INSURANCE............................................................................... 96 14.1 General........................................................................... 96 14.2 Worker's Compensation Insurance................................................... 96 14.3 Commercial General Liability Insurance............................................ 96 14.4 Automobile Liability Insurance.................................................... 97 14.5 Commercial Umbrella and/or Excess Insurance....................................... 97 14.6 Severability of Interest.......................................................... 97 14.7 Builder's Risk Insurance.......................................................... 97 14.8 Ocean Marine Cargo Insurance...................................................... 98 14.9 Subcontractor Insurance........................................................... 98 14.10 Waiver of Subrogation............................................................. 98 14.11 Contractor's Waiver............................................................... 99 iii PAGE 14.12 Evidence of Coverage.............................................................. 99 14.13 Contractor's or Rented Equipment.................................................. 99 14.14 Descriptions not Limitations...................................................... 100 14.15 Cost of Premiums, Risk of Loss and Deductibles.................................... 100 14.16 Additional Insureds............................................................... 101 14.17 No Limitation of Liability........................................................ 101 14.18 Insurance Primary................................................................. 101 ARTICLE 15 TERMINATION; SUSPENSION................................................................. 102 15.1 Suspension or Termination for Owner's Convenience................................. 102 15.2 Suspension or Termination by Contractor Upon Non-Payment by Owner................. 104 15.3 Consequences of Termination....................................................... 105 15.4 Surviving Obligations............................................................. 107 ARTICLE 16 DEFAULT AND REMEDIES.................................................................... 108 16.1 Contractor's Default.............................................................. 108 16.2 Owner's Rights and Remedies....................................................... 110 ARTICLE 17 ASSIGNMENT.............................................................................. 111 17.1 Consent Required................................................................. 111 17.2 Successors and Assigns........................................................... 112 ARTICLE 18 DESIGN DOCUMENTS........................................................................ 113 18.1 Owner Review...................................................................... 113 18.2 Review not Release of Obligations................................................. 113 18.3 Final Documents................................................................... 113 18.4 Ownership........................................................................ 114 ARTICLE 19 CONFIDENTIAL INFORMATION............................................................... 114 19.1 Confidentiality................................................................... 114 19.2 Publicity Releases................................................................ 116 ARTICLE 20 INSPECTION.............................................................................. 116 20.1 Project Inspection................................................................ 116 20.2 No Relief for Differing Conditions............................................... 117 20.3 Owner's Environmental Site Assessment............................................. 119 ARTICLE 21 DISPUTE RESOLUTION...................................................................... 120 21.1 Dispute Resolution................................................................ 120 21.2 Performance During Dispute........................................................ 121 iv PAGE ARTICLE 22 COST RECORDS; AUDITS.................................................................... 121 22.1 Maintenance of Records............................................................ 121 22.2 Inspection of Books, Records and Audit Rights..................................... 121 22.3 Quality Audits.................................................................... 122 ARTICLE 23 INDEPENDENT CONTRACTOR.................................................................. 122 23.1 Contractor as Independent Contractor.............................................. 122 ARTICLE 24 REPRESENTATIONS AND WARRANTIES.......................................................... 122 24.1 Representations and Warranties of Contractor...................................... 122 24.2 Representations and Warranties of Owner........................................... 124 ARTICLE 25 MISCELLANEOUS........................................................................... 126 25.1 Past Due Amounts.................................................................. 126 25.2 Delay not Waiver.................................................................. 126 25.3 No Set-Off, Deduction or Counterclaim by Contractor............................... 126 25.4 Choice of Law..................................................................... 127 25.5 Severability...................................................................... 127 25.6 Notice............................................................................ 127 25.7 Section Headings.................................................................. 129 25.8 Entire Agreement.................................................................. 129 25.9 Amendments........................................................................ 129 25.10 Conflicting Provisions............................................................ 129 25.11 No Third Party Rights............................................................. 129 25.12 Owner's Obligations Non-Recourse.................................................. 129 25.13 Survival of Provisions............................................................ 129 25.14 Title to the Project.............................................................. 130 25.15 Counterparts...................................................................... 130
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APPENDICES ---------- Appendix A Scope of Services Appendix B Payment and Milestone Schedule Appendix C Project Schedule Appendix D Performance Test Plan Appendix E Approved Subcontractors List Appendix F Applicable Permits Appendix G Facility Site and Real Estate Rights Description Appendix H PPA Operating Requirements Excerpts Appendix I-1 Form of Contractor's Final Waiver and Release Appendix I-2 Form of Contractor's Interim Waiver and Release Appendix I-3 Form of Subcontractor's Final Waiver and Release Appendix J-1 Form of Limited Notice to Proceed Appendix J-2 Form of Notice to Proceed Appendix K Quality Assurance Plan Appendix L Form of EPC Guaranty Appendix M Cancellation Schedule Appendix N Construction Progress Milestones Appendix O Scope Options Appendix P Table of Submittals and Approvals Appendix Q List of Key Personnel Appendix R Warranty Data Sheet Appendix S Environmental Requirements Appendix T Form of AES Pre-Financial Closing Guaranty Appendix U Certain Equipment and/or Subcontracts Appendix V Form of Letter of Credit Appendix W Project Procedures Manual
vi AGREEMENT dated as of October 15, 1999 by and between AES Red Oak, LLC, a Delaware limited liability company ("OWNER"), and Raytheon Engineers & Constructors, Inc., a Delaware corporation ("CONTRACTOR"). W I T N E S S E T H : WHEREAS, Contractor desires to provide and Owner desires to obtain engineering, design, procurement, construction and related services for the Project, all of which shall be provided on a lump sum, fixed price, turnkey contract basis and in accordance with the terms and conditions herein specified; NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the parties hereto, intending to be legally bound, hereby agree as follows: ARTICLE 1 DEFINITIONS 1.1 DEFINITIONS. As used in this Agreement, the following terms shall have the following meanings (such meanings as necessary to be equally applicable to both the singular and plural forms of the terms defined): "AAA" shall have the meaning set forth in Section 21.1 hereof. "ACCEPTED ELECTRICAL PRACTICES" means those practices, methods, standards, and equipment engaged in or approved by a significant portion of the electric utility industry during the relevant time period, or any of the practices, methods, standards and equipment which, in exercise of reasonable judgment in light of the facts known (or which a qualified and prudent contractor should have known) at the time a decision is made, would have been expected to accomplish a desired result at reasonable cost consistent with good business practices, reliability, safety and expedition, in each case in accordance with the National Electrical Safety Code, the National Electrical Code and the standards of the Institute of Electrical and Electronic Engineers, the National Electrical Manufacturers Association, the North American Electric Reliability Council, the MidAtlantic Area Council, any regional power pool in which the Transmitting Utility is a participant, and the American National Standards Institute and any other applicable statutes, codes, regulations and/or standards. Accepted Electrical Practices are not intended to be limited to the optimum practices, methods, standards and equipment to the exclusion of others, but rather refer to those practices, methods, standards and equipment generally accepted or approved by a significant portion of the electric utility industry in 1 the relevant region, during the relevant time period, as described in the immediately preceding sentence. "AES PRE-FINANCIAL CLOSING GUARANTY" shall have the meaning set forth in Section 5.12 hereof. "AGREEMENT" means the Contract Document, all written amendments, modifications and supplements hereto, all Scope Change Orders, and the Appendices hereto, all of which by this reference are incorporated herein. "APPLICABLE LAWS" means all laws, treaties, ordinances, judgments, decrees, injunctions, writs and orders of any court or governmental agency or authority, and rules, regulations, orders, interpretations and Permits of any federal, state, county, municipal, regional, environmental or other governmental body, instrumentality, agency, authority, court or other body having jurisdiction over the Project or any activity conducted at or in connection with the Project or the Facility Site, including, without limitation, construction of the Project on the Facility Site, use or disposal of any Hazardous Material, transportation of all equipment and other items necessary for the Project to and from the Facility Site, transmission of electricity to the Transmitting Utility, performance of the Services, or start-up, testing or operation of the Facility, as may be applicable and in effect from time to time. "APPLICABLE PERMITS" means all Permits required to be obtained or maintained under Applicable Laws in connection with the Project or any activity conducted at or in connection with the Project or the Facility Site, including, without limitation, construction of the Project on the Facility Site, transportation of all equipment and other items necessary for the Project to and from the Facility Site, transmission of electricity to the Transmitting Utility, performance of the Services, or start-up, testing or operation of the Facility, as may be in effect from time to time. "APPROVED REMEDIATION PLAN" means any approved remediation plan between Owner and the appropriate governmental authorities relating to the remediation of any Hazardous Materials on or about or under the Facility Site that may be specifically identified and covered by such plan, which Owner delivers to Contractor prior to the Commencement Date hereunder and which is mutually satisfactory to Owner and Contractor. "APPROVED SUBCONTRACTORS LIST" shall have the meaning set forth in Section 3.1 hereof. 2 "ASME" means the American Society of Mechanical Engineers or any successor society thereto. "AVERAGE EQUIVALENT AVAILABILITY" shall have the meaning set forth in Appendix D hereto. "BASE BID SCOPE CHANGES" shall have the meaning set forth in Section 4.3.1 hereof. "BASELINE ENVIRONMENTAL SITE ASSESSMENT" means the Preliminary Assessment/Site Investigation (PA/SI) Report, 2 Volumes, by TRC, dated April 1999 or any replacement thereof and/or any supplement thereto that Owner delivers to Contractor prior to the execution of this Agreement. "BTU" means one (1) British thermal unit. "BUILDING PERMITS" means all Permits required to be obtained or maintained under Applicable Laws in order for Contractor (or its Subcontractors) to perform the design, engineering, procurement, site preparation and clearing, civil works, construction, start-up, training and testing of the Facility (including, without limitation, the provision of all machinery, materials, labor and transportation services related thereto) and any other Services, including without limitation all Permits required to allow Contractor (or its Subcontractors) to do business in the jurisdictions where the Project is to be performed; PROVIDED that if any such required Permits need to be obtained in the name of Owner and not in the Contractor's (or its Subcontractors') name, Owner shall, at Contractor's cost and expense, cooperate with Contractor as reasonably necessary to enable Contractor to obtain such Permits in the Owner's name. Building Permits shall not include Permits pertaining to (a) environmental regulation of the Facility Site (other than with respect to Contractor's (or its Subcontractors') activities thereon in its performance of the Services), (b) remediation of Hazardous Material on the Facility Site (other than with respect to any Hazardous Materials that (i) were brought to the Facility Site by a Contractor Responsible Party, (ii) were created as a result of, or in connection with, the performance by any Contractor Responsible Party of the Services, or (iii) were covered in any Scope Change Order entered into by Contractor and Owner pursuant to Section 12.12 or 20.3 hereof ), (c) land use or zoning matters affecting the Facility Site, (d) environmental regulation of Facility operation during start-up, testing or commercial operation, or (e) operation and maintenance of the Facility following the earlier to occur of Provisional Acceptance or Final Acceptance. 3 "COMMENCEMENT DATE" means the date on which Contractor is to commence performance of the Services pursuant to and as specified in the Notice to Proceed delivered to Contractor by Owner pursuant to Section 2.2 hereof. "COMMERCIAL OPERATION DATE" means, with respect to the Facility, the date upon which Owner will begin to sell, and the Power Purchaser will begin to buy, energy and capacity pursuant to the terms of the Power Purchase Agreement (including the satisfaction of all applicable conditions to the "Commercial Operation Date" thereunder as specified therein). "COMPLETED PERFORMANCE TEST" means any Performance Test established as a Completed Performance Test in accordance with the provisions of Section 6.2.7 hereof. "CONSTRUCTION PROGRESS MILESTONE DATES" means the dates, as specified in Appendix N hereto, by which the Construction Progress Milestones are required to have been fully completed in accordance with the standards of performance set forth herein. "CONSTRUCTION PROGRESS MILESTONES" means the construction progress milestones specified in Appendix N hereto. "CONTRACT DOCUMENT" means this document consisting of Articles 1 through 25 hereof, as amended from time to time. "CONTRACTOR" means Raytheon Engineers & Constructors, Inc., a Delaware corporation, and its successors and permitted assigns, as contractor hereunder. "CONTRACTOR INDEMNIFIED PARTIES" shall have the meaning set forth in Section 13.1.1 hereof. "CONTRACTOR PAYMENT REQUEST" shall have the meaning set forth in Section 4.2.2 hereof. "CONTRACTOR RESPONSIBLE PARTY" means Contractor or any of its Subcontractors or any other Person while such Person is acting on behalf of, or under the direction or supervision of, Contractor or any of its Subcontractors, including without limitation, any of their respective employees or agents. "CONTRACTOR TAXES" shall have the meaning set forth in Section 2.1.17(a) hereof. 4 "CONTRACT PRICE" shall have the meaning set forth in Section 4.1 hereof. "CPM SCHEDULE" shall have the meaning set forth in Section 2.1.16 hereof. "CTG SERVICES" shall have the meaning set forth in Section 15.3(c) hereof. "CTG SUBCONTRACT" shall mean that certain agreement, to be executed by and between Contractor and Siemens Westinghouse Power Corporation providing for Contractor's purchase of three (3) model 501F Econopac combustion turbine generators and associated equipment and services for the Project, on terms consistent with that certain Memorandum of Understanding dated as of February 15, 1999 by and between Contractor and Siemens Westinghouse Power Corporation, as such agreement may be amended, supplemented or modified from time to time; PROVIDED, HOWEVER, that the CTG Subcontract as defined herein shall not include any amendment, supplement or modification thereto that has not been consented to in writing by Owner (which consent shall not be unreasonably withheld or delayed). "DAMAGES" shall have the meaning set forth in Section 13.1 hereof. "DESIGN DOCUMENTS" shall have the meaning set forth in Section 2.1.2 hereof. "DOCUMENTS FOR APPROVAL" shall have the meaning set forth in Section 18.1 hereof. "DOLLARS" or "$" means the legal currency of the United States. "ELECTRICAL INTERCONNECTION FACILITIES" means all structures, facilities, equipment, auxiliary equipment, devices and apparatus up to and including the "transfer tower" (as more specifically described in Section IV.b.3 of Appendix A hereto) to be constructed and installed by Contractor in accordance with the Electrical Interconnection Requirements and the terms of this Agreement for the purpose of interconnecting the Facility with the Transmitting Utility's transmission system at the Electrical Interconnection Point in order to enable the transmission thereon of the full electric generating capacity of the Facility in accordance with Accepted Electrical Practices, including without limitation all internal breakers, relays, switches, synchronizing equipment, Electric Metering Equipment, automatic regulation, communications, safety and other switchyard equipment and facilities, Protective Apparatus and other protective and control equipment for the Facility described in Appendix A hereto. 5 "ELECTRICAL INTERCONNECTION POINT" means that point (as further described in Appendix A hereto) at which the Facility is to be interconnected with the Transmitting Utility's transmission system. "ELECTRICAL INTERCONNECTION REQUIREMENTS" means the requirements of GPU Energy and PJM for the Facility's interconnection with the Transmitting Utility's transmission system as set forth in the Transmission Interconnection Agreement, which such drawings and technical requirements are attached in Appendix A hereto, as such drawings and technical requirements may be amended, supplemented or modified from time to time; PROVIDED, that if any such amendment, supplement or modification materially affects the Services to be performed by Contractor hereunder, and Contractor has not consented in writing thereto (which consent shall not be unreasonably withheld or delayed or delayed), the Electrical Interconnection Requirements as defined herein shall not include such amendment, supplement or modification in the event and only to the extent the Services are so affected thereby, unless a Scope Change Order has been issued in accordance with Article 12 with respect thereto. "ELECTRIC METERING EQUIPMENT" shall have the meaning set forth in Appendix A hereto. "ELECTRICAL OUTPUT GUARANTEE" shall have the meaning set forth in Section 8.1.1.1 hereof. "ENVIRONMENTAL REQUIREMENTS" means those requirements, standards, guidelines and policies (including, without limitation, all emission standards for gaseous, particulate, solid, liquid and noise pollutants) set forth in Appendix S hereto. "EPC GUARANTY" shall have the meaning set forth in Section 2.1.26 hereof. "EQUIPMENT" shall mean all of the materials, apparatus, structures, tools, supplies or other goods provided by Contractor or any Subcontractor which are incorporated into the Facility or are provided by Contractor as part of the Services to be retained by Owner after Final Acceptance in accordance with this Agreement. "EQUIVALENT OPERATING HOURS" shall have the meaning specified in Part A of Appendix D hereto. "FACILITY" means the combined cycle electric generating plant with a designed electric generating capacity of a nominal eight hundred (800) megawatts (net) to be engineered, designed, constructed, completed, synchronized, tested and made available for commercial operation by Contractor in accordance with the requirements of this 6 Agreement (including without limitation Appendix A hereto) on the Facility Site, as an integrated whole and including all components thereof and all related facilities on the Facility Site, including without limitation the Electrical Interconnection Facilities and all of the appliances, parts, instruments, appurtenances, accessories and other property that may be incorporated or installed in or attached to or otherwise become part of such plant or related facilities (excluding all such items and other property to be furnished by or on behalf of Owner as specifically set forth herein). "FACILITY SITE" means all those parcels of land near Sayreville, New Jersey, owned or leased, or to be owned or leased, by Owner on which the Facility will be located, including, without limitation, the areas for construction laydown and parking, all as more particularly described in Appendix G hereto. "FINAL ACCEPTANCE" means the achievement or deemed achievement of substantial Project performance pursuant to the provisions of Section 6.5 hereof. "FINAL ACCEPTANCE CERTIFICATE" shall have the meaning set forth in Section 6.5.1.2 hereof. "FINANCIAL CLOSING DATE" means the later of (a) the date of the first closing of the initial construction financing of the Project and (b) the date on which Owner first has access to such construction financing funds. "FINANCING DOCUMENTS" means any and all loan agreements, notes, indentures, security agreements, pledges, mortgages, subordination agreements, intercreditor agreements, partnership agreements, subscription agreements, participation agreements and other documents relating to the construction, interim or long-term financing of the Project and any refinancing of the Project (including a leveraged lease), including any and all modifications, extensions, renewals and replacements of any such financing or refinancing. "FINANCING PARTIES" means (a) any and all lenders providing the construction, interim or long-term financing (including a leveraged lease or any other refinancing thereof) for the Project, and any trustee or agent acting on their behalf, (b) any and all equity investors (other than Owner) providing financing or refinancing for the Project in a leveraged lease or similar financing arrangement, and any trustee or agent acting on their behalf, and (c) any and all credit ratings agencies that may provide ratings on debt to be issued by Owner in connection with financing for the Project. "FORCE MAJEURE EVENT" shall have the meaning set forth in Section 11.1 hereof. 7 "FUEL SUPPLIER" means any and all suppliers of Gas for the Facility, and each of their respective successors and permitted assigns. "GAS" means natural gas that meets the specifications set forth in Section V.b. of Appendix A hereto. "GAS METERING EQUIPMENT" shall have the meaning set forth in Appendix A hereto. "GUARANTEED COMPLETION DATES" means the Guaranteed Provisional Acceptance Date and the Guaranteed Final Acceptance Date. "GUARANTEED EMISSIONS LIMITS" means all of the standards for emission by the Facility of gaseous, particulate, liquid and noise pollutants as set forth in the Warranty Data Sheet attached as Appendix R hereto and in the Environmental Requirements attached as Appendix S hereto, and such other or more stringent standards (if any) under all Applicable Laws and Applicable Permits. "GUARANTEED FINAL ACCEPTANCE DATE" means thirteen (13) months after the Guaranteed Provisional Acceptance Date. "GUARANTEED PROVISIONAL ACCEPTANCE DATE" means March 1, 2002, which date is subject to adjustment as expressly provided in this Agreement. "HAZARDOUS MATERIAL" means any pollutant, contaminant, solid waste, hydrocarbon product, toxic or hazardous substance or waste, any flammable, explosive or radioactive material, or any other substance, material, waste or constituent, in each case for which any duty is imposed under, cleanup is authorized pursuant to, or regulation is otherwise imposed by, any Applicable Law. "HEAT RATE GUARANTEE" shall have the meaning set forth in Section 8.1.2.1 hereof. "INDEPENDENT ENGINEER" means an independent engineer of recognized expertise, selected by the Financing Parties and reasonably acceptable to Owner, and such independent engineer's successors and permitted assigns. "INSTRUCTION MANUAL" shall have the meaning set forth in Section 2.1.2.1 hereof. "INTERIM PERIOD" shall have the meaning set forth in Section 8.1.1.2 hereof. 8 "INTERIM PERIOD ELECTRICAL OUTPUT REBATES" shall have the meaning set forth in Section 8.1.1.2 hereof. "INTERIM PERIOD HEAT RATE REBATES" shall have the meaning set forth in Section 8.1.2.2 hereof. "INTERIM PERIOD REBATES" means Interim Period Electrical Output Rebates and Interim Period Heat Rate Rebates. "INTERIM SCOPE CHANGE ORDER" shall have the meaning set forth in Section 12.3(b) hereof. "kWh" means kilowatt-hour. "LD SUBCAP" shall have the meaning set forth in Section 9.1 hereof. "LETTER OF CREDIT" shall have the meaning set forth in Section 4.2.4 hereof. "LIMITED NOTICE TO PROCEED" shall have the meaning set forth in Section 2.2.1 hereof. "MECHANICAL COMPLETION" means the mechanical completion of the Facility pursuant to the provisions of Section 6.1.2 hereof. "MECHANICAL COMPLETION CERTIFICATE" shall have the meaning set forth in Section 6.1.2.2 hereof. "MONTHLY PROGRESS REPORT" means a progress report containing the following information: (a) a description of Contractor's and all Subcontractors' activities and engineering, manufacturing, construction and testing progress as compared with the Project Schedule (and, at the request of Owner, an updated schedule), (b) certification that all amounts due to Subcontractors prior to the date of the Monthly Progress Report have been paid, (c) an identification and evaluation of problems and deficiencies in the Services performed hereunder (including but not limited to an explanation and evaluation, in reasonably sufficient detail, of any factors which have had or are anticipated to have a material effect on the Project Schedule), (d) a detailed description of the Services which have been completed as compared with the Payment and Milestone Schedule, the CPM Schedule and the Project Schedule, and a description of the Scheduled Payments which have been received as compared with the Payment and Milestone Schedule, (e) the status of major material and equipment deliveries, (f) the status of Building Permits, (g) quality assurance reports (i) from the manufacturing and fabrication facilities of Contractor and, 9 if requested by Owner, its Subcontractors and (ii) with respect to all construction activity at the Facility Site, and (h) all other information requested by Owner and agreed to by Contractor, such agreement not to be unreasonably withheld or delayed. "NOTICE OF FINAL ACCEPTANCE" shall have the meaning set forth in Section 6.5.1.1 hereof. "NOTICE OF MECHANICAL COMPLETION" shall have the meaning set forth in Section 6.1.2.1 hereof. "NOTICE OF PROJECT COMPLETION" shall have the meaning set forth in Section 6.7.1 hereof. "NOTICE OF PROVISIONAL ACCEPTANCE" shall have the meaning set forth in Section 6.3.1 hereof. "NOTICE OF RELIABILITY GUARANTEE ACHIEVEMENT" shall have the meaning set forth in Section 6.6.2 hereof. "NOTICE TO PROCEED" means the written notice to be delivered by Owner to Contractor pursuant to Section 2.2 hereof setting forth the Commencement Date. "OFFEREES" shall have the meaning set forth in Section 19.1 hereof. "OWNER" means AES Red Oak, LLC, a Delaware limited liability company, and its successors and permitted assigns as owner hereunder. "OWNER INDEMNIFIED PARTIES" shall have the meaning set forth in Section 13.1 hereof. "OWNER RESPONSIBLE PARTY" means Owner or any other Person while such Person is acting on behalf of, or under the direction or supervision of, Owner, including without limitation, any of its employees and agents, but specifically excluding in all cases, any Contractor Responsible Party. "PARTY" means Owner or Contractor. "PAYMENT AND MILESTONE SCHEDULE" means the schedule of payments and milestones as set forth in Appendix B hereto, as adjusted pursuant to the terms of this Agreement. 10 "PERFORMANCE GUARANTEES" shall have the meaning set forth in Section 8.1 hereof. "PERFORMANCE GUARANTEE PAYMENTS" shall have the meaning set forth in Section 8.1 hereof. "PERFORMANCE TEST" means the operation of the Facility by or on behalf of Contractor in accordance with the provisions of Section 6.2 hereof and in accordance with Applicable Laws, Applicable Permits, the Electrical Interconnection Requirements and the PPA Operating Requirements, for the purpose of determining the compliance with the Guaranteed Emissions Limits and the level of achievement of the Performance Guarantees, as described in greater detail in Article 6 hereof and Part A of Appendix D hereto. "PERMIT" means any valid waiver, exemption, variance, franchise, permit, authorization, license or similar order of or from any federal, commonwealth, state, county, municipal, regional, environmental or other governmental body, instrumentality, agency, authority, court or other body having jurisdiction over the matter in question. "PERMITTED LIENS" shall mean material men's, mechanics', workers', repairmen's, employees' or other similar liens arising in the ordinary course of business for amounts either not yet due or being contested in good faith and by appropriate proceedings, so long as, in the case of a contest, (a) Contractor shall have deposited with Owner, or the appropriate governmental authorities, a bond or other security satisfactory to Owner and the Financing Parties in an amount equal to such contested lien, which security shall have the effect of either discharging or staying the execution of such lien or, in the judgment of Owner and the Financing Parties, otherwise not involving any danger of the sale, forfeiture or loss of any part of the Facility, title thereto or any interest therein, or (b) such proceedings, in the judgment of Owner and the Financing Parties, shall not involve any danger of the sale, forfeiture or loss of any part of the Facility, title thereto or any interest therein and shall not interfere with the use or disposition of the Facility. "PERSON" means any individual, corporation, partnership, association, joint stock company, trust, unincorporated organization, joint venture, government or political subdivision or agency thereof. "PRE-TERMINATION OBLIGATIONS" shall have the meaning set forth in Section 15.3(c) hereof. "PJM" means the PJM Interconnection, L.L.C., acting in accordance with the PJM Agreement or the applicable successor entity. 11 "PJM AGREEMENT" means that certain Amended and Restated Operating Agreement of PJM Interconnection, L.L.C., dated as of June 2, 1997, and applicable PJM operating policies, as further amended, revised or superseded from time to time. "PLAN" shall mean a written plan prepared by Contractor to accelerate the performance of the Services pursuant to Section 7.2.1 or 7.6.2 hereof. "POWER PLANT SITE" means the power plant area of the Facility Site as shown in the Site Arrangement Drawing in Section V.a of Appendix A hereto. "POWER PURCHASE AGREEMENT" means the Power Purchase Agreement dated as of September 17, 1999 between Williams Energy Marketing & Trading Company and Owner, as such agreement may be amended, supplemented or modified from time to time. "POWER PURCHASER" means Williams Energy Marketing & Trading Company, as the purchaser under the Power Purchase Agreement. "PPA OPERATING REQUIREMENTS" means those requirements relating to the testing, operation and maintenance of the Facility that are set forth in those sections of the Power Purchase Agreement that are attached as Appendix H hereto, including any amendments, supplements or modifications to such sections of the Power Purchase Agreement as may be made from time to time and any procedures that are established by Owner and the Power Purchaser pursuant to such sections of the Power Purchase Agreement from time to time; PROVIDED, HOWEVER, that if any such amendments, supplements or modifications or any such subsequently established procedures or requirements materially affects the Services to be performed by Contractor hereunder, and such amendments, supplements or modifications or such procedures or requirements have not been consented to in writing by Contractor (which consent shall not be unreasonably withheld or delayed), the PPA Operating Requirements as defined herein shall not include any such amendments, supplements or modifications or any such subsequently-established procedures or requirements in the event and only to the extent that the Services are so affected, unless a Scope Change Order has been issued in accordance with Article 12 with respect to such required changes. "PROJECT" means the Facility and the Services to be furnished by Contractor hereunder, as an integrated whole, including all equipment, labor and materials to be furnished to Owner by Contractor hereunder, all as described in greater detail in Article 2 hereof and in Appendix A hereto. 12 "PROJECT COMPLETION" means the acceptance by Owner of the completed Project from Contractor in accordance with the provisions of Section 6.7 hereof. "PROJECT COMPLETION CERTIFICATE" shall have the meaning set forth in Section 6.7.2 hereof. "PROJECT COMPLETION DEADLINE" shall have the meaning set forth in Section 6.7.3 hereof. "PROJECT COMPLETION PAYMENT" shall have the meaning set forth in Section 4.2.5 hereof. "PROJECT DESIGN BOOK" means a detailed description of the design of the Facility to be prepared by Contractor, which shall initially consist of Appendix A hereto and, subject to the approval of Owner (and, after the Financial Closing Date, the Independent Engineer) with respect to any material change, refinement or detailing (PROVIDED, however, that in determining whether the change, refinement or detailing is "material" and therefore requires such approval, such determination shall be consistent with the types of documents, changes, etc. for which Owner's approval expressly is or is not required pursuant to Appendix P hereto), such approval not to be unreasonably withheld or delayed, shall be updated by Contractor to reflect any Scope Changes relating to the design of the Facility and any material refinement or detailing thereof in connection with the further development and completion of the engineering and design of the Facility in a manner consistent with Appendix A hereto and the other standards of performance required hereunder. "PROJECT DUTIES" shall have the meaning set forth in Section 2.1.17 hereof. "PROJECT PROCEDURES MANUAL" means the manual attached as Appendix W hereto, as the same may be revised from time to time pursuant to Section 2.1.2.2 hereof, which manual provides the guidelines by which the normal working relationships will be conducted between Owner (and its designees or assigns) and Contractor. "PROJECT SCHEDULE" shall have the meaning set forth in Section 2.1.16 hereof. "PROJECT TAXES" shall have the meaning set forth in Section 2.1.17(a) hereof. "PROTECTIVE APPARATUS" means electrical interconnection equipment and apparatus, including without limitation protective relays, circuit breakers and the like, 13 necessary or appropriate to isolate the Facility from the Utility's transmission system consistent with Accepted Electrical Practices. "PROVISIONAL ACCEPTANCE" means the achievement of provisional Project performance pursuant to the provisions of Section 6.3 hereof. "PROVISIONAL ACCEPTANCE CERTIFICATE" shall have the meaning set forth in Section 6.3.2 hereof. "PROVISIONAL ACCEPTANCE LATE COMPLETION PAYMENTS" shall have the meaning set forth in Section 7.2(a) hereof. "PRUDENT UTILITY PRACTICES" means the practices, methods, techniques standards and acts engaged in or approved by a significant portion of the electric utility industry in the United States or any of the practices, methods, techniques, standards and acts which, in the exercise of reasonable judgment in light of the facts known (or which a qualified and prudent contractor should have known) at the time a decision is made, would have been expected to accomplish a desired result at reasonable cost consistent with good business practices, reliability, safety and expedition, in each case for use in connection with the design, engineering, construction, testing, operation and maintenance of power stations of the same or similar size and type as the Facility, that at the particular time of performance of the Services (i) in the exercise of that degree of skill, diligence, prudence and foresight which would reasonably be expected from a skilled and experienced contractor employing generally accepted professional standards with respect to the performance of the Services hereunder, would have been expected to accomplish the desired result in a manner consistent with Applicable Laws, Applicable Permits, Accepted Electrical Practices, reliability, safety, environmental protection, economy and expediency, and (ii) conform in all material respects to the design, engineering, construction, testing, operation, maintenance and other recommendations and guidelines of the equipment suppliers and manufacturers applicable to the equipment in question. Prudent Utility Practices are not limited to the optimum practices, methods, techniques, standards and acts to the exclusion of others, but rather refer to those practices, methods, techniques, standards and acts that are generally accepted or approved by a significant portion of the electric utility industry in the relevant region, during the relevant time period, as described in the immediately preceding sentence. "PUNCH LIST" means the list prepared by Owner, with the full cooperation of Contractor, which list shall set forth all items of work which remain to be performed in order to ensure that the Project fully complies with all of the standards and requirements set forth herein. The Punch List shall not include any items of work, alone or in the 14 aggregate, the noncompletion of which prevents the Facility from (i) being used for the purposes as described in this Agreement in accordance with all Applicable Laws, Applicable Permits, the Guaranteed Emissions Limits, the Electrical Interconnection Requirements and the PPA Operating Requirements or (ii) being safely and reliably placed in commercial operation. "QUALITY ASSURANCE PLAN" means the quality assurance plan prepared by Contractor and attached as Appendix K hereto, as the same may be revised from time to time pursuant to Section 2.1.2.3 hereof. "REAL ESTATE RIGHTS" means all rights in or to real estate (including rights to use or access the Facility Site), whether arising through fee ownership, leases, contracts, permits, easements, licenses, private rights of way, or utility and railroad crossing rights, that are required to be obtained or maintained in connection with the performance of the Services hereunder, including, without limitation, the construction of the Facility on the Facility Site, construction laydown and parking, the transportation of all necessary materials, labor, equipment and other items to the Facility Site, access for the construction and use of water intake facilities, and the startup and testing of the Facility. "RELIABILITY CERTIFICATE" shall have the meaning set forth in Section 6.6.3 hereof. "RELIABILITY GUARANTEE" shall have the meaning set forth in Section 6.6 hereof. "RELIABILITY RUN" means the operation of the Facility for [*] in accordance with Applicable Laws, Applicable Permits, the Guaranteed Emissions Limits, the Instruction Manual, the Electrical Interconnection Requirements, the PPA Operating Requirements and Section 6.6.1 hereof for the purpose of determining the Facility's reliability, as described in greater detail in Section 6.6.1 hereof. "RETAINAGE" shall have the meaning set forth in Section 4.2.4 hereof. "RISK TRANSFER DATE" shall have the meaning set forth in Section 14.15.2 hereof. "SCHEDULED PAYMENT" shall have the meaning set forth in Section 4.2 hereof. 15 "SCOPE CHANGE" means any material addition to, deletion from, suspension of or other modification to the Project or to the quality, function or intent of the Project as described in this Agreement, including without limitation any such addition, deletion, suspension or other modification which requires a change in one or more of the Contract Price, the Guaranteed Completion Dates, the Payment and Milestone Schedule, the Construction Progress Milestone Dates, the Project Schedule and the Performance Guarantees in accordance with the terms of Article 12 hereof. "SCOPE CHANGE ORDER" means a written order to Contractor issued and signed by Owner (with the written concurrence of the Independent Engineer in the event that such concurrence is required under Section 12.2 hereof) after the execution and delivery of this Agreement authorizing a Scope Change and, if appropriate, an adjustment in one or more of the Contract Price, the Guaranteed Completion Dates, the Payment and Milestone Schedule, the Construction Progress Milestone Dates, the Project Schedule and the Performance Guarantees or any other amendment of the terms and conditions of this Agreement. "SCOPE CHANGE ORDER NOTICE" means a written notice to Owner issued by Contractor indicating that Contractor believes a Scope Change Order is required in connection with the performance of the Services. "SCOPE CHANGE ORDER REQUEST" means a written proposal issued and signed by Owner requesting a Scope Change, submitted to Contractor by Owner pursuant to the terms of Section 12.3 hereof. "SEC" shall have the meaning set forth in Section 19.1 hereof. "SERVICES" shall have the meaning set forth in Section 2.1 hereof. "SUBCONTRACTORS" shall have the meaning set forth in Section 3.1.3 hereof. "TAXES" shall have the meaning set forth in Section 2.1.17(a) hereof. "TERMINATION DATE" shall have the meaning set forth in Section 15.3(c) hereof. "TERMINATION PAYMENT" shall have the meaning set forth in Section 4.4 hereof. "THIRD-PARTY BENEFICIARIES" shall have the meaning set forth in Section 25.11 hereof. 16 "TITLE INSURER" means any and all title insurance companies writing title insurance with respect to any portion of the Facility Site, the Real Estate Rights, the Project or any interest therein. "TRANSMISSION INTERCONNECTION AGREEMENT" means the Generation Facility Transmission Interconnection Agreement, dated as of April 27, 1999, by and between Owner and the Transmitting Utility. "TRANSMITTING UTILITY" means Jersey Central Power and Light Company, d/b/a GPU Energy. "WARRANTY DATA SHEET" means the warranty data sheet attached as Appendix R hereto, which sets forth, among other things, (i) the Electrical Output Guarantee and Heat Rate Guarantee and (ii) certain Guaranteed Emission Limits, in each case applicable to the Facility. "WARRANTY PERIOD" means the period ending: (a) except as may be extended under clause (b) hereof, on the earlier of (i) the date that is [*] after the earlier to occur of Provisional Acceptance and Final Acceptance and (ii) the date on which the Facility has operated for [*] following the earlier to occur of Provisional Acceptance and Final Acceptance; and (b) in the case of any correction, addition, repair or replacement to any machinery, equipment, materials, systems, supplies or other items, including without limitation the engineering or design thereof, during any existing Warranty Period, but only with respect to such corrected, added, repaired or replaced machinery, equipment, materials, systems, supplies or other items, on the later of (i) the expiration date of the initial Warranty Period under clause (a) hereof and (ii) the date that is [*] after the date of such correction, addition, repair or replacement, PROVIDED that the date under this clause (b)(ii) shall in no event be later than [*] after the earlier to occur of Provisional Acceptance and Final Acceptance. ARTICLE 2 CONTRACTOR'S SERVICES AND OTHER OBLIGATIONS 2.1 SERVICES TO BE PERFORMED. Contractor shall complete the Project by performing or causing to be performed all work and services required or appropriate in 17 connection with the design, engineering, procurement, site preparation and clearing, civil works, construction, start-up, training, and testing of the Facility, and provide all materials and equipment (excluding operational spare parts), machinery, tools, construction fuels, chemicals and utilities, labor, transportation, administration and other services and items required to complete the Project, all on a lump sum, fixed price, turnkey basis and otherwise in accordance with this Agreement (the "SERVICES"). Certain details of the Services are described in this Article 2 and in Appendix A hereto. For the avoidance of doubt, the Parties hereby acknowledge and agree that the Services shall include the provision of all equipment, components, systems, materials, documentation and other services and items necessary or appropriate to complete the Project in conformity with and as reasonably inferred from the Project Design Book and the terms and conditions of this Agreement, notwithstanding the fact that each such necessary or appropriate service or item may not be expressly mentioned in the Project Design Book or this Agreement, and excluding only such items that are specifically set forth in Article 5 of this Agreement as being furnished by or on behalf of Owner. Without limiting the foregoing, Contractor shall provide the following Services: 2.1.1 ENGINEERING, DESIGN, CONSTRUCTION AND CONSTRUCTION MANAGEMENT. 2.1.1.1 ENGINEERING AND DESIGN. Contractor shall provide all engineering and design services necessary for completion of the Project in conformity with this Agreement, including but not limited to (a) preparation of (i) the Project Design Book which shall form the basis of the design of the Project, (ii) conceptual design, and (iii) engineering and design necessary to describe and detail the Project and to optimize the Project heat balance consistent with the Performance Guarantees, (b) provision of criteria for the detailed design by suppliers of equipment, materials and systems for incorporation into the Project, and (c) preparation of drawings, plans, bills of material, schedules and estimates. Contractor shall comply with the Electrical Interconnection Requirements and cooperate with the engineering efforts and otherwise accommodate the interface requirements of the Transmitting Utility, the Fuel Supplier, all federal, state and local agencies, and all utilities serving the Project; PROVIDED, HOWEVER, that in the event that such interface requirements would require Contractor to perform studies or other tasks that would not reasonably be expected to be required by Prudent Utility Practices and would be a material addition or change to the Services otherwise contemplated by this Agreement, Contractor shall not be required to perform such material additional work hereunder unless a Scope Change Order has been issued by Owner with respect thereto in accordance with Article 12 hereof. 18 Upon Owner's request, Contractor shall provide Owner (and, at Owner's request, the Independent Engineer, the Power Purchaser and the Transmitting Utility) with reasonable access to meetings between Contractor and its architects, engineers or Subcontractors regarding the construction of the Project (except in the event and only to the extent such meetings involve commercial, contractual or proprietary matters that do not substantially affect or relate to the performance of the Services hereunder). Contractor agrees to timely provide Owner (and, at Owner's request, the Independent Engineer, the Power Purchaser and the Transmitting Utility) with such documents and other information as are reasonably requested by Owner in order to enable Owner (and, if applicable, the Independent Engineer, the Power Purchaser and the Transmitting Utility) to review and evaluate the design of the Project. Without limitation to the foregoing, Contractor agrees to submit to Owner (and, at Owner's request, the Transmitting Utility) the design for the Electrical Interconnection Facilities (or any addition, modification or replacement thereto) in a timely manner in accordance with Section 2.1.8.1 hereof. Contractor shall review and be fully responsible for all engineering and design services even if Subcontractors are utilized by Contractor in connection with the engineering and design of portions of the Project. 2.1.1.2 CONSTRUCTION AND CONSTRUCTION MANAGEMENT. Contractor shall develop a project construction plan for, and oversee the construction of, the Project in accordance with Appendix A hereto and the other terms and provisions of this Agreement. Contractor shall inspect or cause to be inspected all materials and equipment to be incorporated in the Project and shall reject those items determined not to be in compliance with the requirements of this Agreement. Any item that is rejected by Contractor pursuant to the immediately preceding sentence shall be corrected (whether by repair, replacement or otherwise) so that it is in compliance with the requirements of this Agreement. Contractor also shall oversee the manner of incorporation of the materials and equipment in the Project and the workmanship with which such materials are incorporated and otherwise coordinate the construction of the Project. Contractor shall require the Subcontractors to perform the subcontracts in accordance with this Agreement and, in performing the duties incident to such responsibility, Contractor shall issue to the Subcontractors such directives and impose such restrictions as may be required in the construction of the Project to obtain compliance by the Subcontractors with the relevant terms of this Agreement. Contractor shall review and be fully responsible for all construction services of the Project, including, without limitation, all construction services provided by Subcontractors. Contractor shall establish and track Project management controls systems and provide construction management services. 2.1.2 DOCUMENTATION AND MANUALS. In accordance with and subject to the terms of Article 18 hereof, Contractor shall submit to Owner (and, at 19 Owner's request, the Independent Engineer) the specifications, data sheets, plans and drawings, and other information and documents required to be submitted to Owner pursuant to Appendix P hereto (together with the Project Design Book such documents are collectively referred to herein as the "DESIGN DOCUMENTS"). U.S. customary units shall be used as the primary system of units in all documents prepared by Contractor and its Subcontractors for the Project. In addition, Contractor shall provide the following: 2.1.2.1 INSTRUCTION MANUALS. Contractor will provide ten (10) sets in English of Instruction Manuals supplied by the vendors for each equipment purchase package (including any equipment supplied directly by the Contractor) and for equipment furnished by construction Subcontractors (each, an "INSTRUCTION MANUAL"). Contractor shall provide all such Instruction Manuals relevant to the Project not later than six (6) months prior to the Guaranteed Provisional Acceptance Date. Each Instruction Manual shall be provided to Owner (with a copy to the Independent Engineer) in time for equipment installation and startup and shall be bound in a binder suitable for rough usage with equipment and purchase order or specification noted on the binder edge. Instruction Manuals with multiple volumes shall have each volume numbered. The Instruction Manuals shall include (a) Subcontractor-provided equipment operation instruction books/leaflets, (b) equipment maintenance instruction books/leaflets and (c) all vendor-provided installation, operation, and maintenance information. The Instruction Manuals shall be based on generally accepted standards of professional care, skill, diligence, and competence applicable to engineering and operating practices and shall be consistent with Prudent Utility Practices. 2.1.2.2 PROJECT PROCEDURES MANUAL. Prior to the date hereof, Contractor shall have prepared and attached in Appendix W hereto the Project Procedures Manual, which shall, by mutual agreement between Owner and Contractor (such agreement not to be unreasonably withheld or delayed), be revised in accordance with any comments relating thereto from Owner. Upon notice from Owner, Contractor shall deliver to Owner six (6) copies in English of the final Project Procedures Manual as so revised. 2.1.2.3 QUALITY ASSURANCE PLAN. Prior to the date hereof, Contractor shall have prepared and attached in Appendix K hereto the Quality Assurance Plan, which will be revised by mutual agreement between Owner and Contractor (which agreement shall not be unreasonably withheld or delayed) in accordance with any comments relating thereto received by Owner from the Independent Engineer, the Power Purchaser or the Transmitting Utility. Contractor shall adhere to the Quality Assurance Plan in order to ensure that the construction and engineering methods and standards required to be employed by Contractor hereunder are achieved. 20 2.1.3 PROCUREMENT. Contractor shall procure and pay for all materials, equipment and supplies and all Contractor and Subcontractor labor and manufacturing and related services (whether on or off the Facility Site) for construction of and incorporation into the Project which are required for completion of the Project in accordance with this Agreement and are not explicitly specified in Article 5 of this Agreement to be furnished by or on behalf of Owner. All such items shall be subject to the warranties and guarantees in Section 3.4 and Article 10 hereof. 2.1.3.1 SPARE PARTS LIST. At a time mutually agreeable to Owner and Contractor (such agreement not to be unreasonably withheld or delayed) prior to the scheduled date for Provisional Acceptance of the Facility, Contractor shall provide to Owner a recommended spare parts list and a price list covering all spare and replacement parts pertaining to the equipment specified in Appendix U hereto (including without limitation the combustion turbine generators, the steam turbine generator, and the auxiliary equipment associated with each of the foregoing). Contractor shall provide to Owner the applicable Subcontractor's recommended spare parts lists and price lists covering all other spare and replacement parts for the Facility not covered by the preceding sentence sufficiently in advance of Provisional Acceptance so as to allow Owner a reasonable period of time to evaluate such spare parts lists and to purchase and obtain such spare parts at the Facility Site prior to the date of Provisional Acceptance. 2.1.4 LABOR AND PERSONNEL. Contractor shall provide all labor and personnel required in connection with the Services, including without limitation: (a) licensed professional engineers, in the event and to the extent required by Applicable Law or otherwise necessary or appropriate in accordance with Prudent Utility Practices and the other standards of performance required herein, to perform engineering services in the State of New Jersey; (b) a Project engineer, a safety engineer and lead structural, mechanical, electrical, instrumentation and control, civil, cost, schedule, procurement, construction, start-up and training supervisors, all of whom shall have had extensive power plant experience in facilities of similar technology and magnitude; (c) a Project manager or other representative who shall be fully acquainted with the Project and shall have the authority to administer this Agreement on behalf of Contractor; and (d) quality assurance personnel, all of whom shall report directly (but not necessarily immediately) to Contractor's senior management, and not to the management personnel of Contractor directly responsible for the Project. Upon Owner's request, Contractor shall provide Owner with the resumes of, and arrange for the interview by Owner of, any or all key personnel employed in connection with the Project, and Owner will have the right to approve those individuals who will hold any of the positions set forth in Appendix Q 21 hereto, which approval shall not be unreasonably withheld or delayed. Contractor shall not remove any Project personnel that hold any of the positions set forth in Appendix Q hereto without the prior consent of Owner, which consent shall not be unreasonably withheld or delayed. Owner shall have the right at all times to require for just cause, as reasonably determined by Owner, that any personnel performing any work in connection with the Project (whether or not previously approved by Owner) be removed and replaced by other qualified personnel acceptable to Owner. 2.1.5 PERMITTING. (a) Contractor hereby acknowledges and agrees that Appendix F hereto lists all Building Permits that may be necessary for performance of the Services and, to the best of its knowledge, Appendix F hereto also lists all other Applicable Permits necessary for performance of the Services that Owner is required to obtain hereunder. Contractor shall obtain and maintain in effect all Building Permits, including without limitation those Permits designated in Appendix F hereto as Contractor's responsibility. If Contractor at any time becomes aware of any Building Permit or other Applicable Permit that is not listed on Appendix F hereto, Contractor shall immediately give notice thereof to Owner; PROVIDED, HOWEVER, that the giving of any such notice shall not in any way derogate from Contractor's obligation hereunder to obtain and maintain in effect all Building Permits, whether or not such Building Permits are listed on Appendix F hereto. (b) Contractor shall provide engineering and other permitting support services as set forth in Appendix A hereto for the permitting effort of Owner with respect to, and shall cooperate with Owner and any environmental or permitting consultants hired by Owner in Owner's efforts to obtain, those Applicable Permits required to be obtained by Owner hereunder. 2.1.6 INSPECTION AND EXPEDITING. Contractor shall perform all inspection, expediting, quality surveillance and traffic services as are required for performance of the Services. Contractor shall perform such detailed inspection of all work in progress at intervals appropriate to the stage of construction or fabrication off the Facility Site as is necessary to ensure that such work is proceeding in accordance with this Agreement and the Design Documents and to reasonably protect Owner against defects and deficiencies in such work. On the basis of such inspections, Contractor shall keep Owner informed of the progress and quality of all work and shall provide Owner with written reports of deficiencies revealed through such inspections and of measures proposed by Contractor to remedy such deficiencies. Owner (and, commencing with the Financial Closing Date, the Independent Engineer) shall be given at least five (5) days' advance notice (or, if despite Contractor's use of reasonable efforts only a shorter period of advance notice is available under the circumstances, as much advance notice as is so available) of, and shall have the option of being present at, all inspections and witness points off the Facility Site as specified in the Quality Assurance Plan, and, in the event 22 that the progress and quality of the work is not proceeding in accordance with this Agreement and the Design Documents, shall be entitled to make recommendations to Contractor for the purpose of remedying such deficiencies. In the event that Owner (or the Independent Engineer, if applicable) fails to be present for such inspection or witness point on the date scheduled therefor, Contractor may proceed with such inspection or witness point in Owner's (or the Independent Engineer's) absence. No inspection performed or failed to be performed by Owner (or the Independent Engineer) hereunder shall be construed as a waiver of any of Contractor's obligations hereunder or be construed as an approval or acceptance of any of the Services. In addition, Contractor shall secure for Owner and the Independent Engineer the inspection rights set forth in Section 2.1.13 hereof. 2.1.6.1 TRANSPORTATION. Contractor shall be responsible for the transportation, shipping, receiving and marshaling of all materials, supplies, equipment and other items required for the Project (including, without limitation, materials, supplies, equipment and other items required for construction activities, but excluding all materials, supplies, equipment and other items that Owner is required to furnish hereunder), whether such items are sourced in or outside of the United States. Contractor shall arrange for the security of any such items while in transport or in storage off or on the Facility Site. 2.1.7 STORAGE, DISPOSAL AND RELATED MATTERS. Contractor shall warehouse or otherwise provide appropriate storage (in accordance with manufacturers' recommendations) for all materials, supplies, equipment and other items required for permanent and temporary construction, and shall provide for the procurement or disposal of, as appropriate, all soil, gravel and similar materials required for performance of the Services, PROVIDED that Contractor shall only be responsible for excavating, stockpiling, storing, handling, transporting, remediating or disposing of any Hazardous Material in the event and only to the extent that such Hazardous Material: (a) was brought to the Facility Site by a Contractor Responsible Party; (b) was created as a result of, or in connection with, the performance by any Contractor Responsible Party of the Services; (c) is specifically identified in and covered by the Baseline Environmental Site Assessment and either: (1) is not specifically identified in and covered by the Approved Remediation Plan; or 23 (2) is specifically identified in and covered by the Approved Remediation Plan, has been remediated by Owner in accordance with the terms thereof and is subsequently disturbed by any Contractor Responsible Party's performance hereunder in such a manner that Applicable Laws, Applicable Permits or the standard of performance hereunder requires such Hazardous Material to be so excavated, handled, transported, remediated or disposed of; (d) is specifically identified in and covered by any additional environmental site assessment which Owner elects to deliver to Contractor prior to the Commencement Date pursuant to Section 20.3 hereof and either: (1) Contractor does not elect to refuse to accept responsibility for handling such Hazardous Material pursuant to clause (ii) of Section 20.3; or (2) Contractor elects to refuse to accept responsibility for the handling thereof pursuant to clause (ii) of said Section 20.3, it is excavated, handled, transported remediated and/or disposed of by Owner in accordance with Section 20.3 hereof and is subsequently disturbed by any Contractor Responsible Party's performance hereunder in such a manner that Applicable Laws, Applicable Permits or the standards of performance hereunder requires such Hazardous Material to be so excavated, handled, transported, remediated or disposed of; or (e) is covered by any Scope Change Order entered into by Contractor and Owner pursuant to Section 12.12 or 20.3 hereof. All materials, supplies, equipment and other items which are stored shall be (i) stored in a manner consistent with the applicable manufacturer's or supplier's recommendations and practices with respect thereto and (ii) properly tagged and identified for the Project and segregated from other goods. Contractor shall notify Owner in the event that it intends to store any materials, supplies, equipment and other items in or near the town of Sayreville, New Jersey, and any such supplies, equipment and other items shall be stored only at locations that have been approved by Owner, such approval not to be unreasonably withheld or delayed. Contractor shall notify Owner of the location where it stores any other major piece of equipment, but such location shall not require the approval of Owner. All equipment which would reasonably be expected under Prudent Utility Practices and the standards of performance required hereunder to be permanently labeled shall be labeled with permanently affixed durable nameplates which will include the 24 manufacturer's name, equipment model number, equipment serial number, equipment tag number and all appropriate design parameters. 2.1.8 ELECTRICAL INTERCONNECTION FACILITIES, AND OTHER INTERCONNECTIONS. 2.1.8.1 ELECTRICAL INTERCONNECTION FACILITIES. (a) Contractor shall design, construct and install the Electrical Interconnection Facilities (including, without limitation, the Electric Metering Equipment, automatic regulation equipment, Protective Apparatus and control system equipment) in accordance with the Electrical Interconnection Requirements and the other terms and conditions hereof. Contractor shall provide to Owner (and, at Owner's request, the Transmitting Utility), in detail satisfactory to Owner (and, if applicable, the Transmitting Utility), for prior review and acceptance (which shall not be unreasonably withheld or delayed) all plans and specifications relating to the design, construction and installation of the Electrical Interconnection Facilities (and any additions, modifications or replacements thereto), including without limitation single-line diagrams and control and protective relay schemes, not later than twelve (12) months prior to the commencement of construction of such Electrical Interconnection Facilities or such other reasonable time as Owner, Contractor and the Transmitting Utility may agree upon. Owner shall use reasonable efforts to cause the Transmitting Utility to provide written notification of its comments on and, if applicable, its acceptance or rejection of) such plans and specifications within sixty (60) days (or if a shorter period of time is reasonably necessary to maintain compliance with the Project Schedule, such shorter period of time as is reasonable under the circumstances) after Owner's receipt of such plans and specifications. Contractor shall not commence the construction and installation of the Electrical Interconnection Facilities without having received the prior written approval of the Owner (and, if required by the Electrical Interconnection Requirements or otherwise requested by Owner, the Transmitting Utility); PROVIDED, HOWEVER, that in the event that Owner (or, if applicable, the Transmitting Utility) were to unreasonably withhold or delay such approval, and the Contractor were to be materially adversely affected in the performance of the Services as a direct result thereof despite Contractor's reasonable efforts to avoid or mitigate such effect, the provisions of Section 5.9 hereof shall apply. Contractor shall review with Owner and, at Owner's request, the Transmitting Utility, the design and construction schedule for the Electrical Interconnection Facilities, and shall coordinate the performance of such Services with the work to be performed by the Transmitting Utility on its side of the Electrical Interconnection Point in order to enable the Electrical Interconnection Facilities to be completed and interconnected with the Transmitting Utility's transmission system in accordance with the time frames (including without limitation Section 5.8 hereof) and performance standards as set forth herein. 25 (b) Contractor shall also be responsible forarranging for the Transmitting Utility to make its temporary construction power distribution line available at the Power Plant Site within such period of time after the date specified for site mobilization in the Notice to Proceed as is necessary for the performance of the Services hereunder. 2.1.8.2 OTHER INTERCONNECTIONS. (a) Contractor shall review with Owner and each of the Fuel Supplier and any other Person providing other permanent utility or similar service interconnections to the Facility (including, without limitation, the interconnections with the Gas Pipeline, the Duhernal Pipeline, South River Reservoir, MCUA sewer system, and the municipal potable water pipeline), the design and construction schedule for the interconnection facilities between the Facility and the systems of such third parties, and shall coordinate the performance of the Services with such other work performed by such third parties in order to enable Contractor's construction of the Facility and such third parties' construction of such other facilities to be completed in accordance with the time frames and performance standards as set forth herein. (b) Contractor shall also be responsible for arranging for the construction-period water supply facilities specified in Appendix A hereto (or such other facilities as are reasonably satisfactory to Owner and Contractor) being available at or inside the boundary of the Power Plant Site within such period of time after the date specified for site mobilization in the Notice to Proceed as is necessary for the performance of the Services hereunder. 2.1.9 PERFORMANCE TESTING. Contractor shall perform, and re-perform if necessary, the Performance Tests in accordance with the provisions of Section 6.2 hereof in order to demonstrate achievement of Provisional Acceptance (unless the Contractor proceeds directly to Final Acceptance without first achieving Provisional Acceptance) and Final Acceptance and the level of achievement of the Performance Guarantees relating thereto. 2.1.10 START-UP AND INITIAL OPERATION. The Services shall include the start-up, commissioning and initial testing of components, calibration of controls and equipment, initial operation of the Facility and each portion thereof, function and verification tests, and all other start-up and initial operation functions pertaining to the Project. At all times during the performance of the Services, Contractor shall use all reasonable efforts to minimize (consistent with Prudent Utility Practices and the terms of this Agreement) the use of fuels, feed materials, utilities, consumables, waste disposal services, electricity, water and chemicals. 26 2.1.11 UTILITIES, CHEMICALS AND SPARE PARTS. Contractor shall provide, at its expense (unless otherwise specified in this Section 2.1.11): (a) all construction and start-up spare parts, (b) all lubrication oil and grease required prior to the Risk Transfer Date, (c) all waste disposal services (including, without limitation, for waste water and waste chemicals from boiler cleaning) required in connection with the performance of the Services, PROVIDED that Contractor shall not be required to provide and pay for such waste disposal services with respect to Facility operations after the Risk Transfer Date or with respect to any Hazardous Materials on the Facility Site other than any Hazardous Materials that Contractor is responsible for responding to and handling as set forth in Sections 2.1.7, 2.1.15 and 12.12 hereof, (d) all chemicals and resins, including, without limitation, all chemicals required to treat water as required for testing, start-up or other operation of the Facility prior to the Risk Transfer Date, (e) all electricity required in connection with its performance of the Services, PROVIDED that during the period from interconnection of the Electrical Interconnection Facilities to the Transmitting Utility's transmission system until completion of initial synchronization of the steam turbine generator, Contractor shall only be required to pay for (or if Owner shall have already made such payment, to promptly reimburse Owner for) all electricity used during such period in excess of [*], and PROVIDED FURTHER that this clause (e) shall not relieve Owner of its obligations under Section 5.8 hereof to arrange for the Transmitting Utility's provision of such interconnection facilities as are necessary to allow for the Electrical Interconnection Facilities to be interconnected with the Transmitting Utility's transmission system at the Electrical Interconnection Point at the time specified therein, and (f) all other consumables and utilities (including without limitation sewage), and all provisions necessary for the delivery of all such items to the Facility Site, in each case as required to enable Contractor to perform the Services. Contractor shall not be required to pay for (i) raw water, (ii) operational spare parts, (iii) Gas required for start-up, testing or operation of the Facility, or (iv) any re-fills of lubrication oil, grease or 27 resins or any waste disposal services, chemicals, electricity, consumables and other utilities required for operation of the Facility following the Risk Transfer Date. 2.1.12 PERSONNEL TRAINING.Commencing six (6) months prior to the scheduled date for Provisional Acceptance of the Facility, Contractor shall provide on-site classroom training for Owner's (and, if requested by Owner, its designee's) personnel in the operation and maintenance of the Facility including, without limitation, safety training, all as more fully described in Appendix A hereto. Contractor shall provide on-the-job training during the start-up, testing and commissioning of the Facility. Such training shall be provided in its entirety in English and shall be designed to offer basic instruction and training to reasonably qualified (as determined by Owner) power plant personnel and shall be of such quality so as to provide such personnel with a comprehensive understanding of all operational and maintenance aspects of the Facility and shall include instruction related to the major components of the Facility, including without limitation the following: the gas turbine generators, heat recovery steam generators, steam turbine generator, make-up water and water treatment facilities, air treatment facilities, plant controls, cooling tower and distributed controls. Contractor will provide a minimum of thirty (30) copies in English of appropriate manuals and other written materials as part of the training program. In addition, Contractor's training of Owner's personnel shall include coordination of any Subcontractor training sessions in a manner sufficient to provide such personnel with an adequate understanding of the operation and maintenance aspects of each dimension of the Facility as an integrated whole, all as more fully described in Appendix A hereto. 2.1.13 FACILITY SITE ACCESS AND OWNER'S ACCOMMODATIONS. Contractor shall provide Owner (and, at Owner's request, its designees, the Independent Engineer and the Transmitting Utility) with access to the Facility Site at all times and shall arrange for reasonable access by Owner (and such other Persons, if applicable) to those areas of the engineering, manufacturing and fabricating premises of all facilities of Contractor or its Subcontractors (in the event and only to the extent such Subcontractor so agrees, which agreement Contractor shall use all reasonable efforts to obtain) where work is being performed in connection with the Project, in each case as is sufficient to permit Owner (and such other Persons, if applicable) to inspect work being performed and monitor compliance by Contractor and the Subcontractors with the terms hereof. In connection therewith, Owner (and such other Persons, if applicable) shall comply with applicable site visitation policies and shall not unreasonably interfere with progress of the work. Contractor shall make available to Owner as part of the Contract Price one (1) furnished office trailer (with temporary utilities) for up to ten (10) people at the Facility Site and furnished office space (with utilities) for up to five (5) people at or near the 28 home office of Contractor for the use by personnel of Owner (or such other Persons, if applicable). 2.1.14 REAL ESTATE RIGHTS. (a) Contractor has reviewed the Real Estate Rights set forth on Appendix G hereto and hereby acknowledges and agrees that it does not need any additional Real Estate Rights in order to perform the Services (PROVIDED, HOWEVER, that such acknowledgment and agreement by Contractor shall not be construed to extend to the status of title to or the existence of liens or other similar encumbrances against such Real Estate Rights). Contractor shall provide all necessary information and documents and use all reasonable efforts to assist Owner in obtaining all Real Estate Rights required to be obtained by Owner hereunder. If Contractor at any time becomes aware of any Real Estate Right that it requires which is not listed in Appendix G hereto, Contractor shall immediately give notice thereof to Owner. (b) If at any time after the date hereof, performance of the Services hereunder requires any Real Estate Right not listed on Appendix G hereto (as such Appendix G may be modified pursuant to any Scope Change Order issued hereunder), Contractor shall be responsible for obtaining such Real Estate Right at its own expense; PROVIDED, HOWEVER, that, without limiting the foregoing, Owner shall apply at Contractor's cost and expense for such Real Estate Right with the Person from whom such Real Estate Right is to be secured if such Real Estate Right is of the type customarily obtained by an owner of a project. 2.1.15 CLEAN-UP AND WASTE DISPOSAL. Contractor shall perform a site clean-up regularly and as necessary (PROVIDED, HOWEVER, that Owner may in its reasonable discretion request that Contractor perform such site clean-up on at least a daily basis and Contractor shall not be entitled to a Change Order in exchange for complying with such a request) in order to keep the Power Plant Site and such other portions of the Facility Site on which Contractor performs services hereunder clean, and shall otherwise keep such site free from accumulation of petroleum, waste materials (including, without limitation, waste water and waste chemicals from any chemical cleaning, and any waste Hazardous Materials that were brought to the Facility Site by any Contractor Responsible Party or were created as a result of, or in connection with, the performance by any Contractor Responsible Party of the Services), rubbish and other debris resulting from the 29 performance of the Services. On or before Project Completion, Contractor shall remove from the Facility Site and dispose of all petroleum, waste materials (including, without limitation, waste water and waste chemicals from any chemical cleaning, and any waste Hazardous Materials that were brought to the Facility Site by any Contractor Responsible Party or were created as a result of, or in connection with, the performance by any Contractor Responsible Party of the Services), rubbish and other debris resulting from the performance of the Services, as well as all tools, construction equipment, machinery and surplus material to which Owner does not hold title, and shall leave the Power Plant Site and such other portions of the Facility Site on which Contractor performed Services hereunder in a neat, clean and usable condition. All cleanup and disposal shall be conducted in accordance with all Applicable Laws and Applicable Permits. Contractor shall notify Owner immediately upon the discovery of the presence of any Hazardous Material on, or the release of Hazardous Material on or from, the Facility Site, and shall proceed in accordance with Sections 2.1.7 and 12.12 hereof in connection therewith. 2.1.16 PROJECT SCHEDULE AND PROGRESS REPORTS. No later than thirty (30) days after the Commencement Date, Contractor shall submit to Owner (and, upon Owner's request, the Independent Engineer) a detailed electronic construction schedule that indicates, in a manner consistent with the overall construction schedule set forth in Appendix C hereto on the date hereof, the proposed dates for completion of the individual features of the Services set forth in Appendix C hereto (as such construction schedule may be adjusted pursuant to Article 12 hereof or in connection with changes to the Payment and Milestone Schedule that may be agreed upon pursuant to Section 4.3.2 hereof, the "PROJECT SCHEDULE"), and shall keep and furnish to Owner and the Independent Engineer, in accordance with the Project Procedures Manual, updated schedules of the Services and Monthly Progress Reports of actual progress of the Services. Contractor shall provide five (5) hard copies, and one (1) electronic copy for each of Owner and the Independent Engineer, of such Monthly Progress Reports in a format to be mutually and reasonably agreed upon by Contractor and Owner. Contractor shall be responsible for ensuring that performance of the Services proceeds in general accordance with the Project Schedule (as updated from time to time) and for coordinating and incorporating the schedules of all Subcontractors into the aforementioned schedules and progress reports. In addition, as soon as it is practicable but in no event later than sixty (60) days after the Commencement Date, Contractor shall provide Owner and the Independent Engineer with a critical path method schedule (the "CPM SCHEDULE") for the Project including activity durations for each major component of the Services. The CPM Schedule shall be updated on a monthly basis as the Services progress and shall include delay and acceleration analyses where appropriate. 2.1.17 TAXES; CUSTOMS DUTIES. (a) Contractor (and/or its Subcontractors, as the case may be) shall be responsible for the administration and payment of (i) all taxes, fees and contributions on or measured by the income, gross receipts or assets of Contractor or its Subcontractors and all taxes, fees and contributions on or measured by employees or other labor costs of Contractor or its Subcontractors, including without limitation all payroll or employment 30 compensation tax, social security tax or similar taxes for Contractor's or its Subcontractor's employees (collectively, the "CONTRACTOR TAXES"), (ii) unless otherwise instructed by Owner that it is contesting such taxes, all excise duty, license, municipal and other similar taxes, fees and contributions imposed by the federal or any state government of the United States of America or any of their respective political subdivisions upon the sale, purchase or use by Contractor or its Subcontractors of materials, supplies, equipment, services or labor for the Project (collectively, the "PROJECT TAXES", and together with the Contractor Taxes, the "TAXES"), and (iii) any and all import, export and other customs duties, charges, levies and fees imposed or incurred in connection with the Project, including without limitation in connection with all materials, supplies, equipment and other items transported to the Facility Site for incorporation into the Project or for use in performance of the Services (collectively, the "PROJECT DUTIES"). (b) At Contractor's request, Owner shall provide Contractor all information and documents within Owner's control and possession that are not reasonably available to Contractor and are reasonably necessary to enable Contractor to administer and pay the Taxes and Project Duties. Contractor shall furnish to the appropriate taxing authorities all required information and reports in connection with the Taxes, and shall promptly furnish copies of all such information and reports relating to Project Taxes to Owner. In addition, Contractor shall, to the extent reasonably possible, obtain or take advantage of, for the benefit of Owner, such tax exemptions, rebates and credits that Owner has notified Contractor are available with respect to the Facility and, upon Owner's request, provide breakdowns of the Contract Price by cost components as may be reasonably required in connection with Owner's efforts to obtain tax-exempt financing. All subcontracts and purchase orders shall be written exclusive of any sales or use tax, or, if not so written, shall include the amount of such tax as a separate line item on the face of such subcontracts and purchase orders along with adequate supporting documentation. (c) The Contract Price includes all Contractor Taxes.Notwithstanding Contractor's responsibility for the administration and payment of Project Taxes andProject Duties as provided herein, the Contract Price does not include the Project Taxes or the Project Duties. Project Taxes and Project Duties are for the account of Owner, and Owner agrees to either pay the Project Taxes and the Project Duties directly to the appropriate governmental authorities or to reimburse Contractor outside of the Contract Price (with respect to Project Taxes or Project Duties paid by Contractor directly to the appropriate governmental authorities), in either case within thirty (30) days after receipt of Contractor's monthly payment request for such Project Taxes and Project Duties and appropriate supporting documentation. In the event Contractor desires that Owner pay any Project Taxes or Project Duties directly to the 31 appropriate governmental authorities (rather than Contractor making such payment to the appropriate governmental authorities and being reimbursed by Owner as set forth herein), Contractor must submit to Owner the applicable payment request and supporting documentation at least thirty (30) days prior to the date on which such Project Taxes and Project Duties are due and payable without any late payment charges or interest accruals. All information and supporting documentation relating to Project Taxes and Project Duties shall be made available by Contractor for inspection and/or audit by Owner at any reasonable time. (d) Contractor shall use all reasonable efforts to efficiently manage its provision of the Services and other work hereunder (including without limitation the sourcing and procurement of equipment) so as to minimize Project costs on a total cost basis (including not only Contractor's cost of providing the Services but also Owner's cost of paying or reimbursing Project Taxes and Project Duties). Contractor will use its reasonable prudence and diligence in the administration of Taxes and Project Duties, and Contractor shall confirm with Owner in advance any discretionary action, election or omission permitted in connection with the Project Taxes. 2.1.18 EMPLOYEE IDENTIFICATION; SECURITY. Contractor shall provide and utilize a method, consistent with Prudent Utility Practices and approved by Owner (which approval shall not be unreasonably withheld or delayed), of checking the employees of Contractor and the Subcontractors in and out of the Power Plant Site and such other areas of the Facility Site in which the Services are to be performed. All employees of Contractor and the Subcontractors at the Facility Site shall be identified by the use of a distinctive badge or other proper identification. Contractor shall cause each such employee to carry such identification so that it can be readily seen at all times. Contractor shall be fully responsible for the security of the Project, the Power Plant Site and such other areas of the Facility Site on which the Services are to be performed. 2.1.19 ADJOINING UTILITIES. Contractor shall do all things necessary or expedient to protect any and all parallel, converging and intersecting electric lines and poles, telephone lines and poles, highways, roads, bridges, waterways, railroads, sewer lines, natural gas pipelines, drainage ditches, culverts and any and all third-party property from damage as a result of its performance of the Services. In the event that any such property is so physically damaged or destroyed as a result of the performance by any Contractor Responsible Party of the Services and either Contractor or Owner is required (or in its reasonable discretion elects) to repair or replace such damaged property, then Contractor shall at its own expense promptly rebuild, restore or replace such damaged or destroyed property or promptly reach a settlement agreement with the applicable third 32 party(ies) in full satisfaction of any claims or demands of such third party(ies) in connection with any such damage or destruction. 2.1.20 PROTECTION OF PROPERTY. (a) Contractor shall provide, and shall ensure that each Subcontractor provides, proper and ample protection from damage or loss (including, without limitation, theft) to the Project, the Facility Site, materials, construction equipment and tools (whether on or off the Facility Site) during its performance of the Services. (b) Where ingress and egress to and from the Facility Site requires the traverse of public or private lands, Contractor shall limit the movement of its crews and equipment and of all Subcontractors so as to cause as little damage as possible to crops or other property and shall use all reasonable efforts to avoid marring such lands. All fences and walls which must be opened or moved during construction of the Facility shall be replaced or repaired by Contractor. Contractor shall not be reimbursed by Owner for costs associated with loss of or damage to crops, livestock or other property, whether on or off the Facility Site or rights of way thereto, caused by or arising in connection with the performance of the Services by Contractor or any Subcontractor hereunder. 2.1.21 ROYALTIES AND LICENSE FEES. Contractor shall pay all royalties and license fees and shall procure, as required, the appropriate proprietary rights, licenses, agreements and permissions for materials, equipment, methods, processes and systems incorporated into the Project or used in performing the Services. Contractor shall not incorporate into the Project any materials, equipment, methods, processes or systems which involve the use of any confidential information, intellectual property or proprietary rights which Owner does not have the right to use or which may result in legitimate claims or suits against Owner or Contractor arising out of claims of infringement of any domestic or foreign patent rights, copyrights or other proprietary or intellectual property rights, or applications for any such rights, or use of confidential information, in any such case with respect to the performance of the Services hereunder or otherwise relating to the engineering, procurement, construction, ownership, use, operation or maintenance of the Facility at the Facility Site; PROVIDED, HOWEVER, this Section 2.1.21 shall not in any way limit or otherwise affect Contractor's obligations under Section 13.3 hereof. 2.1.22 FINAL RELEASES AND WAIVERS. 2.1.22.1 FINAL RELEASES AND WAIVERS. On or before (a) the payment of Retainage (or the release of the Letter of Credit deposited in lieu of Retainage hereunder, if applicable) pursuant to Section 4.2.4 hereof, Contractor shall provide to 33 Owner releases and waivers in accordance with Section 2.1.22.3 hereof (which releases and waivers may be conditioned upon Contractor's receipt of such payment from Owner hereunder). 2.1.22.2 FAILURE OF SUBCONTRACTORS TO FURNISH FINAL WAIVERS. If any Subcontractor fails to furnish a final release and waiver required pursuant to Section 4.6 hereof, in lieu thereof Contractor shall furnish a bond or other collateral, in form and substance satisfactory to Owner and the Financing Parties, to fully indemnify Owner against any loss resulting from such claims, liens or other interests of such Subcontractor. 2.1.22.3 FORMS OF FINAL WAIVERS. The forms of required final releases and waivers for Contractor and the Subcontractors are set forth in Appendices I-1 and I-3 hereto, respectively. 2.1.23 LABOR RELATIONS AND PROJECT LABOR AGREEMENTS. Contractor shall be responsible for all labor relations matters relating to the Project and shall at all times use all reasonable efforts to maintain harmony among the unions (if any) and other personnel employed in connection with the Project. Contractor shall at all times use all reasonable efforts and judgment as a skilled and experienced contractor to adopt and implement policies and practices designed to avoid work stoppages, slowdowns, disputes and strikes. Without limiting the foregoing, Contractor shall procure one or more project labor agreements (containing "no strike clauses" reasonably satisfactory to Owner) covering all union personnel employed by Contractor or any Subcontractor at the Facility Site in connection with the Project at the earliest possible date, but in no event later than one (1) month prior to the scheduled Commencement Date hereunder, and shall keep such agreements in full force and effect at all times while such personnel are so employed. 2.1.24 FURTHER ASSURANCES. Contractor shall execute and deliver all further instruments and documents, and take all further action, including but not limited to providing reasonable assistance to Owner in filing a notice of completion with the appropriate state and local lien recording offices, that may be necessary or that Owner may reasonably request in order to enable Contractor to complete performance of the Services or to effectuate the purposes or requirements of this Agreement. 2.1.25 COORDINATION WITH OTHER CONTRACTORS. Contractor shall use all reasonable efforts not to interfere with the performance at the Facility Site of any other contractors designated by Owner and shall provide any such contractors a reasonable opportunity to introduce and store materials and perform their services at the Facility 34 Site. Contractor shall use all reasonable efforts to cooperate with Owner and any such other contractors to coordinate the performance of Contractor's Services hereunder with the work of such other contractors, PROVIDED that Contractor shall not be required pursuant to this sentence to take any actions that would reasonably be expected to materially interfere with Contractor's ability to perform the Services in a manner consistent with Contractor's rights and obligations under this Agreement. Owner, upon the request by Contractor, shall use all reasonable efforts to cause any such other contractors working for Owner on the Facility Site to cooperate with Contractor to coordinate the performance of their work with the performance by Contractor of the Services hereunder. 2.1.26 GUARANTY. Simultaneously with the execution of this Agreement, Contractor shall cause [*] to guarantee irrevocably and unconditionally the performance and payment of all of Contractor's obligations hereunder by executing and delivering to Owner a guaranty substantially in the form set forth in Appendix L hereto (the "EPC GUARANTY"). 2.2 COMMENCEMENT OF THE SERVICES. Except for such Services the performance of which commence prior thereto pursuant to Sections 2.2.1 and 2.2.2 hereof, Contractor shall commence performance of the Services on the date which Owner specifies (the "COMMENCEMENT DATE") in a written notice delivered to Contractor in the form set forth in Appendix J-2 hereto (the "NOTICE TO PROCEED"); PROVIDED, HOWEVER, that the Commencement Date shall not occur more than fifteen (15) days following the date of issuance of the Notice to Proceed; PROVIDED, FURTHER, that the Commencement Date shall not occur unless and until (a) either (i) the Financial Closing Date shall have occurred or (ii) the AES Pre-Financial Closing Guaranty shall have been issued and is effective, (b) Owner shall have delivered to Contractor an Approved Remediation Plan, and (c) Owner (i) has performed any material obligations set forth in Sections 5.1, 5.2, 5.3 and 5.10, the nonperformance of which would prevent Contractor from commencing performance of the Services, and (ii) has paid any payments due and owing to Contractor as of such date under this Agreement. In the event that the Commencement Date does not occur on or prior to March 31, 2000, then (1) the Guaranteed Completion Dates, the Construction Progress Milestone Dates, the Payment and Milestone Schedule and the Project Schedule, and, as appropriate, any other calendar dates set forth in this Agreement that may be affected thereby, shall each be extended by one (1) day for each day following such date before the Commencement Date occurs, and (2) there shall be an adjustment to the Contract Price and the Scheduled Payments in accordance with Note 4 of Appendix B as a result of any such delay. In the event that the Commencement Date does not occur on or prior to April 30, 2000, then an equitable adjustment in one or more of the Contract Price, the Guaranteed Completion Dates, the Construction Progress 35 Milestone Dates, the Payment and Milestone Schedule and the Project Schedule, and, as appropriate, such other provisions of this Agreement that may be affected by such additional delay, shall be made by agreement of Owner and Contractor or otherwise pursuant to Article 12 or 21 hereof. In the event that the Commencement Date does not occur on or prior to September 30, 2000, then until such time as the Commencement Date occurs, either Party shall have the right to terminate this Agreement upon written notice to the other Party, in which event this Agreement shall terminate without any liability of either Party to the other, except that Owner shall be required to pay Contractor (to the extent not previously paid) any amounts due and owing to Contractor pursuant to Section 2.2.1 or 2.2.2 hereof. 2.2.1 LIMITED NOTICE TO PROCEED. (a) Prior to the Commencement Date, Contractor shall perform those portions of the Services specified in the Limited Notice to Proceed Agreement and the letter amendments thereto, which are set forth in Appendix J-1 hereto (the "LIMITED NOTICE TO PROCEED"), pursuant to the terms and conditions set forth therein. Payment for Services rendered pursuant to this Section 2.2.1 shall be guaranteed to be paid in accordance with the terms and conditions of the Limited Notice to Proceed by the AES Pre-Financial Closing Guaranty as set forth in Section 5.12 hereof until the Financial Closing Date occurs. (b) Contractor will be paid monthly in arrears in accordance with the terms of the Limited Notice to Proceed for the pre-Commencement Date Services actually performed under the Limited Notice to Proceed. In addition, upon the occurrence of the Commencement Date, Owner shall withhold from the first Scheduled Payment to be made to Contractor on or after the Commencement Date under Section 4.2.2 hereof, as Retainage, an amount equal to [*] of all payments theretofor made to Contractor under the Limited Notice to Proceed, which Retainage shall be in addition to the [*] of such Scheduled Payment to be withheld from such payment as Retainage pursuant to Section 4.2.4 hereof. 2.2.2 PRE-COMMENCEMENT DATE TERMINATION OR SUSPENSION. (a) Notwithstanding any provision in this Agreement to the contrary, if this Agreement were to be terminated by Owner pursuant to Section 15.1 or 15.2 hereof prior to the occurrence of the Commencement Date, the total cancellation costs that Owner shall be responsible for hereunder in connection with the Services undertaken by Contractor, if any, shall be equal to the cancellation charges that are specified to be due and payable pursuant to (and subject to the limits set forth in) the terms and conditions of the Limited Notice to Proceed; PROVIDED, HOWEVER, that costs incurred by Contractor in connection with items procured by Contractor shall not be included in such cancellation charges until Contractor shall have delivered to Owner (or to Owner's designee, which may be any 36 other AES affiliate or any third party purchaser, provided that such assignment is consistent with the provisions of Article 17 hereof) all documents necessary to transfer all of Contractor's right, title and interest and to such items to Owner (or such designee) and, with respect to such items which Contractor has received possession of, Contractor shall have delivered such items to Owner (or such designee), in each case free and clear of all liens and encumbrances made by, through or under Contractor or any Subcontractor (subject to Owner's payment of the cancellation charges due under the Limited Notice to Proceed). Contractor shall use all reasonable efforts to minimize any cancellation charges under this Section 2.2.2. (b) Except as set forth in Section 2.2.2(a) hereof, Owner shall have no other payment or reimbursement obligation to Contractor with respect to Contractor's performance of Services prior to the Commencement Date hereunder, and Contractor hereby acknowledges and agrees that all costs and expenses incurred by Contractor (other than those covered by Section 2.2.2(a) hereof) in performing Services hereunder prior to the Commencement Date will be at its own risk and expense and that it hereby waives any and all rights to require any payment therefor from Owner, whether arising hereunder, at law or in equity, except as expressly set forth in Section 2.2.2(a) hereof. 2.3 PERFORMANCE. 2.3.1 STANDARD OF PERFORMANCE. Without limiting any other provision of this Agreement, (a) Contractor shall perform the Services in accordance with Prudent Utility Practices, generally accepted standards of professional care, skill, diligence and competence applicable to engineering, construction and project management practices, all Applicable Laws, all Applicable Permits, the Real Estate Rights, the Quality Assurance Plan, the Electrical Interconnection Requirements, the Environmental Requirements set forth in Appendix S hereto, the safety precautions set forth in Section 2.5 hereof and all of the requirements necessary to maintain the warranties granted by the Subcontractors pursuant to Section 3.4 hereof, and (b) the Project shall be constructed and erected (i) in a good workmanlike manner, (ii) using Prudent Utility Practices for use by a skilled and experienced contractor in connection with power stations of the same or similar size and type as the Facility, and (iii) in specific conformity with the Design Documents, including without limitation Appendix A hereto, and the other requirements of this Agreement (including without limitation Section 10.1 hereof). All engineering work requiring certification under Applicable Law shall be certified by professional engineers licensed and properly qualified to perform such engineering services in all appropriate jurisdictions, which 37 engineers and their qualifications shall be subject to the review and approval procedures set forth in Section 2.1.4 hereof. 2.3.2. TIMELINESS OF PERFORMANCE. Contractor shall perform the Services in accordance with the Project Schedule and shall cause (a) each Construction Progress Milestone to be achieved on or prior to the applicable Construction Progress Milestone Date, (b) either Provisional Acceptance or Final Acceptance of the Facility to occur on or prior to the Guaranteed Provisional Acceptance Date, and (c) Final Acceptance of the Facility to occur on or before the Guaranteed Final Acceptance Date; PROVIDED, HOWEVER, that Contractor's failure to satisfy either of clauses (a) and (b) above shall not constitute an Event of Default hereunder except as set forth in Section 16.1(i) or (j) hereof. 2.3.3 ORDER OF PERFORMANCE. Owner shall have the right to request that Contractor perform any part or parts of the Services before any other part or parts of such Services, and Contractor shall use all reasonable efforts to comply with such request; PROVIDED that Contractor shall not be obligated to comply with such request if compliance would, in Contractor's reasonable judgment, materially adversely affect Contractor's ability to meet the Project Schedule, the Performance Guarantees, the Guaranteed Completion Dates, the Construction Progress Milestone Dates or the warranties hereunder, or increase the cost to Contractor of performing the Services. Compliance by Contractor with such a request shall not relieve Contractor of any obligation hereunder or affect its liability for failure to perform in accordance with this Agreement. 2.3.4 COMPLIANCE WITH PLAN. In the event thatContractor shall have submitted a Plan that has been approved and/or modified pursuant to Section 7.2.1 and/or 7.6.2 hereof, Contractor shall perform the Services in accordance with such Plan. 2.4 COMPLIANCE WITH APPLICABLE LAWS, APPLICABLE PERMITS AND THE GUARANTEED EMISSIONS LIMITS. (a) Contractor shall strictly comply with and shall cause all Subcontractors and the Project and all components thereof (including without limitation the design, engineering, construction and operability of the Project) to strictly comply with all Applicable Laws and Applicable Permits as they may be in effect at the time of Contractor's or such Subcontractor's performance hereunder. Without limiting the foregoing, the effect of any change in Applicable Laws or Applicable Permits enacted after the date of this Agreement shall be determined under Section 12.5 hereof. (b) Contractor shall perform the Services such that the Facility, when operated over the load range in accordance with the Instruction Manual as of Provisional 38 Acceptance and Final Acceptance, will comply with all Applicable Laws and Applicable Permits, the Electrical Interconnection Requirements and the Guaranteed Emissions Limits in accordance with the Completed Performance Test requirements set forth in Section 6.2.7 hereof. 2.5 SAFETY PRECAUTIONS. Contractor shall be solely responsible for safety precautions and programs in connection with the performance of the Services, and shall implement and administer a safety and health program for the Services to be performed at the Facility Site which shall include: (a) development of a Project safety manual establishing Contractor and Subcontractor safety guidelines and requirements, (b) conducting of weekly Project safety meetings with all Subcontractors, (c) development, implementation and enforcement of procedures for advising Subcontractors of, and correction of, safety violations and deficiencies, and (d) taking of all other actions necessary to provide a safe work environment in accordance with Applicable Laws and Applicable Permits. Contractor shall take all reasonable precautions for the safety of, and shall provide all reasonable protection to prevent damage, injury or loss to: (x) all Persons employed by Contractor or Subcontractors in connection with the Services to be performed and all other Persons who may be affected thereby, (y) all materials and equipment to be incorporated into the Project, whether in storage on or off the Facility Site, owned by and/or under the care, custody or control of Contractor or any Subcontractor, and (z) other property at the Facility Site or adjacent thereto, including trees, shrubs, lawns, walks, pavements, roadways, structures and utilities not designated for removal, relocation or replacement in the course of construction. Contractor shall require all Subcontractors working on the Facility Site to comply with all safety requirements in effect at all such times. 2.5.1 HAZARDS. When the use or storage of explosives or other hazardous materials or equipment is necessary for performance of the Services, or when the conditions under which the Services must be performed are necessarily hazardous, Contractor shall exercise the utmost care and shall carry on such activities under the supervision of properly qualified personnel. 2.5.2 PUBLIC SAFETY. Contractor shall erect and maintain, as required by existing conditions and progress of the Project or as otherwise required by Applicable Law, Applicable Permits or any governmental authority, all reasonable safeguards (including such reasonable safeguards established by Owner from time to time) for safety and protection of the public, including supplying and maintaining in good condition safety equipment, lighting, wire fences and warning signals, employing guards, posting danger signs and other warnings against hazards, promulgating safety regulations and notifying owners and users of adjacent highways, waterways and utilities. 39 2.5.3 OSHA. Contractor shall comply with and shall cause all Subcontractors to comply with all applicable occupational safety and health laws, child labor laws and other Applicable Laws relating to safety and health. ARTICLE 3 SUBCONTRACTS 3.1 MAJOR SPECIALTY CONSULTANTS, SUBCONTRACTORS AND EQUIPMENT SUPPLIERS. 3.1.1 APPROVED SUBCONTRACTORS' LIST. Set forth in Appendix E hereto is a list of certain equipment vendors, suppliers, materialmen, consultants and subcontractors (and, if applicable, the permitted countries of manufacture or fabrication relating thereto) agreed to by the Parties (the "APPROVED SUBCONTRACTORS LIST") and from which Contractor shall be obligated to select each vendor, supplier, materialman, consultant and subcontractor who will be executing a subcontract with an individual aggregate total subcontract price in excess of $100,000 for the tasks specified on the Approved Subcontractors List. Contractor and Owner shall each have the right to recommend additions or deletions to the Approved Subcontractors List from time to time (PROVIDED that any such recommended addition or deletion shall only be made with the approval of the other Party, which shall not be unreasonably withheld or delayed), and shall each have the right to approve any successor or replacement of any Person listed on such list. Owner shall have the right to approve any other vendor, supplier, materialman, consultant or subcontractor with an individual aggregate total subcontract price in excess of $100,000 selected by Contractor (which approval shall not be unreasonably withheld or delayed). 3.1.2 EQUIPMENT STANDARDS. In connection with the purchase of any items of equipment or machinery from any Subcontractor, Contractor shall purchase only such models of equipment, machinery or materials for incorporation into the Project as have attained the standards of reliability and performance in the electrical generating industry that are consistent with Prudent Utility Practices and the requirements of Article 10 hereof. 3.1.3 SUBCONTRACTORS AND RELATED INFORMATION. All vendors, suppliers, materialmen, consultants and subcontractors providing equipment, materials or services directly or indirectly to Contractor in connection with the Project are herein referred to as "SUBCONTRACTORS". Contractor shall provide to Owner such information concerning the Subcontractors or the subcontracts and purchase orders (except in the event and only to the extent such information involves confidential commercial or 40 proprietary matters that could not reasonably be expected to substantially affect or relate to the performance of the Services hereunder) as Owner may reasonably request from time to time. 3.2 PURCHASE ORDERS AND SUBCONTRACTS. Contractor's purchase orders, subcontracts and similar purchase forms in connection with the Project shall comply with the applicable requirements of this Agreement (including without limitation the requirements set forth in Sections 2.4 and 15.3 hereof). All purchase orders and subcontracts for the Equipment specified in Appendix U hereto shall contain a recommended spare parts list and a price list (which shall be binding to the extent reasonably feasible for a period of two years from the Guaranteed Provisional Acceptance Date) covering all spare and replacement parts pertaining to the subject matter of such purchase order or subcontract. Contractor shall use all reasonable efforts to require that any contract with Subcontractors which is in excess of $250,000 in cost include a reasonable limitation on the amount of any mark-up which such Subcontractor can include in Scope Change Orders. 3.3 PAYMENTS TO SUBCONTRACTORS. Contractor shall be solely responsible for paying (or arranging for the payment on its behalf to) each Subcontractor and any other Person to whom any amount is due from Contractor for services, equipment, materials or supplies in connection with the Project, and shall pay (or cause to be paid) each such amount promptly as the same becomes due. Prior to any such payment, Contractor shall take all reasonable steps to ensure that such equipment, materials and supplies have been or will be received, inspected and approved and that such services have been or will be properly performed in accordance with the requirements of this Agreement. 3.4 SUBCONTRACTOR WARRANTIES. Contractor shall, for the protection of Owner (and its assignees, including the Financing Parties), obtain guarantees and warranties from all Subcontractors with respect to all material machinery, equipment, services, materials, supplies and other items used and installed hereunder on terms and conditions that are consistent with Contractor's customary practices for projects of similar type and capacity to the Project, and such guarantees and warranties shall not be amended, modified or otherwise discharged without the prior written consent of Owner. Contractor shall use all reasonable efforts to cause such guarantees and warranties received from Subcontractors with respect to the Equipment specified in Appendix U hereto to cover a period of not less than the Warranty Period hereunder. Contractor shall enforce such Subcontractor guarantees and warranties obtained hereunder (whether or not they exceed the scope or term of any of the guarantees or warranties provided by Contractor pursuant to Article 10 hereof) to the fullest extent thereof until such time as 41 they are transferred to Owner pursuant to this Section 3.4 or Section 15.3 hereof, as the case may be. In the event and only to the extent that any of the guarantees and warranties obtained under this Section 3.4 extends beyond the applicable Warranty Period hereunder, Contractor shall transfer to Owner (or its designee) all interests and rights of Contractor in and to such Subcontractor guarantees and warranties. Without the consent of Owner, neither Contractor nor its Subcontractors nor any Person under Contractor's control shall take any action which releases, voids, impairs or waives any such warranties or guarantees on equipment, materials or services. Nothing in this Section 3.4 shall detract from or limit any of the obligations of Contractor to provide the warranties described in, and to comply with the provisions of, Article 10 hereof. 3.5 SUBCONTRACTOR INSURANCE. Contractor shall require all Subcontractors to obtain, maintain and keep in force during the time in which they are engaged in performing Services, insurance coverages that are consistent with Contractor's customary practices for such types of subcontracts for projects of similar type and capacity to the Project and with the requirements of Section 14.9 hereof, if applicable. 3.6 NO PRIVITY WITH SUBCONTRACTORS. Owner shall not be deemed by virtue of this Agreement or its performance hereunder to have any contractual obligation to orrelationship with any Subcontractor. 3.7 REVIEW AND APPROVAL NOT RELIEF OF CONTRACTOR'S LIABILITY. The review, approval, consent and selection by Owner as to the Approved Subcontractors List or as to Contractor's entering into any subcontract or purchase order (including, without limitation, that for performance of the Performance Tests) shall not relieve Contractor of any of its duties, liabilities or obligations under this Agreement, and Contractor shall be liable hereunder to the same extent as if such subcontract or purchase order had not been entered into. Any inspection, review, approval or selection by Owner (or its assignees and designees, including without limitation the Financing Parties and the Independent Engineer) permitted under this Agreement of any portion of the Services or of any work in progress by Contractor or Subcontractors shall not relieve Contractor of any duties, liabilities or obligations under this Agreement and shall not deprive Owner of any rights or remedies that it may have under this Agreement. 3.8 ASSIGNABILITY OF SUBCONTRACTS. With respect to each subcontract and purchase order entered into between Contractor and any Subcontractor in connection with any of the Equipment specified in Appendix U hereto, Contractor shall ensure that, and, with respect to each other subcontract and purchase order entered into between Contractor and any Subcontractor in connection with the Project, Contractor shall use all 42 reasonable efforts to ensure that, each such subcontract and purchase order is assignable from Contractor to Owner (and its assignees, including the Financing Parties). 3.9 QUALITY CONTROL. Contractor shall use all reasonable efforts to ensure that all Subcontractors establish and implement a quality control system in their work and manufacturing processes which assures that all goods and services supplied hereunder will comply with the quality assurance program guidelines required of such Subcontractors as set forth in the Quality Assurance Plan. ARTICLE 4 PRICE AND PAYMENT 4.1 CONTRACT PRICE. As full consideration to Contractor for the full and complete performance of the Services and all costs incurred in connection therewith, Owner shall pay, and Contractor shall accept, the sum of two hundred ninety million four hundred seventeen thousand dollars ($290,417,000), to be paid in installments as set forth in Section 4.2 hereof, as such sum may be adjusted pursuant to Section 4.3 and Article 12 hereof (such adjusted amount referred to as the "CONTRACT PRICE"). 4.2 PAYMENT SCHEDULE. All payments made to Contractor shall be paid by Owner to Contractor in installments, in accordance with the Payment and Milestone Schedule ("SCHEDULED PAYMENTS") attached hereto as Appendix B, as adjusted pursuant to Section 4.3 and Article 12 hereof, which Scheduled Payments shall be subject to Retainage pursuant to Section 4.2.4 hereof (except in the event and only to the extent that Contractor has deposited the Letter of Credit in lieu of Retainage in accordance with said Section 4.2.4). In the event Owner has retained Retainage pursuant to Section 4.2.4 hereof, such Retainage will be paid by Owner to Contractor pursuant to Section 4.2.4 hereof, which payments shall not be subject to any further Retainage. 4.2.1 NOT USED. 4.2.2 CONDITIONS TO SCHEDULED PAYMENTS. Subject to the terms of this Article 4, Owner shall, within thirty (30) days after the later of (i) each successive applicable payment date set forth in the Payment and Milestone Schedule and (ii) receipt by Owner of an invoice package from Contractor in which Contractor certifies that (1) all of the milestones set forth on the Payment and Milestone Schedule required to be achieved prior to such payment date have been achieved in compliance with the standards of performance required hereunder and (2) it is performing the Services hereunder in a timely manner consistent with achieving Final Acceptance of the Facility no later than the Guaranteed Final Acceptance Date or such later date, if any, that may have been accepted 43 by Owner pursuant to a Plan proposed pursuant to the provisions of Sections 7.2.1 or 7.6.2 hereof (the "CONTRACTOR'S PAYMENT REQUEST"), make or cause to be made the Scheduled Payments to Contractor with respect to the Services performed; PROVIDED that: (a) Owner shall not be obligated to make any Scheduled Payment hereunder if the Owner or, at the Owner's election, the Independent Engineer fails to confirm the matters so certified to by Contractor in the Contractor's Payment Request with respect to such payment; PROVIDED, that if Contractor disputes the decision of Owner or the Independent Engineer and it is determined pursuant to Article 21 hereof that Owner or the Independent Engineer should have confirmed the matters so certified by Contractor with respect to such payment, but failed to do so, then Contractor shall be entitled to interest on such Scheduled Payment in accordance with Section 25.1 hereof to be accrued from the date such Scheduled Payment would otherwise have been due to Contractor until the date actually paid to Contractor; (b) Owner shall not be obligated to make any Scheduled Payment hereunder until Contractor has supplied Owner with the certification and waivers required pursuant to Section 4.6 hereof; and (c) If this Agreement is terminated before the Project Completion Payment is made, Owner shall not be obligated to make further Scheduled Payments or other payments except in accordance with Section 4.4 hereof, in the event and only to the extent such Section 4.4 may be applicable. 4.2.3 DEFERRAL OF SCHEDULED PAYMENTS. Subject to the following sentence, any Scheduled Payment that Owner is not obligated to, and does not, make under Section 4.2.2 hereof shall be made, without interest, following the applicable payment date under Section 4.2 hereof, within thirty (30) days of the date on which all conditions described in such Section are satisfied. In no event shall Owner, as a result of deferred Scheduled Payment(s) or otherwise, be obligated to make more than one payment per month of amounts due to Contractor under this Agreement (other than any Termination Payment hereunder); rather, Contractor shall submit to Owner only one invoice package per month, which invoice package will set forth all amounts then due to Contractor hereunder (including any deferred Scheduled Payment(s) or other non-scheduled payments due, as well as the Scheduled Payment for such month). 4.2.4 RETAINAGE. Owner shall withhold from each Scheduled Payment, other than the Project Completion Payment, an amount equal to [*] of such payment, which shall be held by Owner as retainage ("RETAINAGE"); 44 PROVIDED, HOWEVER, that in the event and only to the extent that Contractor deposits with or for the account of Owner a letter of credit (i) from a major New York bank or trust company or a New York branch of a major international bank, in each case reasonably satisfactory to Owner and its Financing Parties and whose long-term debt is rated (or in the case of the New York branch of an international bank, which international bank's long-term debt is rated) "A" or higher by S&P and "A2" or higher by Moody's and (ii) on terms and conditions substantially similar to those set forth in Appendix V hereto, in an aggregate U.S. dollar amount available for draw thereunder by sight demand equal to the amount of Retainage in lieu of which Contractor seeks to have such letter of credit held hereunder (the "LETTER OF CREDIT"), then the Retainage to be held by Owner hereunder shall be reduced (but not below zero) by the amount of the Letter of Credit so available for draw by Owner (or its assignees). The Letter of Credit shall be assignable by Owner as security to the Financing Parties. Subject to Section 4.8 hereof, Retainage shall be paid to Contractor (or the aggregate amount available under the Letter of Credit deposited in lieu of Retainage hereunder shall be reduced, if applicable) in accordance with the following: (a) Within ten (10) days after the determination, in accordance with the terms of this Agreement, that Final Acceptance of the Facility has been achieved (PROVIDED that Contractor shall first have paid in full any Performance Guarantee Payments due to Owner hereunder, which payment may, at Contractor's election, be made in whole or part by Owner's set-off pursuant to Section 4.8 hereof as long as after such set-off Owner still holds Retainage in at least the amounts Owner is entitled to retain under this clause (a)) and receipt by Owner of documentation in the forms specified in Appendix I hereto establishing that the requirements of Section 4.6 and 2.1.22 hereof have been met, all Retainage shall be paid to Contractor, except for an amount equal to the sum of (1) one hundred and fifty percent (150%) of the cost of completing all Punch List items as reasonably determined by the Independent Engineer, and (2) the lesser of (i) one hundred and fifty percent (150%) of the cost (including labor costs), as reasonably determined by the Independent Engineer, of repairing or replacing any machinery, equipment, materials, systems, supplies or other items that have already been corrected, added, repaired or replaced by or on behalf of Contractor as of such date pursuant to Section 10.1.1 hereof, and (ii) one million dollars ($1,000,000); (b) Within thirty (30) days after Project Completion pursuant to Section 6.6 hereof, all remaining Retainage, less the amount (if any) retained pursuant to clause (2) of Section 4.2.4(a) hereof, shall be paid to Contractor in accordance with the terms of Section 4.2.5 hereof; and 45 (c) Within thirty (30) days after the first anniversary of the earlier of Provisional Acceptance and Final Acceptance of the Facility, and PROVIDED that Project Completion has occurred, all remaining Retainage shall be paid to Contractor. 4.2.5 PROJECT COMPLETION PAYMENT. Owner shall make to Contractor the payment of the sum of the unpaid balance of the Contract Price (including all Retainage, less the amount (if any) retained pursuant to clause (2) of Section 4.2.4(a) hereof) (the "PROJECT COMPLETION PAYMENT") within thirty (30) days after Project Completion. 4.3 PRICE ADJUSTMENTS. 4.3.1 BASE SCOPE CHANGES; SCOPE OPTIONS. (a) Owner and Contractor hereby agree that as expressly set forth in Section A of Appendix O hereto, the applicable Scope Changes set forth in said Section A of Appendix O as identified by Owner (the "BASE BID SCOPE CHANGES") will be made hereunder. On or before the Commencement Date, Owner shall issue a Scope Change Order setting forth the adjustments to the Contract Price (as the Contract Price set forth in Section 4.1 hereof does not include any of the price adjustments for such Base Bid Scope Changes), as expressly set forth in said Section A of Appendix O hereto as being applicable to such specified circumstances. (b) In its sole discretion and by delivery of a written notice to Contractor on or prior to the respective dates provided in Section B of Appendix O hereto for each scope option listed therein, Owner may add to the Services one or more of the scope options listed in said Section B of Appendix O. In the event Owner makes any such election(s), (i) the Contract Price shall be adjusted in accordance with the respective provisions of Section B of Appendix O hereto that are expressly set forth therein as being applicable to such scope option(s), and (ii) corresponding adjustments to the Guaranteed Completion Dates, the Construction Progress Milestone Dates, the Payment and Milestone Schedule, the Project Schedule and the Performance Guarantees and such other provisions of this Agreement that may be affected thereby shall be made as reasonably agreed upon by Owner and Contractor. 4.3.2 OTHER ADJUSTMENTS TO PAYMENT AND MILESTONE SCHEDULE. Owner and Contractor may agree (which agreement shall not be unreasonably withheld or delayed) from time to time to revise the Payment and Milestone Schedule (and, if appropriate, the Cancellation Schedule attached as Appendix M hereto) to reflect changes in the order of performance of the Services or in the projected schedule for performance 46 of the Services if Contractor demonstrates to the satisfaction of Owner and the Independent Engineer that (i) notwithstanding such changes in the order or the projected schedule for performance of the Services, Contractor's performance of the Services will comply with the Construction Progress Milestone Dates, the Guaranteed Completion Dates and the other requirements of this Agreement and (ii) the revision to the Payment and Milestone Schedule (and Cancellation Schedule, if applicable) will not accelerate the cumulative Scheduled Payments (or Termination Payment, if applicable) to be made by Owner hereunder as of any date; PROVIDED, HOWEVER, that unless Owner otherwise agrees in its sole discretion, no such revision shall increase the Contract Price. 4.4 PAYMENT UPON TERMINATION. (a) Upon termination of this Agreement at any time after the Commencement Date pursuant to Section 15.1 or 15.2 hereof, Contractor shall be entitled to be paid at the time specified in Section 4.4.2 hereof an amount (the "TERMINATION PAYMENT") equal to the sum of: (1) any and all Scheduled Payments due and owing to Contractor on or prior to the date on which written notice of termination is issued to Contractor; (2) any pro-rata portion of the Scheduled Payment due for that month in which written notice of such termination is issued to Contractor for the Services properly performed by Contractor and its Subcontractors in such month; (3) all Retainage (if any) held by Owner at such time; and (4) all reasonable, actual termination costs incurred by Contractor as a result of terminating and demobilizing all aspects of the Services theretofore properly performed by Contractor and its Subcontractors hereunder (including, but not limited to, the cancellation of subcontracts and purchase orders, if any), but excluding any and all costs and expenses incurred by Contractor from and after the date of termination for those of its employees who are not directly performing required termination and demobilization services (whether or not Contractor has reassigned such employees to other work following Owner's notice of termination), as audited and accepted by an independent certified public accounting firm selected by Owner and reasonably acceptable to Contractor, and only in the event and to the extent such costs are not covered by Scheduled Payments previously made hereunder or under clauses (1) and (2) directly above; PROVIDED, HOWEVER, that the Termination Payment due hereunder shall in no event exceed the amount equal to the difference of (i) the amount set forth for the month in which such written notice of termination is issued to Contractor (as measured from the 47 Commencement Date) in the Cancellation Schedule attached as Appendix M hereto (as such schedule may have been expressly amended by any Scope Change Order issued hereunder from time to time), which amount shall be subject to an equitable adjustment in the event that any Services performed as of such date do not comply with the standards and warranties required hereunder or have not been completed in accordance with the Payment and Milestone Schedule, minus (ii) all Scheduled Payments previously made to Contractor hereunder; and PROVIDED, FURTHER, that costs incurred by Contractor in connection with items procured by Contractor shall not be included in the Termination Payment until Contractor shall have delivered to Owner (or to Owner's designee, which may be any other AES affiliate or any third party purchaser) all documents necessary to transfer all of Contractor's right, title and interest in and to such items to Owner (or such designee) and, with respect to such items which Contractor has received possession of, Contractor shall have delivered such items to Owner (or such designee), in each case free and clear of all liens and encumbrances (other than Permitted Liens) made by, through or under Contractor or any Subcontractor (subject to Owner's payment of the Termination Payment due hereunder). Contractor shall use all reasonable efforts to minimize any termination costs under clause (4) above. (b) As conditions precedent to receiving any cancellation charges pursuant to Section 2.2.2 hereof or any Termination Payment pursuant to Section 4.4 hereof, Contractor shall (x) if Owner so requests, execute and deliver all such papers and take all such steps, including legal assignments, as required for the purpose of fully vesting in Owner (or its designee) all contractual rights of Contractor under all subcontracts, purchase orders, warranties, guarantees and other agreements and (in the event and only to the extent permitted under Applicable Law) all rights of Contractor under Applicable Permits and (y) comply with the requirements of Section 2.1.22 hereof. 4.4.1 VERIFICATION OF THE TERMINATION PAYMENT. Contractor shall, within sixty (60) days of any such termination of all or part of the Services, make available for review by Owner and the independent accounting firm referred to in clause (4) of Section 4.4(a) hereof all invoices and other documentation as are reasonable and sufficient to enable Owner to verify the performance of the Services and such accounting firm to verify Contractor's costs associated therewith, in order to determine the amount of the Termination Payment due thereunder. The Termination Payment shall not include the costs of future anticipated profit. 4.4.2 PAYMENT OF THE TERMINATION PAYMENT. Owner shall pay the Termination Payment to Contractor within thirty (30) days of the documentation required under Sections 4.4(b) and 4.4.1 hereof being made available to Owner. 48 4.4.3 LIMITATION OF LIABILITY. Payment of the Termination Payment under this Section 4.4 or payment of the cancellation charges specified in Section 2.2.2 hereof, as the case maybe, shall be the sole and exclusive liability of Owner to Contractor, and the sole and exclusive remedy of Contractor, with respect to termination of this Agreement pursuant to Section 15.1 or 15.2 hereof. In no event shall Owner have any further liability to Contractor in any such event, whether based in contract, in tort (including negligence and strict liability) or otherwise, for any actual, direct, indirect, incidental, special, consequential or other damages of any type (including, without limitation, loss of use or loss of profit or revenue) resulting from such termination, notwithstanding the actual amount of damages that Contractor may have sustained, and Contractor hereby releases Owner and its contractors, subcontractors and agents from any such liability. 4.5 NO PAYMENT IN THE EVENT OF MATERIAL BREACH. Notwithstanding any other provision to the contrary contained herein, Owner shall have no obligation to make any payment to Contractor at any time when Contractor is in material breach of this Agreement; PROVIDED, HOWEVER, that if Owner's determination that Contractor is in material breach hereof is subsequently found pursuant to Article 21 hereof to be incorrect, then Contractor shall be entitled to interest on the unpaid amounts from the date such amounts should have been paid hereunder until such time such payments are made at the interest rate specified in Section 25.1 hereof. On the payment date next following the date on which all material breaches of Contractor have been remedied, Owner shall make all payments withheld during the continuation of such material breaches without interest, subject to the provisions of this Article 4, less any amounts due from Contractor to Owner pursuant to Section 16.2 hereof. 4.6 ALL PAYMENTS SUBJECT TO RELEASE OF CLAIMS. 4.6.1 INTERIM WAIVERS. On or before any payment to Contractor hereunder (excluding the payment of any Retainage, the Project Completion Payment and any Termination Payment, as the provisions of Section 2.1.22 hereof shall apply with respect to such excluded payments), Contractor shall duly execute and deliver to Owner a waiver and release in substantially the form attached hereto as Appendix I-2. If any lien or claim of lien, other than a Permitted Lien, is filed against any portion of the Project, Owner may withhold from any Scheduled Payment or other payment payable to Contractor an amount sufficient to discharge any or all such liens or claims and, after thirty (30) days from the time such lien or claim is made (or sooner, if the Applicable Law would otherwise allow the claimant to proceed to enforce such lien or claim), may discharge such lien or claim with the moneys withheld, whereupon for purposes of this Agreement such moneys shall be deemed to have been paid to Contractor hereunder. 49 4.6.2 FINAL RELEASE FROM SUBCONTRACTORS. In addition to the interim waivers required under Section 4.6.1 above, on or prior to the payment date next following the date on which final payment to such Subcontractor is made, with respect to each Subcontractor providing the services or equipment listed in Appendix U hereto or otherwise is party to a subcontract or purchase order with Contractor with a total cost in excess of one hundred thousand dollars ($100,000), Contractor shall deliver to Owner a copy of a final release and waiver, in the form of Appendix I-3 hereto. Notwithstanding the foregoing, if Contractor is unable to deliver a final release and waiver required under this Section 4.6.2, Contractor may provide to Owner in lieu thereof a bond or other collateral, in form and substance satisfactory to Owner and the Financing Parties, to fully indemnify Owner against any loss resulting from claims of such Subcontractor. 4.7 PAYMENT OR USE NOT ACCEPTANCE. No Scheduled Payment or other payment to Contractor or any use of the Facility by Owner shall constitute an acceptance of any of the Services or shall relieve Contractor of any of its obligations or liabilities with respect thereto. 4.8 SET-OFF. Owner may (but shall not be obligated to) deduct and set-off against any part of the balance due or to become due to Contractor under this Agreement, and/or may (but shall not be obligated to) apply any Retainage held by Owner (or draw on the Letter of Credit, if applicable) for payment of, any amounts due from Contractor to Owner under or in connection with this Agreement (including, without limitation, any amounts due under Articles 5, 7, 8, 10, 13, 14 or 16 hereof). The application of any Retainage (or any draw under the Letter of Credit, if applicable) pursuant to this Section 4.8 in payment of any amounts due from Contractor hereunder shall not constitute a cure of any such payment default by Contractor hereunder unless after such application of Retainage (or draw amounts on the Letter of Credit, if applicable), Owner holds Retainage (and/or available amounts under the Letter of Credit) in the aggregate amount that Owner would then be entitled to hold as Retainage under Section 4.2.4 hereof; PROVIDED, HOWEVER, that in the event and only to the extent that Owner applies any Retainage (or any draws under the Letter of Credit, if applicable) in payment of any amounts believed by Owner to be due from Contractor to Owner hereunder, and Contractor in good faith disputes pursuant to Article 21 hereof whether such amount is due from it hereunder, then Contractor shall not be required by this sentence to replenish such Retainage (or Letter of Credit, if applicable) for that portion used by Owner to pay such disputed amount unless and until it is determined pursuant to Article 21 hereof that all or a portion of such disputed amount was due from Contractor to Owner hereunder, in which event Contractor shall replenish the Retainage (or Letter of Credit, if applicable) by the amount of such disputed amount that is so determined to have been due from it hereunder. In the event that Owner sets off pursuant to this Section 4.8 against any 50 amount due to Contractor hereunder an amount believed by Owner to be due from Contractor to Owner hereunder, but which is subsequently determined pursuant to Article 21 hereof not to have been due from Contractor to Owner hereunder, then Contractor shall be entitled to interest on such set-off amount at the interest rate specified in Section 25.1 hereof, which interest shall accrue from the date such set-off amount would otherwise have been due to Contractor until the date actually paid to Contractor. ARTICLE 5 OWNER SERVICES 5.1 REPRESENTATIVE. Owner shall designate a representative who shall be acquainted with the Project and shall have authority to administer this Agreement on behalf of Owner, to agree upon procedures for coordinating Owner's efforts with those of Contractor and to furnish information, when appropriate, to Contractor. 5.2 FACILITY SITE. On or prior to the Commencement Date, Owner shall furnish to Contractor access to the Facility Site, as set forth on Appendix G hereto. Contractor hereby acknowledges and agrees that the Facility Site as described in Appendix G hereto, together with the Real Estate Rights designated in Appendix G hereto, is suitable and sufficient for Contractor to perform the Services. 5.3 PERMITS AND REAL ESTATE RIGHTS. (a) Owner shall secure and maintain at its own expense, in the time periods (if any) indicated therefor, (i) all Applicable Permits and Real Estate Rights which are listed in Appendices F and G hereto and designated therein as Owner's responsibility, and (ii) all other Applicable Permits (other than Building Permits) and Real Estate Rights (other than those required to be obtained by Contractor pursuant to Section 2.1.14 hereof), if any, required for performance of the Services (including without limitation all such Applicable Permits and Real Estate Rights required to be obtained or maintained in connection with the transmission of electricity to the Transmitting Utility and operation of the Project). (b) If any Applicable Permit necessary for performance of the Services (other than any Building Permit) is not obtained when required under this Agreement and Contractor was materially adversely affected in the performance of the Services as a direct result thereof despite Contractor's reasonable efforts to avoid or mitigate such effect, the provisions of Section 5.9 hereof shall apply. (c) If any Real Estate Right listed in Appendix G hereto and required for the performance of the Services is not obtained when required under this Agreement and Contractor was materially adversely affected in the performance of the Services as a 51 direct result thereof despite Contractor's reasonable efforts to avoid or mitigate such effect, the provisions of Section 5.9 hereof shall apply. (d) Owner shall cooperate with Contractor and shall use all reasonable efforts to provide all necessary information and documents and otherwise assist Contractor, at Contractor's cost and expense, in connection with Contractor's efforts to obtain the Applicable Permits and, if applicable, any Real Estate Rights required to be obtained by Contractor hereunder pursuant to Sections 2.1.5 and 2.1.14(b) hereof. (e) In the event that the inability of a Party to obtain any Applicable Permit or Real Estate Right required hereunder is caused by a Force Majeure Event, the provisions of this Section 5.3 are subject to, and are not intended to supersede, the provisions of this Agreement relating to Force Majeure Events (including without limitation Article 11 and Section 12.7 hereof). 5.4 START-UP PERSONNEL. Owner (or its designee) shall provide at its own expense operating and maintenance personnel of such number and qualifications as Owner, in good faith, reasonably determines is appropriate for the normal, day-to-day, in-service operation and maintenance of the Facility, which personnel shall be trained by Contractor and assist Contractor by performing normal operating and maintenance duties in connection with the start-up of the Facility and the performance of the Performance Tests. Said personnel will be available to Contractor for such purposes until Final Acceptance of the Facility. Contractor shall be responsible for providing technical guidance to, and shall otherwise direct, Owner's operating and maintenance personnel during the start-up and testing of the Facility. Contractor shall be responsible for all acts and omissions of such operating and maintenance personnel of Owner that are so made available to Contractor in connection with the start-up and testing of the Facility, except for the gross negligence or intentional misconduct of any of Owner's operating and maintenance personnel. Any personnel required in addition to those provided by Owner pursuant to this Section 5.4 will be the responsibility of Contractor. The provision of personnel by Owner (or its designee) pursuant to this Section 5.4 shall not relieve Contractor of any of its obligations or liabilities hereunder, except in the event and only to the extent that the gross negligence or intentional misconduct of Owner's personnel causes Contractor to be unable to perform its obligations hereunder. 5.5 SPARE PARTS, WASTE DISPOSAL AND CONSUMABLES. Owner shall furnish (a) all operational spare parts, (b) all waste disposal services required with respect to Facility operations after the Risk Transfer Date and (c) any refills of lubrication oil, grease, resins and other consumables (including water treatment chemicals) required with respect to Facility operations after the Risk Transfer Date; PROVIDED that this Section 5.5 52 shall not relieve Contractor of any of its obligations under Article 2 hereof, including without limitation Section 2.1.11 hereof. 5.6 UTILITIES. Owner shall arrange and pay for the provision of all permanent utilities required for the start-up, testing and operation of the Facility (other than any excess electricity requirements for which Contractor is responsible pursuant to Section 2.1.11 hereof), and shall not be responsible for any other utilities that will be required at the Facility Site during the construction of the Facility, other than for arranging for (i) the availability, commencing one (1) month after the Commencement Date, of raw and potable water at the source identified in Appendix A hereto (or such other source as may be reasonably agreed upon by Contractor and Owner), (ii) the availability at the boundary of the Power Plant Site of the Fuel Supplier's natural gas pipeline facilities as set forth in Section 5.7 hereof, (iii) during the period from completion of interconnection of the Electrical Interconnection Facilities to the Transmitting Utility's transmission system until completion of initial synchronization of the steam turbine generator, the provision of up to [*] of electricity, and (iv) the availability at the Electrical Interconnection Point of the Transmitting Utility's electrical interconnection facilities as set forth in Section 5.8 hereof. 5.7 FUEL. Owner shall arrange for the Fuel Supplier's natural gas pipeline system to be made available for interconnection with the Facility at the interconnection point identified in Appendix A hereto, with such facilities to be scheduled to be so available for such interconnection nine (9) months prior to the Guaranteed Provisional Acceptance Date, PROVIDED FURTHER that if Contractor notifies Owner that it requires such facilities be so available at an earlier date in order for Contractor to be able to maintain compliance with the Project Schedule, Owner shall use reasonable efforts (at Contractor's expense) to arrange for such facilities to be so available at such earlier date as may be reasonably achievable. Owner shall arrange for the provision of Gas as required for the start-up, testing and operation of the Facility, with such supply of Gas to be scheduled to be available eight (8) months prior to the Guaranteed Provisional Acceptance Date, PROVIDED that Contractor shall have given Owner prior written notice of the Gas requirements for the commencement of Facility testing, and shall have reconfirmed such requirements if necessary, on or before the date on which Owner is required to notify (and, if applicable, reconfirm with) the Fuel Supplier of such requirements under its fuel supply arrangements (PROVIDED that such notification requirements are consistent with Prudent Utility Practices and are made known to Contractor as soon as reasonably possible). Unless Owner and the Fuel Supplier otherwise agree, the commencement of Facility testing shall not occur prior to such scheduled date. 53 5.8 ELECTRICAL INTERCONNECTION. Owner shall arrange for the Transmitting Utility to make the relevant portions of its transmission system available at the Electrical Interconnection Point for interconnection with the Electrical Interconnection Facilities of the Facility at least nine (9) months prior to the Guaranteed Provisional Acceptance Date (PROVIDED that Contractor has made the Electrical Interconnection Facilities available as reasonably required to permit such interconnection to have been made by such date). 5.9 OWNER'S FAILURE TO MEET OBLIGATIONS. If Owner fails to meet any of its material obligations under this Agreement then, in the event and only to the extent that Contractor was materially adversely affected in the performance of the Services as a direct result thereof despite Contractor's reasonable efforts to avoid or mitigate such effect, an equitable adjustment to one or more of the Contract Price, the Guaranteed Completion Dates, the Construction Progress Milestone Dates, the Payment and Milestone Schedule and the Project Schedule, and, as appropriate, such other provisions of this Agreement that may be affected thereby, shall be made by agreement of Owner and Contractor or otherwise pursuant to Article 12 or 21 hereof. 5.10 APPROVALS. Owner shall use all reasonable efforts to furnish all required review or other appropriate action or information with respect to all drawings, samples, estimates, schedules, questions and other items submitted by Contractor and to respond with respect to any matters hereunder requiring its review and approval, in each case within the time periods contemplated herein. Owner shall also use all reasonable efforts to cause the Independent Engineer to respond within the time periods contemplated herein with respect to its reviews of payment invoices, Performance Test results and any other matters hereunder requiring its review and approval. If (a) Owner fails to furnish such required review or other appropriate action or information within the time periods contemplated in this Agreement, or (b) Owner or the Independent Engineer (i) fails to respond to the matters requiring its review and approval within the time periods contemplated in this Agreement or (ii) in its response does not approve any matters hereunder requiring its review and approval and it is subsequently determined pursuant to Article 21 hereof that Owner or the Independent Engineer (as the case may be) should have approved such matters, then in the event and only to the extent that Contractor was materially adversely affected in the performance of the Services as a direct result thereof despite Contractor's reasonable efforts to avoid or mitigate such effect, the provisions of Section 5.9 hereof shall apply. 5.11 ADMINISTRATION OF THIRD PARTY PROJECT AGREEMENTS. Owner shall use all reasonable efforts to administer and coordinate the establishment of, and upon the reasonable request of Contractor the continued participation by all third parties other than Contractor Responsible Parties (including, but not limited to, the Transmitting Utility, the 54 Fuel Supplier and other third parties supplying permanent utilities to the Project) in connection with, such meetings and other interactions between such third parties and Contractor as are reasonably necessary for Contractor's performance of the Services hereunder. Without limiting the foregoing, Owner shall be responsible for obtaining any comments of the Transmitting Utility on (and, if applicable under the Electrical Interconnection Requirements, its acceptance or rejection of) Contractor's plans and specifications relating to the design, construction and installation of the Electrical Interconnection Facilities as set forth in Section 2.1.8.1 hereof. 5.12 AES PRE-FINANCIAL CLOSING GUARANTY. Simultaneously with the execution of this Agreement, Owner shall cause The AES Corporation to guarantee irrevocably and unconditionally all of Owner's payment obligations hereunder arising prior to the Financial Closing Date by executing and delivering to Contractor a guaranty in substantially the form set forth in Appendix T (the "AES PRE-FINANCIAL CLOSING GUARANTY"). ARTICLE 6 COMPLETION AND ACCEPTANCE OF PROJECT 6.1 PROJECT START-UP; MECHANICAL COMPLETION. 6.1.1 PROJECT START-UP. (a) Contractor shall be responsible for the start-up and synchronization of the Facility with the transmission system of the Transmitting Utility in accordance with Applicable Laws, Applicable Permits, Prudent Utility Practices, the Electrical Interconnection Requirements, the PPA Operating Requirements (in the event and only to the extent applicable to start-up and synchronization) and the Instruction Manual. Contractor shall provide Owner, the Independent Engineer and the Transmitting Utility with at least fifty (50) days' (or if a shorter period of time is reasonably necessary to maintain compliance with the Project Schedule, such shorter period of time as may be reasonably acceptable to Owner, the Independent Engineer and the Transmitting Utility) prior written notice of the expected start-up, commissioning and testing of the Facility and shall make all reasonable efforts to keep Owner, the Independent Engineer and the Transmitting Utility duly advised of any changes in the expected dates. Contractor shall (1) no later than thirty (30) days (or if a shorter period of time is reasonably necessary to maintain compliance with the Project Schedule, such shorter period of time as may be reasonably acceptable to Owner, the Independent Engineer and the Transmitting Utility) prior to expected initial operation of the Facility in parallel with the Transmitting Utility's system, provide record plans and specifications reasonably acceptable to the Transmitting Utility for the Electrical 55 Interconnection Facilities (including Protective Apparatus), and (2) prior to interconnection and parallel operation of the Facility with the Transmitting Utility's system, provide a written certification, in form and substance reasonably satisfactory to the Transmitting Utility, from the licensed inspection agency or registered professional engineer engaged by Contractor with respect to the Electrical Interconnection Facilities and who is reasonably acceptable to the Transmitting Utility, to the effect that the Electrical Interconnection Facilities (including the Protective Apparatus) have been inspected, are satisfactory and are in compliance with applicable Accepted Electrical Practices, in each case in accordance with the requirements of the PPA Operating Requirements. Contractor shall not commence any start-up or testing of the Facility for operation in parallel with the Transmitting Utility system without the prior consent of the Transmitting Utility pursuant to the Electrical Interconnection Requirements and/or the PPA Operating Requirements; PROVIDED, HOWEVER, that in the event that the Transmitting Utility unreasonably withholds or delays its consent to such operation despite the Facility and its Electrical Interconnection Facilities being consistent with the Electrical Interconnection Requirements, the PPA Operating Requirements, Prudent Utility Practices and the other standards of performance required hereunder (including without limitation Appendix A hereto), then, in the event and only to the extent that Contractor was delayed in the performance of the Services as a direct result thereof despite Contractor's reasonable efforts to avoid or mitigate such delay, the provisions of Section 5.9 hereof shall apply. (b) Owner and, at Owner's request, the Transmitting Utility, the Financing Parties and the Independent Engineer shall be permitted to have their own or their designee's personnel on the Facility Site to observe and verify all synchronization procedures and Performance Tests. Subject to Section 2.3.1 hereof, Contractor shall, until the occurrence of Provisional Acceptance of the Facility, manage the operation of the Facility in the course of performing any start-up, commissioning and testing activities, in consultation with Owner and its operating personnel in a manner consistent with Applicable Laws, Applicable Permits, Prudent Utility Practices, the Electrical Interconnection Requirements (including any required approvals by the Transmitting Utility), the PPA Operating Requirements (in the event and only to the extent applicable to start-up, commissioning and testing activities) and the Instruction Manual. 6.1.2 MECHANICAL COMPLETION. Mechanical Completion shall be achieved hereunder with respect to the Facility if the following conditions have been met: (a) All equipment and facilities necessary for the full, safe and reliable operation of the Facility have been properly constructed, installed, insulated and protected where required, and correctly adjusted, and can be safely used for their 56 intended purposes in accordance with the Instruction Manual and all Applicable Laws and Applicable Permits; (b) The tests required for Mechanical Completion that are identified in Appendix D hereto have been successfully completed; (c) The Facility is fully and properly interconnected and ready for synchronization with the electrical system of the Transmitting Utility in accordance with the Electrical Interconnection Requirements, and all features and equipment of the Facility are capable of operating simultaneously to the extent necessary to perform the Performance Tests pursuant to Section 6.2 hereof; and (d) The complete performance by Contractor of all the Services relating to the Facility under this Agreement, except for any remaining Punch List items, Performance Tests and Reliability Run applicable thereto, in compliance with the standards of performance set forth in this Agreement, such that the Facility meets all of the requirements set forth in this Agreement applicable thereto (including, without limitation, Appendix A hereto, but excluding the achievement of the Guaranteed Emissions Limits and the Performance Guarantees). 6.1.2.1 NOTICE AND REPORT OF MECHANICAL COMPLETION. When Contractor believes that it has achieved Mechanical Completion, it shall deliver to Owner and the Independent Engineer a notice thereof (the "NOTICE OF MECHANICAL COMPLETION "). The Notice of Mechanical Completion shall contain a report in a form mutually and reasonably agreeable to Contractor and Owner (with the written concurrence of the Independent Engineer) with sufficient detail to enable Owner and the Independent Engineer to determine whether Mechanical Completion has been achieved. 6.1.2.2 ACHIEVEMENT OF MECHANICAL COMPLETION. Within five (5) days following receipt of the Notice of Mechanical Completion, (a) Owner and the Independent Engineer shall inspect the Facility and review the report submitted by Contractor, and (b) Owner shall either (i) deliver to Contractor a certificate stating, with the written concurrence of the Independent Engineer, that the requirements under Section 6.1.2 have been satisfied (the "MECHANICAL COMPLETION CERTIFICATE") or (ii) if reasonable cause exists for doing so, notify Contractor in writing that Mechanical Completion has not been achieved, stating the reasons therefor. In the event Owner so determines that Mechanical Completion has not been achieved in accordance with the provisions of this Section 6.1.2, Contractor shall promptly take such action or perform such additional Services as will achieve Mechanical Completion of the Facility and shall issue to Owner and the Independent Engineer another Notice of Mechanical Completion 57 pursuant to Section 6.1.2.1 hereof. Such procedure shall be repeated as necessary until Mechanical Completion of the Facility has been achieved. For all purposes of this Agreement, the date of achievement of Mechanical Completion shall be the date on which Owner delivers to Contractor the Mechanical Completion Certificate corresponding to the actual achievement of Mechanical Completion pursuant to this Section 6.1.2.2. 6.2 PERFORMANCE TESTS. Once Mechanical Completion has been achieved and subject to the provisions of Section 6.2.1 hereof, Contractor shall perform the Performance Tests of the Facility in accordance with Appendix D hereto. Owner shall designate and make available qualified and authorized representatives to observe the Performance Tests and monitor the taking of measurements to determine the level of achievement of the Performance Guarantees, all in accordance with Appendix D hereto. The Independent Engineer and, upon Owner's request, the Power Purchaser and the Transmitting Utility shall be permitted to observe the Performance Tests. Subject to Section 6.3.4 hereof, until Final Acceptance of the Facility has occurred, Contractor may undertake efforts to improve the performance of the Facility and may cause additional Performance Tests to be performed and re-performed in order to improve the performance results to reduce Contractor's liability for amounts payable as Performance Guarantee Payments with respect to the Facility. Contractor shall keep Owner and the Independent Engineer apprised of the specific schedule, and changes therein, for the commencement and re-performance of Performance Tests. Contractor, at its discretion, may prematurely terminate any Performance Test in a manner consistent with Appendix D hereto, the Electrical Interconnection Requirements, the PPA Operating Requirements, Applicable Laws, Applicable Permits and Prudent Utility Practices. Prior to commencing any Performance Tests hereunder, Owner and Contractor shall mutually and reasonably agree upon more detailed procedures and notice requirements regarding rescheduling or restarting any such tests, which procedures and notice requirements shall be subject to the approval of the Independent Engineer and, if applicable, the Power Purchaser and the Transmitting Utility, such approval not to be unreasonably withheld or delayed. 6.2.1 PERFORMANCE TEST CRITERIA. Each Performance Test which is used in connection with achievement of Provisional Acceptance or Final Acceptance shall consist of the operation of the Facility as a whole in accordance with the performance test terms and conditions set forth in Appendix D hereto while using Gas for fuel. 58 6.2.2 NOT USED. 6.2.3 NOTICE OF PERFORMANCE TESTING. Contractor shall use all reasonable efforts to give Owner and the Independent Engineer (i) Contractor's schedule for Performance Tests and their projected commencement dates at least thirty (30) days (or if a shorter period of time is reasonably necessary to maintain compliance with the Project Schedule, such shorter period of time as may be reasonably acceptable to Owner, the Independent Engineer and the Transmitting Utility) prior thereto, and (ii) at least fourteen (14) days' (or if a shorter period of time is reasonably necessary to maintain compliance with the Project Schedule, such shorter period of time as may be reasonably acceptable to Owner, the Independent Engineer and the Transmitting Utility) written notice in advance of the date on which Contractor intends to commence such testing of the Facility under this Agreement. Within five (5) days of receipt of any such notice of testing, Owner shall either (a) instruct Contractor to proceed with such testing, or (b) instruct Contractor to delay such testing if Mechanical Completion has not been achieved by such date. Contractor shall not cause such testing to be performed if any aspect of the Project has not been completed by Contractor, the completion of which is required for the safe operation of the Facility during a Performance Test in accordance with Applicable Laws, Applicable Permits, Prudent Utility Practices, the Instruction Manual, the Electrical Interconnection Requirements and the PPA Operating Requirements (in the event and only to the extent applicable to such testing operations). 6.2.4 DISPOSITION OF OUTPUT. At all times when Contractor desires to conduct start-up, testing (including Performance Tests ), or other operations of any portion of the Facility in furtherance of Performance Tests or repair and maintenance, Owner shall, at no expense to Contractor, arrange for the disposition of the Project's output of electricity (in accordance with the requirements set forth in Appendix A hereto) in such manner as Owner shall determine. All output of electricity from the Project and all proceeds from the sale thereof shall be the property of Owner. 6.2.5 NOT USED. 6.2.6 RECONFIGURATION. After each Performance Test conducted or attempted hereunder, Contractor shall leave the Project in, or return the Project to, the best operating control settings and configurations for the Project for those periods during which Contractor is not causing any Performance Tests to be conducted. 6.2.7 COMPLETED PERFORMANCE TESTS. By the report described in Section 6.3.1, 6.5.1.1 or 6.6.2 hereof, Contractor may declare any Performance Test completed in accordance with Section 6.2.1 above to be a Completed Performance Test if 59 and only if during such tests the operation of the Facility complies with all Applicable Laws, Applicable Permits, the Electrical Interconnection Requirements, the PPA Operating Requirements (in the event and to the extent applicable to such testing operations) and the Guaranteed Emissions Limits (which compliance with Applicable Laws, Applicable Permits or Guaranteed Emissions Limits may be based upon a permanent waiver, the terms and conditions of which are acceptable to Owner in its reasonable discretion, PROVIDED that Contractor obtains (at Contractor's sole expense and effort, but with Owner's reasonable assistance) such permanent waiver); PROVIDED, FURTHER, that unless otherwise approved by Owner as set forth in the following sentence, the operation of the Facility shall not constitute a Completed Performance Test hereunder if such compliance with Applicable Laws, Applicable Permits and other required emission standards is based upon a temporary waiver or variance or other temporary grace period, rather than based on demonstrated compliance with all such Applicable Laws, Applicable Permits and other required emission standards that the Facility will have to be capable of complying with on a long term basis. Owner shall not unreasonably withhold or delay its approval of a Completed Performance Test being based upon a temporary waiver, variance or grace period as set forth in the second proviso to the preceding sentence in the event that Contractor demonstrates to the satisfaction of Owner and the Independent Engineer that the Facility will be capable of complying with such long-term requirements prior to the time at which such temporary waiver, variance or grace period may expire; PROVIDED, FURTHER, that Owner may require as a condition to any approval under such proviso that, among other things, (i) Final Acceptance shall not be deemed to be achieved hereunder until such time as such long term compliance is demonstrated and (ii) Provisional Acceptance Late Completion Payments under Section 7.2 hereof shall recommence if and for so long as the operation of the Facility is restricted below its demonstrated Performance Guarantee levels as a result of the expiration of or other change in any such temporary waiver or variance or other temporary grace period. 6.3 PROVISIONAL ACCEPTANCE. Provisional Acceptance shall be achieved hereunder with respect to the Facility upon the earlier to occur of (i) Final Acceptance and(ii) satisfaction of the following conditions: (a) Contractor has caused a Completed Performance Test in accordance with Section 6.2 hereof to be concluded in which the Facility, while operating on Gas, demonstrates during such Performance Test an average net electrical output and a net heat rate (each as measured and corrected to the design operating conditions, all in accordance with the procedures set forth in Appendix D hereto) of [*] (or higher) of the Electrical Output Guarantee and [*] (or lower) of the Heat Rate Guarantee (PROVIDED that each such level of achievement shall be 60 calculated in the manner described in Sections 8.1.1 and 8.1.2 hereof, respectively); PROVIDED, HOWEVER, that if Contractor has made any modifications or repairs to the Facility since the date of such Completed Performance Test, which modifications or repairs could reasonably be expected to adversely affect the performance of the Facility, and Contractor has not reversed such modifications or repairs to Owner's (and the Independent Engineer's) satisfaction, then Owner may require Contractor to conduct another Completed Performance Test on the Facility in accordance with Section 6.2 hereof, which Completed Performance Test shall be utilized for purposes of this Section 6.3(a); and (b) The Facility has achieved Mechanical Completion, and Contractor has not made any modification or repair following the date of achievement of Mechanical Completion that could reasonably be expected, in the judgment of Owner and the Independent Engineer, to adversely affect the performance of the Facility unless Contractor has reversed such modification or repair to Owner's (and the Independent Engineer's) satisfaction. 6.3.1 NOTICE AND REPORT OF PROVISIONAL ACCEPTANCE. When Contractor believes that it has achieved Provisional Acceptance of the Facility, it shall deliver to Owner and the Independent Engineer a notice thereof (the "NOTICE OF PROVISIONAL ACCEPTANCE"). The Notice of Provisional Acceptance shall contain a report of the results of the Performance Test and a report of the Services completed, in each case in a form mutually and reasonably agreeable to Contractor and Owner (with the written concurrence of the Independent Engineer) and with sufficient detail to enable Owner and the Independent Engineer to determine whether Provisional Acceptance of the Facility has been achieved. 6.3.2 ACHIEVEMENT OF PROVISIONAL ACCEPTANCE. (a) Owner and the Independent Engineer shall inspect all Services completed by Contractor and review the results of the Performance Test and the reports submitted by Contractor, and (b) Owner shall either (i) deliver to Contractor a certificate stating, with the written concurrence of the Independent Engineer, that the requirements under Section 6.3 hereof have been satisfied (the "PROVISIONAL ACCEPTANCE CERTIFICATE"), or (ii) if reasonable cause exists for doing so, notify Contractor in writing that Provisional Acceptance of the Facility has not been achieved, stating the reasons therefor; PROVIDED that Owner shall deliver such certificate or notice within seven (7) days (or such shorter period as may be reasonably achieved with Owner's use of reasonable efforts) following receipt of the Notice of Provisional Acceptance. 61 6.3.2.1 RE-SUBMISSION. In the event Owner determines in accordance with Section 6.3.2 hereof that Provisional Acceptance has not been achieved, Contractor shall promptly take such action or perform such additional Services as will achieve Provisional Acceptance and, if Contractor believes that Provisional Acceptance has been achieved, shall issue to Owner and the Independent Engineer another Notice of Provisional Acceptance pursuant to Section 6.3.1 hereof. Unless Final Acceptance shall have previously occurred, such procedure shall be repeated as necessary until Provisional Acceptance has been achieved. 6.3.2.2 DATE OF ACHIEVEMENT. For all purposes of this Agreement, the date of achievement of Provisional Acceptance shall be the date on which Owner delivers to Contractor the Provisional Acceptance Certificate corresponding to the actual achievement of Provisional Acceptance of the Facility pursuant to Section 6.3.2 hereof. 6.3.3 OPERATION OF THE FACILITY. Upon the earlier to occur of Provisional Acceptance and Final Acceptance, Owner shall take possession and control of the Facility and shall thereafter be solely responsible for the operation and maintenance thereof, except as otherwise set forth herein. Prior to such possession and control by Owner, Contractor shall, in the course of performing any start-up, commissioning and testing activities, in consultation with Owner and its operating personnel, operate the Facility in a manner consistent with Applicable Laws, Applicable Permits, Prudent Utility Practices, the Electrical Interconnection Requirements, the PPA Operating Requirements (in the event and to the extent applicable to such start-up, commissioning and testing activities), the Instruction Manual, and the other requirements set forth in this Agreement. 6.3.4 ACCESS FOLLOWING OWNER'S TAKING POSSESSION AND CONTROL OF THE FACILITY. 6.3.4.1 ACCESS FOLLOWING OWNER'S TAKING POSSESSION AND CONTROL OF THE FACILITY. After Owner takes possession and control of the Facility pursuant to Section 6.3.3 hereof, Contractor (i) shall have reasonable access to the Facility and the reasonable cooperation of Owner so as to complete the Services (including without limitation making reasonable repair and replacement alternatives to minimize any Performance Guarantee Payments under Article 8 hereof if Final Acceptance has not yet occurred) and to perform its obligations pursuant to Article 10 hereof, and (ii) to the extent necessary to so complete the Services and perform its obligations under Article 10 hereof, shall have reasonable access to plant operating data and records. Contractor shall complete the Services and shall perform its obligations under Article 10 with minimal 62 interference to operations of the Facility, in the event and only to the extent any such interference is necessary and consistent with Owner's rights and obligations under the PPA Operating Requirements. 6.3.4.2 NO INTERFERENCE WITH OPERATIONS. Notwithstanding anything to the contrary in this Section 6.3.4, following the earlier to occur of (a) Provisional Acceptance and (b) Final Acceptance, Owner shall not be obligated hereunder to shutdown, reduce or otherwise interfere with its operation of the Facility as a direct or indirect result of allowing Contractor access pursuant to this Section 6.3.4 (unless, in the event and only to the extent that, Owner determines that such outage or reduced operation would not conflict with the PPA Operating Requirements and would be mutually beneficial to both Parties, which determination shall not be unreasonably withheld or delayed). Owner will provide Contractor with reasonable advance notice of any extended scheduled outages of the Facility and the expected duration thereof. 6.4 NOT USED. 6.5 FINAL ACCEPTANCE. Final Acceptance of the Facility may be achieved hereunder only pursuant to any of Sections 6.5.1, 6.5.2, 6.5.3 or 6.5.4. 6.5.1 DEMONSTRATION OF FINAL ACCEPTANCE. Final Acceptance of the Facility shall be achieved hereunder if the following conditions have been met: (a) Contractor has caused a Completed Performance Test in accordance with Section 6.2 hereof to be concluded in which the Facility, while operating on Gas, demonstrates during such Performance Test an average net electrical output and a net heat rate (each as measured and corrected to the design operating conditions, all in accordance with the procedures set forth in Appendix D hereto) of [*] (or higher) of the Electrical Output Guarantee and [*] (or lower) of the Heat Rate Guarantee (PROVIDED that each such level of achievement shall be calculated in the manner described in Sections 8.1.1 and 8.1.2 hereof, respectively); PROVIDED, HOWEVER, that if Contractor has made any modifications or repairs to the Facility since the date of such Completed Performance Test, which modifications or repairs could reasonably be expected to adversely affect the performance of the Facility, and Contractor has not reversed such modifications or repairs to Owner's (and the Independent Engineer's) satisfaction, then Owner may require Contractor to conduct another Completed Performance Test on the Facility in accordance with Section 6.2 hereof, which Completed Performance Test shall be utilized for purposes of this Section 6.5.1(a). For the avoidance of doubt, the Parties acknowledge and agree that if Contractor shall 63 have already achieved Provisional Acceptance and subsequent thereto shall have made modifications or repairs that could not reasonably be expected to adversely affect the performance of the Facility, this Section 6.5.1(a) shall not require Contractor to reperform a Completed Performance Test in order to maintain its already-demonstrated Provisional Acceptance; however, Contractor shall not be entitled to claim improved performance levels at Final Acceptance pursuant to this Section 6.5.1(a) after such modifications or repairs have been made without demonstrating such improved performance pursuant to a Completed Performance Test; (b) The Facility has achieved Mechanical Completion, and Contractor has not made any modification or repair following the date of achievement of Mechanical Completion that could reasonably be expected, in the judgment of Owner and the Independent Engineer, to adversely affect the performance of the Facility unless Contractor has reversed such modification or repair to Owner's (and the Independent Engineer's) satisfaction; (c) The Reliability Guarantee has been achieved pursuant to Section 6.6 hereof; and (d) Contractor has completed performance of the Services except for (i) any remaining Punch List items and (ii) Services that are required by the terms of this Agreement to be completed after the achievement of Final Acceptance (such as Contractor's warranty obligations under Article 10 hereof). 6.5.1.1 NOTICE AND REPORT OF FINAL ACCEPTANCE. When Contractor believes that it has achieved Final Acceptance of the Facility, it shall deliver to Owner and the Independent Engineer a notice thereof (the "NOTICE OF FINAL ACCEPTANCE"). The Notice of Final Acceptance shall contain a report of the results of the Performance Test and a report of the Services completed, in each case in a form mutually and reasonably agreeable to Contractor and Owner (with the written concurrence of the Independent Engineer) and with sufficient detail to enable Owner and the Independent Engineer to determine whether Final Acceptance of the Facility has been achieved. 6.5.1.2 ACHIEVEMENT OF FINAL ACCEPTANCE. (a) Owner and the Independent Engineer shall inspect the Facility and all Services performed hereunder with respect thereto and review the results of the Performance Test and the reports submitted by Contractor, and (b) Owner shall either (i) deliver to Contractor a certificate stating, with the written concurrence of the Independent Engineer, that the requirements under Section 6.5.1 have been satisfied (the "FINAL ACCEPTANCE CERTIFICATE") or (ii) if 64 reasonable cause exists for doing so, notify Contractor in writing that Final Acceptance has not been achieved, stating the reasons therefor; PROVIDED that Owner shall deliver such certificate or notice within ten (10) days (or such shorter period as may be reasonably achieved with Owner's use of reasonable efforts) following receipt of the Notice of Final Acceptance. 6.5.1.2.1 RE-SUBMISSION. In the event that Owner determines in accordance with Section 6.5.1.2 that Final Acceptance has not been achieved, Contractor shall promptly take such action or perform such additional Services as will achieve Final Acceptance and shall issue to Owner and the Independent Engineer another Notice of Final Acceptance pursuant to Section 6.5.1.1 hereof. Such procedure shall be repeated as necessary until Final Acceptance has been achieved or deemed to have occurred. 6.5.1.2.2 DATE OF ACHIEVEMENT. For all purposes of this Agreement: (i) if Provisional Acceptance of the Facility has not theretofore occurred hereunder, the date of achievement of Final Acceptance shall be deemed to be the date on which Owner delivers to Contractor the Final Acceptance Certificate corresponding to the actual achievement of Final Performance Acceptance pursuant to this Section 6.5.1.2; and (ii) if Provisional Acceptance of the Facility has theretofore occurred hereunder, the date of achievement of Final Performance Acceptance shall be deemed to be the later of (A) the date on which Provisional Acceptance of the Facility occurred hereunder and (B) the date on which Contractor delivers to Owner pursuant to Section 6.5.1.1 hereof the Notice of Final Acceptance corresponding to the actual achievement of Final Acceptance pursuant to this Section 6.5.1.2. 6.5.2 OWNER'S ELECTION OF FINAL ACCEPTANCE. At any time, by giving notice to Contractor, Owner in its sole discretion may elect, with the written concurrence of the Independent Engineer, to effect Final Acceptance, in which case Final Acceptance shall be deemed effective as of the date of such notice, and Contractor shall have no liability to Owner for any amounts thereafter arising as Performance Guarantee Payments for failure of the Facility to achieve any or all of the Performance Guarantees applicable thereto (it being understood that in such event Contractor shall not be liable to Owner for any Performance Guarantee payments hereunder other than those Interim Period Rebates that arose prior to such election by Owner). 65 6.5.3 CONTRACTOR'S ELECTION OF FINAL ACCEPTANCE. (a) At any time after Provisional Acceptance of the Facility has been achieved, Contractor may, after exercising all reasonable repair and replacement alternatives, if any, that could reasonably be expected to improve for Final Acceptance the level of achievement of the Performance Guarantees demonstrated at Provisional Acceptance and PROVIDED that the Reliability Guarantee shall have been achieved pursuant to Section 6.6 hereof, give to Owner six (6) days' (but not more than fifteen (15) days') notice of its intention to elect to declare Final Acceptance. In such event, PROVIDED that Contractor has not made any modifications or repairs to the Facility since the date of its most recent Completed Performance Test, which work or modifications could reasonably be expected to adversely affect the performance of the Facility and which have not been reversed by Contractor to Owner's (and the Independent Engineer's) satisfaction, Contractor may elect to use the results of the most recent Completed Performance Test for the purpose of determining the Facility's level of achievement of the Performance Guarantees. If (i) Contractor does not so elect or (ii) any such modifications or repairs have been made to the Facility by Contractor after the date of the most recent Completed Performance Test and Owner requests that Contractor conduct another Completed Performance Test, then Contractor shall conduct a final Completed Performance Test on the Facility in accordance with Section 6.2 hereof that demonstrates a level of achievement of [*] (or higher) of the Electrical Output Guarantee and [*] (or lower) of the Heat Rate Guarantee in accordance with the performance test procedures set forth in Appendix D hereto. For the avoidance of doubt, the Parties acknowledge and agree that if Contractor shall have already achieved Provisional Acceptance and subsequent thereto shall have made modifications or repairs that could not reasonably be expected to adversely affect the performance of the Facility, this Section 6.5.3(a) shall not require Contractor to reperform a Completed Performance Test in order to achieve Final Acceptance at the levels of achievement of the Performance Guarantees already demonstrated at Provisional Acceptance; however, Contractor shall not be entitled to claim improved performance levels at Final Acceptance pursuant to this Section 6.5.3(a) after such modifications or repairs have been made without demonstrating such improved performance pursuant to a Completed Performance Test. Contractor will be obligated to pay all Performance Guarantee Payments as determined by the final or most recent Completed Performance Test, as applicable, pursuant to Article 8 hereof, which payment shall be a condition precedent to the effectiveness of Contractor's election of Final Acceptance under this Section 6.5.3; PROVIDED that this Section 6.5.3 in no way detracts from or limits any of Contractor's obligations hereunder to comply and cause the Project to comply with all Applicable Laws, all Applicable Permits, the Electrical Interconnection Requirements, the PPA Operating Requirements and the Guaranteed Emissions Limits, to pay any Provisional Acceptance Late Completion Payments required hereunder and to perform its 66 other obligations hereunder following Final Acceptance (including without limitation its obligation to achieve Project Completion). (b) In the event Contractor elects to declare Final Acceptance under this Section 6.5.3, Final Acceptance shall be deemed effective as of the last to occur of (i) the date of Owner's receipt of the declaration and report of the final Completed Performance Test, or, as applicable, the most recent Completed Performance Test, referred to in this Section 6.5.3, and (ii) the effective date of the achievement of the Reliability Guarantee pursuant to Section 6.6.4 hereof. 6.5.4 DEEMED FINAL ACCEPTANCE. In the event that on or before the Guaranteed Final Acceptance Date (i) the Facility has achieved Provisional Acceptance and (ii) the Reliability Guarantee has been achieved, then Final Acceptance of the Facility shall be deemed to occur hereunder on the Guaranteed Final Acceptance Date; PROVIDED that this Section 6.5.4 in no way detracts from or limits any of Contractor's obligations hereunder to comply, and to cause the Project to comply, with all Applicable Laws, all Applicable Permits, the Electrical Interconnection Requirements, the PPA Operating Requirements and the Guaranteed Emissions Limits, to pay any Provisional Acceptance Late Completion Payments and Performance Guarantee Payments required hereunder and to perform its other obligations hereunder following such deemed Final Acceptance (including without limitation its obligation to achieve Project Completion). In the event that Final Acceptance is deemed to have occurred pursuant to this Section 6.5.4, except as may be otherwise provided pursuant to the following sentence, the most recent Completed Performance Test of the Facility performed before the date of such deemed achievement shall be used for the purpose of determining the Facility's level of achievement of the applicable Performance Guarantees pursuant to Article 8 hereof, and Contractor will be obligated to pay all Performance Guarantee Payments as determined by such Completed Performance Test, which payment shall be a condition precedent to the deemed achievement of Final Performance Acceptance under this Section 6.5.4. If Contractor has made any modifications or repairs to the Facility after the date of such most recent Completed Performance Test, which modifications or repairs could reasonably be expected to adversely affect the performance of the Facility, and Contractor has not reversed such modifications or repairs to Owner's (and the Independent Engineer's) satisfaction, then Owner may require Contractor to conduct another Completed Performance Test of the Facility in accordance with Section 6.2 hereof that demonstrates a level of achievement of [*] (or higher) of the Electrical Output Guarantee and [*] (or lower) of the Heat Rate Guarantee in accordance with the performance test procedures set forth in Appendix D hereto, which Completed Performance Test shall be used for the purpose of determining the Facility's level of achievement of the applicable Performance Guarantees pursuant to Section 8.1 hereof. 67 For the avoidance of doubt, the Parties acknowledge and agree that if Contractor shall have already achieved Provisional Acceptance and subsequent thereto shall have made modifications or repairs that could not reasonably be expected to adversely affect the performance of the Facility, this Section 6.5.3(a) shall not require Contractor to reperform a Completed Performance Test in order to achieve Final Acceptance at the levels of achievement of the Performance Guarantees already demonstrated at Provisional Acceptance; however, Contractor shall not be entitled to claim improved performance levels at Final Acceptance pursuant to this Section 6.5.3(a) after such modifications or repairs have been made without demonstrating such improved performance pursuant to a Completed Performance Test. 6.6 RELIABILITY RUN. Contractor guarantees that, in no event later than the occurrence of Final Acceptance of the Facility hereunder, the Facility shall have successfully completed the Reliability Run (the "RELIABILITY GUARANTEE"). 6.6.1 RELIABILITY GUARANTEE. The Reliability Guarantee shall have been achieved hereunder if and only if the Facility demonstrates an Average Equivalent Availability of not less than [*] while operating over a period of [*] in accordance with Applicable Laws, Applicable Permits, the Electrical Interconnection Requirements, the PPA Operating Requirements, the Guaranteed Emissions Limits and the Instruction Manual, and with Contractor electing which period of [*] should comprise the Reliability Run. 6.6.2 NOTICE AND REPORT OF RELIABILITY GUARANTEE ACHIEVEMENTS. When Contractor believes that it has achieved the Reliability Guarantee, it shall deliver to Owner and the Independent Engineer a written notice thereof (the "NOTICE OF RELIABILITY GUARANTEE ACHIEVEMENT"). The Notice of Reliability Guarantee Achievement shall contain a report of the results of the Reliability Run in a form mutually and reasonably agreeable to Contractor and Owner (with the written concurrence of the Independent Engineer) and with sufficient detail to enable Owner and the Independent Engineer to determine whether the Reliability Guarantee has been achieved. 6.6.3 ACHIEVEMENT OF THE RELIABILITY GUARANTEE. Within fifteen (15) days (or such shorter period as may be reasonably achieved with Owner's use of reasonable efforts) following receipt of the Notice of Reliability Guarantee Achievement, (a) Owner and the Independent Engineer shall review the results of the Reliability Run, and (b) Owner shall either (i) deliver to Contractor a certificate stating, with the written concurrence of the Independent Engineer, that the requirements in Section 6.6.1 hereof have been satisfied (the "RELIABILITY CERTIFICATE"), or (ii) if reasonable cause exists for doing so, notify Contractor in writing that the Reliability Guarantee has not been 68 achieved, stating in detail the reasons therefor. In the event that Owner so determines that the Reliability Guarantee has not been achieved, Contractor shall consult with Owner as to the reasons for such failure and thereafter shall take such action or perform such additional Services as will allow the Reliability Run to be re-run as promptly as is practicable. Such procedure shall be repeated as necessary until the Reliability Guarantee has been achieved. 6.6.4 DATE OF ACHIEVEMENT. For all purposes of this Agreement, the date of achievement of the Reliability Guarantee shall be deemed to be the date on which Contractor delivers to Owner the Notice of Reliability Guarantee Achievement relating to the Reliability Run that Owner subsequently delivered the Reliability Certificate pursuant to Section 6.6.3 hereof. 6.7 PROJECT COMPLETION. Project Completion shall be achieved hereunder if and only if: (a) Final Acceptance of the Facility shall have occurred, and the Performance Guarantees with respect to the Facility shall have been achieved (or in lieu of achievement of the Performance Guarantees, applicable rebates under Article 8 shall have been paid, or Owner shall have elected Final Acceptance under Section 6.5.2 hereof); (b) The Reliability Guarantee shall have been achieved; (c) Contractor shall have demonstrated during the Completed Performance Test that the operation of the Facility does not exceed the Guaranteed Emissions Limits; (d) The Facility has achieved Mechanical Completion, and Contractor has not made any modification or repair following the date of achievement of Mechanical Completion that could reasonably be expected, in the judgment of Owner and the Independent Engineer, to adversely affect the performance of the Facility unless Contractor has reversed such modification or repair to Owner's (and the Independent Engineer's) satisfaction; (e) The Punch List items shall have been completed in accordance with this Agreement; and (f) Contractor shall have performed all of the Services, other than those Services (such as Contractor's warranty obligations under Article 10 hereof) which by their nature are intended to be performed after Project Completion. 69 6.7.1 NOTICE AND REPORT OF PROJECT COMPLETION. When Contractor believes that it has achieved Project Completion, it shall deliver to Owner and the Independent Engineer a written notice thereof (the "NOTICE OF PROJECT COMPLETION"). The Notice of Project Completion shall contain a report in a form mutually and reasonably agreeable to Contractor and Owner (with the written concurrence of the Independent Engineer) and with sufficient detail to enable Owner and the Independent Engineer to determine the achievement by Contractor of the Punch List items and such other information as Owner or the Independent Engineer may require to determine whether Project Completion has been achieved. 6.7.2 ACHIEVEMENT OF PROJECT COMPLETION. (a) Within fifteen (15) days (or such shorter period as may be reasonably achieved with Owner's use of reasonable efforts) following receipt of the Notice of Project Completion, Owner and the Independent Engineer shall inspect all work and review the report submitted by Contractor, and (b) Owner shall either (i) deliver to Contractor a certificate stating, with the concurrence of the Independent Engineer, that the requirements under clauses (a) through (f) of Section 6.7 have been satisfied (the "PROJECT COMPLETION CERTIFICATE") or (ii) if reasonable cause exists for doing so, notify Contractor in writing that Project Completion has not been achieved, stating the reasons therefor. In the event that Owner so determines that Project Completion has not been achieved, Contractor shall promptly take such action or perform such additional work as will achieve Project Completion and shall issue to Owner and the Independent Engineer another Notice of Project Completion pursuant to Section 6.7.1 hereof. Such procedure shall be repeated as necessary until Project Completion is achieved. For all purposes of this Agreement, the date of achievement of Project Completion shall be the date on which Owner delivers to Contractor the Project Completion Certificate corresponding to the actual achievement of Project Completion pursuant to this Section 6.7.2. 6.7.3 PROJECT COMPLETION DEADLINE . Contractor shall be obligated hereunder to achieve Project Completion not later than ninety (90) days after Final Acceptance of the Facility (the "PROJECT COMPLETION DEADLINE"). If Contractor does not achieve Project Completion on or before the Project Completion Deadline or if Contractor is not proceeding with all due diligence to complete the Services in order to achieve Project Completion by such deadline, Owner may retain another contractor to complete such work and Contractor shall pay to Owner upon demand any and all costs reasonably incurred by Owner in completing the Services in the event and only to the extent such costs exceed the remaining unpaid portion of the Contract Price that would have been payable to Contractor hereunder to complete the Services had this Agreement been performed. 70 ARTICLE 7 COMPLETION DATES 7.1 GUARANTEED COMPLETION DATES. Contractor guarantees that: (i) the earlier to occur of Provisional Acceptance and Final Acceptance of the Facility shall be achieved on or before the Guaranteed Provisional Acceptance Date; and (ii) Final Acceptance of the Facility shall be achieved on or before the Guaranteed Final Acceptance Date. 7.2 GUARANTEED COMPLETION DATE PRICE REBATES. (a) If neither Provisional Acceptance nor Final Acceptance of the Facility occurs on or before the thirty fifth (35th) day following the Guaranteed Provisional Acceptance Date, Contractor hereby agrees to pay to Owner, as a rebate and not as a penalty and as part of the consideration for awarding the contract, as follows: (i) For each calendar day by which the earlier to occur of Provisional Acceptance and Final Acceptance of the Facility is later than thirty five (35) calendar days after the Guaranteed Provisional Acceptance Date, an amount equal to [*] per day (the "PROVISIONAL ACCEPTANCE LATE COMPLETION PAYMENTS"); PROVIDED, HOWEVER, that any Provisional Acceptance Late Completion Payments due hereunder shall be reduced (but in no event to less than zero) by the sum of all gross revenue received by Owner from such Facility operations until the earlier to occur of Provisional Acceptance and Final Acceptance minus all fuel, labor and other fixed and variable operation and maintenance costs, all debt service and other costs and all taxes incurred or accrued by Owner during such period. (b) Notwithstanding anything to the contrary in Section 7.2(a) hereof, the aggregate of the Provisional Acceptance Late Completion Payments required to be made by Contractor pursuant to this Section 7.2 shall be equal to the lesser of: (i) the aggregate of the Provisional Acceptance Late Completion Payments due pursuant to the terms of Section 7.2(a) hereof; and (ii) the maximum aggregate value of the Provisional Acceptance Late Completion Payments as a percentage of the Contract Price set forth in Section 9.1 hereof. 7.2.1 PLAN TO ACHIEVE PROVISIONAL AND FINAL ACCEPTANCE. (a) If neither Provisional Acceptance nor Final Acceptance of the Facility occurs on or before the date that is seventy five (75) days after the Guaranteed Provisional Acceptance Date, Contractor shall, on such date, submit for approval by Owner and the Independent Engineer a Plan to accelerate the performance of the Services as necessary in order to 71 achieve Final Acceptance of the Facility by the Guaranteed Final Acceptance Date. Upon receipt of such a Plan, Owner (and, at Owner's request, the Independent Engineer) shall promptly review the Plan and, within ten (10) days after receipt thereof, shall provide Contractor with written approval or disapproval of the Plan, such approval not to be unreasonably withheld or delayed. If the Plan is not approved by Owner, Contractor shall revise the Plan and resubmit a revised Plan for approval by Owner (and, at Owner's request, the Independent Engineer). This procedure shall be repeated until (i) Provisional Acceptance or Final Acceptance of the Facility is achieved or (ii) a Plan relating to the Facility is approved by Owner and the Independent Engineer. (b) Notwithstanding anything to the contrary in Section 7.2.1(a) hereof, if neither Provisional Acceptance nor Final Acceptance of the Facility occurs on or before the date that is seventy five (75) days after the Guaranteed Provisional Acceptance Date and Contractor determines that the Services cannot, despite its best efforts, be accelerated to achieve Final Acceptance of the Facility by the Guaranteed Final Acceptance Date, then Contractor shall, on such date, submit a Plan to accelerate the performance of the Services as necessary in order to achieve Final Acceptance of the Facility as soon as possible. Following receipt of such a Plan, Owner shall have the right in its sole discretion to require Contractor to proceed in accordance with such Plan (as it may be modified by Owner or the Independent Engineer as set forth in the following sentence) or , upon fifteen (15) days prior notice to Contractor, to declare an Event of Default pursuant to Section 16.1(i) hereof; PROVIDED, HOWEVER, that if Contractor shall have demonstrated to the reasonable satisfaction of Owner and the Independent Engineer that (x) the primary reason for Contractor's inability to so achieve Final Acceptance by the Guaranteed Final Acceptance Date is a defect or a delivery failure with respect to one or more of the major equipment components in the Facility's power island or transformer being provided by Subcontractors, and (y) such defect or delivery failure, or the consequent extended delay in Contractor's ability to achieve Final Acceptance as a result thereof, would not have been avoided by Contractor's compliance with the Quality Assurance Plan and the other standards of performance as specified in Section 2.3.1 hereof, then Owner and the Independent Engineer shall not unreasonably withhold approval of a Plan (as it may be modified by Owner or the Independent Engineer as set forth in the following sentence) that accelerates the performance of the Services in such a manner as to achieve Final Acceptance as soon as possible (it being understood and acknowledged that such a Plan may require the replacement of such SUBCONTRACTORS). With respect to a Plan submitted under this Section 7.2.1(b), if Owner or the Independent Engineer in good faith believe such Plan does not accelerate the performance of the Services in such a manner as to achieve Final Acceptance as soon as possible, Owner shall have the right to modify such Plan (with the written concurrence of the Independent Engineer) as reasonably necessary to cause it to do so. In the event any Plan is so 72 approved or modified by Owner (with the written concurrence of the Independent Engineer), Contractor shall thereafter perform the Services in accordance with such approved or modified Plan. (c) For the avoidance of doubt, all costs and expenses incurred by Contractor and its Subcontractors in connection with the development and performance of any Plan pursuant to this Section 7.2.1, including without limitation any overtime or other acceleration costs and expenses, shall be solely the responsibility of Contractor, and Owner shall have no responsibility or liability with respect thereto. 7.3 EARLY COMPLETION BONUS. In the event that either Provisional Acceptance or Final Acceptance occurs hereunder pursuant to Sections 6.3.1 or 6.5.1, respectively, prior to the Guaranteed Provisional Acceptance Date, Owner shall pay Contractor an amount equal to [*] for each day before the Guaranteed Provisional Acceptance Date that either Provisional Acceptance has been achieved pursuant to Section 6.3.1 hereof or Final Acceptance has been achieved pursuant to Section 6.5.1 hereof; PROVIDED, HOWEVER, that such payment by Owner pursuant to this sentence shall not exceed a maximum aggregate amount equal to [*], and such payment shall be due and payable to Contractor (subject to Section 7.3.1 hereof) thirty (30) days after the date of achievement of Final Acceptance. Owner's obligation to pay any such bonus payments shall not be secured by any lien or security interest on the Facility or any other assets of Owner. 7.3.1 PAYMENT OF BONUS. In the event and to the extent that Owner does not have sufficient funds available to make any bonus payments pursuant to this Section 7.3 at the time such payment would otherwise be due and payable (after the payment of or reservation for all Retainage hereunder, all then-current operating and maintenance expenses, taxes, debt service and required contributions to reserves under the Financing Documents, and then-current reasonable working capital requirements), such unpaid bonus payments (i) shall accrue interest from such otherwise applicable payment date until paid at the rate set forth in Section 25.1 hereof and (ii) shall be payable by Owner at the times and to the extent of fifty percent (50%) of the first after-tax net cash flows from Facility operations that are distributable to Owner in accordance with the provisions of the Financing Documents until paid in full (including all applicable interest accrued thereon). 73 7.4 REBATES REASONABLE; PAYMENT OF REBATES. 7.4.1 REBATES REASONABLE. Owner and Contractor hereby acknowledge and agree that the terms, conditions and amounts fixed pursuant to Section 7.2 for Provisional Acceptance Late Completion Payments are reasonable, considering the reduction in value of the Project and the increased costs that it is anticipated Owner will incur in the event of Contractor's failure to achieve at least one of Provisional Acceptance or Final Acceptance of the Facility by the Guaranteed Provisional Acceptance Date. The amounts of these rebates are agreed upon and fixed hereunder by the Parties because of the difficulty of ascertaining on the date hereof the exact amount of reduction in value of the Project and increased costs that will be actually incurred by Owner in such event, and the Parties hereby agree that the rebate amounts specified herein (a) shall be applicable regardless of the amount of such reduction in value actually occurring and such increased costs actually incurred by Owner and (b) shall be the sole and exclusive remedy of Owner and the sole liability of Contractor under this Agreement for Contractor's delay in meeting the Guaranteed Provisional Acceptance Date. Solely for clarification and for the avoidance of doubt, the Parties hereby agree that this Section 7.4.1 shall not be construed in any way to limit, extend or otherwise affect Contractor's obligations and liabilities, or Owner's remedies, under this Agreement arising as a result of or in connection with (i) an Event of Default under Section 16.1(i) or (j) hereof or (ii) Contractor's obligation to achieve Final Acceptance and Project Completion and to cause the Project to comply with all Applicable Laws, all Applicable Permits and the Guaranteed Emission Limits. The payment of any such rebates hereunder shall not affect Owner's rights under Articles 15 and 16 hereof or Owner's rights to receive price rebates pursuant to Article 8 hereof. 7.4.2 PAYMENT OF REBATES. Contractor shall pay the rebates required under Section 7.2 hereof monthly in arrears on the tenth (10th) day of each month, with the last such payment to occur within ten days of the determination that the first to occur of Provisional Acceptance or Final Acceptance of the Facility has been achieved. 7.5 NOT USED. 7.6 ACHIEVEMENT OF CONSTRUCTION PROGRESS MILESTONES. Contractor is obligated to achieve each Construction Progress Milestone on or before the corresponding Construction Progress Milestone Date. 7.6.1 EVIDENCE OF ACHIEVEMENT. At Owner's request, Contractor shall be obligated to demonstrate, in a manner reasonably satisfactory to Owner and 74 Independent Engineer, that each Construction Progress Milestone has been achieved on or prior to the applicable Construction Progress Milestone Date. 7.6.2 PLAN TO ACHIEVE CONSTRUCTION PROGRESS MILESTONES. (a) If any Construction Progress Milestone has not been achieved on or before the corresponding Construction Progress Milestone Date, Contractor shall promptly prepare and submit to Owner and Independent Engineer, within thirty (30) days of such Construction Progress Milestone Date, a Plan (which Plan may revise the order of the milestones set forth in the Payment and Milestone Schedule, but shall not increase the Contract Price or accelerate the timing of the Scheduled Payments hereunder) to accelerate the performance of the Services that reasonably demonstrates that Contractor will achieve Final Acceptance of the Facility by the Guaranteed Final Acceptance Date. Upon receipt of such a Plan, Owner (and, at Owner's request, the Independent Engineer) shall promptly review the Plan and provide Contractor, within ten (10) days of receipt of such Plan, with written notice of either (1) approval of the Plan, which approval will not be unreasonably withheld or delayed, or (2) proposed revisions to or disapproval of (with a summary of the perceived deficiencies therein) the Plan. Upon receipt of any such notice from Owner under clause (2) of the preceding sentence, Contractor shall promptly take one of the following actions: (x) revise the Plan in accordance with the comments received pursuant to said clause (2) or in accordance with such other changes as Contractor reasonably determines are appropriate, and submit the revised Plan to Owner (and, at Owner's request, the Independent Engineer), whereupon the procedure set forth in the preceding sentence will be repeated; or (y) if Contractor in good faith believes that its Plan as proposed reasonably demonstrates that Final Acceptance will be achieved by the Guaranteed Final Acceptance Date, submit the issue for dispute resolution pursuant to Article 21 hereof, in which event if the final decision thereunder finds that the Contractor's proposed Plan does reasonably demonstrate the likelihood of such achievement, such Plan shall be deemed approved by Owner. In the event that (A) such a dispute on a Plan is submitted to dispute resolution pursuant to clause (y) above and a final resolution thereof is not obtained thereunder by the date that is ninety (90) days after the missed Construction Progress Milestone Date, or (B) a Plan is otherwise not approved by Owner pursuant to the review and resubmittal procedure set forth above by the date that is ninety (90) days after the missed Construction Progress Milestone Date, then either (I) Contractor shall thereafter proceed to perform the Services in accordance with the Plan as revised in accordance with the most recent comments submitted by Owner and Independent Engineer pursuant to clause (2) above (PROVIDED that if a final decision subsequently received under clause (y) above finds that Contractor's proposed Plan should have been approved by Owner, Contractor shall be entitled hereunder to a Scope Change to reflect the additional costs reasonably incurred by Contractor solely as a result 75 of proceeding in accordance with provisions of this clause (I) instead of its proposed Plan), or (II) Contractor shall be in default hereunder pursuant to Section 16.1(j) hereof. (b) Notwithstanding anything to the contrary in Section 7.6.2(a) hereof, if any Construction Progress Milestone has not been achieved on or before the corresponding Construction Progress Milestone Date and Contractor determines that the Services cannot, despite its best efforts, be accelerated to achieve Final Acceptance of the Facility by the Guaranteed Final Acceptance Date, then Contractor shall promptly prepare and submit for approval to Owner (and, at Owner's request, the Independent Engineer) within thirty (30) days of such Construction Progress Milestone Date a Plan (which Plan may revise the order of the milestones set forth in the Payment and Milestone Schedule, but shall not increase the Contract Price or accelerate the timing of the Scheduled Payments hereunder) to accelerate the performance of the Services as necessary in order to achieve Final Acceptance of the Facility as soon as possible. Upon receipt of such a Plan, Owner shall have the right in its sole discretion to require Contractor to proceed in accordance with such Plan (as it may be modified by Owner or the Independent Engineer as set forth in the following sentence) or, upon fifteen (15) days prior notice to Contractor, to declare an Event of Default pursuant to Section 16.1(j) hereof; PROVIDED, HOWEVER, that if Contractor shall have demonstrated to the reasonable satisfaction of Owner and the Independent Engineer that (x) the primary reason for Contractor's inability to so achieve Final Acceptance by the Guaranteed Final Acceptance Date is a defect or a delivery failure with respect to one or more of the major equipment components in the Facility's power island or transformer being provided by Subcontractors, and (y) such defect or delivery failure, or the consequent extended delay in Contractor's ability to achieve Final Acceptance as a result thereof, would not have been avoided by Contractor's compliance with the Quality Assurance Plan and the other standards of performance as specified in Section 2.3.1 hereof, then Owner and the Independent Engineer shall not unreasonably withhold approval of a Plan (as it may be modified by Owner or the Independent Engineer as set forth in the following sentence) that accelerates the performance of the Services in such a manner as to achieve Final Acceptance as soon as possible (it being understood and acknowledged that such a Plan may require the replacement of such Subcontractors). With respect to a Plan submitted under this Section 7.6.2(b), if Owner or the Independent Engineer in good faith believe such Plan does not accelerate the performance of the Services in such a manner as to achieve Final Acceptance as soon as possible, Owner shall have the right to modify such Plan (with the written concurrence of the Independent Engineer) as reasonably necessary to cause it to do so. In the event any Plan is so approved or modified by Owner (with the written concurrence of the Independent Engineer), Contractor shall thereafter perform the Services in accordance with such approved or modified Plan. 76 (c) For the avoidance of doubt, except in the circumstances and to the extent expressly set forth in the parenthetical in clause (I) of the last sentence of Section 7.6.2(a) hereof, all costs and expenses incurred by Contractor and its Subcontractors in connection with the development and performance of any Plan pursuant to this Section 7.6.2, including without limitation any overtime or other acceleration costs and expenses, shall be solely the responsibility of Contractor, and Owner shall have no responsibility or liability with respect thereto. ARTICLE 8 PRICE REBATE FOR FAILURE TO MEET PERFORMANCE GUARANTEES 8.1 PERFORMANCE GUARANTEES. Contractor guarantees that the Facility will be capable of achieving all the applicable performance specifications referred to in this Section 8.1 during a Completed Performance Test (a) at Provisional Acceptance of the Facility, if Provisional Acceptance were to occur prior to Final Acceptance hereunder and (b) at Final Acceptance of the Facility (the "PERFORMANCE GUARANTEES"). Without limiting the foregoing, Contractor agrees to exercise all reasonable repair and replacement alternatives, if any, that could reasonably be expected to improve for Final Acceptance the level of achievement of the Performance Guarantees demonstrated at Provisional Acceptance. Contractor agrees that, if (i) the Facility fails to achieve the Heat Rate Guarantee during the period, if any, commencing with Provisional Acceptance of the Facility and continuing until Final Acceptance of the Facility, (ii) the Facility fails to achieve the Electrical Output Guarantee during the period, if any, commencing with Provisional Acceptance and continuing until Final Acceptance of the Facility, or (iii) the Facility fails to achieve any of the applicable Performance Guarantees at Final Acceptance of the Facility, as the case may be, Contractor shall pay Owner as rebates and not as penalties the amounts calculated in accordance with the terms set forth in Sections 8.1.1 and 8.1.2 hereof (the "PERFORMANCE GUARANTEE PAYMENTS"). 8.1.1 ELECTRICAL OUTPUT GUARANTEE AND REBATES. 8.1.1.1 ELECTRICAL OUTPUT GUARANTEE. Contractor guarantees to Owner that, with respect to the Completed Performance Test used pursuant to Section 6.2 hereof to determine the level of achievement of the Performance Guarantees (i) at Provisional Acceptance of the Facility, if Provisional Acceptance were to occur prior to Final Acceptance, and (ii) at Final Acceptance of the Facility, the average net electrical output of the Facility as measured during the most recent Completed Performance Test as of such day (as such average net electrical output is measured and 77 corrected to the design operating conditions, all in accordance with the procedures set forth in Appendix D hereto) will be [*] the electrical output guarantee as set forth in the Warranty Data Sheet attached as Appendix R hereto (the "ELECTRICAL OUTPUT GUARANTEE"). 8.1.1.2 INTERIM PERIOD REBATES. If (1) Contractor achieves Provisional Acceptance of the Facility prior to Final Acceptance of the Facility (the period of time between Provisional Acceptance and Final Acceptance being referred to as the "INTERIM PERIOD") and (2) the average net electrical output of the Facility as demonstrated by the Completed Performance Test used pursuant to Section 6.3(a) hereof to determine the level of achievement of the Performance Guarantees at Provisional Acceptance (as measured and corrected to the design operating conditions, all in accordance with the procedures set forth in Appendix D hereto) is [*] than the Electrical Output Guarantee, then Contractor shall pay to Owner, as a rebate and not as a penalty and as part of the consideration for awarding the contract, for each day during the Interim Period, an amount equal to [*] for each kilowatt by which such average net electrical output (as measured during the most recent Completed Performance Test as of such day) of the Facility is [*] than such Electrical Output Guarantee (the "INTERIM PERIOD ELECTRICAL OUTPUT REBATES"). 8.1.1.3 FINAL ACCEPTANCE REBATES. Upon Final Acceptance of the Facility, if, with respect to the Completed Performance Test used pursuant to Section 6.2 hereof to determine the level of achievement of the Performance Guarantees at Final Acceptance, the average net electrical output of the Facility during such Completed Performance Test (as such average net electrical output is measured and corrected to design operating conditions, all in accordance with the procedures set forth in Appendix D hereto) is [*] than the Electrical Output Guarantee, then Contractor shall pay to Owner, as a rebate and not as a penalty and as part of the consideration for awarding the contract, an amount equal to the sum of (i) [*] for each kilowatt by which such average net electrical output of the Facility is [*] than the Electrical Output Guarantee minus (ii) the amount of any Interim Period Electrical Output Rebates paid or to be paid by Contractor to Owner hereunder. 8.1.2 HEAT RATE GUARANTEE, REBATES. 8.1.2.1 HEAT RATE GUARANTEE. Contractor guarantees to Owner that, with respect to the Completed Performance Test used pursuant to Section 6.2 hereof to determine the level of achievement of the Performance Guarantees (i) at Provisional Acceptance of the Facility, if Provisional Acceptance occurs prior to Final Acceptance, and (ii) at Final Acceptance of the Facility, the net heat rate of the Facility 78 during such Completed Performance Test, calculated in BTUs per kilowatt-hour (as measured and corrected to design operating conditions, all in accordance with the procedures set forth in such Appendix D hereto), shall be [*] the heat rate guarantee as set forth in the Warranty Data Sheet attached as Appendix R hereto (the "HEAT RATE GUARANTEE"). 8.1.2.2 INTERIM PERIOD REBATES. (a) If (1) Contractor achieves Provisional Acceptance of the Facility before Final Acceptance of the Facility, and (2) the average net heat rate of the Facility as demonstrated by the Completed Performance Test used pursuant to Section 6.3(a) to determine the level of achievement of the Performance Guarantees at Provisional Acceptance (as measured and corrected to the design operating conditions, all in accordance with the procedures set forth in Appendix D hereto) [*] the Heat Rate Guarantee, then Contractor shall pay to Owner, as a rebate and not as a penalty and as part of the consideration for awarding the contract, for each day during the Interim Period, an amount equal to [*] for each BTU/kWh by which such measured net heat rate of the Facility (as measured during the most recent Completed Performance Test as of such day) [*] the Heat Rate Guarantee (the "Interim Period Heat Rate Rebates"). 8.1.2.3 FINAL ACCEPTANCE REBATES. Upon Final Acceptance of the Facility, if, with respect to the Completed Performance Test used pursuant to Section 6.5 hereof to determine the level of achievement of the Performance Guarantees at Final Acceptance, the net heat rate of the Facility during such Completed Performance Test (as measured and corrected to design operating conditions, all in accordance with the procedures set forth in Appendix D hereto) [*] the Heat Rate Guarantee, then Contractor shall pay to Owner, as a rebate and not as a penalty and as part of the consideration for awarding the contract, an amount equal to the sum of (i) [*] for each BTU/kWh by which such measured heat rate [*] such Heat Rate Guarantee minus (ii) the amount of any Interim Period Heat Rate Rebates paid or to be paid by Contractor to Owner hereunder. 8.2 REBATES REASONABLE. Owner and Contractor hereby acknowledge and agree that the terms, conditions and amounts fixed pursuant to this Article 8 for Performance Guarantee Payments are reasonable, considering the reduction in the value of the Facility and the increased costs that it is anticipated Owner will sustain in the event of Contractor's failure to achieve [*]. The amounts of these rebates are agreed upon and fixed hereunder by the Parties because of the difficulty of ascertaining on the date hereof the exact amount of such reduction in value and increased costs that will be actually sustained by Owner in the event of any such failure by Contractor, and the Parties hereby agree that the rebate 79 amounts specified herein (a) shall be applicable regardless of the amount of such reduction in value and increased costs actually sustained by Owner and (b) shall be the sole and exclusive remedy of Owner and the sole liability of Contractor under this Agreement for the failure of the Facility to achieve one hundred percent (100%) of the Performance Guarantees. Solely for clarification and for the avoidance of doubt, the Parties hereby agree that this Section 8.2 shall not be construed in any way to limit, extend or otherwise affect Contractor's obligations and liabilities, or Owner's remedies, under this Agreement arising as a result of or in connection with (i) an Event of Default under Section 16.1(i) or (j) hereof or (ii) Contractor's obligation to achieve Final Acceptance and Project Completion and to cause the Project to comply with all Applicable Laws, all Applicable Permits and the Guaranteed Emission Limits. The payment of any such rebates hereunder shall not affect Owner's rights under Articles 15 and 16 hereof or Owner's rights to receive price rebates pursuant to Article 7 hereof. 8.2.1 FINANCIAL CAP ON PERFORMANCE REBATES. Notwithstanding anything to the contrary in this Article 8, the total aggregate Performance Guarantee Payments required to be made by Contractor pursuant to this Article 8 shall be equal to the lesser of (i) the aggregate total of the Performance Guarantee Payments due pursuant to the terms of Sections 8.1.1 and 8.1.2, and (ii) the maximum aggregate value of the Performance Guarantee Payments as a percentage of the Contract Price set forth in Section 9.1 hereof. 8.3 PAYMENT OF PERFORMANCE REBATES. Contractor shall pay to Owner all rebate amounts required under Sections 8.1.1.3 and 8.1.2.3 hereof within fifteen (15) days after the determination that the conditions (other than the payment of these rebate amounts) to Final Acceptance have been achieved. All rebate amounts required under Sections 8.1.1.2 and 8.1.2.2 hereof shall be due and payable by Contractor to Owner monthly in arrears on the tenth (10th) day of each month, with the last such payment to occur no later than fifteen (15) days after the determination that Final Acceptance has been achieved. ARTICLE 9 LIABILITY AND DAMAGES 9.1 LIMITATION OF LIABILITY. Notwithstanding any other provision in this Agreement, in no event shall Contractor's liability under this Agreement (a) for Provisional Acceptance Late Completion Payments exceed in the aggregate an amount equal to [*], (b) for Performance Guarantee Payments under Section 8.1.1 hereof exceed in the aggregate an amount equal to [*] 80 [*], (c) for Performance Guarantee Payments under Section 8.1.2 hereof exceed in the aggregate an amount equal to [*], and (d) for all Provisional Acceptance Late Completion Payments and Performance Guarantee Payments exceed in the aggregate an amount equal to [*] (which amount set forth in this clause (d) is referred to as the "LD SUBCAP"). Solely for clarification and for the avoidance of doubt, the Parties hereby agree that this Section 9.1 shall not be construed in any way to limit, extend or otherwise affect Contractor's other obligations or liabilities arising under or in connection with this Agreement, including without limitation (i) its liability for an Event of Default under Section 16.1(i) or (j) hereof or (ii) its obligation to achieve Final Acceptance of the Facility and Project Completion and to cause the Project to comply with all Applicable Laws, all Applicable Permits, and the Guaranteed Emissions Limits. 9.2 CONSEQUENTIAL DAMAGES. Notwithstanding anything stated to the contrary in this Agreement, except as otherwise provided in this Section 9.2, neither Party nor any of its contractors, subcontractors or other agents providing equipment, material or services for the Project shall be liable under this Agreement, whether based in contract, in tort (including negligence and strict liability), warranty or otherwise, for any indirect, incidental, special, exemplary, punitive or consequential loss or damage of any type, including but not limited to loss of use or loss of profit or revenue, and each Party hereby releases the other Party and its contractors, subcontractors and agents from any such liability; PROVIDED, HOWEVER, that the provisions of this Section 9.2 shall not limit Contractor's obligations (i) to pay to Owner the Provisional Acceptance Late Completion Payments and Performance Guarantee Payments pursuant to Articles 7 and 8 hereof, and (ii) to pay any excess completion costs pursuant to Sections 6.7.3 or 15.3(b) hereof. 9.3 AGGREGATE LIABILITY OF CONTRACTOR. Notwithstanding anything to the contrary herein, the total aggregate liability of Contractor (including, without limitation, liabilities covered by the LD SubCap) to Owner arising out of the performance or nonperformance of any or all obligations in connection with this Agreement, whether based in contract, tort, negligence, strict liability, warranty, error or omission or otherwise, shall not in any event exceed an amount equal to (a) [*] for liability due to events occurring prior to the date of Provisional Acceptance (or, if Provisional Acceptance was achieved on the basis of a temporary waiver, variance or grace period pursuant to Section 6.2.7 hereof, such later date on which the Facility's long-term compliance with Applicable Laws, Applicable Permits and other required emission standards is demonstrated), and (b) [*] for liability due to events occurring from and after the date of Provisional Acceptance (or, if applicable under clause (a) above, such later date on which such long-term compliance of the Facility is demonstrated); [*] 81 [*] ARTICLE 10 WARRANTIES AND GUARANTEES 10.1 WARRANTIES AND GUARANTEES. Contractor warrants and guarantees that (i) all machinery, equipment, materials, systems, supplies and other items comprising the Project will be new and unused (except computer cards) and of first-rate quality in accordance with Prudent Utility Practices and will be in specific conformity with the Design Documents (including without limitation Appendix A hereto) and the other requirements of this Agreement, will be suitable for use in generating electric energy and capacity under the climatic and normal operating conditions described in this Agreement and will be free from defective workmanship or materials, (ii) it will perform all of its design, construction, engineering and other Services hereunder in accordance with the provisions of Section 2.3 hereof, (iii) the Project and its components will be free from all defects caused by errors or omissions in engineering and design, as determined by reference to Prudent Utility Practices and the standard of performance required under Section 2.3 hereof, and will comply with all Applicable Laws, all Applicable Permits, the Electrical Interconnection Requirements, the PPA Operating Requirements and the Guaranteed Emissions Limits in accordance with the provisions of Section 2.4 hereof, and (iv) the completed Project will perform its intended functions of generating electric energy and capacity as a complete, integrated operating system as contemplated in this Agreement, it being understood that the design of the Facility (including, without limitation, the Electrical Interconnection Facilities and the Protective Apparatus) is based upon a useful life design objective of [*] from the Commercial Operation Date. 10.1.1 CORRECTION OF NONCONFORMING OR DEFECTIVE SERVICES. (a) If Owner notifies Contractor in writing no later than thirty (30) days after the expiration of the applicable Warranty Period of any defects or deficiencies in the Project discovered during the applicable Warranty Period, Contractor promptly (i) shall re-perform the Services at Contractor's expense as necessary or appropriate in order to correct any errors, omissions, defects or deficiencies in the Project and (ii) in the case of any defective or otherwise deficient machinery, equipment, materials, systems, supplies or other items (including without limitation the engineering or design thereof), 82 shall replace or, at Contractor's option, repair the same at Contractor's expense such that it is in compliance with the standards warranted and guaranteed in this Section 10.1; PROVIDED, HOWEVER, that Contractor's obligation to correct such defective or deficient items (x) shall not extend to any re-performance, repairs or replacements in the event and only to the extent required as a result of normal corrosion, erosion, noise level or wear and tear in the operation of the Facility (other than as caused by the negligence of any Contractor Responsible Party or the acts or omissions of any Contractor Responsible Party that are not in compliance with Contractor's obligations hereunder) and (y) shall not apply in the event and only to the extent such obligation arises directly from Owner's failure to operate and maintain the Facility in accordance with the Instruction Manual and otherwise in accordance with Applicable Laws, Applicable Permits, the Electrical Interconnection Requirements, the PPA Operating Requirements and Prudent Utility Practices. Contractor shall bear all costs and expenses associated with re-performing or repairing or replacing any Services, including, without limitation, necessary disassembly, transportation, reassembly and re-testing, as well as reworking, repair or replacement of such Services, and disassembly and reassembly of adjacent facilities that are included in the Services or indicated in the Project Design Book or in the Real Estate Rights when necessary to give access to the defective or deficient work. In the event that such adjacent facilities are not included in the Services or indicated in the Project Design Book or in the Real Estate Rights, all such costs and expenses associated with such disassembly and reassembly of such adjacent facilities shall be borne by Owner. In no event shall the Contractor have any obligation to undertake any corrective work as described in this Section 10.1.1 if Owner fails to provide notice on or before the date occurring thirty (30) days after the expiration of the Warranty Period. After investigation by Contractor, should Contractor and Owner mutually and reasonably agree (or, in the event Owner and Contractor are unable to agree, should it be determined pursuant to Article 21 hereof) that any of the errors, omissions, defects or deficiencies in the Project reported by Owner do not exist, Owner shall reimburse Contractor for all reasonable out-of-pocket costs in the event and only to the extent such costs were incurred by Contractor in connection with the investigation of such reported errors, omissions, defects or deficiencies that did not exist. (b) In the course of re-performing or repairing or replacing any Services pursuant to this Article 10, Contractor shall coordinate its performance of such work with Owner in accordance with Section 6.3.4 hereof. (c) Contractor shall promptly notify Owner after any defective or otherwise deficient work with respect to the Project is discovered by Contractor or should have been discovered by or been apparent to a skilled and experienced contractor in Contractor's position. Owner shall use its reasonable efforts to promptly notify 83 Contractor after any defective or otherwise deficient work becomes apparent to Owner; PROVIDED, HOWEVER, that the failure of Owner to so notify Contractor shall not relieve Contractor from any of its obligations under this Article 10. 10.2 NO LIENS OR ENCUMBRANCES. Contractor warrants and guarantees that, in the event and only to the extent Owner has made all payments then due to Contractor under this Agreement, title to the Facility and all work, materials, supplies and equipment provided hereunder shall pass to Owner free and clear of, and the Facility, the Facility Site and any and all interests and estates therein and any and all improvements and materials placed on the Facility Site shall be free and clear of, all liens, claims, security interests and other encumbrances made by, through or under Contractor or any Subcontractor, other than any Permitted Liens that are being contested in good faith by Contractor and comply with the requirements set forth in clause (a) or (b) of the definition thereof. In the event of any nonconformity to the requirements of this Section, Contractor promptly (i) shall defend Owner's title to the Facility and such work, materials, supplies and equipment or to the Facility Site and such interests, estates, improvements and materials, as the case may be, and (ii) shall remove and discharge any such lien, claim, security interest or other encumbrance; PROVIDED that if Contractor is unable to so promptly remove and discharge any such encumbrance, Contractor may provide to Owner in lieu thereof a bond or other collateral, in form and substance satisfactory to Owner and the Financing Parties, to fully indemnify Owner against any loss resulting from such liens, claims, security interests or other encumbrances. 10.3 LIMITATION OF WARRANTIES. EXCEPT AS EXPRESSLY PROVIDED IN ARTICLES 7 AND 8 HEREOF, THE WARRANTIES AND GUARANTEES PROVIDED IN THIS ARTICLE 10 ARE EXCLUSIVE AND THERE ARE NO OTHER WARRANTIES OR GUARANTEES OF ANY KIND, WHETHER EXPRESS OR IMPLIED (INCLUDING ALL WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE), RELATING TO THE SERVICES (AS DEFINED IN SECTION 2.1 HEREOF). SOLELY FOR CLARIFICATION AND FOR THE AVOIDANCE OF DOUBT, THE PARTIES HEREBY AGREE THAT NOTWITHSTANDING THE FOREGOING, NOTHING IN THIS SECTION 10.3 SHALL IN ANY WAY LIMIT, EXTEND OR OTHERWISE AFFECT CONTRACTOR'S OTHER OBLIGATIONS AND LIABILITIES HEREUNDER, INCLUDING WITHOUT LIMITATION (I) CONTRACTOR'S OBLIGATION TO ACHIEVE FINAL ACCEPTANCE (AS DEFINED HEREIN) OF THE FACILITY AND PROJECT COMPLETION (AS DEFINED HEREIN) AND TO CAUSE THE PROJECT TO COMPLY WITH ALL APPLICABLE LAWS, ALL APPLICABLE PERMITS AND THE GUARANTEED EMISSIONS LIMITS (AS DEFINED HEREIN), (II) CONTRACTOR'S LIABILITY 84 FOR WILLFUL BREACH OF ITS OBLIGATIONS UNDER THIS ARTICLE 10, AND (III) CONTRACTOR'S OBLIGATIONS UNDER ARTICLES 7, 8 AND 13 HEREOF. ARTICLE 11 FORCE MAJEURE 11.1 FORCE MAJEURE EVENT. As used in this Agreement, a "FORCE MAJEURE EVENT" shall mean any act or event that prevents the affected Party from performing any obligations (other than the payment of money) under this Agreement or complying with any conditions required to be complied with under this Agreement if such act or event is beyond the reasonable control of and without the fault or negligence of the affected Party and such Party has been unable by the exercise of all reasonable efforts to overcome or mitigate the effects of such act or event. Force Majeure Events include, but are not limited to, acts of declared or undeclared war, sabotage, landslides, revolution, terrorism, flood, tidal wave, hurricane, lightning, earthquake, fire, explosion, civil disturbance, act of God or the public enemy, any unreasonable delay or failure to act of a court or public authority with respect to a requested action necessary for the performance of the Services (PROVIDED that such requested action is legal, customary and within such authority's jurisdiction and application therefor was made in a proper and timely manner (taking into account all circumstances known or that should have been known with the exercise of due diligence) and was diligently pursued), transportation accidents in the event and only to the extent that they cause physical damage to Equipment, or strikes or other labor disputes of a regional or national character that are not limited to only the employees of Contractor or its affiliates and that are not due to the breach of a labor contract or Applicable Law by the Party claiming Force Majeure or its affiliates). Force Majeure Events do not include (i) late delivery of materials or equipment (except in the event and only to the extent caused by a Force Majeure Event, including but not limited to those listed above), (ii) the acts or omissions of any Contractor Responsible Party (except in the event and only to the extent that such act or omission of such Contractor Responsible Party would itself be excused hereunder by virtue of a Force Majeure Event, including but not limited to those listed above), and (iii) in the event and only to the extent the claiming Party's act, failure to perform or event was caused by lack of funds or other mere economic hardship. 11.2 BURDEN OF PROOF. In the event that the Parties are unable in good faith to agree that a Force Majeure Event has occurred, the Parties shall submit the dispute to dispute resolution pursuant to Section 21.1 hereof, PROVIDED that the burden of proof as to (a) whether a Force Majeure Event has occurred and (b) whether performance 85 was excused in accordance with Section 11.3 hereof, shall be upon the Party claiming a Force Majeure Event. 11.3 EXCUSED PERFORMANCE. If either Party is rendered wholly or partly unable to perform its obligations under this Agreement because of a Force Majeure Event, that Party will be excused from whatever performance is affected by the Force Majeure Event to the extent so affected, PROVIDED that: (a) the non-performing Party gives the other Party notice describing the nature (in such detail as is reasonable under the circumstances) of the occurrence, including an estimation of its expected duration and probable impact on the performance of such Party's obligations hereunder, such notice to be delivered as promptly as practicable (but in no event more than five (5) days following the later to occur of (i) the date of the occurrence of the Force Majeure Event and (ii) with respect to the CTG Subcontract only, the date on which the non-performing Party learns of such Force Majeure Event) and the non-performing Party thereafter continues to furnish timely regular reports with respect thereto during the continuation of the Force Majeure Event; (b) the suspension of performance is of no greater scope and of no longer duration than is reasonably required by the Force Majeure Event; (c) no liability of either Party which arose due to events that occurred before the occurrence of the Force Majeure Event causing the suspension of performance shall be excused as a result of such occurrence; (d) the non-performing Party exercises all reasonable efforts to mitigate or limit damages to the other Party; (e) the non-performing Party uses all reasonable efforts to continue to perform its obligations hereunder and to correct or cure the event or condition excusing performance; and (f) as soon as the non-performing Party is able to resume performance of its obligations under this Agreement excused as a result of the Force Majeure Event, that Party shall give the other Party written notice to that effect and shall promptly resume performance hereunder. 86 ARTICLE 12 SCOPE CHANGES 12.1 FURTHER REFINEMENT, CORRECTIONS AND DETAILING NOT SCOPE CHANGES. It is understood and agreed that the Project shall be subject to further refinement, correction and detailing by Contractor from time to time in a manner consistent with Appendix A hereto and the other standards of performance required hereunder, and that Contractor shall receive no additional compensation for any such refinement, correction, or detailing that is contemplated to be a part of, or would reasonably be inferred to be a part of, the Services under this Agreement (including without limitation any refinement, correction or detailing in connection with the engineering development or completion of the design in accordance with Appendix A) hereto, and any such refinements, corrections and detailing shall not constitute Scope Changes. A material addition to, deletion from, suspension of or other modification to the requirements or provisions of this Agreement pursuant to a Scope Change Order issued by Owner hereunder shall constitute a Scope Change rather than a refinement, correction or detailing. 12.2 SCOPE CHANGES. Owner, without invalidating this Agreement, may order Scope Changes to the Services, in which event one or more of the Contract Price, the Construction Progress Milestone Dates, the Guaranteed Completion Dates, the Payment and Milestone Schedule, the Project Schedule and the Performance Guarantees shall be equitably adjusted accordingly, if necessary. All Scope Changes shall be authorized by a Scope Change Order and only the Owner may issue Scope Change Orders; PROVIDED that no Scope Change Order issued by Owner on or after the Financial Closing Date shall be valid hereunder without the written concurrence of the Independent Engineer unless such Scope Change Order (i) does not extend the Guaranteed Completion Dates under this Agreement, does not result in a material change in the design of the Project (as determined in accordance with the definition of Project Design Book herein), that has not been expressly approved by the Independent Engineer, and does not increase the Contract Price either individually or in the aggregate with all previous non-Independent Engineer-authorized Scope Change Orders by more than the applicable dollar thresholds to be set forth in the acknowledgment and consent agreement to be entered into among Owner, Contractor and the Financing Parties pursuant to Section 17.1 hereof, or (ii) is required pursuant to the terms of the Agreement as a result of circumstances not in the control of Owner or as a result of Owner's failure to perform its obligations hereunder. 12.3 PROCEDURE FOR SCOPE CHANGES. (a) As soon as Contractor becomes aware of any circumstances which Contractor has reason to believe may necessitate a Scope Change, Contractor shall issue to Owner a Scope Change Order Notice at 87 Contractor's expense. All Scope Change Order Notices shall include documentation sufficient to enable Owner to determine (i) the factors necessitating a Scope Change; (ii) the impact which the Scope Change is likely to have on the Contract Price and the Payment and Milestone Schedule; (iii) the impact which the Scope Change is likely to have on the Project Schedule, the Construction Progress Milestone Dates and the Guaranteed Completion Dates; (iv) the impact which the Scope Change is likely to have on the Performance Guarantees; and (v) such other information which Owner may reasonably request in connection with such Scope Change in order to determine the above factors and impacts (including, with respect to Scope Changes involving price changes under the provisions of Section 12.8(c) or (d) hereof, material and labor cost information). (b) If Owner desires or is required to make a Scope Change, in response to a Scope Change Order Notice or otherwise, it shall submit a Scope Change Order Request to Contractor. Contractor shall promptly review the Scope Change Order Request and notify Owner in writing of the options for implementing the proposed Scope Change (including, if possible, any option that does not involve an extension of time) and the effect, if any, each such option would have on the Contract Price, the Guaranteed Completion Dates, the Construction Progress Milestone Dates, the Payment and Milestone Schedule, the Project Schedule and the Performance Guarantees. Contractor shall provide cost, schedule and performance level guarantee impacts to Owner for Scope Changes proposed by Owner, including furnishing to Owner a statement, setting forth in detail, a breakdown by trades and work classifications. Owner may, but shall not be obligated to (except and only as specifically provided in Sections 12.2(ii) and 12.12 hereof), issue a Scope Change Order covering such proposed Scope Change, in which event the contents of Contractor's notice described in this Section 12.3 shall be binding on Owner (except as otherwise provided in the following sentence) and Contractor. In the event Owner disagrees with Contractor's statement of the effect of such Scope Change on the Contract Price, the Guaranteed Completion Dates, the Construction Progress Milestone Dates, the Project Schedule or the Performance Guarantees, Owner may (and with respect to matters addressed in Sections 12.2(ii), 12.5 and 12.12 hereof, shall) proceed with issuance of an interim Scope Change Order (an "INTERIM SCOPE CHANGE ORDER") on such terms and conditions as Owner deems to be warranted, in which case Contractor shall proceed in accordance therewith, and the dispute as to the effect of such Scope Change shall be resolved as provided in Article 21 hereof. 12.4 SCOPE CHANGES DUE TO CONTRACTOR ERROR. Notwithstanding anything in this Article 12 to the contrary, no Scope Change Order shall be issued and no adjustment of the Contract Price, the Guaranteed Completion Dates, the Construction Progress Milestone Dates, the Payment and Milestone Schedule, the Project Schedule or 88 the Performance Guarantees shall be made for or as a result of any correction of errors, omissions, deficiencies, or improper or defective work on the part of Contractor or any Subcontractors in the performance of the Services. 12.5 SCOPE CHANGES DUE TO CHANGES IN LAW AND PERMITS. In the event and only to the extent that: (a) any Applicable Permit is obtained after the date of this Agreement and either (1) neither the application for nor a draft of such Applicable Permit is identified in Section 12.6.2 hereof (and thus neither was provided to Contractor prior to the date of this Agreement) and Contractor's compliance with the terms of such Applicable Permit constitutes a material change to the Scope of Services to be performed by Contractor as set forth in Appendix A hereto, or (2) the application for, or a draft of, such Applicable Permit was provided to Contractor prior to the date of this Agreement (as indicated in Section 12.6.2 hereof) and such Applicable Permit contains requirements that are materially more stringent than the corresponding requirements set forth in the Guaranteed Emission Limits (or, if such requirements do not have corresponding requirements in the Guaranteed Emission Limits, they are materially more stringent than indicated in the application for, or draft of, as the case may be, such Applicable Permit); or (b) any changes in Applicable Laws or Applicable Permits occur after the date of this Agreement, and such more stringent requirements or changes necessitate a Scope Change; then, in any such case, such requirements or changes shall be treated as a Scope Change pursuant to clause (ii) of Section 12.2 hereof; PROVIDED, HOWEVER, that this Section 12.5 shall not apply to (1) any change in Applicable Laws relating to Contractor Taxes or (2) any change in Applicable Permits in the event and only to the extent resulting directly or indirectly from the acts or omissions of any Contractor Responsible Party that are wrongful or otherwise not in compliance with the Contractor's obligations hereunder. 12.6 FAMILIARITY WITH CONDITIONS AND DOCUMENTATION. 12.6.1 FAMILIARITY WITH CONDITIONS. As more fully set forth in Article 20 hereof, Contractor acknowledges and accepts the risk of mistake or error relating to all matters within the scope of Section 20.1 hereof and further acknowledges and agrees that no increase or adjustment in the Contract Price, the Guaranteed Completion Dates, the Construction Progress Milestone Dates, the Payment and Milestone Schedule, the Project Schedule, the Performance Guarantees or any other 89 provision which may be affected thereby will be made as a result of any such mistake or error. 12.6.2 FAMILIARITY WITH DOCUMENTATION. Prior to the date of this Agreement, Contractor has reviewed: (a) all documentation which is attached as an Appendix hereto or which Contractor is required to perform as set forth herein or in any such Appendix, (b) the Baseline Environmental Site Assessment, (c) the wetlands delineation established pursuant to the Letter of Interpretation/Line Verification, LURP File No. 1219-90-0002.4 issued by the New Jersey Department of Environmental Protection on March 22, 1999, with the attached Survey by Carr Engineering Associates as last revised April 5, 1999, (d) the Land Development Application (including the EIS, Drawings and Reports referred to therein) prepared by Maser and TRC, dated September 1999, as amended pursuant to the Sayreville Planning Board Final Resolution dated as of October 12, 1999 (subject to Contractor's comments as set forth in its letter ARPAC/0055 dated October 25, 1999), (e) the Topographic Survey Sketch No. 71599 (consisting of 5 sheets) provided to Contractor prior to the date hereof, undated but based on July 1999 survey, and (f) the draft MCUA Wastewater Discharge Permit Application dated October 11, 1999 (subject to Contractor's comments as set forth in its letter RA/0093 dated November 8, 1999), and Contractor confirms that it will be able to perform the Services consistent with such documentation, subject to the comments set forth in the letters identified above and assuming Owner implements the Approved Remediation Plan in accordance with the terms thereof and such implementation has the effect of remediating Hazardous Materials as specifically intended and set forth in the Approved Remediation Plan. Contractor has further reviewed: (g) the Draft Air Permit/Compliance Plan issued by the New Jersey Department of Environmental Protection to Owner under date of November 12, 1999 (subject to Owner's final comments thereon sent to NJDEP by letter dated November 18, 1999) and Contractor confirms that it will be able to perform the Services consistent with such draft (i) with respect to the emissions limits set forth therein, to the extent such draft is consistent with and limited by the technical considerations and conditions for emissions limits and guarantees set forth in Appendix R and (ii) with respect to any other technical requirements set forth therein, to the extent such draft is consistent with and no more stringent than the technical requirements of Appendix A. Contractor acknowledges and agrees that any difficulty or extra cost it may encounter in performing the Services consistent with such documentation will not entitle Contractor to any increase or adjustment in the Contract Price, the Guaranteed Completion Dates, the Construction Progress Milestone Dates, the Payment and Milestone Schedule, the Project Schedule, the Performance Guarantees or any other provision which may be affected thereby. For the avoidance of doubt, the Parties hereby acknowledge and agree that this Article 12 does not impose on Contractor the risk of mistake or error in the documentation attached 90 hereto constituting the Electrical Interconnection Requirements, the PPA Operating Requirements or the Real Estate Rights or in the documentation referred to in clauses (b) through (g) of this Section 12.6.2. 12.7 EFFECT OF FORCE MAJEURE EVENT. (a) In the event and only to the extent that any Force Majeure Event affects Contractor's ability to meet the Guaranteed Completion Dates or the Construction Progress Milestone Dates, then an equitable adjustment in one or more of such dates and in the Payment and Milestone Schedule and the Project Schedule shall be made by agreement of Owner and Contractor or otherwise pursuant to Article 21 hereof. (b) No adjustment to the Performance Guarantees shall be made as a result of a Force Majeure Event unless, and in the event and only to the extent that, the Performance Guarantees are impossible to achieve as a practical matter as a direct result of such Force Majeure Event. (c) Except as otherwise expressly set forth below in this Section 12.7, no adjustment to the Contract Price shall be made as a result of a Force Majeure Event. In the event that Contractor is delayed in the performance of the Services by a Force Majeure Event, then: (i) to the extent that the delay(s) are, [*] (ii) to the extent that the delay(s) are, [*] 12.8 PRICE CHANGE. An increase or decrease in Contract Price, if any, resulting from a Scope Change requested by Owner or made pursuant to this Article 12 shall be determined, upon the mutual agreement of the Parties, as follows: (a) By lump sum payment, in an amount proposed by Contractor (properly itemized and supported by sufficient substantiating data to permit evaluation) and accepted by Owner; or (b) By unit pricing; or 91 (c) By cost and percentage or by cost and fixed fee; or (d) If none of the methods set forth in Section 12.8(a), 12.8(b) or 12.8(c) hereof is agreed upon after good faith negotiation by the Parties, Contractor shall provide Owner with such purchase orders, invoices, subcontractor quotes and other documents and records as may enable Owner to verify, to its reasonable satisfaction, the costs or savings reasonably incurred by Contractor in effecting such Scope Change. All equipment, materials, labor, equipment rental and other items required as a result of such Scope Change shall be purchased by Contractor at competitive market prices. Owner shall, upon verifying Contractor's costs or savings associated with such Scope Change, adjust the Contract Price by the amount thereof plus [*] and appropriate adjustments shall be made to the corresponding Scheduled Payments. 12.9 CONTINUED PERFORMANCE PENDING RESOLUTION OF DISPUTES. Notwithstanding a dispute regarding the amount of any increase or decrease in Contractor's costs with respect to a Scope Change, Contractor shall proceed with the performance of such Scope Change promptly following Owner's execution of the corresponding Interim Scope Change Order. 12.10 DOCUMENTATION. All claims by Contractor for adjustments to one or more of the Contract Price, the Guaranteed Completion Dates, the Construction Progress Milestone Dates, the Payment and Milestone Schedule, the Project Schedule and the Performance Guarantees as a result of Scope Changes under this Article 12 shall be supported by such documentation as is reasonably sufficient for Owner to determine the accuracy thereof, including, as applicable, invoices from Subcontractors and Contractor's man-hour breakdowns in the event and only to the extent such invoices and man-hour breakdowns are relevant to the method utilized by the Parties pursuant to Section 12.8 hereof for adjusting the Contract Price. 12.11 QUALITATIVE ENGINEERING. If Contractor identifies an opportunity for a cost beneficial non-necessary improvement of the Facility, Contractor may issue a Scope Change Notice to notify Owner of the existence of such opportunity. After evaluating the information presented in the Scope Change Notice issued by Contractor pursuant to this Section 12.11 in good faith, Owner may submit a Scope Change Order Request. Contractor shall review such Scope Change Order Request and notify Owner in writing of the options for implementing the proposed Scope Change, the effect of such Scope Change and any such other information as Owner may request; PROVIDED that Contractor shall be reimbursed by Owner for all reasonable costs incurred by Contractor 92 in responding to any Scope Change Order Request submitted by Owner pursuant to this Section 12.11. Owner may, but shall not be obligated to, issue a Scope Change Order covering such proposed Scope Change in the manner provided by Section 12.3 hereof. 12.12 HAZARDOUS MATERIALS. In the event a Hazardous Material is discovered to exist at the Facility Site, Contractor shall be responsible for responding to and handling such Hazardous Material (including but not limited to the condition resulting from the presence thereof) in compliance with the requirements of all Applicable Laws and Applicable Permits and Sections 2.1.7 and 2.1.15 hereof, provided, however, that if such Hazardous Material is not one for which Contractor is responsible pursuant to clauses (a) through (e) of Section 2.1.7 hereof or Section 2.1.15 hereof, then Contractor shall be entitled to a Scope Change hereunder as required for such response and handling, except that if any Contractor Responsible Party has negligently aggravated the condition resulting from the presence of such Hazardous Material at the Facility Site, any such Scope Change shall be equitably adjusted to account for the impact on Owner's costs and/or liability (actual or contingent) arising from, and directly attributable to, such conduct . Notwithstanding the foregoing, (i) Contractor shall have the right, upon written notice delivered to Owner within thirty (30) days (or such shorter period of time as is practicable with the exercise of all reasonable efforts) of its discovery of the presence of any such Hazardous Material not covered by any of clauses (a) through (e) of Section 2.1.7 or Section 2.1.15 hereof), to refuse to accept responsibility for responding to and handling such Hazardous Material (including but not limited to the condition resulting from the presence thereof) if Contractor determines, in its reasonable discretion, that the potential liabilities and difficulties associated with such response and handling would materially and adversely affect the risks to Contractor in performing the Services hereunder, and (ii) Owner shall retain the right to contract directly with a third party contractor to perform any such response and handling work instead of the Contractor hereunder, PROVIDED that any such work shall be performed in such a manner as not to adversely affect any Contractor Responsible Party's performance of the Services in any material way. ARTICLE 13 INDEMNIFICATION 13.1 GENERAL INDEMNIFICATION. Contractor shall fully indemnify, save harmless and defend Owner, its parents, subsidiaries and other affiliates, the Financing Parties, and the directors, officers, agents, employees, successors and assigns of each of them (the "OWNER INDEMNIFIED PARTIES"), from and against any and all third-party losses, costs, damages, injuries, liabilities, claims, demands, penalties, interest and causes of 93 action, including without limitation reasonable attorney's fees (collectively, the "DAMAGES"), arising out of, resulting from or related to this Agreement (including without limitation any damage to or destruction of property of, or death of or bodily injury to, Persons (whether they are employees of the Owner Indemnified Parties, Contractor or any Subcontractor, or are Persons unaffiliated with the Project)) in the event and only to the extent such Damages are caused or contributed to (i) by the fault, intentional misconduct, negligence, strict liability or omission in the performance of the Services or otherwise relating to this Agreement or the Project by Contractor or any Subcontractor, or any of their respective employees, agents, representatives, invitees or other Contractor Responsible Parties or (ii) by the failure of Contractor or any Subcontractor to comply with the terms of this Agreement, whether or not any of the Owner Indemnified Parties are contributorily negligent; PROVIDED, HOWEVER, that the foregoing indemnification shall not apply (i) in the event and only to the extent the Damages are caused by or contributed to by the negligence or willful misconduct of any of the Owner Indemnified Parties, or (ii) with respect to Damages resulting from Hazardous Materials, as Contractor's indemnity obligations with respect thereto are solely as provided in Section 13.4 hereof. 13.2 ADDITIONAL INDEMNIFICATION. Without limiting the generality of Section 13.1 hereof, Contractor shall fully indemnify, save harmless and defend the Owner Indemnified Parties from and against any and all Damages in favor of any governmental authority or other third party in the event and to the extent such Damages are caused by (i) failure of Contractor or any Subcontractor to comply with Applicable Laws and Applicable Permits as required by this Agreement, (ii) failure of Contractor or any Subcontractor to properly administer and pay the Taxes or Project Duties as required hereunder (including without limitation the Contractor Taxes) or any other taxes, fees and contributions required to be paid by Contractor or any Subcontractor under Applicable Laws, or (iii) nonpayment of amounts due as a result of furnishing materials or services to Contractor or any Subcontractor which are payable by Contractor or any Subcontractor in connection with the Services. 13.3 PATENT AND COPYRIGHT INDEMNIFICATION. Without limiting the generality of Section 13.1 hereof, Contractor shall fully indemnify, save harmless and defend the Owner Indemnified Parties from and against any and all Damages which the Owner Indemnified Parties may hereafter suffer or pay by reason of any claims or suits arising out of claims of infringement of any domestic or foreign patent rights, copyrights or other intellectual property, proprietary or confidentiality rights with respect to the performance by Contractor or any Subcontractor of the Services, including without limitation, with respect to materials or information in any way incorporated in or related to the engineering, procurement, construction, ownership, use, operation or maintenance 94 of the Facility at the Facility Site. If, in any such suit or claim, a temporary restraining order or preliminary injunction is granted, Contractor shall make every reasonable effort, by giving a satisfactory bond or otherwise, to secure the suspension of the injunction or restraining order. If, in any such suit or claim, the Project, or any part, combination or process thereof, is held to constitute an infringement and its use is permanently enjoined, Contractor shall promptly make every reasonable effort to secure for Owner a license, at no cost to Owner, authorizing continued use of the infringing work. If Contractor is unable to secure such suspension or such license within a reasonable time, Contractor shall, at its own expense and without impairing performance requirements, either replace the affected work, or part, combination or process thereof, with non-infringing components or parts or modify the same so that they become non-infringing. 13.4 HAZARDOUS MATERIALS LIABILITY. (a) Owner shall fully indemnify, save harmless and defend the Contractor Indemnified Parties from and against all Damages in the event and only to the extent such Damages are caused or contributed to by the presence of any Hazardous Material on, or the release of any Hazardous Material on or from, the Facility Site, other than any Hazardous Material for which Contractor is responsible pursuant to Section 2.1.7 hereof; PROVIDED, HOWEVER, that the foregoing indemnification shall not apply in the event and only to the extent that the Damages are caused by or contributed to by (x) the negligence or willful misconduct of any Contractor Responsible Party. (b) Contractor shall fully indemnify, save harmless and defend the Owner Indemnified Parties from and against all Damages in the event and only to the extent such Damages are caused or contributed to by (i) any Hazardous Material for which Contractor is responsible pursuant to Section 2.1.7 hereof, or (ii) the negligence or willful misconduct of any Contractor Responsible Party in connection with the presence of any Hazardous Material on, or the release of any Hazardous Material on or from, the Facility Site; PROVIDED, HOWEVER, that the foregoing indemnification shall not apply in the event and only to the extent that the Damages are caused by or contributed to by the negligence or willful misconduct of any Owner Indemnified Party. 13.5 NOTICE AND LEGAL DEFENSE. Promptly after receipt by a Party of any claim or notice of the commencement of any action, administrative or legal proceeding, or investigation as to which the indemnity provided for in Section 13.1, 13.2, 13.3 or 13.4 hereof may apply, such Party shall notify the other Party in writing of such fact. Contractor or Owner, as the case may be, shall assume on behalf of the indemnified party and conduct with due diligence and in good faith the defense thereof with counsel reasonably satisfactory to the indemnified party; PROVIDED that the indemnified party shall have the right to be represented therein by advisory counsel of its own selection and at its 95 own expense; and PROVIDED FURTHER, that if the defendants in any such action include both Contractor or Owner and any indemnified party and the indemnified party shall have reasonably concluded that there may be legal defenses available to it which are different from or additional to, or inconsistent with, those available to Contractor or Owner, the indemnified party shall have the right to select separate counsel to participate in the defense of such action on its own behalf at the expense of the indemnified party. 13.6 FAILURE TO DEFEND ACTION. If any claim, action, proceeding or investigation arises as to which the indemnity provided for in Section 13.1, 13.2, 13.3 or 13.4 hereof may apply, and Contractor or Owner, as the case may be, fails to assume the defense of such claim, action, proceeding or investigation, then the indemnified party may at the expense of Contractor or Owner, as the case may be, contest (or, with the prior written consent of Contractor or Owner, settle) such claim. 13.7 SURVIVAL. The provisions of this Article 13 shall survive Project Completion and the termination of this Agreement. ARTICLE 14 INSURANCE 14.1 GENERAL. Except as otherwise expressly provided in this Article 14, Contractor shall provide and maintain the types and amounts of insurance set forth in this Article 14 at all times while Contractor or any Subcontractor is performing the Services. The insurance carriers providing insurance as described in this Article 14 shall have an A.M. Best Financial Rating of A-VII or a comparable international rating from an international rating institute, or if unrated, then such carriers shall be acceptable to both Parties, which acceptance shall not be unreasonably withheld or delayed. The capitalized terms used in this Article 14 and not otherwise defined in this Agreement shall have the meaning generally ascribed to such terms in the commercial insurance industry in the United States. 14.2 WORKER'S COMPENSATION INSURANCE. Contractor shall maintain Worker's Compensation Insurance and Employers' Liability Insurance (including occupational disease) to cover statutory benefits and limits of the Worker's Compensation laws of any applicable jurisdiction in which any work is to be performed hereunder, and with such Employers' Liability Insurance to have a coverage limit of one million dollars ($1,000,000) per occurrence. 14.3 COMMERCIAL GENERAL LIABILITY INSURANCE. Contractor shall maintain Commercial General Liability Insurance for Hazards of (a) Construction Operation, (b) 96 Elevators and Escalators, (c) Subcontractors and Independent Contractors, (d) Products and Completed Operations (with Completed Operations coverage to remain in force for two years following Final Acceptance), (e) Explosion Collapse and Underground Hazards, (f) Contractual Liability, (g) Personal Injury Liability (with the standard contractual and employee exclusions deleted) and (h) Sudden and Accidental Pollution. The insurance required by this Section 14.3 shall have the following limits of liability: Third Party Bodily Injury and Property Damage Liability $1,000,000 Combined Single Limit per occurrence and $2,000,000 annual aggregate issued on an occurrence basis, with such limits available to the Project. 14.4 AUTOMOBILE LIABILITY INSURANCE. $1,000,000 Combined Single Limit per occurrence. Each Party shall obtain its own Business Automobile liability insurance to cover all owned, leased and non-owned vehicles in connection with construction, services, and/or other associated work hereunder. 14.5 COMMERCIAL UMBRELLA AND/OR EXCESS INSURANCE. Commencing on or prior to the earlier of (i) the date that Contractor commences shipment of any equipment to be provided hereunder and (ii) the Financial Closing Date, Contractor shall maintain Commercial Umbrella and/or Excess Insurance Policies for Bodily Injury and Property Damage Liability [*] over Primary Employer's Liability, Commercial General Liability, and Business Automobile Liability Limits. 14.6 SEVERABILITY OF INTEREST. All insurance carried in accordance with Section 14.3, 14.4 and/or 14.5 hereof shall be endorsed to provide that, inasmuch as the policy is written to cover more than one insured, all terms, conditions, insuring agreements and endorsements, with the exception of limits of liability, shall operate in the same manner as if there were a separate policy covering each insured. 14.7 BUILDER'S RISK INSURANCE. On or prior to the earlier of (i) the commencement of performance of the Services at the Facility Site and (ii) the Financial Closing Date, Contractor shall provide, for the benefit of Owner, the Financing Parties, Contractor and all Subcontractors, "All-Risk" Builder's Risk Insurance in form reasonably acceptable to Owner and the Financing Parties covering direct physical loss or damage to the Facility for perils including but not limited to fire, lightning, hail, explosion, riot and civil commotion, vandalism and malicious mischief, theft, damage from aircraft (and other falling objects), inland transportation, vehicles, smoke, fire, flood, earthquake, landslide, Tsunami, windstorm, collapse, start-up and testing of the Facility and to any and all materials, supplies or equipment comprising the Facility or 97 intended for installation into the Facility and covering all such materials, supplies or equipment during temporary storage and transit to or from the Facility Site during erection and otherwise. Insurance maintained shall be written on a full replacement cost basis. This insurance shall include "Delay in Start-up" Coverage equal to the defined Business Interruption amount (including construction financing costs, fixed operating and maintenance costs and extension payments under the Power Purchase Agreement) equal to the initial eighteen (18) months of commercial operation. Policy Deductible amounts shall be based on a "per occurrence" basis not to exceed [*] for Equipment Start-up Testing, [*] for earthquake, [*] for windstorm, [*] for flood, and [*] for all other property damage losses. The "Delay in Start-up" Deductible shall also be based on a "per occurrence" basis with Waiting Period Deductibles not to exceed [*]. Contractor shall maintain such All-Risk Builder's Risk Insurance until the Risk Transfer Date. Thereafter and until Final Acceptance, Contractor shall maintain the Visits Maintenance Coverage Extension thereof. 14.8 OCEAN MARINE CARGO INSURANCE. Contractor shall provide on or prior to the earlier of (i) the commencement of shipment of any equipment to be provided hereunder and (ii) Financial Closing Date, and shall maintain until the Risk Transfer Date of the Facility Ocean Marine Cargo Insurance covering any and all materials and equipment while they are in transit to the Facility Site by wet marine bottoms or by air transportation and/or connecting conveyances, with a policy limit not less than the value of the largest single cargo shipment. Such insurance shall include Project "Delay in Start-up" coverage equal to the defined Business Interruption amount (including construction financing costs, operating and maintenance costs and extension payments under the Power Purchase Agreement) equal to the initial eighteen (18) months of commercial operation, with the same deductible and coverage amounts as are applicable to the "Delay in Start-up" insurance under Section 14.7 hereof. 14.9 SUBCONTRACTOR INSURANCE. Before permitting any of its Subcontractors to perform any Services at the Facility Site, Contractor shall obtain a certificate of insurance from each such Subcontractor evidencing that such Subcontractor has obtained insurance in such amounts and against such risks as is consistent with Contractor's customary practices for such types of subcontracts for projects of similar type and capacity to the Project, PROVIDED that such insurance shall at least be in such amounts and against such risks as is customarily carried by persons engaged in similar businesses in the same geographic area. 14.10 WAIVER OF SUBROGATION. All insurance policies obtained or carried by the Parties shall include a waiver of any right of subrogation of the insurers thereunder against Owner, Contractor, the Subcontractors, the Financing Parties, the Power 98 Purchaser, the Transmitting Utility and all their assigns, subsidiaries, affiliates, employees, insurers and underwriters and of any right of the insurers to any set-off or counterclaim or any other deduction, whether by attachment or otherwise, in respect of any liability of any such person insured under any such policy. 14.11 CONTRACTOR'S WAIVER. Contractor further releases, assigns and waives any and all rights of recovery against Owner, the Financing Parties, the Power Purchaser, the Transmitting Utility and all their affiliates, subsidiaries, employees, successors, permitted assigns, insurers and underwriters, which Contractor may otherwise have or acquire, in or from or in any way connected with any loss covered by policies of insurance maintained or required to be maintained by Contractor pursuant to this Agreement (other than third party liability insurance policies) or because of deductible clauses (except as otherwise provided in Section 14.15.3 hereof) in or inadequacy of limits of any such policies of insurance. 14.12 EVIDENCE OF COVERAGE. Prior to the Financial Closing Date (or, if earlier, on or prior to the time such insurance policies under Sections 14.5, 14.7 and 14.8 hereof are required to be in effect), Contractor shall furnish to the Financing Parties and Owner certificates of insurance from each insurance carrier showing that the above required insurance is in force, the amount of the carrier's liability thereunder, and further providing that the insurance will not be canceled until the expiration of at least thirty (30) days (or ten (10) days in the case of cancellation due to non-payment of premiums) after written notice of such cancellation, change or non-renewal has been received by Owner and the Financing Parties. All copies of certificates of insurance submitted under this Section 14.12 shall be in form and content reasonably acceptable to Owner and the Financing Parties. Copies of all insurance policies required under this Article 14 to be obtained by each Party shall be available at such Party's address indicated in Section 25.6 hereof for review by the other Party or the Financing Parties. 14.12.1 STANDARDS. All insurance described herein shall be written by a company or companies authorized to do business in the State of New Jersey and reasonably satisfactory to Owner and the Financing Parties. Contractor and all Subcontractors shall not violate or knowingly permit any violation of any conditions or terms of the policies of insurance described herein. 14.13 CONTRACTOR'S OR RENTED EQUIPMENT. All construction tools and equipment belonging to Contractor or any Subcontractor used by or on behalf of Contractor or any Subcontractor for its performance hereunder shall be brought to and kept at the Facility Site at the sole cost, risk and expense of Contractor or such Subcontractor and Owner shall not be liable for loss or damage thereto, and any insurance 99 policies carried by Contractor, any Subcontractor or any third party on said equipment, supplies and materials shall provide for a waiver of the underwriters' right to subrogation against Owner, the Financing Parties, the Transmitting Utility and all their assignees, subsidiaries, affiliates, employees, insurers and underwriters. Contractor shall obtain adequate insurance to cover any construction tools and equipment leased from third parties. 14.14 DESCRIPTIONS NOT LIMITATIONS. The coverages referred to above shall be set forth in full in the respective policy forms, and the foregoing descriptions of such policies are not intended to be complete, nor to alter or amend any provision of the actual policies; PROVIDED, HOWEVER, that neither the content of any insurance policy or certificate, nor Owner's approval thereof, shall relieve Contractor of any of its obligations under this Agreement. 14.15 COST OF PREMIUMS, RISK OF LOSS AND DEDUCTIBLES. 14.15.1 COST OF PREMIUMS. Contractor shall bear responsibility for payment of all premiums for all insurance coverages required pursuant to this Article 14. 14.15.2 RISK OF LOSS. With respect to the Facility, until (i) delivery by Owner of the Provisional Acceptance Certificate or the Final Acceptance Certificate pursuant to Section 6.3.2 or 6.5.1.2 hereof, whichever occurs earlier, or (ii) any earlier transfer of control of the Facility to Owner upon termination of this Agreement (the earlier of clause (i) or clause (ii) above, the "RISK TRANSFER DATE"), Contractor (not Owner) shall bear the risk of loss and full responsibility for the costs of replacement, repair or reconstruction resulting from any damage to or destruction of the Facility or any materials, equipment, tools and supplies which are purchased for permanent installation in or for use during construction of the Facility, regardless of whether Owner has title thereto under this Agreement, except in the event and only to the extent such loss or damage (other than to any tools and equipment covered by Section 14.13 hereof) is a result of the negligence or intentional misconduct of Owner, its employees or agents, in which event Owner shall be responsible for up to the permitted deductible applicable thereto as set forth in Section 14.15.3 hereof. After the Risk Transfer Date with respect to the Facility, the Owner shall bear all risk of loss and full responsibility for repair, replacement or reconstruction with respect to any loss, damage or destruction to the Facility which occurs after such Risk Transfer Date, except in the event and only to the extent such loss or damage is a result of (x) the continuing performance of the Services by any Contractor Responsible Party or (y) the negligence or intentional misconduct of any Contractor Responsible Party, in either of which events 100 Contractor shall be responsible for up to the lesser of the insurance deductible applicable thereto and [*]. 14.15.3 DEDUCTIBLES. Contractor shall be responsible for deductibles for any losses covered by insurance required to be provided by Contractor under this Article 14; PROVIDED, HOWEVER, that Owner shall be responsible for the following: (a) deductibles in connection with any such Project losses that are covered by Builder's Risk insurance required under Section 14.7 hereof and Ocean Marine Cargo insurance required under Section 14.8 hereof, in each case only up to the permitted deductibles hereunder and only in the event and to the extent that the deductibles are in respect of losses caused by the negligence or intentional misconduct of any Owner Responsible Party; and (b) deductibles in connection with any Project losses that are (i) caused as a direct result of an event of Force Majeure pursuant to Article 11 hereof and (ii) covered by the "Delay in Start-Up" insurance required under Sections 14.7 and 14.8 hereof. 14.16 ADDITIONAL INSUREDS. All Contractor and Owner furnished insurance coverages required by this Article 14 (with the exception of the insurance required under Sections 14.2, 14.7 and 14.8) shall, to the extent of their respective indemnity obligations hereunder, include Owner, Contractor, the Financing Parties, the Power Purchaser, the Transmitting Utility and all their assignees, subsidiaries and affiliates as additional insureds. The insurance coverages required by Sections 14.7 and 14.8 hereof (a) shall designate the Financing Parties (as identified by Owner) as loss payees for losses in excess of $1 million and (b) shall name Owner, the Financing Parties, the Power Purchaser, the Transmitting Utility and their assignees, subsidiaries and affiliates as additional insureds as their interests may appear. 14.17 NO LIMITATION OF LIABILITY. The required coverages referred to and set forth in this Article 14 shall in no way affect, nor are they intended as a limitation of, Contractor's liability with respect to its performance of the Services except as expressly provided elsewhere. 14.18 INSURANCE PRIMARY. All policies of insurance provided by Contractor pursuant to this Article 14 shall be written as primary and noncontributing with respect to any other similar coverage that Owner, the Financing Parties, the Power Purchaser, the Transmitting Utility and their assignees, subsidiaries and affiliates may carry. 101 ARTICLE 15 TERMINATION; SUSPENSION 15.1 SUSPENSION OR TERMINATION FOR OWNER'S CONVENIENCE. Owner may for its convenience terminate any part of the Services or all remaining Services at any time upon thirty (30) days' prior written notice to Contractor specifying the part of the Services to be terminated and the effective date of termination. Promptly upon receipt of such notice, Contractor shall stop performance of the terminated Services and shall promptly order and commence demobilization with regard to the terminated Services. Contractor shall continue to prosecute the part of the Services not terminated. In case of such partial termination, an equitable adjustment to one or more of the Contract Price, the Guaranteed Completion Dates, the Construction Progress Milestone Dates, the Payment and Milestone Schedule, the Project Schedule, the Performance Guarantees and, as appropriate, such other provisions of this Agreement which may be affected thereby shall be made by agreement of Owner and Contractor or otherwise pursuant to Article 12 or 21 hereof. In the event of termination by Owner under this Section 15.1 at any time prior to the Commencement Date, Owner shall pay to Contractor such amounts, if any, as are required pursuant to Section 2.2 hereof. In the event of termination by Owner under this Section 15.1 at any time on or after the Commencement Date, Owner shall pay to Contractor such amounts as are required pursuant to Section 4.4 hereof (PROVIDED that if such termination is only of part of the Services, the provisions of said Section 4.4 shall be applied only with respect to the terminated Services); PROVIDED that Contractor shall mitigate all damages or expenses to be borne by Owner under Section 4.4 hereof; and PROVIDED, FURTHER, that if Owner so requests, Contractor shall execute and deliver all documents and take all other steps, including legal assignments, as necessary to transfer to Owner (or to Owner's designee, which may be any other AES affiliate or any third party purchaser) all of Contractor's right, title and interest in and to all items procured by Contractor for the Project and all contractual rights of Contractor under all subcontracts, purchase orders, warranties, guarantees and other agreements for the Project, in each case in accordance with the provisions set forth in Section 4.4(a) and (b) hereof, as applicable. 15.1.1 OWNER'S RIGHT TO SUSPEND COMPLETION OF THE SERVICES. (a) Owner may elect to suspend completion of all or any part of the Services upon ten (10) days' prior written notice to Contractor (or, in emergency situations, upon such prior notice as circumstances permit) indicating (i) the portion of the Services the completion of which Owner has elected to defer; (ii) Owner's estimate of the duration of such suspension; and (iii) the effective date of such suspension of the Services. Upon receipt of and consistent with the effective date of such notice, Contractor shall stop performance of the Services which Owner has elected to defer and shall continue to complete performance of the balance of the Services. In the event of a suspension of the Services 102 pursuant to this Section 15.1.1, Owner shall (A) within thirty (30) days after receipt from Contractor of an invoice and such supporting documentation as Owner reasonably requires to verify the invoiced amounts, pay to Contractor the sum of (1) such amount, if any, of the unpaid Contract Price that is representative of the actual stage of completion of the Services being deferred that have been performed to date and not previously compensated for through Contract Price payments made through such date (as reasonably determined based upon the percentage completion of applicable milestones relating to such deferred work as set forth in the Payment and Milestone Schedule or as otherwise mutually and reasonably agreed upon by the Parties), plus (2) in the event and only to the extent appropriate based upon the duration and scope of the suspension, such reasonable demobilization costs incurred by Contractor as a result of such suspension, including any reasonable payments that Contractor is required to make to Subcontractors due to such suspension (PROVIDED that Contractor shall use all reasonable efforts to minimize such payments), and (B) authorize a Scope Change Order making equitable adjustments to one or more of the Contract Price, the Guaranteed Completion Dates, the Construction Progress Milestone Dates, the Payment and Milestone Schedule, the Project Schedule, the Performance Guarantees and such other provisions of this Agreement which may be affected thereby, as appropriate. Contractor shall use all reasonable efforts to mitigate expenses to be borne by Owner as a result of suspension of the Services pursuant to this Section 15.1.1. Contractor shall promptly resume the suspended portion of the Services upon receipt of a written notice from Owner authorizing reinstatement of such portion and specifying the effective date of resumption. (b) Notwithstanding anything to the contrary in this Agreement, in the event that (i) Owner desires to suspend completion of all the Services hereunder or any portion of the CTG Services for its convenience in accordance with Section 15.1.1(a) hereof, and (ii) despite its use of all reasonable efforts Contractor is unable to obtain a corresponding suspension under the CTG Subcontract (it being understood that Contractor has no right or power under the CTG Subcontract to require Siemens Westinghouse Power Corporation to accept a suspension thereunder), then Owner shall thereafter for the duration of such suspension pay to Contractor all amounts (other than any that are caused by Contractor's failure to perform its obligations thereunder) which become due and payable from Contractor under the CTG Subcontract on or before the corresponding payment date under the CTG Subcontract. In the event Owner elects to resume performance of the CTG Services hereunder, (i) its payment of such suspension period CTG-related payments (exclusive of any accrued interest paid thereon) shall be credited against the Contract Price, and (ii) the continued performance by Contractor and Siemens Westinghouse Power Corporation under the CTG Subcontract during such suspension period shall be taken into account in determining the appropriate equitable adjustments to be made to one or more of the Contract Price, the Guaranteed Completion 103 Dates, the Construction Progress Milestone Dates, the Payment and Milestone Schedule, the Project Schedule, the Performance Guarantees and any other provisions of this Agreement as a result of such suspension. 15.1.2 TERMINATION UPON EXTENDED SUSPENSION OF SERVICES. (a) If all or substantially all of the Services have been suspended by Owner for its convenience pursuant to Section 15.1.1 hereof, and the aggregate number of days of all such discretionary suspensions exceeds [*], Contractor may, at its option, at any time thereafter so long as such suspension continues, give written notice to Owner that Contractor desires to terminate the Agreement. Unless Owner orders Contractor to resume performance of the Services within fifteen (15) days after the receipt of such notice from Contractor, this Agreement shall terminate upon the end of such fifteenth (15th) day. In the event of such termination, the Contractor shall be paid a Termination Payment in accordance with Section 4.4 hereof as though the termination was made by Owner pursuant to Section 15.1 hereof. (b) If all or substantially all of the Services have been suspended as a result of Force Majeure Events hereunder and the aggregate number of days of all such suspensions exceeds [*], either Party may, at its option, at any time thereafter so long as such suspension continues, terminate this Agreement upon written notice to the other Party. In the event of such termination, Contractor shall be paid a Termination Payment in accordance with Section 4.4 hereof as though the termination was made by Owner pursuant to Section 15.1 hereof. 15.2 SUSPENSION OR TERMINATION BY CONTRACTOR UPON NON-PAYMENT BY OWNER. If Owner fails to pay to Contractor any payment as required hereunder and such failure continues for [*], then (a) Contractor may suspend its performance of the Services hereunder upon [*] prior written notice to Owner, which suspension may continue until such time as such payment (plus accrued interest thereon pursuant to Section 25.1 hereof) is paid to Contractor, and/or (b) if such payment has not been made prior to the commencement of a suspension by Contractor under clause (a) above, Contractor may terminate this Agreement upon [*] prior written notice to Owner, PROVIDED that such termination shall not become effective if such payment (plus accrued interest thereon pursuant to Section 25.1 hereof) is made to Contractor prior to the end of such notice period. In the event of such a suspension by Contractor pursuant to clause (a) above, an equitable adjustment to one or more of the Contract Price, the Guaranteed Completion Dates, the Construction Progress Milestone Dates, the Payment and Milestone Schedule and the Project Schedule, and, as appropriate, such other provisions of this Agreement that may be affected thereby, shall be made by agreement between Owner and Contractor or otherwise pursuant to Article 12 104 or 21 hereof. In the event of such a termination by Contractor pursuant to clause (b) above, Owner shall pay to Contractor such amounts as are required pursuant to Section 4.4 hereof; PROVIDED that Contractor shall use all reasonable efforts to mitigate all damages or expenses to be borne by Owner under Section 4.4 hereof. Notwithstanding the foregoing, Owner shall not be deemed to be in breach hereof, nor shall Contractor be entitled to suspend its performance hereunder or to terminate this Agreement, by reason of the withholding of any payment (or portion thereof) which is the subject of a bona fide dispute. 15.3 CONSEQUENCES OF TERMINATION. (a) Upon any termination pursuant to this Article 15 or Article 16 hereof, Owner may, PROVIDED that if such termination is pursuant to Article 15 hereof Contractor shall have been paid all amounts due and owing to it under this Agreement, at its option elect to have itself (or its designee, which may include any other affiliate of The AES Corporation or any third party purchaser) (i) assume responsibility for and take title to and possession of the Project and any or all work, materials or equipment remaining at the Facility Site, and (ii) succeed automatically (upon delivery of written notification by Owner (or its designee) to all third parties concerned), without the necessity of any further action by Contractor, to the interests of Contractor in any or all items procured by Contractor for the Project and in any and all contracts and subcontracts entered into between Contractor and any Subcontractor with respect to the Project, in each case as selected by Owner (or its designee). With respect to all such contracts and subcontracts that Owner (or its designee) so succeeds to, it shall be required, as between Contractor and Owner (or its designee), to compensate such Subcontractors only for compensation becoming due and payable to such Subcontractors under the terms of their respective contracts and subcontracts with Contractor for Services performed from and after the date Owner (or its designee) elects to succeed to the interests of Contractor in such contracts and subcontracts. All sums claimed by such Subcontractors to be due and owing for Services performed prior to such date shall constitute debts between Contractor and the affected Subcontractors, and Owner (or its designee) shall in no way be liable for such sums. Contractor shall include in all contracts and subcontracts entered into with Subcontractors a provision providing for the foregoing. (b) In the event of any termination hereof, Owner may, without prejudice to any other right or remedy it may have, at its option, finish the Services by whatever method Owner may deem expedient. If such termination was by Owner pursuant to Section 16.2 hereof, then, in addition to any Provisional Acceptance Late Completion Payments and any Performance Guarantee Payments due under Articles 7 and 8 hereof, Owner shall be entitled (i) to recover from Contractor, and Contractor shall pay to Owner upon demand, any costs reasonably incurred by Owner in completing the Services 105 (including without limitation any construction, professional services and financing costs) in the event and only to the extent such costs exceed the remaining unpaid portion of the Contract Price that would have been payable to Contractor hereunder to complete the Services if this Agreement had been fully performed, and [*]. In the case of such a termination by Owner pursuant to Section 16.2 hereof, Contractor shall not be entitled to any further payment hereunder, other than any amounts for Services duly performed in accordance with the standards of performance required under this Agreement prior to such termination; PROVIDED that any such amounts shall not be payable to Contractor unless and until Contractor has paid any and all amounts that are due or may become due from it to Owner hereunder (including without limitation any payments due under Section 16.2 hereof). (c) Notwithstanding anything to the contrary in this Agreement, in the event that either (i) Owner desires to terminate for its convenience pursuant to Section 15.1 hereof either all of the Services hereunder or that part of the Services involving Contractor's purchase of three (3) model 501F Econopac combustion turbine generators and associated equipment and services pursuant to the CTG Subcontract (the "CTG SERVICES") or (ii) this Agreement is terminated pursuant to Section 15.1.2 or 15.2 hereof (the effective date of such termination, the "TERMINATION DATE"), then, in either such case, Contractor shall assign and delegate to Owner, and Owner shall assume by way of an assignment and delegation from Contractor pursuant to documentation reasonably satisfactory to Owner, all of Contractor's outstanding rights, benefits, entitlements, duties, liabilities and obligations under the CTG Subcontract; PROVIDED, HOWEVER, that either (x) Owner shall not be obligated hereunder to assume any duty, liability or obligation, the responsibility for which accrued prior to the Termination Date (the "PRE-TERMINATION OBLIGATIONS"), and Contractor shall cause Siemens Westinghouse Power Corporation (or its successor or permitted assigns as seller under the CTG Subcontract) to acknowledge and agree to the assumption by Owner of all of Contractor's outstanding rights, benefits, entitlements, duties, liabilities and obligations under the CTG Subcontract, excluding the Pre-Termination Obligations, or (y) as a condition precedent to the assumption by Owner of all of Contractor's outstanding rights, benefits, entitlements, duties, liabilities and obligations under the CTG Subcontract, Owner may request, and, in such event, Contractor shall provide to Owner, an indemnity agreement from Contractor's parent, Raytheon Company, in form and substance reasonably acceptable to Owner, fully indemnifying Owner from and against any and all claims, liabilities, damages, costs and expenses, including attorneys' fees and legal costs, arising out of or in connection with the Pre-Termination Obligations; PROVIDED, FURTHER, that 106 (1) for all purposes of this Section 15.3(c), the Pre-Termination Obligations shall not include (and Owner shall assume) any payment obligation under the CTG Subcontract that was due from Contractor prior to the Termination Date but was withheld by Contractor as a result of Owner's withholding of the corresponding portion from any Scheduled Payment hereunder, unless such withholding by Owner was due to Contractor's failure to have properly performed its obligations under the CTG Subcontract and (2) if Contractor satisfied a payment obligation under the CTG Subcontract prior to the Termination Date and prior to its receipt of a corresponding payment from Owner, but does not receive reimbursement for such payment from Owner by a corresponding portion of a Scheduled Payment, Termination Payment or otherwise, then within thirty (30) days following the Termination Date Owner shall make such payment to Contractor (PROVIDED, HOWEVER, that Section 4.4 hereof sets forth the full amounts that may be due to Contractor pursuant to the terms thereof and in no event is any amount described in this Section 15.3(c) intended to supplement amounts described in Section 4.4 hereof). It shall be a condition precedent to Contractor's obligation to assign the CTG Subcontract hereunder, and such assignment shall not be effective, until (A) Contractor has received all payments which are due and payable to Contractor in accordance with this Section 15.3(c) and (B) Owner furnishes to Siemens Westinghouse Power Corporation a financial guaranty or other security reasonably acceptable to Siemens Westinghouse Power Corporation as may be required pursuant to the terms of the CTG Subcontract as a condition to such assignment. 15.4 SURVIVING OBLIGATIONS. Termination of this Agreement pursuant to this Article 15 or Article 16 hereof (a) shall not relieve Contractor or Owner of its obligations with respect to the confidentiality of the other Party's information as set forth in Article 19 hereof, (b) shall not relieve Contractor or Owner of any obligation hereunder which expressly or by implication survives termination hereof, and (c) except as otherwise provided in any provision of this Agreement expressly limiting the liability of either Party, shall not relieve either Party of any obligations or liabilities for loss or damage to the other Party arising out of or caused by acts or omissions of such Party prior to the effectiveness of such termination or arising out of such termination, and shall not relieve Contractor of its obligations as to portions of the Services already performed or as to obligations assumed by Contractor or Owner prior to the date of termination. For the avoidance of doubt, the warranty obligations of Contractor pursuant to Article 10 hereof with respect to all Services performed hereunder prior to the termination of this Agreement shall survive termination of this Agreement; PROVIDED that such warranty obligations shall be equitably modified by agreement of the Parties, or otherwise pursuant to Article 21 hereof, to account for any material adverse effect such termination may have on Contractor's ability to perform Services meeting the warranty and guarantee standards contained in Article 10 hereof. 107 ARTICLE 16 DEFAULT AND REMEDIES 16.1 CONTRACTOR'S DEFAULT. Contractor shall be immediately in default of its obligations hereunder upon the occurrence of any one or more of the following events, acts or conditions: (a) Contractor shall commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect, or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, or shall consent to any such relief or the appointment of or taking of possession by any such official in an involuntary case or other proceeding commenced against it, or shall generally not pay its debts as they become due, or shall make a general assignment for the benefit of creditors, or shall take any corporate action to authorize any of the foregoing; (b) An involuntary case or other proceeding shall be commenced against Contractor seeking liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, and such involuntary case or other proceeding shall remain undismissed or unstayed for a period of sixty (60) days; (c) Any representation or warranty made by Contractor under Article 24 hereof was false or materially misleading when made, and Contractor fails to remedy such false or materially misleading representation or warranty within thirty (30) days after Contractor receives a written notice from Owner with respect thereto; (d) Contractor assigns or transfers this Agreement (or any right or interest herein) in breach of Section 17.1 hereof without the express written consent of Owner; (e) Contractor (i) knowingly fails to maintain any insurance coverages required of it pursuant to Article 14 hereof, or (ii) otherwise fails to maintain and, within two business days of receiving actual knowledge of such failure, fails to correct its failure to maintain any such required insurance coverages; 108 (f) Contractor or any Subcontractor fails to comply with any provision of any Applicable Law or Applicable Permit, and such failure is not remedied within (i) ten (10) days after Contractor receives actual knowledge thereof, or (ii) such longer period as may be necessary for Contractor to cure such failure, not to exceed one hundred twenty (120) days, PROVIDED that Contractor diligently pursues the cure of such failure and such cure is effected in such a manner and within such time that such failure to comply could not reasonably be expected to have a material adverse effect on Owner or the Project; (g) The cessation (other than as expressly permitted by Article 15 hereof) or abandonment by Contractor of the performance of the Services, and Contractor fails to recommence the Services within ten (10) days after Contractor receives a written notice from Owner with respect thereto, unless due to an emergency (PROVIDED that Contractor shall have furnished Owner with a reasonable justification for its course of action within twenty four (24) hours of declaring the emergency in question, which course of action is consistent with the standards of performance required hereunder); (h) Contractor (1) fails to supply sufficient skilled workers or suitable materials or equipment to perform the Services, or (2) fails to make prompt payments when due to Subcontractors (unless such payment is the subject of a bona fide dispute, and PROVIDED that Contractor is in compliance with its requirements under Sections 2.1.22, 4.6 and 10.2 hereof) or for labor, materials or equipment, and does not remedy any such failure within thirty (30) days of receipt of written notice thereof from Owner (with respect to clause (1) above) or within thirty (30) days of receiving actual knowledge thereof (with respect to clause (2) above); (i) Either of the following events or conditions shall have occurred or exist: (1) On the date that is [*] after the Guaranteed Provisional Acceptance Date, (i) neither Provisional Acceptance nor Final Acceptance of the Facility shall have occurred, and (ii) Contractor shall have failed to provide Owner with a Plan relating thereto in accordance with Section 7.2.1 hereof; or (2) Final Acceptance of the Facility shall not have occurred by the Guaranteed Final Acceptance Date; and Contractor is not proceeding in 109 accordance with a Plan that has been approved and/or modified by Owner in accordance with Section 7.2.1(b) or 7.6.2(b) hereof; (j) Contractor (i) fails to achieve any Construction Progress Milestone, and (ii) fails, by the date that is [*] after such Construction Progress Milestone Date, to be proceeding in accordance with a Plan that has been approved and/or modified by Owner pursuant to Section 7.6.2 hereof; (k) Contractor fails to perform or observe in any material respect any provision of this Agreement not otherwise addressed in this Section 16.1 and fails to remedy any such failure within (i) thirty (30) days after Contractor receives a written notice from Owner with respect thereto, or (ii) such longer period as may be necessary for Contractor to cure such failure, PROVIDED that Contractor diligently pursues the cure of such failure and such cure is effected in such a manner and within such time that such failure to comply could not reasonably be expected to have a material adverse effect on Owner or the Project; or (l) The EPC Guaranty issued by Raytheon Corporation pursuant to Section 2.1.26 hereof is terminated or repudiated or an event of default (as defined therein) exists thereunder. 16.2 OWNER'S RIGHTS AND REMEDIES. In the event that Contractor is in default of its obligations hereunder pursuant to Section 16.1 hereof, Owner shall have any or all of the following rights and remedies [*] and Contractor shall have the following obligations: (a) Owner may, [*], terminate this Agreement in whole or in part immediately upon delivery of notice to Contractor. In case of such partial termination, an equitable adjustment (including the reduction and/or deletion of obligations of the Parties commensurate with the reduced scope Contractor shall have after taking into account such partial termination) to one or more of the Contract Price, the Guaranteed Completion Dates, the Construction Progress Milestone Dates, the Payment and Milestone Schedule, the Project Schedule, the Performance Guarantees and such other provisions of this Agreement which may be affected thereby, as appropriate, shall be made by agreement of Owner and Contractor or otherwise pursuant to Article 12 or 21 hereof. (b) If requested by Owner, Contractor shall withdraw from the Facility Site, shall assign to Owner such of Contractor's subcontracts as Owner may 110 request, and shall remove such materials, equipment, tools and instruments used by, and any debris and waste materials generated by, Contractor in the performance of the Services as Owner may direct, and Owner, without incurring any liability to Contractor (other than the obligation to return to Contractor at the completion of the Project such materials that are not consumed or incorporated into the Project, solely on an "as is, where is" basis without any representation or warranty of any kind whatsoever), may take possession of any and all designs, drawings, materials, equipment, tools, instruments, purchase orders, schedules and facilities of Contractor at the Facility Site that Owner deems necessary to complete the Services; (c) Owner, without incurring any liability to Contractor, shall have the right (either with or without the use of Contractor's materials, equipment, tools and instruments) to have the Services finished and to exercise any rights or remedies available to it hereunder or at law or in equity (including without limitation demanding the payments from Contractor pursuant to Section 15.3 hereof); and (d) Owner may [*], including seeking the recovery of damages subject to any applicable limitations on Owner's remedies and/or Contractor's obligations and liabilities that are expressly set forth in this Agreement. ARTICLE 17 ASSIGNMENT 17.1 CONSENT REQUIRED. (a) It is expressly understood and agreed that this Agreement is personal to Contractor and Owner, and that Contractor and Owner shall have no right, power or authority to assign or delegate any of their respective rights or obligations under this Agreement or any portion thereof, either voluntarily or involuntarily, or by operation of law. (For the avoidance of doubt, the Parties acknowledge and agree that Contractor's entry into subcontracts in accordance with the provisions of Article 3 hereof shall not release or qualify any of Contractor's obligations hereunder and shall not be deemed to constitute an assignment or delegation of any of Contractor's rights or obligations hereunder; PROVIDED, that Contractor does not grant or otherwise convey to any Subcontractor any lien or other encumbrance on Contractor's rights under this Agreement.) Notwithstanding the foregoing, Owner may, without Contractor's approval, (i) assign any or all of its rights under this Agreement as collateral security to the Financing Parties, and (ii) assign any or all of its rights under this 111 Agreement to any transferee of the Project or a substantial portion thereof, PROVIDED that such assignee has financial and operational capabilities that either are substantially similar to those of Owner at such time or otherwise are such that the assignment could not reasonably be expected to have a material adverse effect on Contractor's rights and obligations hereunder. (b) If in connection with any assignment permitted pursuant to clause (a)(i) of this Section 17.1 any Financing Party requests Contractor to consent in writing to such an assignment even though such consent is not required hereunder, Contractor shall do so promptly, with such acknowledgment and consent agreement to include such terms and conditions as are mutually and reasonably agreed upon by Contractor, Owner and the Financing Parties. If either Party reasonably determines or is reasonably advised that any further instruments are necessary or desirable to carry out the intent of this Section 17.1, the other Party will execute and deliver all such instruments and take any action reasonable to effectuate the intent of this Section 17.1. The Parties recognize that this Agreement is subject to review by financial institutions for purposes of the project financing of the Project. At Owner's request, Contractor shall provide to any Financing Party a certificate from Contractor and/or an opinion of counsel addressed to any such Financing Party concerning such matters as such Financing Party reasonably requests from Contractor, including that (v) Contractor is duly organized, validly existing and in good standing under the laws of the state or commonwealth of its formation or incorporation, as the case may be, and is qualified to do business in the State of New Jersey, (w) the execution, delivery and performance of this Agreement is within the power and authority of Contractor and this Agreement is not in conflict with its organizational documents or any agreement to which Contractor is a party or by which it is bound or affected, (x) there is no law, rule or regulation, nor is there any judgment, decree or order of any court or governmental entity binding on Contractor which would be contravened by the execution, delivery, performance or enforcement of the Agreement, (y) no consent, approval, authorization, order, registration or qualification under any Applicable Law is required for the execution, delivery or performance by the Contractor of the Agreement, except those that have already been obtained and are in full force and effect or those that can be obtained in the ordinary course of business upon due application therefor (and there is no reason to believe that they will not be so obtained), and (z) the Agreement is a legal, valid and binding obligation enforceable against Contractor in accordance with its terms, subject to usual and customary qualifications. 17.2 SUCCESSORS AND ASSIGNS. All of the rights, benefits, duties, liabilities and obligations of the Parties hereto shall inure to the benefit of and be binding upon their respective permitted successors and permitted assigns. 112 ARTICLE 18 DESIGN DOCUMENTS 18.1 OWNER REVIEW. It is expressly understood and agreed that the Design Documents and other related design information which are prepared in connection with the Services and which have been identified in Appendix P hereto as being subject to the review, comment and/or approval of Owner (such design information together with the Design Documents, the "DOCUMENTS FOR APPROVAL"), shall be made available to Owner and (commencing on the Financial Closing Date) the Independent Engineer for their review, comment and/or approval, as the case may be, in order to monitor compliance with this Agreement as such documents are prepared and completed. Owner and, if applicable, the Independent Engineer shall review the Documents for Approval as set forth in Appendix P hereto within twenty (20) days of receipt thereof (or such other period of time as may be specified in Appendix P with respect thereto, as the case may be). In the event Owner or the Independent Engineer, as applicable, fails to provide notice of approval or disapproval of the Documents for Approval within such period, and such failure continues for twenty-four (24) hours after Owner's receipt of a written request from Contractor (which request shall expressly state that it is being delivered pursuant to this Section 18.1), then, in the event and only to the extent that Contractor was delayed in the performance of the Services as a direct result thereof despite Contractor's reasonable efforts to avoid or mitigate such delay, an equitable adjustment to one or more of the Contract Price, the Guaranteed Completion Dates, the Construction Progress Milestone Dates, the Payment and Milestone Schedule and the Project Schedule, and, as appropriate, such other provisions of this Agreement that may be affected thereby, shall be made by agreement of Owner and Contractor or otherwise pursuant to Article 12 or 21 hereof. 18.2 REVIEW NOT RELEASE OF OBLIGATIONS. Review, comment and/or approval by Owner or the Independent Engineer of any documents or submittals that Contractor is required to submit to Owner or the Independent Engineer hereunder for its review, comment and/or approval (including without limitation the Documents for Approval pursuant to Section 18.1 hereof) shall not relieve or release Contractor from any of its duties, obligations or liabilities provided for under the terms of this Agreement. Prior to the Commencement Date, the Parties shall mutually agree upon and set forth in Appendix P hereto the timing requirements for submittal, review, approval and return of such Documents for Approval. 18.3 FINAL DOCUMENTS. Within ninety (90) days after the occurrence of the earlier to occur of Provisional Acceptance and Final Acceptance, Contractor shall furnish Owner with the Record design documents listed in Appendix P hereto, in form 113 and substance reasonably satisfactory to Owner, reflecting the Facility as actually constructed, including without limitation a "record" survey illustrating the boundaries of the Facility Site, and the established building setback lines, if any. 18.4 OWNERSHIP. Contractor agrees that all Design Documents and other documents prepared by Contractor in the performance of the Services shall be the sole and exclusive property of Owner, except that Contractor shall retain the right to utilize such documents for reference in its general practice. Contractor agrees that all such documents, as well as any drawings, tracings, specifications, calculations, memoranda, data, notes and other materials which are supplied by Owner and come into the possession of Contractor, shall be used solely with respect to this Project and shall, except for Contractor's file copy, be delivered to Owner at the first to occur of Provisional Acceptance, Final Acceptance and termination of the Services. ARTICLE 19 CONFIDENTIAL INFORMATION 19.1 CONFIDENTIALITY. Each Party agrees to hold in confidence for a period commencing with the date hereof and ending five years from the date of Project Completion, except as may be necessary to perform its obligations hereunder, any information supplied to it by the other Party and designated in writing as confidential. Contractor further agrees to require its Subcontractors to enter into appropriate non-disclosure agreements relative to such confidential information as may be communicated to them by Contractor or Owner. The provisions of this Section 19.1 shall not apply to information within any one of the following categories: (a) information which was in the public domain prior to receipt thereof from the other Party or which subsequently becomes part of the public domain by publication or otherwise, except by the receiving Party's wrongful act; (b) information which the receiving Party can show was in its possession prior to its receipt thereof from the other Party; (c) information received by a Party from a third party without a confidentiality obligation with respect thereto; (d) information which the receiving Party developed independently; or (e) information which a Party is required by law to disclose; PROVIDED, HOWEVER, that prior to making any such disclosure under clause (e) of this Section 19.1, such disclosing Party shall: (i) provide the other Party with timely advance written notice of the confidential information requested by such government authority and such disclosing Party's intent to so disclose; (ii) minimize the amount of confidential information to be provided consonant with the interests of the non-disclosing Party and the requirements of the government authority involved; and (iii) at the request and expense of the non-disclosing Party make every reasonable effort (which shall include, to the extent possible, 114 participation by the non-disclosing Party in discussions with the government authority involved) to secure confidential treatment and minimization of the confidential information to be provided. Neither Party shall publish the terms and conditions of this Agreement or Project technical information, unless the other Party provides its express prior written consent thereto; PROVIDED, HOWEVER, that (x) Owner shall be permitted to disclose such terms and provisions to the Independent Engineer, the Financing Parties, the Power Purchaser and the Transmitting Utility to the extent such disclosure is required to obtain financing for the Facility or to perform its obligations under the Power Purchase Agreement or the Transmission Interconnection Agreement or, upon the termination of this Agreement pursuant to Section 16.2 hereof, in the event and only to the extent Owner reasonably deems such disclosure is necessary to complete the Services, and (y) Contractor shall be permitted to disclose such terms and provisions to its Subcontractors in the event and only to the extent such disclosure is reasonably necessary to provide for the performance of the Services hereunder; PROVIDED FURTHER, HOWEVER, that each such recipient shall agree in writing that such information will be subject to the confidentiality requirements of this Section 19.1. Notwithstanding any other provision of this Section 19.1, Owner shall be permitted to summarize the material terms and conditions of this Agreement for purposes of including such summary in any offering document associated with the issuance of debt by the Owner for the purpose of obtaining financing for the Facility, which offering document will be made available only to the Financing Parties or to prospective purchasers of such debt ("OFFEREES"); PROVIDED, HOWEVER, that prior to the distribution of such summary, Owner shall provide Contractor a reasonable period of time (not to exceed ten (10) days) to review and provide comments thereon and Owner shall give due consideration to such comments in finalizing the summary in light of both Contractor's interest in protecting its proprietary information and Owner's disclosure obligations under applicable securities laws, and the Parties shall attempt in good faith to resolve any disagreement concerning the information to be included in such summary. Contractor recognizes that to obtain financing for the Project, Owner may be requested to provide a copy of this Agreement to an Offeree and Owner agrees that, prior to providing a copy of this Agreement to any such Offeree, Owner shall use its commercially reasonable efforts to have such Offeree execute a confidentiality agreement consistent with the terms of this Section 19.1. In the event that Owner is unable to secure such a confidentiality agreement from such Offeree, Owner shall not provide a copy of this Agreement to such Offeree (but may make a summary of the material terms and conditions of this Agreement available to such Offeree in accordance with the provisions of this Section 19.1). Contractor further recognizes that in the event that Owner files a registration statement with the Securities and Exchange Commission (including any replacement or successor agency thereof, the "SEC") in respect of any debt offering, it will be required to submit a copy of this Agreement to the SEC. In the event that this Agreement is submitted to the SEC in accordance with SEC rules, 115 Contractor may designate portions of this Agreement with respect to which Contractor wishes Owner to obtain confidential treatment in any filing with the SEC, and Owner shall provide Contractor a reasonable opportunity (not to exceed ten (10) days) prior to such submission to deliver such designations to Owner, accompanied by a written explanation of such designations. Owner shall comply with Contractor's designations regarding confidential treatment in connection with any such filing, PROVIDED that Contractor recognizes that any decision regarding the confidential treatment of any portion of this Agreement shall be made by the SEC in its sole discretion and Owner (provided that Owner has complied with the provisions of this Section 19.1) shall have no obligation under this Section 19.1 with respect to any portion of this Agreement for which the SEC elects not to grant confidential treatment. No Person shall be permitted access to the Facility or the Facility Site, except as provided in this Agreement or as otherwise agreed by the Parties. 19.2 PUBLICITY RELEASES. Contractor shall not (other than in Contractor's internal publications and corporate resumes), nor shall it permit any Subcontractor to, issue any press or publicity release or any advertisement, or publish or otherwise disclose any photograph or other information, concerning this Agreement or the Project without the express prior written consent of Owner, which consent shall not be unreasonably withheld or delayed. ARTICLE 20 INSPECTION 20.1 PROJECT INSPECTION. Contractor acknowledges and agrees that, prior to the execution of this Agreement, Contractor: (a) has made a complete and careful examination of the Facility Site and the surrounding areas, the Design Documents and the drawings and specifications and other information set forth in Appendix A hereto; (b) has made a complete and careful geotechnical survey and analysis of the nature, character and condition of the soil and terrain of and under the Facility Site in order to determine any material difficulties, hazards or conditions on or about or under the Facility Site (including without limitation topography (but only as identified in the documents referenced in clause (e) of Section 12.6.2 hereof and shown on the drawing contained in Appendix A hereto entitled "Site Plan Existing Topography," drawing number 78812-E-120001, dated September 12 1999) and ground surface conditions, subsurface geology and conditions, wetlands (but only to the extent identified in the documents referenced in 116 clause (c) of Section 12.6.2 hereof) and the location of any underground utilities (including as such conditions will be affected by Owner's implementation, in accordance with the terms thereof, of the Approved Remediation Plan, but excluding any Hazardous Materials existing on or about or under the Facility Site that were not specifically identified in and covered by the Baseline Environmental Site Assessment)); (c) has made a complete and careful examination to determine the difficulties and hazards incident to the performance of the Services, including without limitation (i) the location of the Project, (ii) the condition of the Facility Site and the surrounding areas (including as such conditions will be affected by Owner's implementation of the Approved Remediation Plan in accordance with the terms thereof), (iii) the proximity of the Project to adjacent facilities and structures, (iv) the conditions of the roads, waterways, bridges, railroads, airports and other transportation facilities in the vicinity of the Facility Site, including the conditions affecting shipping and transportation, access, disposal, handling and storage of materials, (v) the labor conditions in the region of the Facility Site, (vi) performance in accordance with Applicable Laws, Applicable Permits, the Electrical Interconnection Requirements, the PPA Operating Requirements (as in effect on the date of execution of this Agreement), the Guaranteed Emissions Limits and Real Estate Rights, (vii) the local weather conditions based upon previous weather data, and (viii) all other matters that might affect Contractor's performance hereunder or the construction of the Facility (but excluding any Hazardous Materials existing on or about or under the Facility Site that were not specifically identified in and covered by the Baseline Environmental Site Assessment); and (d) has determined to Contractor's satisfaction the nature and extent of such difficulties, hazards and conditions. 20.2 NO RELIEF FOR DIFFERING CONDITIONS. (a) Contractor specifically acknowledges and accepts the risk of mistake or error relating to all matters within the scope of Section 20.1 hereof (PROVIDED that for the avoidance of doubt the Parties hereby acknowledge and agree that this Article 20 does not impose on Contractor the risk of mistake or error in the documentation attached hereto constituting the Electrical Interconnection Requirements, the PPA Operating Requirements or the Real Estate Rights), and agrees that, except as expressly set forth in Section 20.3 hereof, no adjustment shall be made to any of the Contract Price, the Guaranteed Completion Dates, the Construction Progress Milestone Dates, the Payment and Milestone Schedule, the Performance Guarantees, the Project Schedule or any other provisions of this Agreement 117 which may be affected thereby should any difficulties, hazards or conditions on, about or under the Facility Site be different from or in addition to those identified by Contractor through its inspections and examinations referenced in Section 20.1 hereof, except in the event and only to the extent directly caused by any archaeological or other manmade subsurface condition that was not known to Contractor prior to its execution of this Agreement and is not a condition which would have been identified by a contractor exercising the degree of skill, diligence, prudence and foresight regularly exercised by a skilled and experienced professional contractor in Contractor's position. In the event and only to the extent Contractor is delayed or incurs costs or expenses as a direct result of any such unknown archaeological or other manmade subsurface condition despite Contractor's reasonable efforts to avoid or mitigate such delay, costs or expenses, Contractor shall be entitled to a Scope Change hereunder; PROVIDED, HOWEVER, that Contractor shall not be entitled to a Scope Change in the event and only to the extent Contractor fails to act reasonably under the prevailing conditions upon discovering such unknown archaeological or manmade subsurface condition. (b) Contractor further agrees that, other than with respect to (i) unknown archaeological or other manmade subsurface conditions covered by the preceding sentence (and not excluded by the proviso thereto), and (ii) any Hazardous Materials existing on or about or under the Facility Site (A) that were not specifically identified in and covered by the Baseline Environmental Site Assessment or (B) that were so identified and covered by the Baseline Environmental Site Assessment and were also specifically identified in and covered by the Approved Remediation Plan, in which event they shall also be excluded by this clause (ii) (except in the event and only to the extent that such Hazardous Materials had previously been remediated by Owner in accordance with the terms of said plan and are subsequently disturbed by any Contractor Responsible Party's performance hereunder), no claim by the Contractor of any nature whatsoever, whether based in contract, in tort (including negligence and strict liability), warranty or otherwise, will be allowed on the ground of any misunderstanding or misapprehension or other error or mistake in respect of the matters referred to in Section 20.1 hereof or on the ground of any allegation or fact that incorrect or insufficient information with respect to the matters referred to in Section 20.1 hereof (other than with respect to any material inaccuracy or omission in the documentation attached hereto constituting the Electrical Interconnection Requirements, the PPA Operating Requirements, the Real Estate Rights or the Approved Remediation Plan or the documentation referred to in clauses (b), (c), (d) or (e) of Section 12.6.2 hereof provided to Contractor by Owner prior to the date thereof) was given to it by any Person whether or not such Person is an Owner Responsible Party or of any failure on Contractor's part to obtain correct and sufficient information, nor shall the Contractor be relieved from any risks or obligations imposed on or undertaken by it under the Agreement on any such ground or on the ground that it did not or could 118 not foresee any such matter which may in fact affect or have affected the performance of the Services. 20.3 OWNER'S ENVIRONMENTAL SITE ASSESSMENT. Prior to execution hereof, Owner delivered to Contractor for its review and analysis the Baseline Environmental Site Assessment, and Contractor hereby acknowledges and agrees that, assuming the Approved Remediation Plan is implemented by Owner in accordance with the terms thereof and such implementation has the effect of remediating the Hazardous Materials as specifically intended and set forth in the Approved Remediation Plan, no adjustment shall be made to any of the Contract Price, the Guaranteed Completion Dates, the Construction Progress Milestone Dates, the Payment and Milestone Schedule or any other provision of this Agreement as a result of or in connection with any Hazardous Materials specifically identified in and covered by any of such Baseline Environmental Site Assessment (unless such Hazardous Materials were also specifically identified in and covered by the Approved Remediation Plan, in which event they shall not be covered by this sentence except in the event and only to the extent that such Hazardous Materials are subsequently disturbed by any Contractor Responsible Party's performance hereunder). In addition, Owner shall have the right, in its sole discretion, to prepare and deliver to Contractor after the execution of this Agreement, but no later than thirty (30) days prior to the Commencement Date, an additional environmental assessment report of the Facility Site, which report shall also reflect the provisions of any Approved Remediation Plan delivered to Contractor prior to the execution hereof. If any such additional environmental report reveals any material environmental difficulties, hazards or conditions at or near or under the Facility Site incident to the performance of the Services that are not to be remediated by Owner pursuant to the terms of the Approved Remediation Plan delivered by Owner to Contractor prior to the execution hereof and were not specifically identified in and covered by the Baseline Environmental Site Assessment, then Contractor shall have the right, to be exercised no later than thirty (30) days after receipt of such report, to: (i) request a Scope Change providing for such equitable adjustments (if any) in one or more of the Contract Price, the Guaranteed Completion Dates, the Construction Progress Milestone Dates, the Payment and Milestone Schedule, the Performance Guarantees, the Project Schedule and, as appropriate, such other provisions of this Agreement which may be affected thereby, in each case as may be reasonably warranted by such material environmental difficulties, hazards or conditions, or (ii) refuse to accept responsibility for handling such material environmental difficulties, hazards or conditions if Contractor determines, in its reasonable discretion, that the potential liabilities and difficulties associated therewith would materially and adversely affect the risks to Contractor in performing the Services hereunder, in either of which events Owner shall have the option of (x) granting such a Scope Change on terms mutually and reasonably agreeable to Owner and Contractor (but 119 only in the circumstances under clause (i) above), (y) contracting directly with a third party contractor to perform any such work relating to such material environmental differences or additions PROVIDED that any such work shall be performed in such a manner as not to adversely affect any Contractor Responsible Party's performance of the Services in any material way, or (z) terminating this Agreement without any liability of either Party to the other, subject to the provisions of Section 15.1 hereof. ARTICLE 21 DISPUTE RESOLUTION 21.1 DISPUTE RESOLUTION. In the event a dispute arises between Owner and Contractor regarding the application or interpretation of any provision of this Agreement, the aggrieved Party shall promptly give notice in writing to the other Party invoking the provisions of this Section 21.1 and the Parties shall negotiate in good faith and attempt to resolve such dispute. If the Parties fail to resolve the dispute within thirty (30) days after delivery of such notice, each Party shall have the right to require, by written notice to the other Party containing a brief description of the dispute, that each Party nominate and have a senior officer of its management meet with the other Party's nominated senior officer at the Facility Site, or at any other mutually agreed location, within fifteen (15) days of such request, in order to attempt to resolve the dispute. Should the Parties be unable to resolve the dispute to their mutual satisfaction within fifteen (15) days after such meeting, each Party shall have the right to pursue any and all remedies available to it hereunder or available to it at law or in equity; PROVIDED, that if such unresolved dispute involves a sum not to exceed [*], then either Party may serve upon the other a demand that such matter be arbitrated (including a brief description of said dispute or disputes), in which case the same shall be resolved by arbitration conducted by three (3) arbitrators in accordance with the rules of the American Arbitration Association (the "AAA"). Concurrently with making such a demand, the demanding Party shall specify the name and address of an arbitrator selected by it. The other Party shall within twenty (20) days of receipt of the arbitration demand select its arbitrator; PROVIDED, that if it fails to do so, the demanding Party may request the AAA to appoint within fifteen (15) days a member in good standing of such association as the arbitrator for the other Party. The two (2) arbitrators thus selected shall within fifteen (15) days of the selection of the second (2nd) arbitrator select the third (3rd) arbitrator; failing to do so, they shall request the AAA promptly to appoint a member in good standing of such association as the third arbitrator. The decision of any two (2) of the three (3) arbitrators on any issue shall be final. Unless the Parties otherwise agree, the arbitration shall be conducted in the English language and shall be held in New York, New York. The Parties shall proceed with the arbitration expeditiously and shall use best 120 efforts to conclude all proceedings thereunder, including any hearing, in order that a decision may be rendered within one hundred twenty (120) days from the filing of the demand for arbitration by the initiating Party. The award of the arbitrators will be final and binding on both Parties and may be enforced in any court having jurisdiction over the Party against which enforcement is sought. Each Party shall bear its own expenses, including but not limited to counsel fees, except that all expenses of the arbitration shall be apportioned in the award of the arbitrators based upon the respective merit of the positions of the Parties. The provisions of this Section 21.1 shall survive the termination or expiration of this Agreement. 21.1.1 INDEPENDENT EXPERT. If any dispute hereunder involves technical issues (including, without limitation, as to the adequacy of any Plan submitted by Contractor under Section 7.2.1 or 7.6.2 hereof), either Party could request that such matter be referred to a mutually acceptable independent expert for resolution in an expedited manner pursuant to procedures and timing to be mutually agreed upon by the Parties; PROVIDED that if the other Party does not agree to such request or the Parties are unable to reach an agreement on such an independent expert or such governing procedures (in each case in the sole discretion of each Party) in any case within thirty (30) days after the initial request, then either Party may require that the dispute be submitted to resolution pursuant to Section 21.1 hereof. The findings of any such independent expert with respect to any technical issues so presented to it for resolution hereunder shall be binding upon the Parties. 21.2 PERFORMANCE DURING DISPUTE. Notwithstanding the existence of a dispute between Owner and Contractor and regardless of whether such dispute is the subject of dispute resolution pursuant to Section 21.1 hereof, Contractor shall not be entitled to suspend or otherwise delay the performance of the Services; PROVIDED, HOWEVER, that all undisputed amounts, and all undisputed portions of disputed amounts, shall be paid to Contractor when due and payable pursuant to the terms of this Agreement. ARTICLE 22 COST RECORDS; AUDITS 22.1 MAINTENANCE OF RECORDS. Contractor shall maintain fiscal records and books of account pertaining to the Project in accordance with U.S. generally accepted accounting principles consistently applied. 22.2 INSPECTION OF BOOKS, RECORDS AND AUDIT RIGHTS. Contractor covenants and agrees to keep and maintain full, complete and detailed records of all of its 121 costs and allowances incurred in connection with Scope Changes priced at cost plus fee. Contractor authorizes independent third parties designated by Owner and subject to Contractor's approval (not to be unreasonably withheld or delayed) to inspect and audit, during business hours, all such records. Such records, books and accounts shall be preserved by Contractor and shall be available for audit for a period of three (3) years after Project Completion, at no additional cost to Owner. 22.3 QUALITY AUDITS. Owner may perform periodic audits of the Project, or of documents related to the Project, in the event and only to the extent such audits are necessary (in Owner's reasonable judgment) to verify the application of the Quality Assurance Plan set forth in Appendix K hereto and its results. In the event that, as a result of an audit, Owner detects a failure to adhere to or to properly apply such Quality Assurance Plan, upon the receipt of notice thereof from Owner, Contractor shall take all actions necessary to correct such failure. ARTICLE 23 INDEPENDENT CONTRACTOR 23.1 CONTRACTOR AS INDEPENDENT CONTRACTOR. Contractor shall be an independent contractor with respect to the Project, each part thereof and the Services, and neither Contractor nor its Subcontractors nor the employees of either shall be deemed to be agents, representatives, employees or servants of Owner in the performance of the Services, or any part thereof, or in any manner dealt with herein. Contractor covenants and agrees that in the performance of the Services, the Contractor Responsible Parties shall not perform any act or make any representation to any Person to the effect that Contractor, or any of its agents, representatives, Subcontractors or other Contractor Responsible Parties, is the agent or agents of Owner. ARTICLE 24 REPRESENTATIONS AND WARRANTIES 24.1 REPRESENTATIONS AND WARRANTIES OF CONTRACTOR. Contractor represents and warrants to Owner that: 24.1.1 ORGANIZATION AND QUALIFICATION. Contractor is a corporation duly organized, validly existing and in good standing under the laws of Delaware, has the lawful power to engage in the business it presently conducts and contemplates conducting, and is duly licensed or qualified and in good standing as a corporation in 122 each jurisdiction wherein the nature of the business transacted by it makes such licensing or qualification necessary. 24.1.2 POWER AND AUTHORITY. Contractor has the power to enter into this Agreement and to perform its obligations hereunder and all such actions have been duly authorized by all necessary proceedings on its part. 24.1.3 NO CONFLICT. The execution, delivery and performance of this Agreement will not conflict with, result in the breach of, constitute a default under or accelerate performance required by any of the terms of the organizational documents of Contractor or any Applicable Laws or any covenant, agreement, understanding, decree or order to which Contractor is a party or by which Contractor or any of its properties or assets is bound or affected. 24.1.4 VALIDITY AND BINDING EFFECT; GOVERNMENTAL APPROVALS. This Agreement has been duly and validly executed and delivered by Contractor. This Agreement constitutes a legal, valid and binding obligation of Contractor, enforceable in accordance with its terms, except to the extent that its enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the rights of creditors generally or by general principles of equity. To the best knowledge of Contractor after due inquiry, no consent, approval, authorization, order, registration or qualification by or with any governmental or public body or authority (other than the Building Permits listed in Appendix F hereto) is required under Applicable Law in connection with the authorization, execution, delivery and carrying out of the terms of this Agreement by Contractor, and each such Building Permit either: (i) is not yet required, and Contractor has no reason to believe that the same will not be readily obtainable in the ordinary course of business upon due application therefor, or (ii) has been duly obtained and is in full force and effect. 24.1.5 LITIGATION. There are no actions, suits, proceedings or investigations pending or, to the best knowledge of Contractor or its officers after due inquiry, threatened against it at law or in equity before any court or before any federal, commonwealth, state, municipal or other governmental department, commission, board, agency or instrumentality, whether or not covered by insurance, which individually or in the aggregate could reasonably be anticipated to result in any material impairment of Contractor's ability to perform its obligations under this Agreement, other than those that have been disclosed to Owner in writing prior to the execution hereof. Neither Contractor nor any of its officers has knowledge of any violation or default with respect to any order, writ, injunction or any decree of any court or any Federal, commonwealth, state, municipal or other governmental department, commission, board, agency or 123 instrumentality which could reasonably be anticipated to result in any such material impairment, other than those that have been disclosed to Owner in writing prior to the execution hereof. 24.1.6 PATENTS, LICENSES, FRANCHISES. Contractor owns or possesses, or, with respect to those rights that customarily are not obtained by a reasonably prudent contractor until a later stage of construction, will obtain in the ordinary course of business and without causing any delay in the Services, all the patents, trademarks, service marks, tradenames, copyrights, licenses, franchises, permits and other rights with respect to the foregoing necessary to perform the Services and to carry on its business as presently conducted and presently planned to be conducted without conflict with the rights of others. 24.1.7 COMPLIANCE WITH LAWS. Contractor has complied with all Applicable Laws such that it has not been subject to any fines, penalties, injunctive relief or criminal liabilities which in the aggregate have materially adversely affected or could reasonably be anticipated to materially adversely affect the business operations or financial condition of Contractor or its ability to perform the Services, other than those that have been disclosed to Owner in writing prior to the execution hereof. 24.1.8 PROFESSIONAL SKILLS. Contractor has all the required skills and capacity necessary to perform, and shall diligently perform, the Services in a timely and professional manner, utilizing sound engineering principles, project management procedures and supervisory procedures, all in accordance with Prudent Utility Practices and the standards of performance required hereunder. 24.1.9 DISCLOSURE. No representation or warranty by Contractor contained herein or in any other document furnished by Contractor to Owner contains or will contain any untrue statement of material fact or omits or will omit to state a material fact necessary to make such representation or warranty not misleading in light of the circumstances under which it was made. 24.2 REPRESENTATIONS AND WARRANTIES OF OWNER. Owner represents and warrants to Contractor that: 24.2.1 ORGANIZATION AND QUALIFICATION. Owner is a limited liability company duly organized, validly existing and in good standing under the laws of New Jersey, has the lawful power to engage in the business it presently conducts and contemplates conducting, and is duly licensed or qualified and in good standing as a corporation in each jurisdiction wherein the nature of the business transacted by it makes such licensing or qualification necessary. 124 24.2.2 POWER AND AUTHORITY. Owner has the power to enter into this Agreement and to perform its obligations hereunder and all such actions have been duly authorized by all necessary proceedings on its part. 24.2.3 NO CONFLICT. The execution, delivery and performance of this Agreement will not conflict with, result in the breach of, constitute a default under or accelerate performance required by any of the terms of the organizational documents of Owner or any Applicable Laws or any covenant, agreement, understanding, decree or order to which Owner is a party or by which Owner or any of its properties or assets is bound or affected. 24.2.4 VALIDITY AND BINDING EFFECT; GOVERNMENTAL APPROVALS. This Agreement has been duly and validly executed and delivered by Owner. This Agreement constitutes a legal, valid and binding obligation of Owner, enforceable in accordance with its terms, except to the extent that its enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the rights of creditors generally or by general principles of equity. To the best knowledge of Owner after due inquiry, no authorization, approval, exemption or consent by any governmental or public body or authority (other than the Applicable Permits listed in Appendix F hereto) is required in connection with the authorization, execution, delivery and carrying out of the terms of this Agreement by Owner. 24.2.5 LITIGATION. There are no actions, suits, proceedings or investigations pending or, to the best knowledge of Owner or its officers after due inquiry, threatened against it at law or in equity before any court or before any federal, state, municipal or other governmental department, commission, board, agency or instrumentality, whether or not covered by insurance, which individually or in the aggregate could reasonably be anticipated to result in any material impairment of Owner's ability to perform its obligations under this Agreement, other than those that have been disclosed in writing to Contractor prior to the execution hereof. Neither Owner nor any of its officers has knowledge of any violation or default with respect to any order, writ, injunction or any decree of any court or any federal, commonwealth, state, municipal or other governmental department, commission, board, agency or instrumentality which could reasonably be anticipated to result in any such material impairment, other than those that have been disclosed in writing to Contractor prior to the execution hereof. 125 24.2.6 COMPLIANCE WITH LAWS. Owner has complied with all Applicable Laws such that it has not been subject to any fines, penalties, injunctive relief or criminal liabilities which in the aggregate have materially adversely affected or could reasonably be anticipated to materially adversely affect the business operations or financial condition of Owner, other than those that have been disclosed in writing to Contractor prior to the execution hereof. 24.2.7 DISCLOSURE. No representation or warranty by Owner contained herein or in any other document furnished by Owner to Contractor contains or will contain any untrue statement of material fact or omits or will omit to state a material fact necessary to make such representation or warranty not misleading in light of the circumstances under which it was made. ARTICLE 25 MISCELLANEOUS 25.1 PAST DUE AMOUNTS. Any amount owed to either Party hereunder which is not paid by the owing Party [*] after the date such amount is originally due under this Agreement shall accrue interest each day such amount is not paid at the lesser of (a) an annual rate equal to [*], and (b) the maximum rate permitted by Applicable Laws. 25.2 DELAY NOT WAIVER. It is understood and agreed that any delay, waiver or omission by Owner or Contractor to exercise any right or power arising from any breach or default by Contractor or Owner in any of the terms, provisions or covenants of this Agreement shall not be construed to be a waiver by Owner or Contractor of any subsequent breach or default of the same or other terms, provisions or covenants on the part of Contractor or Owner. 25.3 NO SET-OFF, DEDUCTION OR COUNTERCLAIM BY CONTRACTOR. Any amounts due from Contractor to Owner under this Agreement shall not be subject to any reduction for any set-off, deduction, counterclaim or otherwise based upon any claim against Owner. Neither Party shall assert any claim it may have by reason of the other Party's default under this Agreement as a defense to performance of its obligations under any other agreement with that Party or any of its affiliates, nor shall either Party assert any claim it may have by reason of the other Party's default under any other agreement 126 with that Party or any of its affiliates as a defense to performance of its obligations under this Agreement. 25.4 CHOICE OF LAW. This Agreement shall in all respects be governed by and construed in accordance with the laws of the State of New York, including with respect to all matters of construction, validity and performance, without giving effect to any choice of law rules thereof which may direct the application of the laws of another jurisdiction. 25.5 SEVERABILITY. In the event that any of the provisions, or portions or applications thereof of this Agreement are held to be unenforceable or invalid by any court of competent jurisdiction, Owner and Contractor shall negotiate an equitable adjustment in the provisions of this Agreement with a view toward effecting the purpose of this Agreement, and the validity and enforceability of the remaining provisions, or portions or applications thereof, shall not be affected thereby. 25.6 NOTICE. Any notice required to be given by Owner to Contractor hereunder respecting breach, consent to settlement of claims, termination or indemnification, shall be in writing and shall be addressed to: Raytheon Engineers & Constructors, Inc. 510 Carnegie Center Princeton, NJ 08540 Attention: Kevin T. Colby Telecopy #: (609) 720-2980 with a copy to: Raytheon Engineers & Constructors, Inc. 510 Carnegie Center Princeton, NJ 08540 Attention: J. Jeffry Brightman Telecopy #: (609) 720-3303 127 and a copy to: Raytheon Company 141 Spring Street Lexington, Massachusetts 02421-9107 Attention: General Counsel Telecopy #: 781-860-2924 Any notice required to be given by Contractor to Owner hereunder respecting breach, consent to settlement of claims, termination or indemnification, shall be in writing and shall be addressed to: AES Red Oak, LLC 1001 North 19th Street Arlington, Virginia 22209 Attention: Bart Rossi Telecopy #: (703) 528-4510 with a copy to: AES Red Oak, LLC 1001 North 19th Street Arlington, Virginia 22209 Attention: John Ruggirello Telecopy #: (703) 528-4510 All other notices required or permitted to be given by either Party hereunder shall be in accordance with the requirements of the Project Procedures Manual. 25.6.1 DELIVERY. All notices under Section 25.6 hereof shall be delivered in person to the company above mentioned, sent via registered mail with a return receipt requested in a securely sealed envelope or sent via telecopy and shall be effective when received at the address specified above. The Parties hereto, by like notice in writing, may designate, from time to time, another address or office to which notices may be given pursuant to this Agreement. 128 25.7 SECTION HEADINGS. The Article and Section headings herein have been inserted for convenience of reference only and shall not in any manner affect the construction, meaning or effect of anything herein contained nor govern the rights and liabilities of the Parties hereto. 25.8 ENTIRE AGREEMENT. This Agreement contains the entire agreement between the Parties hereto and supersedes any and all prior written and oral agreements, proposals, negotiations, understandings and representations pertaining to the subject matter hereof. 25.9 AMENDMENTS. No amendments or modifications of this Agreement shall be valid unless evidenced in writing and signed by a duly authorized representative of the Party against which enforcement is sought. 25.10 CONFLICTING PROVISIONS. In the event of any conflict, variation or inconsistency between any provision of this Contract Document, as it may be amended from time to time, and any other provision of this Agreement, the provision of this Contract Document shall control. 25.11 NO THIRD PARTY RIGHTS. This Agreement and all rights hereunder are intended for the sole benefit of the Parties and shall not imply or create any rights on the part of, or obligations to, any other Person, except as otherwise expressly provided herein with respect to the Financing Parties, the Transmitting Utility and the Indemnified Parties (in the event and only to the extent any such rights or obligations may be expressly provided herein, if any, the "THIRD PARTY BENEFICIARIES"). 25.12 OWNER'S OBLIGATIONS NON-RECOURSE. The Parties acknowledge that Owner has entered into this Agreement entirely on its own behalf, and in no manner on behalf of The AES Corporation, and that Contractor shall have no recourse against The AES Corporation (except in the event and only to the extent such recourse may be expressly provided under the AES Pre-Financial Closing Guaranty) or any of its affiliates (other than Owner), partners, joint ventures, officers, directors, successors or assigns for any reason. 25.13 SURVIVAL OF PROVISIONS. All provisions of this Agreement which are expressly or by implication to come into or continue in force and effect after the expiration or termination of this Agreement, including but not limited to Articles 9, 10 and 13 and Section 21.1 hereof, shall remain in effect and be enforceable following such expiration or termination. 129 25.14 TITLE TO THE PROJECT. Title to all materials, supplies, equipment and machinery used in connection with the Services and which become, or are scheduled to become, a part of the Project shall vest in Owner upon the earlier of (i) the time at which Owner has made payment to Contractor for such items and (ii) incorporation of such items into the Project at the Facility Site. Title to water, soil, rock, gravel, sand, minerals, timber and any other resources developed or obtained in the excavation or the performance by Contractor of the Services or other work hereunder and the right to use said items or dispose of the same is hereby expressly vested in and reserved by Owner. Contractor shall not have any right, title or interest in or to said resources. 25.15 COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute the same agreement. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 130 IN WITNESS WHEREOF, the Parties, intending to be legally bound, have caused this Agreement for Engineering, Procurement and Construction Services to be executed by their duly authorized signatories as of the date indicated below and to be effective as of the day and year first above written. AES RED OAK, LLC By: /s/ BART R. ROSSI --------------------------------------- Name: Bart R. Rossi Title: Vice President Date: 12-7-99 RAYTHEON ENGINEERS & CONSTRUCTORS, INC. By: /s/ GEORGE N. LEMMON --------------------------------------- Name: George N. Lemmon Title: Vice President Date: 12-7-99 131 Exhibit 10.2(a) AMENDMENT NO. 1 TO ENGINEERING, PROCUREMENT AND CONSTRUCTION SERVICES DATED AS OF OCTOBER 15, 1999 This Amendment No. 1, dated as of February 23, 2000, be and is hereby made by and between AES Red Oak, L.L.C. ("Owner") and Raytheon Engineers & Constructors, Inc. ("Contractor") (hereinafter each individually a "Party" and collectively "the Parties"). Capitalized terms used herein and not defined shall have the meanings assigned thereto in the Agreement. WITNESSETH WHEREAS, Owner and Contractor entered into the Agreement for Engineering, Procurement and Construction Services dated as of October 15, 1999 ("Agreement") in connection with the AES Red Oak Project, Sayreville, New Jersey; and WHEREAS, Owner and Contractor have agreed to amend and revise certain terms and conditions of the Agreement. NOW THEREFORE, in consideration of the mutual covenants contained herein and for other good and valuable consideration, it is understood and agreed as follows: 1. Section 1.1 of the Agreement is hereby amended and revised as follows: (a) the definition of Guaranteed Provisional Acceptance Date is amended and revised so as to be deleted in its entirety and replaced by the following definition: ""GUARANTEED PROVISIONAL ACCEPTANCE DATE" means February 14, 2002, which date is subject to adjustment as expressly provided in this Agreement"; (b) the definition of Guaranteed Final Acceptance Date is amended and revised so as to be deleted in its entirety and replaced by the following definition: [*] 2. Section 2.2.1 of the Agreement and the Limited Notice to Proceed annexed as Appendix J-1 to the Agreement are hereby amended and revised: 1 (a) to include the (i) clearing and grubbing and (ii) site surface preparation Services, both as described in Section IV.b.2 of Appendix A to the Agreement (hereinafter the "Pre-Commencement Date Site Related Work"), the performance of which Contractor shall be entitled to commence at the Facility Site no later than March 1, 2000; PROVIDED, HOWEVER, the Pre-Commencement Date Site Related Work shall not include Services which require access to the Conrail/CSX right-of-way under the "License Agreement to Cross Railroad with access Roadway and for Underground Structure" required to be obtained by Owner from Conrail/CSX pursuant to Section 5.3 of the Agreement and Appendix F thereto ("Contrail License Agreement"), the access to such right-of-way required in connection with the Pre-Commencement Site Related Work being as set forth in Section 7(a) hereof; and (b) [*] 3. Section 7.2 of the Agreement is hereby amended and revised as follows: (a) [*] (b) [*] 4. Section 7.2.1 of the Agreement is hereby amended and revised as follows: (a) [*] (b) [*] 5. Section 7.3 of the Agreement is hereby amended and revised as follows: 2 [*] 6. Section 16.1 of the Agreement is hereby amended and revised as follows: [*] 7. Owner and Contractor hereby acknowledge and agree that except as expressly provided in subsection (d) of this Section 7, Owner" fulfillment of each of the requirements set forth in subsections (a), (b), (c) and (d) of this Section 7 shall be a condition precedent to the effectiveness of the Parties' agreement to amend and revise the Agreement as set forth in Sections 1 through 6 hereof, and that such amendments and revisions shall be null and void and of no effect should Owner fail to fulfill one or more of such requirements, unless the Parties subsequently and mutually agree to equitable adjustments in those provisions of the Agreement affected by Owner's failure to fulfill such requirements as set forth herein. Subject to the foregoing, Owner agrees that it shall: (a) obtain for the benefit of Contractor and its Subcontractors all Applicable Permits (including for the avoidance of doubt all approvals required by local authorities) and Real Estate Rights required for Contractor and its Subcontractors to have full and unrestricted access to the Facility Site in order to commence performance of the Pre-Commencement Date Site Related Work no later than March 1, 2000 and to continue the performance thereof from and after said date; PROVIDED, HOWEVER, that (i) Owner shall not be required to obtain the New Jersey Department of Environmental Protection Stream Encroachment permit for the Red Oak Lane easement and laydown areas, including the Hercules property, until March 8, 2000 and (ii) Owner shall only be required to ensure that Contractor and its Subcontractors have full and unrestricted access by no later than March 1, 2000 to traverse the Conrail/CSX right-of-way by way of a private at-grade crossing in order to perform the Pre-Commencement Date Site Related Work (PROVIDED FURTHER, HOWEVER, and for the avoidance of doubt, the Parties acknowledge and agree that the limitation in this Section 7(a) on Owner's obligations with respect to the Conrail License Agreement shall pertain to the Pre-Commencement Site Related Work only, and shall not be construed in any way to limit Owner's obligations pursuant to Section 5.3 of the Agreement with respect to the Conrail 3 License Agreement and the performance of the Services by Contractor, which obligations Owner shall fully perform by no later than March 31, 2000); (b) ensure that Contractor and its Subcontractors have full and unrestricted access to, and the unencumbered use of, Jernee Mill Road as a means of ingress and egress to and from the Facility Site in order to commence performance of the Pre-Commencement Date Site Related Work no later than March 1, 2000 and to continue the performance thereof from and after said date; (c) confirm initial interconnections and alternate routes for raw water and natural gas and specify provisions for the alternate routes no later than March 15, 2000; (d) meet all of the conditions required in Section 2.2 of the Agreement for the Commencement Date to occur no later than March 15, 2000; PROVIDED, HOWEVER, that should Owner meet all of the conditions required in Section 2.2 of the Agreement such that the Commencement Date occurs on March 15, 2000, but in no event later than March 31, 2000, then in such case each of the dates and time periods amended and revised pursuant to Sections 1, 3, 4, 5 and 6 hereof shall be adjusted by one (1) day for each day after March 15, 2000 on which the Commencement Date occurs, as follows: (i) the "Guaranteed Provisional Acceptance Date" shall be adjusted ahead by one (1) day for each day after March 15, 2000 the Commencement Date occurs (e.g., in the event Commencement Date occurs on March 16, 2000, the definition of "Guaranteed Provisional Acceptance Date" in Section 1.1 of the Agreement shall be amended and revised so as to be deleted in its entirety and replaced by the following definition: ""GUARANTEED PROVISIONAL ACCEPTANCE DATE" means February 15, 2002, which date is subject to adjustment as expressly provided in this Agreement"; (ii) the "Guaranteed Final Acceptance Date" shall be adjusted backward by one (1) day for each day after March 15, 2000 the Commencement Date occurs (e.g., in the event Commencement Date occurs on March 16, 2000, the definition of "Guaranteed Final Acceptance Date" in Section 1.1 of the Agreement shall be amended and revised so as to be deleted in its entirety and replaced by the following definition: ""GUARANTEED FINAL ACCEPTANCE DATE" means thirteen (13) months and fourteen (14) days after the Guaranteed Provisional Acceptance Date"; and 4 (iii) all time periods amended and revised in Sections 3, 4, 5 and 6 hereof shall be shortened by one (1) day for each day after March 15, 2000 the Commencement Date occurs (e.g., in the event Commencement Date occurs on March 16, 2000, the second and third lines of subsection (a) of Section 7.2 of the Agreement shall be amended and revised to delete the language, "on or before the thirty fifth (35th) day following", and to substitute therefor the language, "on or before the forth-ninth (49th) day following". 8. Owner and Contractor agree that in the event Contractor or its Subcontractor proceeds with the Pre-Commencement Date Site Related Work, and Owner fails to fulfill any of the requirements set forth in subsections (a), (b), (c) and (d) of Section 7 hereof, any reasonable costs and expenses incurred by Contractor (or for which Contractor is responsible) for any such work, including preparatory, mobilization and/or demobilization and related costs and expenses, shall be payable and guaranteed (and considered as part of) those portions of the Services to be performed by Contractor under the Limited Notice to Proceed pursuant to Section 2.2.1 of the Agreement, and that the funding limit set forth in the Limited Notice to Proceed shall be increased from [*] to [*] to cover such reasonable costs and expenses. 5 IN WITNESS WHEREOF, the Parties hereto have caused this Amendment No. 1 to the Agreement to be executed by their respective duly authorized officers effective the day and year first written above. AES RED OAK LLC By: /s/ Patty Rollin ---------------------------------- Name: Patty Rollin Title: VP Date: Feb. 28, 2000 RAYTHEON ENGINEERS & CONSTRUCTORS, INC. By: /s/ George N. Lemmon ---------------------------------- Name: George N. Lemmon Title: Vice President Date: Feb. 28, 2000 6 EX-10.2(B) 4 ex-10_2b.txt EX-10.2(B) EXECUTION COPY Exhibit 10.2(b) An asterisk ([*]) indicates that confidential information has been omitted and filed separately with the Securities and Exchange Commission as part of a Confidential Treatment Request. - -------------------------------------------------------------------------------- EPC CONTRACT PREPAYMENT COORDINATION AGREEMENT between AES RED OAK, L.L.C. and RAYTHEON ENGINEERS & CONSTRUCTORS, INC. Dated as of March 14, 2000 - -------------------------------------------------------------------------------- TABLE OF CONTENTS
PAGE ARTICLE I DEFINITIONS.............................................................................................1 SECTION 1.1 DEFINITIONS..................................................................................1 ARTICLE II REGARDING THE EPC CONTRACT.............................................................................2 SECTION 2.1 PREPAYMENT OF CONTRACT PRICE.................................................................2 SECTION 2.2 ISSUANCE OF EPC PREPAYMENT LETTER OF CREDIT..................................................2 SECTION 2.3 EPC CONTRACT DELAY EVENT.....................................................................2 SECTION 2.4 COSTS AND EXPENSES OF EPC CONTRACT PREPAYMENT LETTER OF CREDIT...............................3 SECTION 2.5 REBATES, LIABILITY LIMITATION AND RETENTION UNDER EPC CONTRACT...............................3 SECTION 2.6 REDUCTION OF LETTER OF CREDIT................................................................3 SECTION 2.7 PAYMENTS UNDER EPC CONTRACT..................................................................4 SECTION 2.8 APPENDICES TO EPC CONTRACT...................................................................4 SECTION 2.9 EFFECTIVENESS OF EPC CONTRACT................................................................4 SECTION 2.10 NOTICES BY OWNER.............................................................................5 SECTION 2.11 DRAWS ON EPC PREPAYMENT LETTER OF CREDIT.....................................................5 ARTICLE III MISCELLANEOUS.........................................................................................5 SECTION 3.1 AMENDMENTS, ETC..............................................................................5 SECTION 3.2 NOTICES, ETC.................................................................................5 SECTION 3.3 NO WAIVER; REMEDIES..........................................................................6 SECTION 3.4 SEVERABILITY.................................................................................6 SECTION 3.5 BINDING EFFECT...............................................................................6 SECTION 3.6 GOVERNING LAW................................................................................6 SECTION 3.7 EXECUTION IN COUNTERPARTS....................................................................6
i EPC CONTRACT PREPAYMENT COORDINATION AGREEMENT EPC Contract Prepayment Coordination Agreement (this "AGREEMENT") dated as of March 14, 2000 by and among AES Red Oak, L.L.C. ("OWNER"), and Raytheon Engineers & Constructors, Inc. ("CONTRACTOR") relating to that certain Engineering, Procurement and Construction Agreement, dated as of October 15, 1999, between the Owner and Contractor (as amended to the date hereof, the "EPC CONTRACT"). The Owner and Contractor are each referred to herein as a "Party" and are collectively referred to as the "PARTIES." RECITALS WHEREAS, Owner is engaged in the development of a combined-cycle power plant to be located near the Borough of Sayreville, New Jersey (the "Facility") and Contractor will perform certain services in connection with the Facility; WHEREAS, in connection with the Facility, the Owner and Contractor entered into the EPC Contract; WHEREAS, the Owner will, subject to the terms of this Agreement, prepay the Contract Price (as defined in the EPC Contract) and Contractor will provide the EPC Contract Prepayment Letter of Credit (as defined below); and WHEREAS, the Parties hereto desire to enter into this Agreement to set forth the terms of the prepayment of the Contract Price; NOW, THEREFORE, in consideration of the mutual promises stated herein and other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows: ARTICLE I DEFINITIONS SECTION 1.1 DEFINITIONS. Capitalized terms used but not defined in this Agreement shall have the meaning given such terms in the EPC Contract. In addition, the following terms when used in this Agreement have the following meanings: "EFFECTIVE DATE" means the Day on which the transactions contemplated in Sections 2.1 and 2.2 are both consummated. "EPC CONTRACT DELAY EVENT" means a suspension or suspensions of the performance of the obligations of the Contractor under the EPC Contract, or an event or events of Force Majeure 1 affecting the performance of the obligations of the Contractor under the EPC Contract, has occurred and a result of such suspension or suspensions and event or events of Force Majeure has been to delay the Guaranteed Provisional Acceptance Date by more than two (2) weeks in the aggregate. "EPC CONTRACT PREPAYMENT AMOUNT" means [*]. "EPC CONTRACT PREPAYMENT LETTER OF CREDIT" means a letter of credit substantially in the form of Appendix A, issued for the account of the Contractor naming The Bank of New York, as Collateral Agent as the beneficiary thereof, from a commercial bank whose unsecured outstanding senior long-term debt is rated "A" or better by Standard & Poor's. "PAYMENT SCHEDULE" means the progress payment schedule attached to the EPC Contract as Appendix B, as such schedule may be revised as set forth in Section 4.2 of the EPC Contract. ARTICLE II REGARDING THE EPC CONTRACT Notwithstanding anything in the EPC Contract to the contrary, the Parties make the covenants and undertakings set forth in this Article II which covenants and undertakings shall modify the provisions of the EPC Contract as and to the extent expressly set forth herein: SECTION 2.1 PREPAYMENT OF CONTRACT PRICE. On the Effective Date, Owner shall cause to be transferred to an account specified in writing by Contractor an amount equal to the EPC Contract Prepayment Amount. SECTION 2.2 ISSUANCE OF EPC PREPAYMENT LETTER OF CREDIT. In consideration of the prepayment of the Contract Price, on the Effective Date Contractor shall cause to be issued and delivered to the beneficiary thereof the EPC Contract Prepayment Letter of Credit in an initial stated amount equal to [*]. SECTION 2.3 EPC CONTRACT DELAY EVENT. Contractor agrees that, upon the occurrence of an EPC Contract Delay Event, Contractor shall be liable to pay to Owner (for deposit in an account specified in writing by the Owner from time to time) for each day during the continuance of such EPC Contract Delay Event, an amount equal to [*], such amount to be prorated in the event of a partial suspension and to be paid to such account within three (3) Business Days following the earlier to occur of resumption of work under the EPC Contract or a drawing in full on the EPC Contract Prepayment Letter of Credit. The initial account to which 2 such payments shall be made is The Bank of New York, Account No. [*]. SECTION 2.4 COSTS AND EXPENSES OF EPC CONTRACT PREPAYMENT LETTER OF CREDIT. [*] SECTION 2.5 REBATES, LIABILITY LIMITATION AND RETENTION UNDER EPC CONTRACT. [*] SECTION 2.6 REDUCTION OF LETTER OF CREDIT. (a) The stated amount of the EPC Contract Prepayment Letter of Credit will be reduced from time to time to no less than [*], upon each receipt by Owner of Contractor's commercial invoice for the milestone or milestones completed, showing the monetary amount of the corresponding milestone, the value of the reduction to be effected (which shall equal the monetary amount of the corresponding milestone less the amount of the corresponding cash retention due under the Agreement) and setting forth the new outstanding value for the EPC Contract Prepayment Letter of Credit. [*] If the Collateral Agent shall fail to give notice to reduce the EPC Contract Prepayment Letter of Credit from time to time in accordance with its terms and the terms of the EPC Contract (including the timing of payment of invoices), Contractor shall, in accordance with the EPC Contract be entitled to receive interest on the amount by which the face amount of the EPC Contract Prepayment Letter of Credit was not reduced in accordance with its terms and the terms of the EPC Contract (including the timing of payment of invoices). 3 (b) The outstanding value of the EPC Contract Prepayment Letter of Credit corresponding to the retention amount will be further reduced [*], upon receipt by Owner of Contractor's written statement of reduction, accompanied by a copy of a Final Acceptance Certificate issued in accordance with the provisions of the EPC Contract and an irrevocable standby letter of credit, issued in favor of the Collateral Agent, for the account of Contractor, for the value required by the formula contained in [*]. The form of Contractor's Final Waiver (Appendix I-1 to the EPC Contract) promptly shall be amended to reflect that the EPC Contract Prepayment Letter of Credit shall be released in consideration of delivery of the Final Waiver. SECTION 2.7 PAYMENTS UNDER EPC CONTRACT. The Parties acknowledge and agree that the giving of notice by the Collateral Agent to the issuer of the EPC Contract Prepayment Letter of Credit of the reduction, from time to time, of the face amount of the EPC Contract Prepayment Letter of Credit shall constitute the making of a Scheduled Payment to Contractor in accordance with Section 4.2.2 of the EPC Contract. SECTION 2.8 APPENDICES TO EPC CONTRACT. (a) The parties agree that [*] (b) [*] (c) [*] SECTION 2.9 EFFECTIVENESS OF EPC CONTRACT. The Parties acknowledge and agree that this Agreement shall constitute amendment of the EPC Contract but that nothing in this Agreement shall, in and of itself, be construed to give Contractor the right to claim or seek any additional compensation under the EPC Contract or otherwise, other than accelerated compensation for accelerated achievement of milestones. Except as expressly stated herein (including in the Annexes hereto), the EPC Contract remains in full force and effect without alteration, amendment or modification. 4 SECTION 2.10 NOTICES BY OWNER. In the event that Owner receives notice from any Lender or a representative thereof of an Event of Default or a Trigger Event, in each case under and as defined in that certain Collateral Agency and Intercreditor Agreement, dated as of March 1, 2000 among Owner, The Bank of New York, as Trustee, Dresdner Bank AG, acting through its New York Branch, as DSR LOC Provider, Dresdner Bank AG, acting through its New York Branch, as PPA LOC Provider, Dresdner Bank AG, acting through its New York Branch, as Working Captial Provider, The Bank of New York , as Collateral Agent and The Bank of New York, as Depositary Bank, then Owner shall immediately advise Contractor by facsimile transmission or in other written form that such notice has been received. SECTION 2.11 DRAWS ON EPC PREPAYMENT LETTER OF CREDIT [*] ARTICLE III MISCELLANEOUS SECTION 3.1 AMENDMENTS, ETC. No amendment or waiver of any provision of this Agreement, or consent to any departure therefrom, shall be effective unless in writing and signed or consented to (in writing) by the Parties, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. SECTION 3.2 NOTICES, ETC. All notices and other communications provided for hereunder shall be in writing (including by telecopier) and shall be delivered in accordance with the EPC Contract. 5 SECTION 3.3 NO WAIVER; REMEDIES. No failure on the part of any Party to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof, and no single or partial exercise of any such right shall preclude any other or further exercise thereof or the exercise of any other right. SECTION 3.4 SEVERABILITY. Any provision of this Agreement that is prohibited, unenforceable or not authorized in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition, unenforceability or nonauthorization without invalidating the remaining provisions of this Agreement or affecting the validity, enforceability or authorization of such provision in any other jurisdiction. In the event of such ineffectiveness, the parties hereto shall negotiate in good faith an equitable adjustment to achieve as nearly as possible within the confines of applicable law the purposes of this Agreement. SECTION 3.5 BINDING EFFECT. This Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors and permitted assigns. Neither Party may assign this Agreement without the prior written consent of the other Party; provided that the Owner may assign this Agreement as collateral security to the lenders providing financing for the Facility. SECTION 3.6 GOVERNING LAW. This Agreement shall be governed by and interpreted in accordance with the laws of the State of New York, without regard to the conflicts of law principles thereof. SECTION 3.7 EXECUTION IN COUNTERPARTS. This Agreement may be executed in any number of counterparts and by different Parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 6 IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be duly executed by their respective officers thereunto duly authorized, as of the day and year first above written. RAYTHEON ENGINEERS & CONSTRUCTORS, INC. By: /S/ ROBERT ZAIST ----------------------------------------- Name: Robert Zaist Title: Sr. Vice President AES RED OAK, L.L.C. By: /S/ CHARLES FALTER ----------------------------------------- Name: Charles Falter Title: Vice President EX-10.3 5 ex-10_3.txt EX-10.3 Exhibit 10.3 An asterisk ([*]) indicates that confidential information has been omitted and filed separately with the Securities and Exchange Commission as part of a Confidential Treatment Request. GUARANTY (NO. [*]) GUARANTY, made effective as of October 15, 1999, by [*], a corporation organized and existing under the laws of the State of Delaware ("GUARANTOR"), in favor of AES RED OAK, L.L.C., a limited liability company organized under the laws of the State of Delaware ("OWNER"). WHEREAS, Owner wishes to have engineered, designed, procured, constructed, equipped, commissioned and tested a combined-cycle electric generating facility with a nominal electric generating capacity of eight hundred (800) megawatts (net) to be located in Sayreville, New Jersey (such facility and the construction thereof, as more fully defined in the EPC Agreement referred to below, the "PROJECT"); WHEREAS, concurrently with the execution and delivery of this Guaranty, Owner has entered into that certain Agreement for Engineering, Procurement and Construction Services, of even date herewith, with Raytheon Engineers & Constructors, Inc., a wholly-owned indirect subsidiary of Guarantor ("CONTRACTOR") (as such Agreement may be amended, supplemented or modified from time to time, the "EPC AGREEMENT"); WHEREAS, Guarantor [*] will continue to obtain substantial benefits as a result of the EPC Agreement; WHEREAS, in order to induce Owner to enter into the EPC Agreement, Contractor has agreed that it would cause Guarantor to execute and deliver to Owner this Guaranty; NOW, THEREFORE, in consideration of Owner's entering into the EPC Agreement, the foregoing premises, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Guarantor, intending to be legally bound, hereby agrees as follows: SECTION 1 DEFINITIONS Unless otherwise defined herein, capitalized terms used in this Guaranty shall have the respective meanings assigned thereto in the EPC Agreement. SECTION 2 GUARANTY Guarantor hereby irrevocably and unconditionally guarantees to Owner, as a primary obligor and not as a surety, the punctual performance and payment in full of all obligations of Contractor under the EPC Agreement in accordance with the terms and conditions thereof (subject to any rights and defenses of Contractor thereunder, other than any rights and defenses arising out of the matters described in Section 4 hereof) and agrees that if for any reason whatsoever Contractor shall fail duly, punctually and fully to perform or pay any such obligation under the EPC Agreement, Guarantor shall, upon receipt of written notice from Owner of such failure pursuant to Section 25.6 of the EPC Agreement, immediately perform or pay each and every such obligation, or cause each such obligation to be performed or paid, without regard to any exercise or nonexercise by Owner of any right, remedy, power or privilege under or in respect of the EPC Agreement against Contractor or under or in respect of any other guaranty or security relating thereto. In addition, Guarantor agrees to reimburse Owner on demand for any and all reasonable expenses (including, without limitation, attorneys' fees and disbursements) incurred by Owner in enforcing or attempting to enforce any rights under this Guaranty, PROVIDED that Guarantor shall have no obligation to reimburse Owner if, in any action or proceeding brought by Owner giving rise to such demand for reimbursement, Guarantor shall have prevailed on the merits. SECTION 3 NO SUBROGATION Notwithstanding any payment or payments made by Guarantor hereunder or any set-off or application of funds of Guarantor by Owner, until all of the obligations of Contractor under the EPC Agreement are performed or paid in full, Guarantor shall not (a) be entitled to be subrogated to any of the rights of Owner against Contractor or any other guarantor or in any collateral security or guaranty or right of offset held by Owner for the performance and payment of the obligations of Contractor under the EPC Agreement, or (b) seek any reimbursement or contribution from Contractor or any other guarantor in respect of any payment, set-off or application of funds made by Guarantor hereunder. 2 SECTION 4 GUARANTY ABSOLUTE The liability of Guarantor under this Guaranty with respect to the guaranteed obligations shall be absolute and unconditional, irrespective of: (a) any lack of validity or enforceability of the EPC Agreement or any other agreement, guaranty or instrument relating thereto (if such lack of validity or enforceability is due to any act or omission of Contractor or Guarantor or an event within the control of Contractor or Guarantor); (b) any amendment to, waiver of or consent to departure from, or failure to exercise any right, remedy, power or privilege under or in respect of the EPC Agreement or any other guaranty; PROVIDED, HOWEVER, that for the avoidance of doubt, Guarantor and Owner hereby agree that the obligations of Contractor under the EPC Agreement guaranteed by Guarantor hereunder shall be such obligations of Contractor as they may have been amended or waived in accordance with the terms of the EPC Agreement; (c) any exchange, release or nonperfection of any collateral, or any release or amendment or waiver of, or consent to departure from, any other guaranty of or security for the performance of all or any of the obligations of Contractor under the EPC Agreement; (d) the insolvency of Contractor or any other party or guarantor or any proceeding, voluntary or involuntary, involving the bankruptcy, insolvency, receivership, reorganization, arrangement, dissolution or liquidation of Contractor or any other guarantor or any defense which Guarantor or Contractor or any other guarantor may have by reason of the order, decree or decision of any court or administrative body resulting from any such proceeding; (e) any change in ownership of Contractor or any change, whether direct or indirect, in Guarantor's relationship to Contractor or in the relationship of Contractor to any other guarantor, including, without limitation, any such change by reason of any merger or any sale, transfer, issuance, or other disposition of any stock of, or other equity interest in, Contractor, Guarantor or any other entity; and (f) any other circumstance of a similar or different nature which might otherwise constitute a defense available to Guarantor as a guarantor (PROVIDED, HOWEVER, that this clause 4(f) shall not prevent Guarantor from being able to assert as a defense to its performance under this Guaranty, any defense which is 3 available to Contractor under the EPC Agreement, other than any defenses arising out of the matters described in this Section 4). This Guaranty shall continue to be effective, or be reinstated, as the case may be, if at any time any payment, or any part thereof, to Owner by Contractor under the EPC Agreement or by Guarantor hereunder or by any other guarantor under any other guaranty of the EPC Agreement is rescinded or must otherwise be returned by Owner to Guarantor or Contractor or any of their respective representatives or any other guarantor for any reason, including, without limitation, upon the insolvency, bankruptcy, reorganization, dissolution or liquidation of Contractor or any other guarantor, all as though such payment had not been made. SECTION 5 WAIVER Guarantor hereby waives notice from Owner of its acceptance and reliance on this Guaranty and notice of any liability to which it may apply, and waives presentment, demand of payment, protest, notice of dishonor or nonpayment of any such liability, and the taking of any other action by Owner against, and (except for the notice specified in Section 2 hereof) any other notice to, any party liable thereon, including Guarantor, and any requirement that Owner exhaust any right or take any action against or with respect to Contractor or any other person or entity or any property (PROVIDED, HOWEVER, that if and to the extent Contractor is entitled by the terms of the EPC Agreement to a grace or cure period with respect to the applicable failure to perform thereunder, this Section 5 shall not prevent Contractor or Guarantor from being entitled to utilize such grace or cure period to remedy such failure of performance, but in no event shall any such grace or cure period for Guarantor hereunder extend past the grace or cure period available to Contractor under the EPC Agreement). SECTION 6 CONSENT TO JURISDICTION; WAIVER OF IMMUNITIES (a) Guarantor hereby irrevocably submits to the jurisdiction of any State or Federal court sitting in the Borough of Manhattan, City of New York, in any action or proceeding arising out of or relating to this Guaranty, and Guarantor hereby irrevocably agrees that, subject to the terms of Section 6(c) hereof and without limiting Owner's rights under Section 6(b) hereof, all claims in respect of such action or proceeding shall be heard and determined in such State or Federal court. Guarantor hereby irrevocably waives, to the fullest extent it may effectively do so, the defense of an inconvenient 4 forum to the maintenance of such action or proceeding. Guarantor hereby irrevocably consents to the service of any and all process in any such action or proceeding by the mailing of copies of such process to Guarantor at its address specified in Section 11 hereof. Guarantor agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner permitted by law. (b) Nothing in this Section shall affect the right of Owner to serve legal process in any other manner permitted by law or affect the right of Owner to bring any action or proceeding against Guarantor or its property in the courts of any other jurisdiction. (c) Notwithstanding the foregoing, any dispute arising under the EPC Agreement and any claims under any of the EPC Agreement and/or this Guaranty relating to any such dispute, whether arising contemporaneously with or subsequent to such dispute, shall be resolved by Owner, Contractor and Guarantor in a single, combined proceeding in accordance with the provisions of Article 21 of the EPC Agreement. Subject to Guarantor's ability to assert as a defense to its performance under this Guaranty Contractor's rights under applicable provisions of the EPC Agreement, notwithstanding the existence of a dispute between Owner and Guarantor and regardless of whether such dispute is the subject of dispute resolution pursuant to this Section 6(c), Guarantor shall not be entitled to suspend or otherwise delay the performance of this Guaranty. SECTION 7 REPRESENTATIONS AND WARRANTIES Guarantor hereby represents and warrants as follows: (a) Guarantor (i) is a duly organized and validly existing corporation in good standing under the laws of Delaware and (ii) has the corporate power and authority to own its property and assets and to transact the business in which it is engaged; (b) Guarantor has the corporate power, authority and legal right to execute, deliver and carry out the terms and provisions of this Guaranty and has taken all necessary corporate action to authorize the execution, delivery and performance of this Guaranty; 5 (c) This Guaranty has been duly executed and delivered by Guarantor and constitutes the legal, valid and binding obligation of Guarantor enforceable against it in accordance with its terms, except to the extent that its enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the rights of creditors generally or by general principles of equity; (d) Neither the execution, delivery or performance by Guarantor of this Guaranty nor the consummation of the transactions herein contemplated, nor compliance with the terms and provisions hereof, (i) will contravene any applicable provision of any law, statute, rule, regulation, order, writ, injunction or decree of any court or governmental instrumentality or authority, or requires the authorization or approval of or any filing with any such instrumentality or authority, (ii) will conflict or be inconsistent with, or result in any breach of, in any material respect, any of the terms, covenants, conditions or provisions of, or constitute a default under, or result in the creation or imposition of (or the obligation to create or impose) any lien upon or assignment of any of the property or assets of Guarantor pursuant to the terms of any agreement or other instrument to which Guarantor is a party or by which it or any of its property or assets is bound or to which it is subject, or (iii) will violate any provision of the charter, by-laws or like organizational documents of Guarantor; and (e) As of the date on which this Guaranty is executed by Guarantor, there are no actions, suits or proceedings pending or, to the best of the knowledge of Guarantor, threatened against or affecting Guarantor before any court or before any governmental or administrative body or agency, except as disclosed in Guarantor's Form 10-K for the year ended December 31, 1998 or Guarantor's Form 10-Q for the quarters ended March 31, 1999, June 30, 1999 or September 30, 1999, which could reasonably be expected to materially and adversely affect its ability to fully perform its obligations hereunder. SECTION 8 COVENANTS Guarantor hereby covenants and agrees that, until performance and payment in full of all obligations of Contractor under the EPC Agreement: (a) Guarantor shall comply, and shall cause its subsidiaries to comply, with all applicable laws, except to the extent that noncompliance therewith could not reasonably be expected to have a material adverse effect on the financial 6 condition of Guarantor or on its ability to fully perform its obligations under this Guaranty; (b) Guarantor shall preserve and maintain, and shall cause its subsidiaries to preserve and maintain, its corporate or legal existence, rights and franchises, except to the extent that noncompliance therewith could not reasonably be expected to have a material adverse effect on the financial condition of Guarantor or on its ability to fully perform its obligations under this Guaranty; and (c) In the event that at any time Owner shall have reasonable grounds for believing that, were Contractor to fail to perform its obligations under the EPC Agreement at that time and such failure would constitute an Event of Default (as such term is defined under the EPC Agreement), Guarantor would be unable to fully perform its obligations hereunder, then within fifteen (15) days of Owner's written request therefor, Guarantor shall provide either (i) financial or other information reasonably demonstrating its ability to so fully perform or (ii) other assurances of its ability to so fully perform that are reasonably satisfactory to Owner. SECTION 9 EVENTS OF DEFAULT (a) If any of the following events shall occur and be continuing it shall constitute an "EVENT OF DEFAULT" hereunder: (i) Guarantor shall fail to observe or perform any covenant or agreement contained in Section 2 hereof; PROVIDED that if and to the extent Contractor is entitled by the terms of the EPC Agreement to a grace or cure period with respect to the failure of performance thereunder that Guarantor's failure under Section 2 hereof relates to, Guarantor shall have the same period of time as is available to Contractor under the EPC Agreement to remedy such failure of performance before such failure constitutes an Event of Default hereunder, but in no event shall any such grace or cure period for Guarantor hereunder extend past the grace or cure period available to Contractor under the EPC Agreement; (ii) Guarantor shall fail to observe or perform any other covenant or agreement contained in this Guaranty (including without limitation the covenants and agreements contained in Section 8 hereof), and such failure is not remedied within (1) thirty (30) days after Guarantor receives actual knowledge thereof, or (2) such longer period as may be necessary for Guarantor to cure such failure, not 7 to exceed one hundred twenty (120) days, PROVIDED that Guarantor diligently pursues the cure of such failure; (iii) Guarantor shall commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect, or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, or shall consent to any such relief or the appointment of or taking of possession by any such official in an involuntary case or other proceeding commenced against it, or shall generally not pay its debts as they become due, or shall make a general assignment for the benefit of creditors, or shall take any corporate action to authorize any of the foregoing; (iv) An involuntary case or other proceeding shall be commenced against Guarantor seeking liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, and such involuntary case or other proceeding shall remain undismissed or unstayed for a period of sixty (60) days; or (v) Any material representation or warranty made by Guarantor hereunder shall prove to have been false or misleading in any material respect when made or deemed made and Guarantor fails to remedy such false or misleading representation or warranty within thirty (30) days after Contractor receives a notice from Owner with respect thereto. (b) Upon the occurrence of an Event of Default, Guarantor shall be in material breach of this Guaranty and Owner may exercise any and all remedies it may have hereunder or at law or in equity. Notwithstanding anything stated to the contrary in this Guaranty, except as otherwise provided in this sentence, Guarantor shall not be liable under this Guaranty, whether based in contract, in tort (including negligence and strict liability), under warranty or otherwise, for any indirect, incidental, special or consequential loss or damage of any type, including but not limited to loss of use or loss of profit or revenue, and Owner hereby releases Guarantor from any such liability; PROVIDED, HOWEVER, that this sentence shall not limit Guarantor's obligations to pay to Owner the Provisional Acceptance Late Completion Payments and Performance Guarantee Payments under Articles 7 and 8 of the EPC Agreement (as such terms are 8 defined therein) in accordance with the terms and provisions of the EPC Agreement and this Guaranty. (c) Guarantor's maximum liability hereunder (except for Guarantor's liability pursuant to the last sentence of Section 2 hereof) shall be subject to the same limitations as expressly set forth in Article 9 of the EPC Agreement (which provisions are hereby incorporated by reference, with each reference therein to Contractor being deemed to be to Guarantor). SECTION 10 AMENDMENTS No amendment or waiver of any provision of this Guaranty nor consent to any departure by Guarantor therefrom shall in any event be effective unless the same shall be in writing and signed by Owner, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. SECTION 11 ADDRESSES FOR NOTICES All notices and other communications provided for hereunder shall be in writing and, (i) if to Guarantor, mailed by certified mail, return receipt requested, or communicated by facsimile or delivered to it, addressed to [*], (ii) if to Owner, mailed or delivered to it, addressed to it at its address specified in the EPC Agreement, or (iii) as to each party at such other address as shall be designated by such party in a written notice to the other party. All such notices and other communications shall, when mailed or communicated by facsimile transmission, respectively, be effective when deposited in the mails addressed as aforesaid or when such facsimile transmission is confirmed. SECTION 12 NO WAIVER; REMEDIES No failure on the part of Owner to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise thereof or the exercise of any other right operate as a waiver thereof. The 9 remedies herein provided are cumulative (unless expressly otherwise provided herein) and are not exclusive of any remedies provided at law or in equity. SECTION 13 CONTINUING GUARANTY; ASSIGNMENTS (a) This Guaranty shall be construed as a continuing, absolute and unconditional guaranty of payment and performance, and not of collection only, and the obligations of Guarantor hereunder shall not be conditioned or contingent upon the pursuit by Owner at any time of any right or remedy against Contractor or against any other person or entity which may be or become liable in respect of all or any part of the obligations of Contractor under the EPC Agreement or against any collateral security or guaranty therefor. This Guaranty shall: (i) remain in full force and effect until satisfaction in full of all obligations of Contractor under the EPC Agreement; (ii) be binding upon Guarantor and its successors and assigns; and (iii) inure to the benefit of and be enforceable by Owner and its successors and permitted assigns. (b) Guarantor shall have no right, power or authority to delegate all or any of its obligations hereunder. Guarantor hereby expressly agrees that Owner may assign all or any of its rights hereunder without Guarantor's approval to any person or entity to which it has assigned its rights under the EPC Agreement (including, without limitation, the Financing Parties referred to in the EPC Agreement) and that any such assignee of Owner may further assign such rights assigned to it. Notwithstanding anything to the contrary contained in the foregoing, no such assignment to any Person which directly competes with [*], Raytheon Engineers & Constructors, Inc., or any of its affiliates in the field of design, engineering, manufacturing, procurement and construction of power generation, transmission or distribution facilities shall be permitted without the prior written consent of Guarantor. In the event of any such assignment, references herein to "Owner" shall be deemed to include references to the relevant assignee. If in connection with such an assignment by Owner any Financing Party requests Guarantor to consent in writing to such permitted assignment even though such consent is not required hereunder, Guarantor shall do so promptly, with such acknowledgment and consent agreement to contain such terms and conditions as are mutually and reasonably agreed upon by Guarantor, Owner and the Financing Parties. In addition, at Owner's request, Guarantor shall provide to the Financing Parties a certificate from Guarantor and/or an opinion of counsel addressed to the Financing Parties, in form and substance reasonably satisfactory to Owner and the Financing Parties, concerning such matters as the Financing Parties reasonably request, including that (w) Guarantor is duly organized, validly existing and in good standing under the laws of the state or 10 commonwealth of its formation or incorporation, as the case may be, (x) the execution, delivery and performance of this Guaranty and the related acknowledgment and consent agreement are within the power and authority of Guarantor, and this Guaranty and such acknowledgment and consent agreement are not in conflict with Guarantor's organizational documents or any agreement to which Guarantor is a party or by which it is bound or affected, (y) there is no law, rule or regulation, nor is there any judgment, decree or order of any court or governmental entity binding on Guarantor which would be contravened by the execution, delivery, performance or enforcement of this Guaranty and such acknowledgment and consent agreement, and (z) each of this Guaranty and such acknowledgment and consent agreement is a legal, valid and binding obligation enforceable against Guarantor in accordance with its terms, subject to usual and customary qualifications. SECTION 14 WAIVER OF JURY TRIAL GUARANTOR AND OWNER EACH HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT OR COUNTERCLAIM ARISING IN CONNECTION WITH THIS GUARANTY. SECTION 15 GOVERNING LAW This Guaranty shall be governed by, and construed in accordance with, the laws of the State of New York, the United States of America, without regard to the conflict of laws rules thereof. SECTION 16 SEVERABILITY If any provision hereof is invalid or unenforceable in any jurisdiction, (i) the other provisions hereof shall remain in full force and effect in such jurisdiction and the remaining provisions hereof shall be liberally construed in order to carry out the provision hereof, (ii) the parties hereto shall enter into good faith negotiations to replace such invalid or unenforceable provision, and (iii) the invalidity or unenforceability of such provision in any jurisdiction shall not affect the validity or enforceability of any such provision in any other jurisdiction. 11 SECTION 17 SURVIVAL OF PROVISIONS All provisions of this Guaranty which are expressly or by implication to come into or continue in force and effect after the expiration or termination of this Guaranty shall remain in effect and be enforceable following such expiration or termination. SECTION 18 CONFIDENTIAL INFORMATION (a) Guarantor agrees to hold in confidence for a period commencing with the date hereof and ending five years from the date of Project Completion any information supplied to it hereunder by the Owner of the type governed by the confidentiality provisions of the EPC Agreement and any other information required by Owner to be so treated. Guarantor hereby further agrees to require third parties to enter into appropriate non-disclosure agreements relative to such confidential information as may be communicated to them by Guarantor or Owner; PROVIDED, HOWEVER, that in the event Guarantor discloses any confidential information to a third party pursuant to such non-disclosure agreement, Guarantor shall remain liable hereunder for any further disclosure by such third-party which is in breach of such non-disclosure agreement or would be in breach of this Section 18 if such further disclosure were made by Guarantor. The provisions of this Section 18(a) shall not apply to information within any one of the following categories: (i) information which was in the public domain prior to receipt thereof from Owner or which subsequently becomes part of the public domain by publication or otherwise, except by Guarantor's wrongful act; (ii) information which Guarantor can show was in its possession prior to its receipt thereof from the other party; (iii) information received by Guarantor from a third party without a confidentiality obligation with respect thereto known by the receiving party; (iv) information which Guarantor developed independently; or (v) information which Guarantor is required by law to disclose; PROVIDED, HOWEVER, that prior to making any such disclosure under clause (v) of this Section 18(a), Guarantor shall: (1) provide Owner with timely advance written notice of the confidential information requested by such government authority and Guarantor's intent to so disclose; (2) minimize the amount of confidential information to be provided consistent with the interests of the Owner and the requirements of the government authority involved; and (3) at the request and expense of Owner, make every reasonable effort (which shall include participation by the non-disclosing party in discussions with the government authority involved) to secure confidential treatment and minimization of the confidential information to be provided. Guarantor shall not publish 12 the terms and conditions of this Guaranty, unless Owner provides its express prior written consent thereto. (b) Guarantor shall not issue any press or publicity release or any advertisement, or publish or otherwise disclose any photograph or other information, concerning this Guaranty, the EPC Agreement or the Project without the express prior written consent of Owner. SECTION 19 IDENTIFICATION This Guaranty is numbered [*] to distinguish it from other guaranties granted by the Guarantor. 13 IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be duly executed and delivered by its officer thereunto duly authorized as of the date first above written. RAYTHEON COMPANY By: /s/ Thomas D. Hyde ---------------------------------------- Name: Thomas D. Hyde Title: Senior Vice President, Secretary and General Counsel Date: ACCEPTED AND AGREED: AES RED OAK, L.L.C. By: /s/ Bart R. Rossi --------------------------- Name: Bart R. Rossi Title: Vice President Date: 12-7-99 14 EX-10.4 6 ex-10_4.txt EXHIBIT 10.4 Exhibit 10.4 An asterisk ([*]) indicates that confidential information has been omitted and filed separately with the Securities and Exchange Commission as part of a Confidential Treatment Request. ================================================================================ MAINTENANCE PROGRAM PARTS, SHOP REPAIRS AND SCHEDULED OUTAGE TFA SERVICES CONTRACT between AES RED OAK, LLC and SIEMENS WESTINGHOUSE POWER CORPORATION ================================================================================ Dated as of December 8, 1999 AES RED OAK PROJECT PROPRIETARY INFORMATION AES RED OAK LTP CONTRACT TABLE OF CONTENTS
PAGE ARTICLE 1. DEFINITIONS; GENERAL REFERENCES......................................................1 1.1 Defined Terms........................................................................1 1.2 General References...................................................................7 ARTICLE 2. CONTRACT DOCUMENTS...................................................................7 2.1 Contract Documents...................................................................7 2.2 Conflicting Provisions...............................................................7 ARTICLE 3. SCOPE OF WORK........................................................................7 3.1 Seller's Scope.......................................................................7 3.2 Buyer's Scope........................................................................7 3.3 Early Replacement....................................................................8 3.4 Parts Life Credit....................................................................9 ARTICLE 4. CONTRACT PRICE AND PAYMENT TERMS....................................................10 4.1 Contract Price......................................................................10 4.2 Taxes...............................................................................10 4.2 Invoices............................................................................11 4.3 Payment.............................................................................11 4.4 Notice of Payment Disputes..........................................................11 4.5 Late Payments.......................................................................11 4.6 Payments Not Acceptance of Workscope Obligations....................................11 ARTICLE 5. TERM AND OUTAGES....................................................................12 5.1 Term................................................................................12 5.2 Unscheduled Outages.................................................................12 5.3 Unscheduled Outage Work.............................................................14 5.4 Exclusivity of Obligations and Remedies.............................................15 ARTICLE 6. CHANGES.............................................................................15 6.1 Request For Changes.................................................................15 6.2 Adjustment..........................................................................15 6.3 No Additional Compensation Changes..................................................16 6.4 Changes in Operating Restrictions...................................................16 6.5 Scope Changes Due to Seller Error...................................................16
PROPRIETARY INFORMATION i AES RED OAK LTP CONTRACT ARTICLE 7. DELIVERY; TITLE; RISK OF LOSS AND TRANSPORTATION....................................16 7.1 Delivery of New Program Parts or Miscellaneous Hardware.............................16 7.2 Shop Repaired Program Parts.........................................................16 7.3 Transportation......................................................................17 ARTICLE 8. WARRANTIES..........................................................................18 8.1 New Program Parts and Miscellaneous Hardware Warranty and Exclusive Remedy..........18 8.2 Shop Repair Warranty and Exclusive Remedy...........................................19 8.3 Services Warranty and Exclusive Remedy..............................................19 8.4 Shop Repair Turn Around Time Warranty and Exclusive Remedy..........................20 8.5 Warranty Conditions.................................................................21 8.6 Exclusivity of Warranties and Remedies..............................................22 8.7 Relationship to CTG Subcontract.....................................................22 ARTICLE 9. INTELLECTUAL PROPERTY...............................................................22 9.1 Patent, Copyright, or Trade Secret Infringement.....................................22 9.2 Limitation of Intellectual Property Obligations.....................................23 9.3 Exclusivity of Duties and Remedies..................................................23 ARTICLE 10. COMPLIANCE WITH LAWS................................................................23 10.1 Generally...........................................................................23 10.2 Changes in Law, Etc.................................................................24 ARTICLE 11. INSURANCE...........................................................................24 11.1 Seller's Insurance..................................................................24 11.2 Buyer's Insurance...................................................................25 11.3 Policies............................................................................25 11.4 Bearing On Other Contractual Rights and Obligations.................................26 ARTICLE 12. TERMINATION.........................................................................26 12.1 Termination for Seller's Inability to Perform.......................................26 12.2 Termination for Seller's Failure to Perform.........................................26 12.3 Buyer's and Seller's Rights and Obligations when Buyer Terminates for Seller's Inability or Failure to Perform ..........................27 12.4 Termination for Buyer's Convenience.................................................26 12.5 Buyer's and Seller's Rights and Obligations When Buyer Terminates for Its Convenience ...................................................27 12.6 Termination by Seller...............................................................28
PROPRIETARY INFORMATION ii AES RED OAK LTP CONTRACT 12.7 Buyer's and Seller's Rights and Obligations when Seller Terminates .......................................................................29 12.8 Exclusivity of Rights and Remedies..................................................30 ARTICLE 13. INDEMNIFICATION.....................................................................30 13.1 Seller's Indemnity..................................................................30 13.2 Buyer's Indemnity...................................................................31 ARTICLE 14. LIMITATION OF LIABILITY.............................................................31 14.1 No Consequential Damages~...........................................................31 14.2 Exclusive Remedy and Cap on Liability...............................................31 14.3 Extent of Waivers...................................................................32 14.4 Extent of Conflicts.................................................................32 ARTICLE 15. FORCE MAJEURE.......................................................................32 15.1 Excuse by Force Majeure.............................................................32 15.2 Effect of Force Majeure.............................................................33 ARTICLE 16. MISCELLANEOUS.......................................................................33 16.1 Cooperation In Financing............................................................33 16.2 Proprietary Information.............................................................33 16.3 Subcontractors......................................................................36 16.4 Third Parties.......................................................................37 16.5 Dispute Resolution..................................................................37 16.6 Assignment and Delegation...........................................................38 16.7 Severability........................................................................38 16.8 Amendments..........................................................................38 16.9 Joint Effort........................................................................38 16.10 Captions............................................................................38 16.11 Non-Waiver..........................................................................38 16.12 Applicable Law......................................................................38 16.13 Successors and Assigns..............................................................39 16.14 Counterparts........................................................................39 16.15 Notices.............................................................................39 16.16 Complete Contract...................................................................39 16.17 Site Access.........................................................................39 16.18 Permits and Licenses................................................................39 16.19 Special Packing.....................................................................40 16.20 Return of Program Parts or Miscellaneous Hardware...................................40 16.21 Transfer............................................................................40 16.22 Survival............................................................................40
PROPRIETARY INFORMATION iii AES RED OAK LTP CONTRACT 16.23 Environmental Compliance............................................................40 16.24 Liquidated Damages Not Penalty......................................................42 16.25 Project Conformance.................................................................42 16.26 501F Fleetwide Issue Notification...................................................42
Exhibit A - Scope of Work Description Exhibit B - Program Parts List Exhibit C - Program Parts Supplied and Repaired Schedule Exhibit D - Current Service Bulletin 36803 Exhibit E - Payment Schedule Exhibit F - Natural Gas & Water Specifications
PROPRIETARY INFORMATION iv AES RED OAK LTP CONTRACT MAINTENANCE PROGRAM PARTS, SHOP REPAIRS AND SCHEDULED OUTAGE TFA SERVICES CONTRACT THIS MAINTENANCE PROGRAM PARTS, SHOP REPAIRS AND SCHEDULED OUTAGE TFA SERVICES CONTRACT (this "CONTRACT") is entered into as of December 8, 1999, by and between AES RED OAK, LLC, a Delaware limited liability company ("BUYER"), and SIEMENS WESTINGHOUSE POWER CORPORATION, a Delaware corporation ("SELLER"). WHEREAS, Buyer is developing a power project to be located near Sayreville, New Jersey (the "PROJECT"); and WHEREAS, in connection with the Project, Buyer desires to purchase from Seller and Seller desires to provide to Buyer combustion turbine parts, shop repairs and scheduled outage technical field assistance services, all as more particularly described herein; NOW, THEREFORE, in consideration of these premises and mutual covenants contained herein, the parties hereby agree as follows: ARTICLE 1. DEFINITIONS; GENERAL REFERENCES 1.1 DEFINED TERMS. Except as otherwise expressly provided herein, capitalized terms used in this Contract and its Exhibits shall have the following meanings: "BUYER" has the meaning set forth in the Preamble. "BUYER'S AFFILIATES" means The AES Corporation, and any subsidiary thereof, excluding any entity which is partially owned by a competitor of Seller in the field of design, engineering, manufacturing, maintenance, operation, procurement and construction of power generation, transmission or distribution facilities. "COMBUSTION TURBINE MAINTENANCE MANAGEMENT PROGRAM SERVICES" means all of the program maintenance managerial services to be provided by Seller hereunder, as described in Section 2.5 of Exhibit A, Scope of Work Description. "CHANGE" has the meaning set forth in Section 6.1. "CHANGE ORDER" has the meaning set forth in Section 6.1. PROPRIETARY INFORMATION 1 AES RED OAK LTP CONTRACT MAINTENANCE PROGRAM PARTS, SHOP REPAIRS AND SCHEDULED OUTAGE TFA SERVICES CONTRACT "COMBUSTION TURBINE" means one of the Project's three (3) 501F combustion turbines furnished by the EPC Contractor under the EPC Contract or any replacement 501F combustion turbine furnished by the EPC Contractor or one of its affiliates under the CTG Subcontract. "CONTRACT" means this Program Parts, Shop Repairs and Scheduled Outage TFA Services Contract, including all Exhibits hereto, as amended, supplemented or modified from time to time. "CONTRACT PRICE" has the meaning set forth in Section 4.1. "CTG SUBCONTRACT" means the Agreement for the Design, Fabrication, Delivery, and Commissioning of Combustion Turbine Generators between Seller and EPC Contractor, dated as of [ , 1999].(1) "DAY" means a calendar day. "DELAYED PAYMENT RATE" means a rate of interest per annum equal to the offered rate as quoted by Reuters' Page ISDA (rounded upwards, if necessary, to the nearest one sixteenth of one percent (1/16 of 1%)) or, in the event that such offered rate does not appear, the offered rate which appears on the Telerate Page 3750, in each case as being the rate obtained in the London interbank eurocurrency market as of 11:00 a.m., London time, for deposits in U.S. dollars on the first Day of any payment default for a period of one (1) month, PLUS TWO PERCENT (2%), or the maximum rate permitted by applicable Law, whichever is less. "DELIVERY" has the meaning set forth in Article 7. The word "DELIVERED" shall have a correlative meaning. "EPC CONTRACT" means the Agreement for Engineering, Procurement and Construction Services between Buyer and EPC Contractor dated as of October 15, 1999, as such agreement may be amended, supplemented or modified from time to time. "EPC CONTRACTOR" means Raytheon Engineers & Constructors, Inc. and its successors and permitted assigns as "Contractor" under the EPC Contract. "EQUIVALENT BASE LOAD HOURS" or "EBH" means the calculated result of equivalent base load hours determined in accordance with Exhibit D, Current Service Bulletin 36803. - ---------------- (1) To insert name and effective date. PROPRIETARY INFORMATION 2 AES RED OAK LTP CONTRACT MAINTENANCE PROGRAM PARTS, SHOP REPAIRS AND SCHEDULED OUTAGE TFA SERVICES CONTRACT "EQUIVALENT STARTS" means the calculated result of equivalent starts determined in accordance with Exhibit D, Current Service Bulletin 36803. "ESCALATION FACTOR" means the net percentage increase or decrease (as the case may be) in the Consumer Price Index-U (published by the US Department of Labor) over the period from base date of January 1, 2000 through date of the invoice. If such index ceases to be published such similar substitute index as is mutually agreed to by the parties, shall apply. "FACILITY" means the combined cycle electric generating facility to be located in Sayreville, New Jersey which makes up the Project, and includes the three (3) Combustion Turbines. "FEE" means the applicable fee listed in Exhibit E, Payment Schedule for the given number of EBHs. "FORCE MAJEURE" shall have the meaning set forth in Section 15.1. "GOVERNMENTAL AUTHORITY" shall have the meaning set forth in Section 16.2.3. "HAZARDOUS MATERIALS" shall have the meaning set forth in Section 16.23(e). "HAZARDOUS WASTE" means any waste that is found to pre-exist or is generated at the Site which is defined in the Laws to be hazardous. "INDEPENDENT ENGINEER" shall have the meaning set forth in Section 16.2.1. "LAWS" means all applicable laws, statutes, rules, regulations, orders and ordinances or specified standards or objective criteria contained in any applicable license, permit or approval, or other legislative or administrative act, of the United States of America or any state of the United States, agency, department, authority, political subdivision or other instrumentality thereof, or a decree, judgment or order of a court, including but not limited to those governing wages, hours, employment discrimination and safety, laws regarding workers' compensation, disability laws and employee benefit laws. "MISCELLANEOUS HARDWARE" means miscellaneous hardware items including but not limited to pins, springs, studs, gaskets, tie wires, fasteners, screws, washers, nuts, bolts which are required to roll out and roll in the Program Parts which is supplied by Seller under this Contract or in accordance with a Change Order hereto, issued pursuant to Article 6. "NATURAL GAS" shall have the meaning set forth in Exhibit F. PROPRIETARY INFORMATION 3 AES RED OAK LTP CONTRACT MAINTENANCE PROGRAM PARTS, SHOP REPAIRS AND SCHEDULED OUTAGE TFA SERVICES CONTRACT "NEW PROGRAM PARTS" means the Program Part(s) of the type that are listed in Exhibit B, Program Parts List which are supplied by Seller under this Contract, in a new and unused condition. "NEW PROGRAM PARTS AND MISCELLANEOUS HARDWARE WARRANTY" shall have the meaning set forth in Section 8.1. "NORMAL WEAR AND TEAR" means the level of wear and tear that the Facility or part(s) thereof will experience as a result of being operated and maintained in accordance with the instruction manuals and operating criteria provided to the EPC Contractor by Seller or the original equipment manufacturer under the terms of the CTG Subcontract and any mutually agreed upon variance thereto, the operating parameters specified in Section 6.4, the warranty conditions specified in Section 8.5 and, to the extent not inconsistent with any of the foregoing, in general accordance with Prudent Utility Practices. The definition of Normal Wear and Tear expressly excludes any consequential/downstream/downflow damage caused to the Facility or part(s) thereof by a part which gave way upstream/upflow. "OFFEREE" shall have the meaning set forth in Section 16.2.1. "OFFERING STATEMENTS" shall have the meaning set forth in Section 16.2.1. "PERIOD" means the interval from the completion of one Scheduled Outage through the next Scheduled Outage of the applicable Combustion Turbine. For the purpose of this definition the initial Period shall begin at initial synchronization of the applicable Combustion Turbine. "POWER PURCHASE AGREEMENT" means the Amended and Restated Power Purchase Agreement dated as of September 17, 1999 between Williams and Buyer, as such agreement may be amended, supplemented or modified from time to time. "PROGRAM PART(S)" means (i) type of part(s) of the Combustion Turbine that are listed in Exhibit B, Program Parts List and are supplied by Seller under this contract PLUS (ii) the equivalent parts to those listed in Exhibit B, Program Parts List, which were included in the original Combustion Turbine(s) supplied by Seller under the CTG Subcontract. "PROJECT" has the meaning set forth in the Preamble. "PRUDENT UTILITY PRACTICE" means the practices, methods, techniques and standards that at the particular time of performance of the Workscope Obligations by Seller or of Buyer's obligations specified in Sections 3 and 4 of Exhibit A, (i) are generally accepted in the electric power industry in the United States, for use in connection with the design, PROPRIETARY INFORMATION 4 AES RED OAK LTP CONTRACT MAINTENANCE PROGRAM PARTS, SHOP REPAIRS AND SCHEDULED OUTAGE TFA SERVICES CONTRACT engineering, construction, testing, operation and maintenance of power stations of the same or similar size and type as the Facility, all in a manner consistent with Laws, reliability, safety, environmental protection, economy and expediency, and (ii) conform in all material respects to the manufacturer's design, engineering, construction, testing, operation and maintenance guidelines applicable to the equipment in question, including Seller's operation and maintenance guidelines for the Combustion Turbines. Prudent Utility Practices are not limited to the optimum practice or method to the exclusion of others, but rather refer to commonly used and reasonable practices and methods. "RATING AGENCY" shall have the meaning set forth in Section 16.2.1. "REPORT" shall have the meaning set forth in Section 16.2.1. "SCHEDULED OUTAGE" means a planned outage of the applicable Combustion Turbine, scheduled by Buyer and Seller, during which the applicable Scheduled Outage TFA Services described in Exhibit A, Scope of Work Description will be performed hereunder. A Scheduled Outage will commence when the Combustion Turbine breaker is opened and will end when Seller has completed its applicable Scheduled Outage TFA Services for the given Scheduled Outage and Seller has submitted to Buyer written notice of completion and Buyer has concurred. The projected Scheduled Outage plan is contained in Exhibit C, Program Parts Supplied and Repaired Schedule. "SCHEDULED OUTAGE TFA SERVICES" means all of the TFA Services to be provided by Seller hereunder during the applicable Scheduled Outage, as described in Section 2.4 of Exhibit A, Scope of Work Description, but excludes services provided by or on behalf of Seller pursuant to the CTG Subcontract. "SELLER" has the meaning set forth in the Preamble. "SEC" shall have the meaning set forth in Section 16.2.1. "SELLER'S AFFILIATES" means Siemens A.G., and any subsidiary thereof, excluding any entity which is partially owned by a competitor of Buyer in the field of development and ownership of power generation, transmission or distribution facilities. "SERVICES" means any and all services to be provided by Seller under this Contract including Scheduled Outage TFA Services, Combustion Turbine Maintenance Program Management Services, Shop Repairs and any services performed in accordance with a Change Order hereto issued pursuant to Article 6. "SERVICES WARRANTY" shall have the meaning set forth in Section 8.3. PROPRIETARY INFORMATION 5 AES RED OAK LTP CONTRACT MAINTENANCE PROGRAM PARTS, SHOP REPAIRS AND SCHEDULED OUTAGE TFA SERVICES CONTRACT "SHOP REPAIR" means shop repair/refurbishment work performed hereunder by Seller on Program Parts at Seller's manufacturing plant, Seller's service facility or a suitable facility selected by Seller. "SHOP REPAIR WARRANTY" shall have the meaning set forth in Section 8.2. "SITE" means the real property located near Sayreville, New Jersey on which the Project is to be or has been constructed. "SPILL" shall have the meaning set forth in Section 16.23(c). "TERM" shall have the meaning set forth in Section 5.1. "TFA SERVICES" means any and all technical field assistance services to be provided by Seller hereunder, including without limitation the advice and consultation given to Buyer's personnel by a field service representative of Seller with respect to: (i) installation, inspection, repair and maintenance activities performed by others at the Site, and (ii) any Seller recommended quality assurance procedures for activities performed at the Site. TFA Services does not include (x) management, supervision or regulation of Buyer's personnel, agents and contractors or (y) any technical field assistance services provided by or on behalf of Seller pursuant to the CTG Subcontract. "TURNED-AROUND" shall have the meaning set forth in Section 8.4. "UNSCHEDULED OUTAGE" means any outage of a Combustion Turbine other than a Scheduled Outage. "WATER" shall have the meaning set forth in Exhibit F. "WILLIAMS" means Williams Energy Marketing & Trading Company, a Delaware corporation, and its permitted successors and assigns as supplier of fuel to, and purchaser of electricity from, the Facility under the Power Purchase Agreement. "WORKSCOPE OBLIGATIONS" means all obligations of Seller pursuant to the terms of this Contract to perform Services and Shop Repairs and to provide Program Parts and Miscellaneous Hardware, and includes any other equipment, parts, shop repairs or services mutually agreed to by the parties hereto and specified in a Change Order issued pursuant to Article 6. PROPRIETARY INFORMATION 6 AES RED OAK LTP CONTRACT MAINTENANCE PROGRAM PARTS, SHOP REPAIRS AND SCHEDULED OUTAGE TFA SERVICES CONTRACT 1.2 GENERAL REFERENCES. As used in this Contract, the terms "herein," "herewith" and "hereof" are references to this Contract, taken as a whole, the term "includes" or "including" shall mean "including, without limitation," and references to a "Section," "subsection," "clause," "Article" or "Exhibit" shall mean a Section, subsection, clause, Article or Exhibit of this Contract, as the case may be, unless in any such case the context requires otherwise. The singular shall include the plural and the masculine shall include the feminine and neuter, and vice versa. ARTICLE 2. CONTRACT DOCUMENTS 2.1 CONTRACT DOCUMENTS. This Contract consists of this contract document itself and the following Exhibits which are specifically made a part hereof by reference: Exhibit A - Scope of Work Description Exhibit B - Program Parts List Exhibit C - Program Parts Supplied and Repaired Schedule Exhibit D - Current Service Bulletin 36803 Exhibit E - Payment Schedule Exhibit F - Natural Gas & Water Specification
2.2 CONFLICTING PROVISIONS. In the event of any conflict between this document and any Exhibit hereto, the terms and provisions of this document, as amended from time to time, shall control. In the event of any conflict among the Exhibits, the following order of precedence shall govern: Exhibit E, A, B, C, D, and F. Subject to the foregoing, the several instruments forming part of this Contract are to be taken as mutually explanatory of one another and in the case of ambiguities or discrepancies within or between such parts the same shall be explained and adjusted by the mutual agreement of the Parties. ARTICLE 3. SCOPE OF WORK 3.1 SELLER'S SCOPE. During the Term, Seller shall fulfill its Workscope Obligations Scope of Work Description and shall perform any other Workscope Obligations mutually agreed to by the parties hereto and specified in a Change Order issued pursuant to Article 6, Changes. 3.2 BUYER'S SCOPE. During the Term, Buyer shall fulfill its obligations specified in Exhibit A, Scope of Work Description, and shall perform any other obligations mutually agreed to by the parties and specified in a Change Order issued pursuant to Article 6, Changes. PROPRIETARY INFORMATION 7 AES RED OAK LTP CONTRACT MAINTENANCE PROGRAM PARTS, SHOP REPAIRS AND SCHEDULED OUTAGE TFA SERVICES CONTRACT 3.3 EARLY REPLACEMENT. (a) If during the Term and after the applicable warranty period for a Program Part set forth in Section 8.1 or set forth in the CTG Subcontract has expired or otherwise does not apply to such Program Part, it is determined that a Program Part has to be replaced, due to Normal Wear and Tear, prior to the scheduled replacement period per Exhibit C, Program Parts Supplied and Repaired Schedule, Seller shall replace such Program Part early by moving up a New Program Part which is scheduled to be Delivered at a later date per Exhibit C, Program Parts Supplied and Repaired Schedule, if such a New Program Part remains available under Exhibit C. Any Program Part which is replaced pursuant to this Section shall be deemed to have a scrap value of $0 and shall be returned by Buyer to Seller along with free and clear title thereto. Any transportation costs associated with the return of such Program Part shall be the responsibility of Seller. No amount shall be due to or from Buyer in connection with the return of such Program Part to Seller. (b) If during the Term and after the applicable warranty period for a Program Part set forth in Section 8.1 or set forth in the CTG Subcontract has expired or otherwise does not apply to such Program Part, it is determined that a Program Part has to be replaced prior to the scheduled replacement period per Exhibit C, Program Parts Supplied and Repaired Schedule and such Program Part is not covered by Section 3.3(a) (I.E. it is not due to Normal Wear and Tear), Seller shall replace such Program Part early by moving up a New Program Part which is scheduled to be Delivered at a later date per Exhibit C, Program Parts Supplied and Repaired Schedule, if such a New Program Part remains available under Exhibit C. Any Program Part which is replaced pursuant to this Section shall be deemed to have a scrap value of $0 and shall be returned by Buyer to Seller along with free and clear title thereto. Any transportation costs associated with the return of such Program Part shall be the responsibility of Seller. No amount shall be due to or from Buyer in connection with the return of such Program Part to Seller. (c) Buyer shall be entitled to participate in the decision making process regarding the actual parts life and the degree of repair or refurbishment associated with any Program Part(s) pursuant to this Section 3.3. The final decision, however, with regard to actual parts life and the degree of repair or refurbishment associated with any Program Part(s) shall be made by Seller based on Prudent Utility Practices and communicated to Buyer. If Buyer disputes Seller's final decision based on the assertion that Seller's final decision is inconsistent with Prudent Utility Practices, then Buyer may seek to resolve such dispute in accordance with Section 16.5, Dispute Resolution. (d) If the actual replacement date of a Program Part pursuant to Section 3.3(a) or (b) is less than or equal to one (1) year earlier than the Scheduled Outage during which the Program Part was scheduled to be replaced per Exhibit C, Program Parts Supplied and Repaired Schedule, such early replacement shall not affect the Contract Price or PROPRIETARY INFORMATION 8 AES RED OAK LTP CONTRACT MAINTENANCE PROGRAM PARTS, SHOP REPAIRS AND SCHEDULED OUTAGE TFA SERVICES CONTRACT Exhibit E, Payment Schedule. If the actual replacement date is more than one (1) year earlier than the Scheduled Outage during which the Program Part was scheduled to be replaced, per Exhibit C, Program Parts Supplied and Repaired Schedule, such early replacement shall result in a change to Exhibit E, Payment Schedule, pursuant to a Change Order, levelizing the cash flow effect of moving the replacement part up over the remaining Term on a $/EBH basis and modifying the Fees listed in Exhibit E accordingly. (e) During the Term, once all of the New Program Parts available under Exhibit C, Program Parts Supplied and Repaired Schedule have been Delivered pursuant to this Section 3.3 and no further replacements remain to be provided under Exhibit C, Buyer shall, pursuant to a Change Order purchase, pursuant to Section 3.4, Parts Life Credit, any and all further replacement Program Parts required for the remainder of the Term (including the Scheduled Outage requirements specified in Exhibit C, Program Parts and Repaired Schedule, and any Unscheduled Outage requirements, but excluding any such replacements covered by any applicable warranty set forth in Section 8.1 or set forth in the CTG Subcontract) and Seller shall provide such replacement Program Parts at the discounted price calculated in accordance with Section 3.4, Parts Life Credit at the prices specified in Exhibit B, subject to the Escalation Factor, discounted by any applicable parts life credit pursuant to Section 3.4. In such event, Buyer shall pay 35% of the purchase price for such replacement Program Part at the time the Change Order is issued and the remainder at the time such replacement Program Parts are Delivered. Any Program Part which is replaced pursuant to this Section shall be deemed to have a scrap value of $0 and shall be returned by Buyer to Seller along with free and clear title thereto. Any transportation costs associated with the return of such Program Part shall be the responsibility of Seller. No amount shall be due to or from Buyer in connection with the return of such Program Part to Seller. (f) Seller's obligation to provide such required early replacement Program Parts shall be to obtain and deliver to the Project the required replacement Program Parts, whether new or repaired, as soon as commercially reasonably possible so as to minimize the duration of the outage. 3.4 PARTS LIFE CREDIT. During the Term and after conclusion of the applicable warranty periods stated in Section 8.1 or in the CTG Subcontract, as the case may be, Seller will provide a parts life credit if a Program Part requires replacement due to Normal Wear and Tear pursuant to Section 3.3(a) prior to meeting neither its expected useful life as calculated in terms of EBHs as specified in Exhibit B, Program Parts List, nor its expected useful life as calculated in terms of Equivalent Starts, as specified in Exhibit B, Program Parts List. (Buyer shall be entitled to participate in the decision making process regarding the actual parts life and the degree of repair or refurbishment PROPRIETARY INFORMATION 9 AES RED OAK LTP CONTRACT MAINTENANCE PROGRAM PARTS, SHOP REPAIRS AND SCHEDULED OUTAGE TFA SERVICES CONTRACT associated with any Program Part(s). The final decision, however, with regard to actual parts life and the degree of repair or refurbishment associated with any Program Part(s) shall be made by Seller based on Prudent Utility Practices and communicated to Buyer. If Buyer disputes Seller's final decision based on the assertion that Seller's final decision is inconsistent with Prudent Utility Practices, then Buyer may seek to resolve such dispute in accordance with Section 16.5, Dispute Resolution.) The parts life credit will be calculated by multiplying the price for such Program Part's replacement specified in Exhibit B, Program Parts List subject to escalation pursuant to the Escalation Factor, by the lesser of: (i) the expected useful life of the Program Part needing to be replaced in terms of EBHs, as specified in Exhibit B, Program Parts List, MINUS the total number of EBHs incurred by such Program Part, DIVIDED BY the expected useful life of such Program Part in terms of EBHs, as specified in Exhibit B; and (ii) the expected useful life of the Program Part needing to be replaced in terms of Equivalent Starts, as specified in Exhibit B, MINUS the total number of Equivalent Starts incurred by such Program Part, DIVIDED BY the expected useful life of such Program Part in terms of Equivalent Starts, as specified in Exhibit B. Once all of the New Program Parts, under Exhibit C, Program Parts Supplied and Repaired Schedule, have been Delivered pursuant to Section 2.1 of Exhibit A, Scope of Work Description, or Section 3.3, Early Replacement, and no further replacements exist under Exhibit C, Buyer shall use this credit towards the purchase of such Program Part replacements. However, in no event, shall any parts life credit be extended under this Section 3.4 beyond one (1) year after the conclusion of the Term of this Contract. ARTICLE 4. CONTRACT PRICE AND PAYMENT TERMS 4.1 CONTRACT PRICE. As full consideration of the performance by Seller of the Workscope Obligations (other than those Workscope Obligations provided pursuant to a Change Order), Buyer will pay to Seller the Fees as adjusted either up or down by the Escalation Factor at the time of each invoice. The "CONTRACT PRICE" shall be the aggregate total of the Fees, as adjusted, PLUS any additional payment amount mutually agreed to by the parties pursuant to a Change Order hereto, issued pursuant to Article 6, Changes. 4.2 TAXES. The Contract Price paid or to be paid to Seller under this Contract does not include any federal, state, (other than federal or state, income taxes imposed on Seller, or Seller's subcontractors or subvendors), or local property, license or privilege (other than federal, state or local assessments for licenses and privileges associated with Seller's ability to conduct general business within the area), sales, use, excise, value added, gross receipts, or similar taxes now or hereafter applicable to, measured by, or imposed upon or with respect to the transaction, the property, its sale, its value or its use, or any services PROPRIETARY INFORMATION 10 AES RED OAK LTP CONTRACT MAINTENANCE PROGRAM PARTS, SHOP REPAIRS AND SCHEDULED OUTAGE TFA SERVICES CONTRACT performed in connection therewith. Buyer agrees to pay or reimburse Seller for any such taxes which Seller or its subcontractors or subvendors are required to pay. Seller shall use reasonable efforts and due diligence, and shall cause its subcontractors or subvendors to use their reasonable efforts and due diligence, to efficiently manage its performance of the Workscope Obligations hereunder so as to minimize the incurrence of any federal, state or local property, license or privilege, sales, use, excise, value added, gross receipts or similar taxes to be paid or reimbursed by Buyer hereunder. Taxes to be paid by Buyer do not include any taxes that Seller should not have incurred if it had used such reasonable efforts and due diligence. 4.3 INVOICES. Per Exhibit E Payment Schedule, Seller shall furnish Buyer an invoice indicating the Fee being invoiced, as adjusted up or down in accordance with this Contract by the Escalation Factor at the time of such invoice. 4.4 PAYMENT. Within twenty-five (25) Days following the date Buyer receives each invoice under Section 4.3, Buyer shall pay to Seller the undisputed amount of the invoice. All payments to Seller shall be made by wire transfer to the account of Seller at Mellon Bank, N.A., Account # 038-0269, ABA # 04300261, or such other depository as Seller shall designate by written notice to Buyer. 4.5 NOTICE OF PAYMENT DISPUTES. Notwithstanding Buyer's obligations under Section 4.4 , if prior to the expiration of the applicable period for payment referenced in Section 4.4, Buyer disputes that any Workscope Obligations satisfy the requirements of this Contract, Buyer shall, prior to the expiration of such period, provide Seller with written notice identifying the basis for such dispute. Thereafter, the payment of such disputed amounts shall be deferred until such dispute has been resolved to the satisfaction of Buyer and Seller. Any dispute which is not resolved by mutual agreement shall be resolved in accordance with Section 16.5. 4.6 LATE PAYMENTS. If there is a dispute about any amount invoiced by Seller, the amount not in dispute shall be promptly paid as described in this Article 4, and any disputed amount which is ultimately determined to have been payable prior to the actual date of payment shall be paid with interest, at the Delayed Payment Rate, from the date due to the date of payment. 4.7 PAYMENTS NOT ACCEPTANCE OF WORKSCOPE OBLIGATIONS. No payment made hereunder shall be considered or deemed to represent that Buyer has inspected the Workscope Obligations, or checked the quality or quantity thereof and shall not be deemed or construed as approval or acceptance of any Workscope Obligations, or as a waiver of any claim or right that Buyer may then or thereafter have, including any warranty right. PROPRIETARY INFORMATION 11 AES RED OAK LTP CONTRACT MAINTENANCE PROGRAM PARTS, SHOP REPAIRS AND SCHEDULED OUTAGE TFA SERVICES CONTRACT ARTICLE 5. TERM AND OUTAGES 5.1 TERM. The term of this Contract (the "TERM") shall commence on the date as specified in the Recitals and unless terminated early pursuant to Article 12, shall terminate upon completion of the Shop Repairs following the twelfth (12th) Scheduled Outage of the applicable Combustion Turbine (I.E. expected to be at 96,000 EBH) or sixteen (16) years from the effective date of this Contract as specified in the Recitals. 5.2 UNSCHEDULED OUTAGES. 5.2.1 If during the Term an Unscheduled Outage occurs which is the result of (i) the failing of a New Program Part or Miscellaneous Hardware supplied by Seller, to conform with the New Program Parts and Miscellaneous Hardware Warranty set forth herein, (ii) the failing of a Shop Repair, supplied by Seller, to conform with the Shop Repair Warranty set forth herein, (iii) a Program Part requiring replacement due to Normal Wear and Tear pursuant to Section 3.3 prior to achieving its expected life in terms of EBHs or Equivalent Starts as specified in Exhibit B, Program Parts, or (iv) the failure of a Service, performed by Seller, to conform with the Service Warranty set forth herein, then Buyer shall hire Seller, to the extent not supplied by Seller as a warranty remedy under Seller's warranties contained in Article 8 of this Contract or by or on behalf of Seller under the , pursuant to a Change Order, to supply any additional Program Parts, Miscellaneous Hardware, Shop Repairs, and TFA Services related to the Combustion Turbine required for such Unscheduled Outage and Seller (a) shall supply any such additional Program Parts required for such Unscheduled Outage, at the prices specified in Exhibit B, Program Parts List, subject to escalation pursuant to the Escalation Factor, discounted by any applicable parts life credit under Section 3.4, (b) any such Miscellaneous Hardware and Shop Repairs required for such Unscheduled Outage, at the prices specified in Seller's Domestic Price Lists, in effect at the time of supply or performance, or in Seller's price quote at the time of supply or performance, if Seller's Domestic Price lists do not include a price for the required Miscellaneous Hardware or Shop Repairs (PROVIDED that any such Seller's price quote is reasonable and consistent with Seller's standard pricing policy), and (c) any such TFA Services related to the Combustion Turbine required for such Unscheduled Outage, at the prices specified in Seller's Domestic Price Lists, in effect at the time of supply or performance with a 10% discount applied capped at a maximum of $100,000 per year, or in Seller's price quote at the time of supply or performance with a 10% discount applied capped at a maximum of $100,000 per year, if Seller's Domestic Price lists do not include a price for the required TFA Services (PROVIDED that any such Seller's price quote is reasonable and consistent with Seller's standard pricing policy). PROPRIETARY INFORMATION 12 AES RED OAK LTP CONTRACT MAINTENANCE PROGRAM PARTS, SHOP REPAIRS AND SCHEDULED OUTAGE TFA SERVICES CONTRACT If such an Unscheduled Outage occurs within 1,000 EBHs of a Scheduled Outage and additional Program Parts, Miscellaneous Hardware, Shop Repairs and TFA Services to be used during the Unscheduled Outage are part of the Program Parts, Miscellaneous Hardware, Shop Repairs and Scheduled Outage TFA Services which were going to be used during the upcoming Scheduled Outage, the upcoming Scheduled Outage shall be moved up in time and those Program Parts, Miscellaneous Hardware, Shop Repairs and Scheduled Outage TFA Services shall be provided during the Unscheduled Outage/moved-up Scheduled Outage. Buyer shall not be required to pay any additional money for those Program Parts, Miscellaneous Hardware, Shop Repairs and Scheduled Outage TFA Services which are provided early during the Unscheduled Outage/moved-up Scheduled Outage pursuant to the preceding sentence. 5.2.2 If during the Term an Unscheduled Outage occurs for reasons other than those set forth in Section 5.2.1, then Buyer shall hire Seller, to the extent not supplied by Seller as a warranty remedy under Seller's warranties contained in Article 8 of this Contract or by or on behalf of Seller under the CTG Subcontract, pursuant to a Change Order, to supply any additional Program Parts, Miscellaneous Hardware, Shop Repairs or technical field assistance service work on the Combustion Turbine required for such Unscheduled Outage, and Seller (a) shall supply such additional Program Parts required for such Unscheduled Outage, at the prices specified in Exhibit B, Program Parts List, subject to escalation pursuant to the Escalation Factor, discounted by any applicable parts life credit under Section 3.4, (b) Miscellaneous Hardware and Shop Repairs, at the prices specified in Seller's Domestic Price Lists, in effect at the time of supply or performance, or in Seller's price quote at the time of supply or performance, if Seller's Domestic Price lists do not include a price for the required additional Miscellaneous Hardware or Shop Repairs in effect at the time of supply (PROVIDED that any such Seller's price quote is reasonable and consistent with Seller's standard pricing policy), and (c) TFA Service, at the prices specified in Seller's Domestic Price Lists, in effect at the time of supply or performance, or in Seller's price quote at the time of supply or performance, if Seller's Domestic Price lists do not include a price for the required TFA Services (PROVIDED that any such Seller's price quote is reasonable and consistent with Seller's standard pricing policy). If such an Unscheduled Outage occurs within 1,000 EBHs of a Scheduled Outage and additional Program Parts, Miscellaneous Hardware, Shop Repairs and TFA Services to be used during the Unscheduled Outage are part of the Program Parts, Miscellaneous Hardware, Shop Repairs and Scheduled Outage TFA Services which were going to be used during the upcoming Scheduled Outage, the upcoming Scheduled Outage shall be moved up in time and those Program Parts, Miscellaneous Hardware, Shop Repairs and Scheduled Outage TFA Services shall be provided during such Unscheduled Outage/Moved-up Scheduled Outage. Buyer shall not be required to pay any additional PROPRIETARY INFORMATION 13 AES RED OAK LTP CONTRACT MAINTENANCE PROGRAM PARTS, SHOP REPAIRS AND SCHEDULED OUTAGE TFA SERVICES CONTRACT money for those Program Parts, Miscellaneous Hardware, Shop Repairs and Scheduled Outage TFA Services which are provided early during such Unscheduled Outage/Moved-up Scheduled Outage pursuant to the preceding sentence. 5.3 UNSCHEDULED OUTAGE WORK. Seller shall be entitled to a Change Order for any additional Program Parts, Miscellaneous Hardware, Shop Repairs or technical field assistance service work on the Combustion Turbine purchased by Buyer from Seller pursuant to Section 3.4 or 5.2 in accordance with Article 6. In the case of an Unscheduled Outage, Seller, upon notification from Buyer via a Change Order, agrees to take prompt action(s) to mobilize its service personnel to the Project site to provide the technical field assistance services requested in such Change Order, and agrees to provide any additional Program Parts specified in such Change Order as soon as reasonably commercially practicable, to minimize downtime; PROVIDED, HOWEVER, and notwithstanding the prices specified in Section 3.4 or 5.2, that if Seller delivers such additional Program Parts within (a) 15 Days of receipt of Buyer's written request for such Change Order, Seller shall be paid by Buyer the price for such additional Program Parts as specified in Section 3.4 or 5.2, as the case may be, PLUS 17%, (b) after 15 Days but within 30 Days of Buyer's written request for such Change Order, Seller shall be paid by Buyer the price for such additional Program Parts, as specified in Section 3.4 or 5.2, as the case may be, or (c) after 30 Days of Buyer's written request for such Change Order, Seller shall be paid the price for such additional Program Parts, as specified in Section 3.4 or 5.2, as the case may be, MINUS 17%. Notwithstanding the provisions of the previous paragraph, in the event that an Unscheduled Outage has occurred and Seller fails, by the end of the second Day (as it may be extended pursuant to Article 15, Force Majeure) following Seller's receipt of written notice of the Unscheduled Outage, to send a TFA Services representative to the Site who can start providing TFA Services related to the Combustion Turbine for the Unscheduled Outage, then, upon Seller's failure, Buyer may obtain another qualified person at Buyer's cost to start providing TFA Services related to the Combustion Turbine for the Unscheduled Outage. If Buyer elects to exercise its right under the preceding sentence, Buyer shall take full responsibility for any damage to the Facility or any adverse effects on the warranties, expected lives, Unscheduled Outages, early Program Part replacements and reduction in time intervals between Scheduled Outage expressed herein that may be caused as a result thereof. In the event that (x) Buyer has exercised its rights under the first sentence of this paragraph, (y) the Combustion Turbine has been disassembled and is ready to be inspected to determine the cause of the Unscheduled Outage, and (z) Seller has not provided TFA Services personnel to assist with such inspection, then Seller shall be considered to have failed to perform its material obligations under this Contract, and Buyer may elect to terminate this Contract pursuant to Section 12.2, Termination for Seller's Failure to Perform. In such case, unless Seller PROPRIETARY INFORMATION 14 AES RED OAK LTP CONTRACT MAINTENANCE PROGRAM PARTS, SHOP REPAIRS AND SCHEDULED OUTAGE TFA SERVICES CONTRACT has made and is continuing to make diligent efforts to cure such failure in accordance with (and subject to the maximum cure period set forth in) Section 12.2, then Seller shall have waived its right to, and shall not be entitled to the benefits of, the cure periods specified in Section 12.2. 5.4 EXCLUSIVITY OF OBLIGATIONS AND REMEDIES. WITHOUT LIMITING SELLER'S OBLIGATIONS, WARRANTIES OR GUARANTEES SPECIFIED IN ARTICLE 8 OR ANY OBLIGATIONS, WARRANTIES OR GUARANTEES OF SELLER UNDER THE CTG SUBCONTRACT (WHICH MAY BE ASSIGNED TO BUYER PURSUANT TO THE EPC CONTRACT), SELLER'S OBLIGATIONS SET FORTH IN THIS ARTICLE 5 WITH RESPECT TO UNSCHEDULED OUTAGES ARE EXCLUSIVE AND ARE IN LIEU OF ALL OTHER OBLIGATIONS, WARRANTIES OR GUARANTEES, WHETHER STATUTORY, EXPRESS, OR IMPLIED (INCLUDING ALL WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, AND ALL WARRANTIES ARISING FROM COURSE OF DEALING OR USAGE OF TRADE). Without limiting any remedies or liabilities arising under or in connection with Section 3.3 or 3.4, Article 8 or the CTG Subcontract, the remedies set forth in this Article 5 shall constitute Seller's sole liability and Buyer's exclusive remedies arising under or in connection with this Contract for Unscheduled Outages whether claims of Buyer are based in contract, in tort (including negligence and strict liability), or otherwise. ARTICLE 6. CHANGES 6.1 REQUEST FOR CHANGES. Buyer or Seller may request changes in the Workscope Obligations (a "CHANGE") and, if accepted by the other party, the Fees set forth in Exhibit E, performance, schedule, and other pertinent provisions of this Contract will be adjusted by mutual agreement of the parties and set forth in a writing in a document (a "CHANGE ORDER") prior to implementation of the Change (or if the parties are unable to agree on an equitable adjustment such equitable adjustment will be determined pursuant to Section 16.5, Dispute Resolution). 6.2 ADJUSTMENT. Additional expenses incurred and time spent by Seller in performing its Workscope Obligations due to (i) delays arising from a failure of Buyer to meet its obligations under this Contract, whether through its own performance or failure to perform, or through Buyer's other contractors' or subcontractors' performance or failure to perform, and (ii) changes in Laws after the date of this Contract, as applicable, will be treated as Changes and this Contract will be adjusted as set forth in Section 6.1. Seller shall use reasonable efforts and due diligence to mitigate the effect of any such delays or changes in Laws on the performance of its Workscope Obligations. PROPRIETARY INFORMATION 15 AES RED OAK LTP CONTRACT MAINTENANCE PROGRAM PARTS, SHOP REPAIRS AND SCHEDULED OUTAGE TFA SERVICES CONTRACT 6.3 NO ADDITIONAL COMPENSATION CHANGES. Upon providing Buyer reasonable prior written notice thereof, Seller may make an immaterial change in its Program Parts and Miscellaneous Hardware, Shop Repairs or Services supplied hereunder without additional compensation from Buyer if such change does not adversely affect the warranties, the technical soundness of the work, the schedule for the performance of the Workscope Obligations, or the operability of the Project. Subject to Buyer's prior written consent (which shall not be unreasonably withheld), Seller may make a material change in its Program Parts and Miscellaneous Hardware, Shop Repairs or Services supplied hereunder without additional compensation from Buyer if such change does not adversely affect the warranties, the technical soundness of the work, the schedule for the performance of the Workscope Obligations, or the operability of the Project. Seller shall not receive additional compensation from Buyer for any such change whether it is are material or immaterial. 6.4 CHANGES IN OPERATING RESTRICTIONS. The basis of this Contract is that each Combustion Turbine shall be operated in accordance with the requirements of the Power Purchase Agreement and Prudent Utility Practices, 8,000 EBH/year, with 250 Equivalent Starts per year, using Natural Gas and Water in accordance with the specifications set forth in Exhibit F, Natural Gas & Water Specification. 6.5 SCOPE CHANGES DUE TO SELLER ERROR. Notwithstanding anything in this Article 6 to the contrary, no Change Order shall be issued and no adjustment of the price, performance, schedule, and other pertinent provisions of this Contract shall be made for Seller's correction of a warranty defect pursuant to Article 8, Warranties. ARTICLE 7. DELIVERY; TITLE; RISK OF LOSS AND TRANSPORTATION 7.1 DELIVERY OF NEW PROGRAM PARTS OR MISCELLANEOUS HARDWARE. "DELIVERY" of each New Program Part, Miscellaneous Hardware or component thereof supplied under this Contract shall be made when said New Program Part, Miscellaneous Hardware, or component thereof arrives free on board the carrier (FOB) at the Site. Subject to the provisions of the immediately following paragraph, legal and equitable title, and risk of loss or damage to each such New Program Part, Miscellaneous Hardware, or component thereof shall pass from Seller to Buyer upon Delivery. 7.2 SHOP REPAIRED PROGRAM PARTS. Program Part(s) sent to Seller for Shop Repair or Program Part(s) and Miscellaneous Hardware being returned pursuant to the provisions of Article 8, Warranty, or Article 9, Intellectual Property, of this Contract will be sent by Buyer at its expense to the repair facility in the continental United States or Canada designated by Seller where the work is to be performed. Title to such Program Part(s) or Miscellaneous Hardware will remain at all times with Buyer. Risk of loss or damage to PROPRIETARY INFORMATION 16 AES RED OAK LTP CONTRACT MAINTENANCE PROGRAM PARTS, SHOP REPAIRS AND SCHEDULED OUTAGE TFA SERVICES CONTRACT such Program Part(s) or Miscellaneous Hardware will transfer to Seller upon its arrival on board the carrier at the repair or manufacturing facility and will transfer back to Buyer when said Program Part, Miscellaneous Hardware, or component thereof is Delivered to Buyer free on board the carrier (FOB) at the Site. "DELIVERY" of each Program Part sent to Seller for Shop Repair or Program Part and Miscellaneous Hardware being returned pursuant to the provisions of Article 8, Warranty, or Article 9, Intellectual Property under this Contract shall be made when such Shop Repaired Program Part, Program Par or Miscellaneous Hardware, or component thereof arrives free on board the carrier (FOB) at the Site. 7.3 TRANSPORTATION. A. Transportation and Storage When items of New Program Parts or Miscellaneous Hardware are ready for shipment or Shop Repair is completed on Program Parts, Seller will (i) in the absence of shipping instructions, inform Buyer of pending shipment and Buyer will thereafter promptly give shipping instructions to Seller, (ii) determine the method of transportation and the routing of the shipment and (iii) ship the New Program Parts, Miscellaneous Hardware or Shop Repaired Program Parts freight and insurance in freight prepaid and included in the price by Normal Carriage as defined below to the Site. In the event that Buyer fails to provide Seller with timely shipping instructions or is unwilling or unable to timely receive the New Program Parts, Miscellaneous Hardware or Shop Repaired Program Parts, Seller will, upon notice to Buyer and after giving Buyer reasonable opportunity to designate a mutually acceptable alternate destination, place such New Program Parts, Miscellaneous Hardware, or Shop Repaired Program Parts in storage. If the New Program Parts, Miscellaneous Hardware or Shop Repaired Program Parts are to be placed into storage pursuant to this provision, Delivery of the New Program Parts Miscellaneous Hardware or Shop Repaired Program Parts shall be deemed to occur when the New Program Parts, Miscellaneous Hardware or Shop Repaired Program Parts (i) are placed Free On Board the common carrier for shipment to the storage location or (ii) is placed into the storage location when stored in a Seller manufacturing or repair facility. On behalf of and as agent for Buyer, Seller shall insure the New Program Parts, Miscellaneous Hardware, or Shop Repaired Program Parts during any such storage period. In the event of storage pursuant to the preceding paragraph, all expenses thereby reasonably incurred by Seller, including but not limited to, preparation for and placement into storage, handling, transportation, storage, inspection, preservation, taxes, insurance and any necessary rehabilitation prior to installation shall be payable by Buyer within 25 Days following submission of invoices prepared by Seller, unless Buyer PROPRIETARY INFORMATION 17 AES RED OAK LTP CONTRACT MAINTENANCE PROGRAM PARTS, SHOP REPAIRS AND SCHEDULED OUTAGE TFA SERVICES CONTRACT disputes that such New Program Part, Miscellaneous Hardware or Shop Repaired Program Part conforms to Seller's warranty obligations under Article 8 and Buyer is found to be correct in its dispute pursuant to Section 16.5, Dispute Resolution. When conditions permit and upon payment to Seller of any additional amounts due hereunder, Buyer shall arrange, at its expense, removal of New Program Parts, Miscellaneous Hardware or Shop Repaired Program Parts from storage. B. Normal Carriage Normal Carriage means carriage by either highway transport (PROVIDED this does not necessitate use of specialized riggers trailers) or by rail transport on normal routing from the manufacturing/repair facility to the Site as designated in Section 7.1 or 7.2 respectively. C. Special Transportation and Services If Buyer requests Seller to transport by other than Normal Carriage, Seller shall provide such requested non-Normal Carriage transport; PROVIDED, HOWEVER, that if Buyer's request for transportation by other than Normal Carriage is for reasons other than a delay attributable to Seller actually jeopardizing Delivery of such Program Part, Miscellaneous Hardware or Shop Repaired Program Part in accordance with Seller's Workscope Obligations, Buyer shall pay or reimburse Seller for any such transportation charges in excess of regular charges for Normal Carriage, including, but not limited to, excess charges reasonably incurred by Seller for special routing, special trains, specialized riggers trailers, lighterage, barging and air transport, within 25 Days following submission of an invoice therefor prepared by Seller. ARTICLE 8. WARRANTIES 8.1 NEW PROGRAM PARTS AND MISCELLANEOUS HARDWARE WARRANTY AND EXCLUSIVE REMEDY. Seller warrants that the New Program Parts and Miscellaneous Hardware (including, without limitation, any additional Program Parts supplied under Section 3.3 or Section 5.2) provided to Buyer hereunder, including any New Program Part or Miscellaneous Hardware repaired or replaced by Seller under this New Program Parts and Miscellaneous Hardware Warranty, will be new and of utility grade quality in accordance with Prudent Utility Practices and free of defects in engineering, design, workmanship and materials until the first to occur of (A) one (1) year from the date of installation of the original New Program Part or Miscellaneous Hardware into the Combustion Turbine, (B) 250 Equivalent Starts after installation of the original New Program Part or Miscellaneous Hardware, (C) 8,000 EBHs after installation of the original New Program Part or Miscellaneous Hardware, or (D) three (3) years from the date of Delivery of the PROPRIETARY INFORMATION 18 AES RED OAK LTP CONTRACT MAINTENANCE PROGRAM PARTS, SHOP REPAIRS AND SCHEDULED OUTAGE TFA SERVICES CONTRACT original New Program Part or Miscellaneous Hardware in accordance with the terms of this Contract; EXCEPT THAT the warranties on all New Program Parts and Miscellaneous Hardware shall expire no later than one year after the conclusion of the Term (the "NEW PROGRAM PARTS AND MISCELLANEOUS HARDWARE WARRANTY"). If during the New Program Parts and Miscellaneous Hardware Warranty period, Seller is within a reasonable time after discovery by Buyer notified in writing that a New Program Part fails to conform to the New Program Parts and Miscellaneous Hardware Warranty, Seller will at its expense (including any import duties, taxes, or fees, etc. imposed by applicable governmental authorities), as soon as commercially reasonable, correct such failure by, at Seller's option, repair or replacement. If Seller, in attempting to correct such failure under this New Program Parts and Miscellaneous Hardware Warranty, determines that such New Program Part or Miscellaneous Hardware cannot be repaired, Seller will, as soon as commercially reasonable, correct such failure by replacement. Any Program Part which is replaced pursuant to this Section shall be deemed to have a scrap value of $0 and shall be returned by Buyer to Seller along with free and clear title thereto. Any transportation costs associated with the return of such Program Part shall be the responsibility of Seller. No amount shall be due to or from Buyer in connection with the return of such Program Part to Seller. 8.2 SHOP REPAIR WARRANTY AND EXCLUSIVE REMEDY. Seller warrants that the Shop Repair work performed by Seller on Program Parts, including any repair of a defective portion of a Shop Repair by Seller under this Shop Repair Warranty, will be free of defects in engineering of the Shop Repair, design of the Shop Repair, workmanship and materials until the first to occur of (A) one (1) year from the date of installation of the original Shop Repaired Program Part into the Combustion Turbine, (B) 250 Equivalent Starts after installation of the original Shop Repaired Program Part into the Combustion Turbine, (C) 8,000 EBHs after installation of the original Shop Repaired Program Part into the Combustion Turbine or (D) three (3) years from completion of the original Shop Repair; EXCEPT THAT the warranties on all Shop Repaired Program Parts shall expire no later than one (1) year after the conclusion of the Term (the "SHOP REPAIR WARRANTY"). If during the Shop Repair Warranty period Seller is within a reasonable time after discovery by Buyer notified in writing that a Shop Repaired Program Part fails to conform to the Shop Repair Warranty, Seller will at its expense (including any import duties, taxes, or fees, etc. imposed by applicable governmental authorities) as soon as commercially reasonable, correct such nonconformity by repair of the defective portion of the Shop Repaired Program Part, or if such nonconformity cannot be repaired, Buyer shall be entitled to a Parts Life Credit pursuant to Section 3.3. 8.3 SERVICES WARRANTY AND EXCLUSIVE REMEDY. Seller warrants, for each item of Services provided hereunder, that (i) the Services of its personnel will be competent and consistent with Prudent Utility Practices, (ii) the technical information, reports, analyses PROPRIETARY INFORMATION 19 AES RED OAK LTP CONTRACT MAINTENANCE PROGRAM PARTS, SHOP REPAIRS AND SCHEDULED OUTAGE TFA SERVICES CONTRACT and recommendations transmitted by Seller in connection therewith will be competent and consistent with Prudent Utility Practices, (iii) the Services will comply in all material respects with Laws for a period of one (1) year from the date of completion of that item of Services and (iv) the Services will be free from defects in workmanship for one a period of one (1) year from the date of completion of that item of Services; EXCEPT THAT the warranties on Services shall expire no later than one year after the termination or conclusion of the Term (the "SERVICES WARRANTY"). If during the Services Warranty period Seller is notified by in writing, within a reasonable amount of time after Buyer's discovery, that any portion of the Services fails to conform to the Services Warranty, Seller will promptly reperform such nonconforming portion of the Services at no additional cost or expense to Buyer in a manner that conforms to the Services Warranty. 8.4 SHOP REPAIR TURN AROUND TIME WARRANTY AND EXCLUSIVE REMEDY. Seller warrants that any Program Part removed during a Scheduled Outage and delivered by Buyer to the repair or manufacturing facility designated by Seller for Shop Repair, will be repaired and Delivered by Seller, in accordance with Section 7.2, ("TURNED-AROUND") within twenty-six (26) weeks of delivery of such Program Part by Buyer to the repair or manufacturing facility designated by Seller. If a Program Part removed during a Scheduled Outage and delivered by Buyer to the repair or manufacturing facility designated by Seller for Shop Repair, is not Turned-Around within twenty-six (26) weeks or Seller, at its option, does not provide a new Program Part in lieu of the Program Part being Shop Repaired and an outage occurs which requires the installation of such Program Part, then for each Day of such outage that such Program Part is not Turned-Around, Seller shall pay Buyer liquidated damages in the amount of $10,000 per Day. Seller's aggregate liquidated damage payments pursuant to this Section 8.4 shall not exceed a maximum annual cap of $250,000. If Seller reaches the maximum cap on aggregate liquidated damages under this Section 8.4, and Seller still has not Turned-Around such Program Part, Seller shall be considered to have failed to perform its material obligations under this Contract, and Buyer may elect to terminate this Contract pursuant to Section 12.2. In such case, unless Seller has made and is continuing to make diligent efforts to cure such failure in accordance with (and subject to the maximum cure set forth in) Section 12.2, then Seller shall have waived its right to, and shall not be entitled to the benefits of, the cure periods specified in Section 12.2. PROPRIETARY INFORMATION 20 AES RED OAK LTP CONTRACT MAINTENANCE PROGRAM PARTS, SHOP REPAIRS AND SCHEDULED OUTAGE TFA SERVICES CONTRACT 8.5 WARRANTY CONDITIONS. The warranties and remedies set forth herein and the obligations and remedies set forth in Section 3.2 and Article 5 shall not apply if and to the extent that a claim hereunder arises as a result of, or is contributed to by, buyer's failure to do any of the following: (1) Buyer's receipt, handling, storage, operation and maintenance during any storage, operation and maintenance, including tasks incident thereto, of the Project, including any Program Parts and Miscellaneous Hardware, being in all material respects in accordance with the terms of the Combustion Turbine instruction manuals and operating criteria provided by Seller under the CTG Subcontract or the original equipment manufacturer subject to any mutually agreed upon variance thereto, and, to the extent not inconsistent with the foregoing, in general accordance with Prudent Utility Practices; (2) the Combustion Turbine being operated using Natural Gas and Water that are consistent with the specifications set forth in Exhibit F, Natural Gas & Water Specification and shall not have been subject to alteration (other than in accordance with this Contract or the CTG Subcontract), abuse or misuse (as determined by reference to Prudent Utility Practices, and excluding any such abuse or misuse arising out of or resulting from work performed by or on behalf of Seller hereunder or under the CTG Subcontract); (3) any accidental damage to the Combustion Turbine being repaired consistent with the original equipment manufacturer's reasonable recommendations, and (4) Buyer, without cost to Seller: (a) providing working access to the non-conforming New Program Parts, Miscellaneous Hardware, Shop Repaired Program Parts or Services including disassembly and reassembly of the Combustion Turbine; (b) providing reasonable access to plant and operating and maintenance data; (c) making its Site facilities and Site operators available to assist Seller in the performance of its warranty obligations, to the extent they are reasonably available; and (d) unless otherwise provided as part of a Seller's warranty obligation, hiring Seller to provide TFA Services, Program Parts, Shop Repairs and Miscellaneous Hardware required to disassemble the Combustion Turbine, to repair, and install or replace the Program Parts or PROPRIETARY INFORMATION 21 AES RED OAK LTP CONTRACT MAINTENANCE PROGRAM PARTS, SHOP REPAIRS AND SCHEDULED OUTAGE TFA SERVICES CONTRACT Miscellaneous Hardware in the Combustion Turbine after it has been disassembled and to reassemble the Combustion Turbine. 8.6 EXCLUSIVITY OF WARRANTIES AND REMEDIES. WITHOUT LIMITING SELLER'S OBLIGATIONS, WARRANTIES OR GUARANTEES UNDER SECTIONS 3.3 AND 3.4 AND ARTICLE 5 OR ANY OBLIGATIONS, WARRANTIES OR GUARANTEES OF SELLER UNDER THE CTG SUBCONTRACT (WHICH MAY BE ASSIGNED TO BUYER PURSUANT TO THE EPC CONTRACT), THE WARRANTIES SET FORTH IN THIS ARTICLE 8 ARE EXCLUSIVE AND ARE IN LIEU OF ALL OTHER WARRANTIES WHETHER STATUTORY, EXPRESS, OR IMPLIED (INCLUDING ALL WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, AND ALL WARRANTIES ARISING FROM COURSE OF DEALING OR USAGE OF TRADE). Without limiting any remedies or liabilities arising under or in connection with Sections 3.3 and 3.4, Article 5 or the CTG Subcontract, the remedies set forth in this Article 8 shall constitute Seller's sole liability and Buyer's exclusive remedies arising under or in connection with this Contract for failure of Seller to meet its warranty obligations hereunder, whether claims of Buyer are based in contract, in tort (including negligence and strict liability), or otherwise. 8.7 RELATIONSHIP TO CTG SUBCONTRACT. Seller and Buyer acknowledge and agree that the warranties, remedies and other benefits provided by Seller to Buyer under this Contract are independent of and complimentary to the warranties, remedies and other benefits provided by EPC Contractor to Buyer under the EPC Contract and by Seller to the EPC Contractor under the CTG Subcontract (which may be assigned to Buyer pursuant to the EPC Contract). ARTICLE 9. INTELLECTUAL PROPERTY 9.1 PATENT, COPYRIGHT, OR TRADE SECRET INFRINGEMENT. Seller will, at its own expense, defend or at its option settle any suit or proceeding brought against Buyer in so far as it is based on an allegation that any Program Parts, Miscellaneous Hardware or any of the processes used by Seller used in connection with the Shop Repairs or Services, supplied by Seller hereunder or use thereof for its intended purpose, constitutes an infringement of any United States patent, copyright or trade secret, if Seller is notified promptly in writing and given authority, information and reasonable assistance in a timely manner for the defense of said suit or proceeding. Seller will pay the damages and costs awarded in any such suit or proceeding. Seller will not be responsible for any settlement of such suit or proceeding made without its prior written consent. In case any of the Program Parts, Miscellaneous Hardware or processes used by Seller in connection with the Shop Repairs or Services supplied by Seller hereunder, as a result of any such suit or proceeding, is held to constitute infringement of any United States patent, copyright or trade secret, or PROPRIETARY INFORMATION 22 AES RED OAK LTP CONTRACT MAINTENANCE PROGRAM PARTS, SHOP REPAIRS AND SCHEDULED OUTAGE TFA SERVICES CONTRACT its use by Buyer is enjoined, Seller will, at its option and its own expense, either: (a) procure for Buyer the right to continue using said Program Part, but still satisfy Seller's Workscope Obligations, Miscellaneous Hardware or process, at no additional cost to Buyer; (b) replace it with substantially equivalent noninfringing Program Part, Miscellaneous Hardware or process; or (c) modify it so it becomes noninfringing and still satisfies Seller's obligations hereunder. 9.2 LIMITATION OF INTELLECTUAL PROPERTY OBLIGATIONS. Seller will have no duty or obligation to Buyer under this Article 9 to the extent that the Program Parts, Miscellaneous Hardware or any of the processes used by Seller in connection with the Shop Repairs or Services supplied by Seller hereunder is (a) supplied according to Buyer's design or instructions wherein compliance therewith has caused Seller to deviate from its normal course of performance; PROVIDED that, prior to deviating in such a manner from its normal course of performance, Seller has given Buyer written notice of such deviation and the resulting effect on Seller's obligations hereunder, (b) modified by Buyer or its contractors after Delivery, or (c) combined by Buyer or its contractors with items not furnished hereunder or under the CTG Subcontract and by reason of said design, instruction, modification, or combination a suit is brought against Buyer. In addition, if by reason of such design, instruction, modification or combination, a suit or proceeding is brought against Seller, Buyer shall protect Seller in the same manner and to the same extent that Seller has agreed to protect Buyer under the provisions of Section 9.1. 9.3 EXCLUSIVITY OF DUTIES AND REMEDIES. THIS ARTICLE 9 IS AN EXCLUSIVE STATEMENT OF ALL THE OBLIGATIONS OF THE PARTIES, RELATING TO PATENTS, COPYRIGHTS OR TRADE SECRETS AND DIRECT OR CONTRIBUTORY INFRINGEMENT THEREOF, AND OF ALL THE REMEDIES OF BUYER OR SELLER RELATING TO ANY CLAIMS, SUITS, OR PROCEEDINGS INVOLVING PATENTS, COPYRIGHTS OR TRADE SECRETS WITH RESPECT TO SELLER'S WORKSCOPE OBLIGATIONS. Compliance with this Article 9 as provided herein shall constitute fulfillment of all obligations of the parties under this Contract with respect to patents, copyrights or trade secrets. ARTICLE 10. COMPLIANCE WITH LAWS 10.1 GENERALLY. Subject to the provisions of Section 10.2, Seller shall at all times comply, and shall assure that the Program Parts, Miscellaneous Hardware, Shop Repairs and Services supplied by Seller, at the time of Delivery or performance comply in all material respects with all Laws applicable to the design, manufacture of the Program Parts and Miscellaneous Hardware, the Shop Repair of Program Parts, and the performance by Seller of its other obligations hereunder. PROPRIETARY INFORMATION 23 AES RED OAK LTP CONTRACT MAINTENANCE PROGRAM PARTS, SHOP REPAIRS AND SCHEDULED OUTAGE TFA SERVICES CONTRACT 10.2 CHANGES IN LAW, ETC. Without limiting Article 8, in the event that any change in Laws enacted or otherwise approved after the date of this Contract requires or makes necessary any modifications to the Workscope Obligations including a change in Law which necessitates Buyer or Seller to vary from the instruction manuals and operating criteria provided to Buyer by the EPC Contractor or the original equipment manufacturer, Buyer or Seller, as the case may be, shall reasonably promptly notify the other thereof in writing upon its discovery of such change in Laws. If any such modification is required by any changes in Laws, Seller shall make such modification provided such modification is reasonably technically feasible, and if such modification increases or decreases Seller's cost of providing the Workscope Obligations, or delays Seller's schedule or affects any other provision of this Contract, the parties shall negotiate in good faith and enter into a Change Order in accordance with the provisions of Section 6.2 (For changes in Law which necessitate Buyer or Seller to vary from the instruction manuals and operating criteria provided to Buyer by the EPC Contractor or the original equipment manufacturer, Buyer and Seller shall mutually and reasonably agree in writing to such variance and shall thereafter comply with such instruction manuals and operating criteria with the variance applied.). Seller shall use reasonable efforts and due diligence to mitigate the effect of any such changes in Laws on the performance of its Workscope Obligations and the cost thereof to Buyer. ARTICLE 11. INSURANCE 11.1 SELLER'S INSURANCE. Without limiting Seller's liability under this Contract, Seller shall self insure or maintain in full force and effect during the term of this Contract with insurance companies authorized to do business in the State of New Jersey and reasonably satisfactory to Buyer, the insurance described below with coverage at levels normal in the ordinary course of its business, but at levels no less than the minimums indicated, and shall provide to Buyer certificates evidencing such coverages: (a) Commercial general liability insurance, including bodily injury, property damage, products/completed operations, contractual, and personal injury liability, with a combined single limit of $1,000,000 per occurrence with a $2,000,000 annual aggregate; (b) Umbrella excess liability coverage providing excess general liability, automobile, liability and employer's liability with a combined single limit of $6,000,000; (c) Workers' Compensation insurance with statutory limits, and Employers Liability insurance with limits of not less than $1,000,000 per accident; and PROPRIETARY INFORMATION 24 AES RED OAK LTP CONTRACT MAINTENANCE PROGRAM PARTS, SHOP REPAIRS AND SCHEDULED OUTAGE TFA SERVICES CONTRACT (d) Business automobile liability insurance covering owned, non-owned and hired automobiles for a combined single limit of $1,000,000 per occurrence with a $2,000,000 annual aggregate. 11.2 BUYER'S INSURANCE. Without limiting Buyer's liability under this Contract, Buyer shall maintain in full force and effect during the term of this Contract with insurance companies authorized to do business in the State of New Jersey and reasonably satisfactory to Seller, the insurance described below, with coverage at levels normal in the ordinary course of its business, but at levels no less than the minimums indicated, and shall provide to Seller certificates evidencing such coverages: (a) Property insurance, including boiler and machinery coverage covering all real and personal property of Buyer on a 100% replacement cost basis (as reasonably determined by Buyer) and business interruption insurance coverage to cover "gross earnings," which will include all fixed expenses and interest for twelve (12) months, in each case to the extent available on commercially reasonable terms (and the parties agree that Buyer shall not be required to have a deductible period on such business interruption coverage of less than 90 Days); (b) Commercial general liability insurance, including bodily injury, property damage, products/completed operations, contractual, and personal injury liability, with a combined single limit of $1,000,000 per occurrence with a $2,000,000 annual aggregate; (c) Umbrella excess liability coverage providing excess general liability, automobile, liability and employer's liability with a combined single limit of $6,000,000; (d) Workers' Compensation insurance with statutory limits, and Employers Liability insurance with limits of not less than $1,000,000 per accident; and (e) Business automobile liability insurance covering owned, non-owned and hired automobiles for a combined single limit of $1,000,000 per occurrence with a $2,000,000 annual aggregate. 11.3 POLICIES. Seller agrees to cause the insurance policy specified in Section 11.1(c) to include a waiver of subrogation rights against Buyer. Buyer agrees to cause the insurance policies specified in Sections 11.2(a) and 11.2(d) to include waivers of subrogation rights against Seller. PROPRIETARY INFORMATION 25 AES RED OAK LTP CONTRACT MAINTENANCE PROGRAM PARTS, SHOP REPAIRS AND SCHEDULED OUTAGE TFA SERVICES CONTRACT [*] ARTICLE 12. TERMINATION 12.1 TERMINATION FOR SELLER'S INABILITY TO PERFORM. If any proceeding is instituted against Seller seeking to adjudicate Seller as a bankrupt or insolvent, or if Seller makes a general assignment for the benefit of its creditors, or if a receiver is appointed on account of the insolvency of Seller, or if Seller files a petition seeking to take advantage of any other Law relating to bankruptcy, insolvency, reorganization, winding up or composition or readjustment of debts and, in the case of any such proceeding instituted against Seller (but not by Seller) if such proceeding is not dismissed within forty-five (45) Days of such filing, Buyer may terminate this Contract by written notice to Seller. 12.2 TERMINATION FOR SELLER'S FAILURE TO PERFORM. Buyer may terminate this Contract by written notice to Seller, if Seller fails to perform or observe in any material respect any provision of this Contract and (a) fails to promptly commence to cure and diligently pursue the cure of such failure or (b) fails to remedy any such failure within (i) forty-five (45) Days after Seller receives written notice of such failure, or (ii) PROVIDED that if Seller diligently pursues the cure of such failure in such a manner and within such time to avoid any material adverse effect on the Project or Buyer's rights hereunder or under the Power Purchase Agreement, or if a material adverse effect cannot be avoided, in such a manner and within such time so that the expected effects of such cure are in all respects no more adverse to the Project and Buyer's rights hereunder and under the Power Purchase Agreement than the expected effects of terminating this Contract and pursuing any or all other options that may be available to Buyer, such longer period, not to exceed one hundred eighty (180) Days as may be necessary for Seller to cure such failure. In addition, Buyer may terminate this Contract if (i) Buyer terminates the EPC Contract due to the EPC Contractor's default or inability to perform thereunder and Buyer does not assume the rights and obligations of the EPC Contractor under the CTG Subcontract or due to Buyer's inability to obtain construction financing or environmental operating permits for the Project, (ii) the EPC Contractor terminates the EPC Contract for any reason other than Buyer's default thereunder and Buyer does not assume the rights and obligations of the EPC Contractor under the CTG Subcontract, or (iii) the CTG Subcontract is terminated for any reason. 12.3 BUYER'S AND SELLER'S RIGHTS AND OBLIGATIONS WHEN BUYER TERMINATES FOR SELLER'S INABILITY OR FAILURE TO PERFORM. If Buyer elects to terminate this Contract pursuant to Section 12.1 or 12.2, Seller shall be entitled to retain or receive only those amounts paid PROPRIETARY INFORMATION 26 AES RED OAK LTP CONTRACT MAINTENANCE PROGRAM PARTS, SHOP REPAIRS AND SCHEDULED OUTAGE TFA SERVICES CONTRACT or payable hereunder at the time of termination for any Workscope Obligations which Seller had manufactured or performed at the time of termination. Upon such a termination, Seller shall stop work on the terminated portion of this Contract and place no further orders or lower tier subcontracts for such terminated portion. Seller shall protect Buyer's property which is in Seller's possession, and shall direct suppliers and subcontractors on orders or subcontracts outstanding to do the same. Upon Buyer's instructions, Seller shall transfer title to and deliver any New Program Parts and Miscellaneous Hardware paid for by Buyer as provided in this Section 12.3, which are in the possession of Seller, its suppliers or subcontractors, at the time of such termination, and shall deliver any of Buyer's property which is in the possession of Seller, its suppliers or subcontractors at the time of such termination. The cost of such Delivery will be paid by Seller. No further rights or obligations shall exist between the parties with respect to this Contract except for any accrued claims existing at the time of such notice of termination and those rights that expressly survive, per Section 16.22, Survival. If the payments that were made by Buyer to Seller prior to or at the time of termination exceed the amounts paid or payable pursuant to this Section 12.3, Seller shall reimburse Buyer the excess. 12.4 TERMINATION FOR BUYER'S CONVENIENCE. Buyer may, at its sole option, terminate this Contract in whole or in part by written notice to Seller, (i) at any time after completion of the first Major Outage of the Combustion Turbine Generators, (ii) if Buyer terminates the EPC Contract for any reason other than (a) the default or inability to perform of the EPC Contractor or (b) Buyer's inability to obtain construction financing or environmental operating permits for the Project, or (iii) if the EPC Contractor terminates the EPC Contract for Buyer's default thereunder. 12.5 BUYER'S AND SELLER'S RIGHTS AND OBLIGATIONS WHEN BUYER TERMINATES FOR ITS CONVENIENCE. Upon Buyer's termination pursuant to Section 12.4, Seller shall stop work on the terminated portion of this Contract and place no further orders or lower tier subcontracts for such terminated portion. Seller shall protect Buyer's property which is in Seller's possession, and shall direct suppliers and subcontractors on orders or subcontracts outstanding to do the same. Upon Buyer's instructions, Seller shall transfer title to and deliver any New Program Parts and Miscellaneous Hardware, which are in the possession of Seller, its suppliers or subcontractors, at the time of such termination, subject to Buyer's payment of the amount due under this Section 12.5 following such termination, and shall deliver any of Buyer's property which is in the possession of Seller, its suppliers or subcontractors at the time of such termination. Within one (1) month after receipt of such notice of termination, Seller will submit to Buyer in writing its claim for reimbursement of reasonable costs incurred as a result of the termination. Such claim, which may include reasonable termination costs, if any, from lower tier subcontractors, shall follow the requirements hereinafter set forth. If the parties cannot PROPRIETARY INFORMATION 27 AES RED OAK LTP CONTRACT MAINTENANCE PROGRAM PARTS, SHOP REPAIRS AND SCHEDULED OUTAGE TFA SERVICES CONTRACT agree within 45 Days after receipt of such notice of termination upon the fair compensation to Seller, Buyer will pay Seller within 60 Days after receipt of such notice of termination, without duplication: (a) The Fees due and payable for Workscope Obligations already performed by Seller and received by Buyer at the time of termination which have not previously been paid by Buyer. (b) Reasonable state of completion expenses for New Program Parts, Miscellaneous Hardware, Shop Repairs and Services performed by Seller at the time of such termination, including reasonable overhead and profit; [*] (c) Reasonable expenses actually incurred by Seller and approved in writing by Buyer in settling Seller's terminated orders and subcontracts hereunder and the protection of property in which Buyer has or may have an interest, including reasonable overhead and profit. (d) Reasonable expenses of demobilization, equipment storage, transportation, and handling, including reasonable overhead and profit. If the payments that were made by Buyer to Seller prior to or at the time of termination exceed the amounts paid or payable pursuant to this Section 12.5, Seller shall reimburse Buyer the excess. Payments under this Section 12.5, excluding all payments made under this Contract prior to the termination, shall in no event exceed the amount of the Contract Price payable to Seller during the year in which this Contract is so terminated. If there is a dispute as to the reasonableness of expenses listed in items (a) - (d) above such dispute shall be resolved in accordance with Section 16.5.2. [*] No further rights or obligations shall exist between the parties with respect to this Contract except for any accrued claims existing at the time of such notice of termination and those rights that expressly survive, per Section 16.22, Survival. 12.6 TERMINATION BY SELLER. If, (i) with respect to any invoice delivered pursuant to Section 4.3, Buyer neither makes payment thereon in accordance with Section 4.4 nor provides a notice of dispute relating thereto in accordance with Section 4.5, in either case within the twenty-five (25) Day period provided in such Sections, (ii) a proceeding is instituted against Buyer seeking to adjudicate Buyer as a bankrupt or insolvent and such PROPRIETARY INFORMATION 28 AES RED OAK LTP CONTRACT MAINTENANCE PROGRAM PARTS, SHOP REPAIRS AND SCHEDULED OUTAGE TFA SERVICES CONTRACT proceeding is not dismissed or stayed within forty-five (45) Days of such filing, (iii) Buyer makes a general assignment for the benefit of its creditors, (iv) a receiver is appointed on account of the insolvency of Buyer, or (v) Buyer files a petition seeking to take advantage of any other Law relating to bankruptcy, insolvency, reorganization, winding up or composition or readjustment of debts, then Seller may at its option terminate this Contract by written notice to Buyer; PROVIDED that, no such termination notice shall be effective if Buyer pays the amount due within ninety (90) Days of Buyer's receipt of such notice. 12.7 BUYER'S AND SELLER'S RIGHTS AND OBLIGATIONS WHEN SELLER TERMINATES. Upon Seller's termination pursuant to Section 12.6, Seller shall stop work on the terminated portion of this Contract and place no further orders or lower tier subcontracts for such terminated portion. Seller shall protect Buyer's property which is in Seller's possession, and shall direct suppliers and subcontractors on orders or subcontracts outstanding to do the same. Upon Buyer's instructions, Seller shall transfer title to and deliver any New Program Parts and Miscellaneous Hardware, which are in the possession of Seller, its suppliers or subcontractors, at the time of such termination, subject to Buyer's payment of the amount due under this Section 12.7 following such termination, and shall deliver any of Buyer's property which is in the possession of Seller, its suppliers or subcontractors at the time of such termination. Within one (1) month after receipt of such notice of termination, Seller will submit to Buyer in writing its claim for reimbursement of reasonable costs incurred as a result of the termination. Such claim, which may include reasonable termination costs, if any, from lower tier subcontractors, shall follow the requirements hereinafter set forth. If the parties cannot agree within 45 Days after receipt of such notice of termination upon the fair compensation to Seller, Buyer will pay Seller within 60 Days after receipt of such notice of termination, without duplication: (a) The Fees due and payable for Workscope Obligations already performed by Seller and received by Buyer at the time of which have not previously been paid by Buyer. (b) Reasonable state of completion expenses for New Program Parts, Miscellaneous Hardware, Shop Repairs and Services performed by Seller at the time of such termination, including reasonable overhead and profit; [*] PROPRIETARY INFORMATION 29 AES RED OAK LTP CONTRACT MAINTENANCE PROGRAM PARTS, SHOP REPAIRS AND SCHEDULED OUTAGE TFA SERVICES CONTRACT (c) Reasonable expenses actually incurred by Seller and approved in writing by Buyer in settling Seller's terminated orders and subcontracts hereunder and the protection of property in which Buyer has or may have an interest, including reasonable overhead and profit. (d) Reasonable expenses of demobilization, equipment storage, transportation, and handling, including reasonable overhead and profit. If the payments that were made by Buyer to Seller prior to or at the time of termination exceed the amounts paid or payable pursuant to this Section 12.7, Seller shall reimburse Buyer the excess. Payments under this Section 12.7, excluding all payments made under this Contract prior to the termination, shall in no event exceed the amount of the Contract Price payable to Seller during the year in which this Contract is so terminated. If there is a dispute as to the reasonableness of expenses listed in items (a) - (d) above such dispute shall be resolved in accordance with Section 16.5.2. [*] No further rights or obligations shall exist between the parties with respect to this Contract except for any accrued claims existing at the time of such notice of termination and those rights that expressly survive, per Section 16.22, Survival. 12.8 EXCLUSIVITY OF RIGHTS AND REMEDIES. WITH THE EXCEPTION OF ANY ACCRUED CLAIMS EXISTING AT THE TIME OF SUCH NOTICE OF TERMINATION AND THOSE RIGHTS, DUTIES, OBLIGATIONS AND REMEDIES THAT EXPRESSLY SURVIVE PURSUANT TO SECTION 16.22, THIS ARTICLE 12 IS AN EXCLUSIVE STATEMENT OF ALL THE RIGHTS, DUTIES, OBLIGATIONS and Remedies OF THE PARTIES RELATING TO TERMINATION. Compliance with this Article 12 as provided herein shall constitute fulfillment of all liabilities of the parties under this Contract with respect to termination. ARTICLE 13. INDEMNIFICATION 13.1 SELLER'S INDEMNITY. To the fullest extent permitted by Law, Seller shall defend, indemnify and hold harmless Buyer from and against liability resulting from injury to or death of persons and from damage to or loss of third party property, caused by or arising in whole or in part out of, but only to the extent of the negligent acts or omissions of Seller while performing Services at or near the Site. Seller's indemnity obligation under this Section 13.1 shall not apply to any liabilities arising out of or relating to events or circumstances occurring more than one (1) year after end of the Term. PROPRIETARY INFORMATION 30 AES RED OAK LTP CONTRACT MAINTENANCE PROGRAM PARTS, SHOP REPAIRS AND SCHEDULED OUTAGE TFA SERVICES CONTRACT 13.2 BUYER'S INDEMNITY. To the fullest extent permitted by Law, Buyer shall defend, indemnify and hold harmless Seller from and against liability resulting from injury to or death of persons and from damage to or loss of third party property, caused by or arising in whole or in part out of, but only to the extent of the negligent acts or omissions of Buyer while performing its obligations under this Contract at or near the Site or while otherwise operating and maintaining the Project. Buyer's indemnity obligation under this Section 13.2 shall not apply to any liabilities arising out of or relating to events or circumstances occurring more than one (1) year after end of the Term. ARTICLE 14. LIMITATION OF LIABILITY 14.1 NO CONSEQUENTIAL DAMAGES. EACH PARTY AGREES THAT, EXCEPT TO THE EXTENT LIQUIDATED DAMAGES PROVIDED HEREIN ARE SO CONSIDERED, NEITHER SELLER, NOR ITS SUPPLIERS, NOR BUYER WILL UNDER ANY CIRCUMSTANCES BE LIABLE UNDER ANY THEORY OF RECOVERY, WHETHER BASED IN CONTRACT, IN TORT (INCLUDING NEGLIGENCE AND STRICT LIABILITY), UNDER WARRANTY, OR OTHERWISE, FOR ANY INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL LOSS OR DAMAGE WHATSOEVER, INCLUDING WITHOUT LIMITATION: DAMAGE TO OR LOSS OF PROPERTY OR EQUIPMENT; LOSS OF PROFITS OR REVENUE; LOSS OF USE OF MATERIAL, EQUIPMENT OR POWER SYSTEM; INCREASED COSTS OF ANY KIND, INCLUDING BUT NOT LIMITED TO CAPITAL COST, FUEL COST AND COST OF PURCHASED OR REPLACEMENT POWER; OR CLAIMS OF CUSTOMERS. 14.2 EXCLUSIVE REMEDY AND CAP ON LIABILITY. BUYER EXPRESSLY AGREES THAT THE REMEDIES PROVIDED HEREIN ARE EXCLUSIVE AND THAT UNDER NO CIRCUMSTANCES SHALL THE TOTAL AGGREGATE LIABILITY OF SELLER ARISING OUT OF ALL OBLIGATIONS HEREUNDER, [*], DURING A GIVEN YEAR UNDER ANY THEORY OF RECOVERY, WHETHER BASED IN CONTRACT, IN TORT (INCLUDING NEGLIGENCE AND STRICT LIABILITY), UNDER WARRANTY, OR OTHERWISE, [*] PAYABLE TO SELLER FOR THAT GIVEN YEAR UNDER THIS CONTRACT. BUYER FURTHER EXPRESSLY AGREES THAT UNDER NO CIRCUMSTANCES SHALL THE TOTAL AGGREGATE LIABILITY OF SELLER ARISING OUT OF ALL OBLIGATIONS HEREUNDER, [*], UNDER ANY THEORY OF RECOVERY, WHETHER BASED IN CONTRACT, IN TORT PROPRIETARY INFORMATION 31 AES RED OAK LTP CONTRACT MAINTENANCE PROGRAM PARTS, SHOP REPAIRS AND SCHEDULED OUTAGE TFA SERVICES CONTRACT (INCLUDING NEGLIGENCE AND STRICT LIABILITY), UNDER WARRANTY, OR OTHERWISE, [*] PAYABLE TO SELLER UNDER THIS CONTRACT. 14.3 EXTENT OF WAIVERS. THE WAIVERS AND DISCLAIMERS OF LIABILITY, RELEASES FROM LIABILITY, AND LIMITATIONS ON LIABILITY EXPRESSED IN THIS ARTICLE 14 SHALL EXTEND TO THE PARTNERS, PRINCIPALS, SHAREHOLDERS, DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS OF SELLER AND BUYER AND THEIR RESPECTIVE AFFILIATES OR SUCCESSORS. 14.4 EXTENT OF CONFLICTS. THE PROVISIONS OF THIS ARTICLE 14 SHALL PREVAIL OVER ANY CONFLICTING OR INCONSISTENT PROVISIONS SET FORTH ELSEWHERE IN THIS CONTRACT. ARTICLE 15. FORCE MAJEURE 15.1 EXCUSE BY FORCE MAJEURE. Neither party will be liable for failure to perform any obligation or delay in performance, excluding payment, to the extent such failure or delay is caused by any act or event beyond the reasonable control of the affected party or Seller's Suppliers; PROVIDED that such act or event is not the fault or the result of negligence of the affected party and such party has been unable by exercise of reasonable diligence to overcome or mitigate the effects of such act or event ("FORCE MAJEURE"). Force Majeure includes, without limitation, any act of God; act of civil or military authority; act of war whether declared or undeclared; act (including without limitation unreasonable delay or failure to act) of any governmental authority; civil disturbance; insurrection or riot; sabotage; fire; inclement weather conditions; earthquake; flood; strikes, work stoppages or other labor difficulties of a regional or national character which are not limited to only the employees of Seller or its subcontractors or suppliers and which are not due to the breach of an applicable labor contract by the party claiming Force Majeure; embargo; fuel or energy shortage; delay or accident in shipping or transportation to the extent attributable to another Force Majeure; changes in Laws which substantially prevents a party from complying with its obligations in conformity with its requirements under this Contract or failure or delay beyond its reasonable control in obtaining necessary manufacturing facilities, labor, or materials from usual sources to the extent attributable to another Force Majeure; or failure of any principal contractor to provide equipment to the extent attributable to another Force Majeure. Force Majeure shall not include: (1) economic hardship, (2) changes in market conditions, or (3) except due to an event of Force Majeure, late Delivery of Program Parts or Other Equipment. PROPRIETARY INFORMATION 32 AES RED OAK LTP CONTRACT MAINTENANCE PROGRAM PARTS, SHOP REPAIRS AND SCHEDULED OUTAGE TFA SERVICES CONTRACT 15.2 EFFECT OF FORCE MAJEURE. In the event of a delay in performance excusable under this Article 15, the date of Delivery or time for performance of the work will be extended by a period of time reasonably necessary to overcome the effect of such Force Majeure and if the Force Majeure lasts for a period longer than thirty (30) Days and such delay directly increases Seller's costs or expenses, Buyer, after reviewing Seller's additional direct costs and expenses, will reimburse Seller for its reasonable additional direct costs and expenses incurred after thirty (30) Days from the beginning of the Force Majeure resulting from said delay. Buyer's may, as part of its review, audit Seller's additional direct costs and expenses; PROVIDED that such audit is conducted by Seller's independent accounting firm used for Corporate Accounts and is done without unreasonably disrupting Seller's normal business operations. ARTICLE 16. MISCELLANEOUS 16.1 COOPERATION IN FINANCING. Subject to the obligations specified in Section 16.2, Seller shall furnish to Buyer such information, consents, certifications, opinions of counsel and other documents or assistance as may reasonably be requested by the parties providing financing to the Project. 16.2 PROPRIETARY INFORMATION. 16.2.1 PROPRIETARY INTEREST. Seller may have a proprietary interest in information that may be furnished pursuant to this Contract including Seller's proposal and this Contract itself, and including any information which provides Seller a competitive advantage in the marketplace in the field of design, engineering, manufacturing, operation, maintenance, procurement and construction of power generation, transmission and distribution facilities.). Buyer will keep in confidence and will not disclose any such information which is specifically designated as being proprietary to Seller in writing, or if given orally and designated as proprietary at such time, reduced to writing within a reasonable amount of time thereafter, without the prior written permission of Seller or use any such information for other than the purpose for which it is supplied. The provisions of this paragraph shall not apply to information, notwithstanding any confidential designation thereof, which is known to Buyer without any restriction as to disclosure or use at the time it is furnished, which is or becomes generally available to the public without breach of any agreement, or which is received from a third party without limitation or restriction on said third party or Buyer at the time of disclosure, or which is developed independently by Buyer. Notwithstanding the foregoing, Buyer may disclose information which it receives from Seller, which Seller has a proprietary interest in, to (i) credit rating agencies (any such agency, a "RATING AGENCY") and entities providing construction or term financing, including an independent engineering firm (the "INDEPENDENT ENGINEER") acting on behalf of such entities, PROVIDED that such entities PROPRIETARY INFORMATION 33 AES RED OAK LTP CONTRACT MAINTENANCE PROGRAM PARTS, SHOP REPAIRS AND SCHEDULED OUTAGE TFA SERVICES CONTRACT are not in competition with Seller in Seller's power generation, distribution and transmission business, (ii) GPU, or (iii) any of Buyer's Affiliates, PROVIDED that such entities or GPU have entered into a confidentiality agreement with Buyer that is reasonably acceptable to Seller. Notwithstanding any other provision of this Section 16.2.1 to the contrary, (a) Buyer shall be permitted to summarize the material terms and conditions of this Contract for purposes of including such summary in any offering statements or similar disclosure documents relating to the financing of the Facility ("OFFERING STATEMENTS"), which will be provided to Rating Agencies that may provide a rating for such debt and to prospective purchasers of such debt (any such prospective purchaser, an "OFFEREE") and (b) the Independent Engineer may utilize certain information relating to the Project in a report (the "REPORT") which will be included in such Offering Statements; PROVIDED, HOWEVER, that prior to the distribution of the summary referred to in clause (a) above and the Report referred to in clause (b) above to any Rating Agency or Offeree, Buyers shall provide Seller a copy thereof and Seller have a reasonable period of time to review and provide comments thereon to Buyer in the case of the summary and to Buyer and the Independent Engineer in the case of the Report. Buyer shall give due consideration to such comments in finalizing the summary and shall cause the Independent Engineer to give due consideration to such comments in finalizing the Report, in both cases in light of Seller's interest in protecting its proprietary information and in light of Buyer's and the Independent Engineer's disclosure obligations under applicable securities laws and Buyer shall use its best efforts to prevent inclusion of the pricing and any individual parts life provisions of this Contract in any such summary or Report. The parties shall attempt in good faith to resolve any disagreement concerning information to be included in such summary and Report. No Offeree shall be given a copy of this Contract without the prior written consent of the Seller (such consent not to be unreasonably withheld), but an Offeree may inspect a copy of this Contract at the offices of Buyer or its designee PROVIDED that such Offeree has entered into an appropriate confidentiality agreement and such Offeree is not in competition with Seller in Seller's power generation, distribution and transmission business. Seller recognizes that in the event that Buyer files a registration statement with the Securities and Exchange Commission ("SEC") in respect of any debt offering, it will be required to submit a copy of this Contract to the SEC. In the event that this Contract is filed with the SEC in accordance with SEC rules, Seller may designate portions of this Contract with respect to which Seller wishes Buyer to use its best efforts to obtain confidential treatment thereof in any filing with the SEC, and Buyer shall provide Seller a reasonable opportunity (not less than ninety (90) days) prior to such filing to deliver such designations to Buyer, accompanied by a written explanation of such designations and Buyer shall reimburse Seller for any reasonable costs Seller incurs with respect to such PROPRIETARY INFORMATION 34 AES RED OAK LTP CONTRACT MAINTENANCE PROGRAM PARTS, SHOP REPAIRS AND SCHEDULED OUTAGE TFA SERVICES CONTRACT designations and written explanation of such designations within (25) Days of Buyer's receipt of Seller's invoice therefor. Buyer shall comply with Seller's designations regarding confidential treatment in connection with any such filing, PROVIDED that Seller recognizes that any decision regarding the confidential treatment of any portion of this Contract shall be made by the SEC in its sole discretion and Buyer (provided that Buyer has complied with the provisions of this paragraph) shall have no obligation under this Section 16.2.1 with respect to any portion of this Contract for which the SEC elects not to grant confidential treatment. 16.2.2 INDEMNITY. Buyer shall indemnify and hold Seller harmless for any direct liability suffered by Seller as a result of Buyer's disclosure to third parties or Buyer's improper use of the proprietary information. 16.2.3 DISCLOSURE PURSUANT TO GOVERNMENT MANDATE. When required by any appropriate governmental or regulatory authority or a court of competent jurisdiction (hereinafter collectively referred to as a "GOVERNMENTAL AUTHORITY"), whether pursuant to applicable law or regulation or lawful subpoena or other order or mandate issued by a Governmental Authority, Buyer may disclose such proprietary information to such Governmental Authority; PROVIDED, HOWEVER, that prior to making any such disclosure, Buyer will: (a) provide Seller with timely advance written notice of the proprietary information requested by such Governmental Authority and Buyer's intent to so disclose; (b) minimize the amount of proprietary information to be provided consonant with the interests of Seller and its Suppliers and the requirements of the Governmental Authority involved; and (c) make every reasonable effort (which shall include participation by Seller in discussions with the Governmental Authority involved but shall not include Buyer incurring costs or expenses) to secure confidential treatment and minimization of the proprietary information to be provided. In the event that efforts to secure confidential treatment are unsuccessful, Seller shall, in the event and to the extent permitted under Law, have the prior right to revise such information to minimize the disclosure of such information in a manner consonant with its interests and the requirements of the Governmental Authority involved. 16.2.4 PROPRIETARY INTEREST. Buyer may have a proprietary interest in information that may be furnished pursuant to this Contract including this Contract itself, and including any information which provides Buyer a competitive advantage in the marketplace in the field of development and ownership of power generation, transmission and distribution facilities.). Seller will keep in confidence and will not disclose any such information which is specifically designated as being proprietary to Buyer without the prior written permission of Buyer or use any such information for other than the purpose for which it is supplied. The provisions of this paragraph shall not apply to information, notwithstanding any confidential designation thereof, which is known to Seller without PROPRIETARY INFORMATION 35 AES RED OAK LTP CONTRACT MAINTENANCE PROGRAM PARTS, SHOP REPAIRS AND SCHEDULED OUTAGE TFA SERVICES CONTRACT any restriction as to disclosure or use at the time it is furnished, which is or becomes generally available to the public without breach of any agreement, or which is received from a third party without limitation or restriction on said third party or Seller at the time of disclosure, or which is developed independently by Seller. Notwithstanding the foregoing, Seller may disclose information which it receives from Buyer, which Buyer has a proprietary interest in, to any of Seller's Affiliates; PROVIDED that such entities have entered into a confidentiality agreement with Seller that is reasonably acceptable to Buyer and such entities are not in competition with Buyer or Buyer's Affiliates in the field of development, operation or ownership of power generation, transmission and distribution facilities. 16.2.5 INDEMNITY. Seller shall indemnify and hold Buyer harmless for any liability suffered by Buyer as a result of Seller's disclosure to third parties or improper use of the proprietary information. 16.2.6 DISCLOSURE PURSUANT TO GOVERNMENT MANDATE. When required by any Governmental Authority, whether pursuant to applicable law or regulation or lawful subpoena or other order or mandate issued by a Governmental Authority, Seller may disclose such proprietary information to such Governmental Authority; PROVIDED, HOWEVER, that prior to making any such disclosure, Seller will: (a) provide Buyer with timely advance written notice of the proprietary information requested by such Governmental Authority and Seller's intent to so disclose; (b) minimize the amount of proprietary information to be provided consonant with the interests of Buyer and the requirements of the Governmental Authority involved; and (c) make every reasonable effort (which shall include participation by Buyer in discussions with the Governmental Authority involved but shall not include Seller incurring costs or expenses) to secure confidential treatment and minimization of the proprietary information to be provided. In the event that efforts to secure confidential treatment are unsuccessful, Buyer shall, in the event and to the extent permitted under Law, have the prior right to revise such information to minimize the disclosure of such information in a manner consonant with its interests and the requirements of the Governmental Authority involved. 16.3 SUBCONTRACTORS. Seller shall have the right to have individual items of the Program Parts or Miscellaneous Hardware supplied to it or Services performed by subcontractors or subvendors, PROVIDED that no such subcontractor or subvendor is intended to be or shall be deemed a third-party beneficiary of this Contract. Notwithstanding the foregoing, no arrangements between Seller and any subcontractor or subvendor shall create any contractual relationship between any subcontractor or vendor and Buyer or relieve Seller from any of its obligations hereunder. Seller shall be solely responsible for the engagement and management of subcontractors and subvendors in the performance of work, for all work performed and items provided by subcontractors and PROPRIETARY INFORMATION 36 AES RED OAK LTP CONTRACT MAINTENANCE PROGRAM PARTS, SHOP REPAIRS AND SCHEDULED OUTAGE TFA SERVICES CONTRACT vendors and for all acts and omissions of subcontractors and vendors. For work performed at the Site, if Buyer requests an employee, subcontractor or subvendor be removed for cause and demonstrates reasonable grounds for such request, Seller shall remove such employee, subcontractor or subvendor and shall not allow such person or entity to participate further in the performance of Services under this Contract. 16.4 THIRD PARTIES. Except as otherwise expressly provided in this Contract, nothing in this Contract shall be construed to create any duty to, standard of care with respect to or any liability to any person who is not a party to this Contract. 16.5 DISPUTE RESOLUTION. 16.5.1 FORMAL DISPUTE RESOLUTION PROCESS. In the event a dispute arises between Seller and Buyer regarding the application or interpretation of any provision of this Contract, the aggrieved party shall promptly notify the other party and the Parties shall negotiate in good faith and attempt to resolve such dispute. If the parties shall have failed to resolve the dispute within thirty (30) Days after delivery of such notice, each party shall have the right to require, by written notice to the other party containing a brief description of the dispute, that each party nominate and have a senior officer of its management meet with the other party's nominated senior officer at the Site, or at any other mutually agreed to location, within fifteen (15) Days of such request, in order to attempt to resolve the dispute. Should the Parties be unable to resolve the dispute to their mutual satisfaction within fifteen (15) Days after such meeting, each party shall have the right to pursue any and all remedies available to it at law or in equity. 16.5.2 INDEPENDENT EXPERT DISPUTE RESOLUTION PROCESS. If any dispute hereunder involves technical issues, either party could request that such matter be referred to a mutually acceptable independent expert for resolution in an expedited manner pursuant to procedures and timing to be mutually agreed upon by the Parties; PROVIDED that if the other party does not agree to such request or the Parties are unable to reach an agreement on such independent expert or such governing procedures (in each case in the sole discretion of each party) in any case within thirty (30) Days after the initial request, then either party may require that the dispute be submitted to resolution pursuant to Section 16.5.1. The findings of any such mutually acceptable independent expert with respect to any technical issues so presented to it for resolution hereunder shall be final and binding upon the Parties. 16.5.3 PERFORMANCE DURING DISPUTE. During the pendency of a dispute, neither party shall be entitled to terminate or suspend its performance under this Contract as a result of any such dispute or dispute resolution proceedings. The provisions of this Section 16.5 shall survive the termination or expiration of this Contract. PROPRIETARY INFORMATION 37 AES RED OAK LTP CONTRACT MAINTENANCE PROGRAM PARTS, SHOP REPAIRS AND SCHEDULED OUTAGE TFA SERVICES CONTRACT 16.6 ASSIGNMENT AND DELEGATION. Except as is otherwise set forth in this paragraph, this Contract will not be assigned by either party without the prior written consent of the other party, which consent will not be unreasonably withheld. Any purported assignment without such prior written consent shall be null and void. Seller may assign this Contract without prior written consent, in whole but not in part, to a Seller's Affiliate or a wholly owned subsidiary or successors thereof, PROVIDED that such assignee's financial and technical capabilities are either greater or substantially similar to Seller's at such time or are otherwise such that the assignment could not reasonably be expected to have a material adverse effect on Buyer's rights and obligations hereunder. Buyer may assign this Contract without prior written consent to (i) entities providing construction or term financing for the Project as security for such entities' loans and (ii) any transferee of the Project or a substantial portion thereof, PROVIDED that such assignee has financial and operational capabilities that either are substantially similar to Buyer at such time or otherwise are such that the assignment could not reasonably be expected to have a material adverse effect on Seller's rights and obligations hereunder. 16.7 SEVERABILITY. The invalidity of one or more phrases, sentences, clauses, Sections or Articles contained in this Contract shall not affect the validity of the remaining portions of this Contract so long as the material purposes of this Contract can be determined and effectuated. 16.8 AMENDMENTS. No change, amendment or modification of this Contract shall be valid or binding upon the parties hereto unless such change, amendment or modification shall be in writing and duly executed by both parties hereto. 16.9 JOINT EFFORT. Preparation of this Contract has been a joint effort of the parties and the resulting document shall not be construed more severely against one of the parties than against the other. 16.10 CAPTIONS. The captions contained in this Contract are for convenience and reference only and in no way define, describe, extend or limit the scope or intent of this Contract or the intent of any provision contained herein. 16.11 NON-WAIVER. Any failure of any party to enforce any of the provisions of this Contract or to require compliance with any of its terms at any time during the pendency of this Contract shall in no way affect the validity of this Contract, or any part hereof, and shall not be deemed a waiver of the right of such party thereafter to enforce any and each such provision. 16.12 APPLICABLE LAW. This Contract shall be, for all purposes, pursuant to New York General Obligations Law Section 5-1401, governed by and construed in accordance with PROPRIETARY INFORMATION 38 AES RED OAK LTP CONTRACT MAINTENANCE PROGRAM PARTS, SHOP REPAIRS AND SCHEDULED OUTAGE TFA SERVICES CONTRACT the laws of the State of New York of the United States of America, exclusive of the United Nations Convention on Contracts for the Sale of Goods. 16.13 SUCCESSORS AND ASSIGNS. This Contract shall be binding upon and inure to the benefit of the parties hereto, their successors and permitted assigns. 16.14 COUNTERPARTS. This Contract may be signed in any number of counterparts and each counterpart shall represent a fully executed original as if signed by both parties. 16.15 NOTICES. Any written notice, direction, instruction, request, or other communication required or permitted under this Contract, including payment invoices from Seller to Buyer, shall be deemed to have been duly given on the date of receipt, and shall be either served personally, or mailed to the party to whom notice is to be given, by first class registered or certified mail, return receipt requested, postage prepaid, and addressed to the addressee at the address stated opposite its name below, or at the most recent address specified by written notice given to the other party in the manner provided in this Section l6.15. BUYER: AES Red Oak, LLC 1001 North 19th Street Arlington, Virginia 22209 Attention: Bart Rossi Fax: (703) 528-4510 SELLER: Siemens Westinghouse Power Corporation 4400 North Alafaya Trail MC-560 Orlando, FL 32826-2399 Attention: Manager Longterm Programs Telephone: (407) 281-2830 Fax: (407) 281-5645 16.16 COMPLETE CONTRACT. This Contract, including all Exhibits attached hereto, constitutes the complete agreement between the parties as of the date of this Contract, and supersedes any and all agreements made or dated prior thereto. 16.17 SITE ACCESS. Seller's personnel performing Services at the Site shall comply with Buyer's Site safety and security measures at the Site. 16.18 PERMITS AND LICENSES. Buyer shall be responsible for obtaining all necessary approvals, permits and licenses for the Project from governmental agencies having jurisdiction including any import and export licenses (except as may be otherwise provided in the CTG Subcontract with respect to the Program Parts supplied under the PROPRIETARY INFORMATION 38 AES RED OAK LTP CONTRACT MAINTENANCE PROGRAM PARTS, SHOP REPAIRS AND SCHEDULED OUTAGE TFA SERVICES CONTRACT CTG Subcontract). [*] Seller shall be responsible for obtaining all necessary approvals, permits and licenses for the provision of the Workscope Obligations hereunder from government agencies having jurisdiction. 16.19 SPECIAL PACKING. Seller will pack for standard shipment via truck or rail transportation. When this packing will not meet Buyer's requirements covering preparation of Program Parts or Miscellaneous Hardware for special shipments, Buyer shall notify Seller thereof. The charge made for such special packing will be based on its cost to Seller and will be shown as a separate item on the invoice. 16.20 RETURN OF PROGRAM PARTS OR MISCELLANEOUS HARDWARE. Program Parts or Miscellaneous Hardware must be returned with complete identification in accordance with instructions furnished by Seller. In no event will Seller be responsible for Program Parts or Miscellaneous Hardware returned without proper authorization and identification. 16.21 TRANSFER. Prior to the transfer to another party of any Program Parts and Miscellaneous Hardware or of Buyer's power generation facility in which said Program Parts and Miscellaneous Hardware are installed, Buyer shall obtain for Seller from the transferee its acceptance of provisions of limitation of and protection against liability following the proposed transfer at least equivalent to that afforded Seller and its suppliers under this Contract. Transfer contrary to the provisions of this Section 16.21 shall make Buyer the indemnitor of Seller and its suppliers against any liabilities incurred by Seller and its suppliers in excess of those that would have been incurred had such transfer taken place in accordance with the first sentence hereof. 16.22 SURVIVAL. The provisions of Articles 9, 13, and 14, and Sections 3.4, 16.2, 16.5 and 16.21 of this Contract shall survive the expiration or other termination of this Contract. 16.23 ENVIRONMENTAL COMPLIANCE. (a) Buyer recognizes that the performance of Service at the Site may involve the generation of Hazardous Waste. (b) Buyer shall at its expense furnish Seller with containers for Hazardous Wastes and shall designate a waste storage facility at the Site where such containers are to be placed by Seller. Seller shall, or shall cause its contractors or subcontractors to, place any Hazardous Wastes that it, its contractors or subcontractors generate, as a result of their work at the Site, into such containers and shall place such containers in the waste storage PROPRIETARY INFORMATION 40 AES RED OAK LTP CONTRACT MAINTENANCE PROGRAM PARTS, SHOP REPAIRS AND SCHEDULED OUTAGE TFA SERVICES CONTRACT facility at the Site designated by Buyer. Buyer shall handle, store and dispose of Hazardous Waste in accordance with all Laws. (c) [*] (d) Buyer shall indemnify Seller from any fines, penalties, expense, loss or liability incurred by Seller as a result of Buyer's failure to meet its obligations under the second paragraph of this Section 16.23. [*] (e) [*] PROPRIETARY INFORMATION 41 AES RED OAK LTP CONTRACT MAINTENANCE PROGRAM PARTS, SHOP REPAIRS AND SCHEDULED OUTAGE TFA SERVICES CONTRACT 16.24 LIQUIDATED DAMAGES NOT PENALTY. The parties acknowledge and agree that it would be difficult or impossible to determine with absolute precision the amount of damages that would or might be incurred by Buyer as a result of Seller's failure to perform those matters hereunder for which liquidated damages are provided. The parties agree that the amounts of liquidated damages provided under this Contract are in lieu of actual damages and are the parties' reasonable estimates of fair compensation for the losses that may reasonably be anticipated from such failures in respect of such matters, and do not constitute a penalty. Liquidated damages are limited to those outlined in Section 8.4. [*] [*] PROPRIETARY INFORMATION 42 AES RED OAK LTP CONTRACT MAINTENANCE PROGRAM PARTS, SHOP REPAIRS AND SCHEDULED OUTAGE TFA SERVICES CONTRACT NOW, THEREFORE, the parties hereto have entered into this Contract as of the date first appearing above. SELLER BUYER SIEMENS WESTINGHOUSE POWER AES RED OAK, LLC CORPORATION. By: /s/ Randy H. Zwirn By: /s/ Bart R. Rossi -------------------------------- ------------------------------- Name: Randy H. Zwirn Name: Bart R. Rossi -------------------------- ------------------------- Title: President Title: Vice President ------------------------- ------------------------ PROPRIETARY INFORMATION 43 AES RED OAK LTP CONTRACT Exhibit 10.4 AMENDMENT NO. 1 TO MAINTENANCE, PROGRAM PARTS, SHOP REPAIRS AND SCHEDULED OUTAGE TFA SERVICES CONTRACT AMENDMENT NO. 1 dated as of February 15, 2000 (this AMENDMENT NO. 1), between AES Red Oak LLC (BUYER) and Siemens Westinghouse Power Corporation (SELLER). W I T N E S S E T H : - - - - - - - - - - WHEREAS, Buyer and Seller have entered into the Maintenance, Program Parts, Shop Repairs and Scheduled Outage TFA Services Contract dated as of December 8, 1999 (the MAINTENANCE AGREEMENT); and WHEREAS, Buyer and Seller desire to amend the Maintenance Agreement in accordance with Section 16.8 thereof in the manner set forth herein; NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the parties hereto, intending to be legally bound, hereby agree as follows: 1. All capitalized terms used but not defined herein shall have the meanings set forth therefor in the Maintenance Agreement. 2. From and after the effective date of this Amendment No. 1, the Maintenance Agreement is hereby amended as follows: (a) By deleting the words ", exclusive of the United Nations Convention on Contracts for the Sale of Goods" from the third and fourth lines of Section 16.12 thereof; (b) By deleting the words "Combustion Turbine" in the tenth (10th) line of Section 2.4 of Exhibit A to the Maintenance Agreement and substituting therefor the word "combustor"; and (c) By deleting the words "January 1, 1998" in the second (2nd) line of the second (2nd) paragraph of Exhibit E to the Maintenance Agreement and substituting therefor the words "January 1, 2000". 3. Except as expressly provided in this Amendment No. 1, the Maintenance Agreement and all provisions thereof in effect as of the date hereof shall continue in full force and effect without any modification or amendment. 4. This Amendment No. 1 shall be, for all purposes, pursuant to New York General Obligations Law Section 5-1401, governed by and construed in accordance with the laws of the State of New York of the United States of America. 5. This Amendment No. 1 shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. 6. This Amendment No. 1 may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute the same agreement. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 2 IN WITNESS WHEREOF, the parties hereto, intending to be legally bound, have caused this Amendment No. 1 to be executed by their duly authorized signatories and effective as of the date first above written. AES RED OAK LLC By: /s/ Bart R. Rossi ----------------------------- Name: Bart R. Rossi Title: Vice President SIEMENS WESTINGHOUSE POWER CORPORATION By: /s/ R. M. Morgan ----------------------------- Name: R. M. Morgan Title: Director, Contract Policy EX-10.5 7 ex-10_5.txt EXHIBIT 10.5 Exhibit 10.5 EXECUTION COPY - -------------------------------------------------------------------------------- DEVELOPMENT AND OPERATIONS SERVICES AGREEMENT between AES SAYREVILLE, L.L.C. and AES RED OAK, L.L.C. Dated as of March 1, 2000 - -------------------------------------------------------------------------------- 830 MW (Net) Gas-Fired Combined Cycle Electric Generating Facility Borough of Sayreville, Middlesex County, New Jersey TABLE OF CONTENTS
PAGE ARTICLE I DEFINITIONS.............................................................................................1 SECTION 1.1 DEFINITIONS..................................................................................1 ARTICLE II DEVELOPMENT AND CONSTRUCTION MANAGEMENT................................................................4 SECTION 2.1 DEVELOPMENT AND CONSTRUCTION MANAGEMENT SERVICES.............................................4 SECTION 2.2 PAYMENT FOR DEVELOPMENT AND CONSTRUCTION MANAGEMENT SERVICES.................................4 ARTICLE III OPERATION AND MAINTENANCE.............................................................................5 SECTION 3.1 OPERATING AND MAINTENANCE PERSONNEL AND OTHER SERVICES.......................................5 SECTION 3.2 PAYMENT FOR OPERATING AND MAINTENANCE SERVICES...............................................5 ARTICLE IV PAYMENT OF FEES........................................................................................7 SECTION 4.1 PAYMENT OF FEES..............................................................................7 ARTICLE V TERM, TERMINATION AND RELATIONSHIP OF PARTIES...........................................................8 SECTION 5.1 TERM.........................................................................................8 SECTION 5.2 TERMINATION..................................................................................8 ARTICLE VI REPRESENTATIONS AND WARRANTIES.........................................................................8 SECTION 6.1 REPRESENTATIONS AND WARRANTIES OF THE OPERATOR...............................................8 SECTION 6.2 REPRESENTATIONS AND WARRANTIES OF THE COMPANY................................................9 ARTICLE VII ARBITRATION...........................................................................................9 SECTION 7.1 ARBITRATION..................................................................................9 ARTICLE VIII LIMITATIONS OF LIABILITY............................................................................10 SECTION 8.1 NO CONSEQUENTIAL DAMAGES....................................................................10 SECTION 8.2 LIMITATION OF OPERATOR'S LIABILITY..........................................................10 ARTICLE IX FORCE MAJEURE.........................................................................................10 SECTION 9.1 FORCE MAJEURE...............................................................................10 ARTICLE X INDEMNIFICATION........................................................................................11 SECTION 10.1 INDEMNIFICATION.............................................................................11 ARTICLE XI MISCELLANEOUS.........................................................................................11 SECTION 11.1 FURTHER ASSURANCES..........................................................................11 SECTION 11.2 ENTIRE AGREEMENT............................................................................11 SECTION 11.3 COUNTERPARTS................................................................................12 SECTION 11.4 GOVERNING LAW...............................................................................12 SECTION 11.5 ASSIGNABILITY...............................................................................12 SECTION 11.6 BINDING EFFECT..............................................................................12 SECTION 11.7 HEADINGS....................................................................................12 SECTION 11.8 NOTICES.....................................................................................12 SECTION 11.9 AMENDMENT...................................................................................13 SECTION 11.10 NO IMPLIED WAIVER...........................................................................13 SECTION 11.11 OVERDUE OBLIGATIONS TO BEAR INTEREST........................................................13 SECTION 11.12 INDEPENDENT CONTRACTOR......................................................................13 SECTION 11.13 ACCESS......................................................................................13
1 DEVELOPMENT AND OPERATIONS SERVICES AGREEMENT DEVELOPMENT AND OPERATIONS SERVICES AGREEMENT (this "AGREEMENT"), dated as of March 1, 2000, by and between AES SAYREVILLE, L.L.C. a Delaware limited liability company (the "OPERATOR"), and AES RED OAK, L.L.C, a Delaware limited liability company (the "COMPANY") (the Company and Operator, each a "PARTY", and collectively, the "PARTIES"). W I T N E S S E T H: WHEREAS, the Company has been organized to develop, construct, own, operate and maintain the Facility located at the Facility Site; WHEREAS, the Company desires that the Operator provide certain personnel and support services required by the Company for the development and construction management of the Facility and for operation and maintenance of the Facility after completion of such development and construction; and WHEREAS, the Operator desires to provide such personnel and support services in accordance with the terms hereof. NOW, THEREFORE, in consideration of the agreements and covenants hereinafter set forth, and intending to be legally bound hereby, the Parties hereto covenant and agree as follows: ARTICLE I DEFINITIONS SECTION 1.1 DEFINITIONS. Capitalized terms not otherwise defined herein shall have the meanings specified in the Indenture (as defined below). For the purposes of this Agreement, the rules of construction set forth in the Indenture shall apply as if such rules were set forth herein. The following terms shall have the meanings specified below: "AES DIRECT COSTS" shall have the meaning specified in the Services Agreement. "AES DIRECT LABOR COSTS" shall have the meaning specified in the Services Agreement. "AES OVERHEAD" shall have the meaning specified in the Services Agreement. "ANNUAL ADJUSTMENT DATE" means each January 1st occurring after the date hereof. "ANNUAL REVISION DATE" means each March 1st occurring after the date hereof. "CAPITAL CONTRIBUTIONS" means the contributions by the Manager to the Company required pursuant to the LLC Agreement. 1 "COMMERCIAL OPERATION DATE" has the meaning specified in the Power Purchase Agreement. "COMPANY" has the meaning specified in the preamble to this Agreement. "DIRECT COSTS" means expenditures for all goods and services which, in the opinion of the Operator, are necessary for the operation, maintenance and management of the Facility or the performance by the Operator of its obligations under this Agreement, including but not limited to goods and services (i) necessary to operate the Facility and all associated facilities and equipment and (ii) necessary to maintain, repair, replace and otherwise keep the Facility and all associated facilities and equipment in good and serviceable working order. Such goods and services shall include without limitation raw materials to operate the boiler, pollution control equipment and other equipment, including limestone, magnesium oxide, ammonia, urea, sand and any other additives as appropriate; utilities, including natural gas, oil, electricity, raw water, potable water, industrial waste water discharge, sanitary sewer and waste disposal; transportation charges, including demurrage, for fuel, raw materials, waste, personnel, equipment, and other items; contract maintenance services, including electrical, mechanical, civil, chemical and instrumentation and control; outside shops, warehousing and storage; expendable supplies, including chemicals, resins, abrasives, lab supplies, protective clothing, paper products, rags, rope, wire, glue, caulking, soaps, paint, primer and painting supplies, clean-up supplies and equipment, lubricants and solvents; shop tools and equipment; equipment rental and leasing; spare and replacement parts, repair and replacement items and material and upgrading equipment and material; communications, including telephone, facsimile transmission, postage, express mail and parcel delivery; office furniture, supplies and equipment, computers and computer equipment, and reproduction equipment, services and supplies; mobile equipment and vehicles; insurance premiums; contract employee charges; community relations programs and expenses; recruiting and training costs, including advertising, physicals, recruiter fees and the like; professional services, including legal, accounting, engineering, management and other; safety arid employee relations expenses (awards, picnics, bonuses, etc.); travel and business entertainment; taxes (such as sales, property, value added and gross receipts taxes but excluding taxes based solely on income); and Direct Labor Costs. Direct Costs shall include but not be duplicative of AES Direct Costs. "DIRECT LABOR COSTS" means all labor costs of the Operator, including but not limited to salaries, wages, overtime pay, shift differentials, fringe benefits, profit sharing and pension, holiday pay, vacation pay, bonuses, termination payments, travel and other similar costs of the Operator personnel primarily engaged in activities at the Site pursuant to this Agreement. Direct Labor Costs shall not include (i) labor costs related to Operator personnel who are not primarily located at the Site or (ii) labor costs related to activities unrelated to the Operator's performance of this Agreement which are undertaken by Operator personnel who are primarily engaged in activities at the Site. Direct Labor Costs shall include, but not be duplicative of, AES Direct Labor Costs. "EFFECTIVE DATE" means the date of this Agreement. "ELECTRIC DELIVERY POINT" has the meaning specified in the Power Purchase Agreement. 2 "FINANCING PARTIES" means the Trustee, acting on behalf of the Bondholders, and any and all other lenders providing the construction or long-term financing or any refinancing of the Facility pursuant to the Financing Documents, and any trustee or agent acting in their behalf, including the Collateral Agent. The term "FINANCING PARTIES" shall not include the Company, any Affiliate of the Company or any Affiliate of any Partner. "FORCE MAJEURE EVENT" shall have the meaning set forth in Section 9.1. "INDENTURE" means the Trust Indenture, dated as of March 1, 2000, among the Company, the Trustee and the Depositary Bank. "LLC AGREEMENT" means the Limited Liability Company Agreement of AES Red Oak, L.L.C., dated as of November 23, 1999, as such agreement may be amended, modified or supplemented from time to time. "MANAGEMENT FEE"' means the monthly fee described in Section 2.2(a)(ii). "MANAGER" means AES Red Oak, Inc., the owner of all of the membership interests in the Company and the Manager of the Company pursuant to the LLC Agreement. "OPERATING AND MAINTENANCE FEE" means the monthly fee described in Section 3.2(a)(ii). "OPERATIONS" means any transaction in the ordinary course of the Company's business, but does not include the making of Capital Contributions to the Company or a Capital Event. "OPERATOR" has the meaning specified in the preamble to this Agreement. "OPERATOR COSTS" means all Direct Costs and Overhead. "OPERATOR FEES" means, collectively, the Management Fee and the Operating and Maintenance Fee. "OVERHEAD" means (to the extent not included in Direct Costs) the Operator's cost of and any expenses related to employee relations, financial controls, data processing, management and administration, and other similar services required for performance by the Operator of its obligations under this Agreement, including labor costs of the Operator's overhead personnel, if any; PROVIDED, that all Overhead hereunder shall be allocated on a reasonable basis to services rendered by Operator in the performance of its obligations under this Agreement. Overhead shall include but not be duplicative of AES Overhead. Notwithstanding anything herein to the contrary, from and after the Commercial Operation Date through the remaining term of this Agreement, Overhead payable under Sections 2.2 and 3.2 with respect to any period shall be deemed in the aggregate to equal [45%]of Direct Labor Costs for such period. "PRIME-BASED RATE" means the interest rate equal to the sum of (i) the prime commercial lending rate announced by Citibank NA as in effect from time to time, and (ii) two (2) percentage points, provided that such interest rate shall in no event be greater than the maximum interest rate permitted by applicable law. 3 "UNPAID FEE AMOUNT" shall have the meaning set forth in Section 4.1. ARTICLE II DEVELOPMENT AND CONSTRUCTION MANAGEMENT SECTION 2.1 DEVELOPMENT AND CONSTRUCTION MANAGEMENT SERVICES. The Parties acknowledge that, under the Financing Documents and the Project Contracts, the Company has certain obligations to develop and construct the Facility. In order to assist the Company in the performance of such obligations, but subject to Section 2.2(b), the Operator shall from the date hereof until the Commercial Operation Date (i) supervise and manage the development of the Facility, and the design, engineering and construction of the Facility in accordance with (a) generally accepted engineering practices, (b) generally accepted construction procedures, (c) the plans and standards set forth in the EPC Contract, (d) the requirements of the Power Purchase Agreement and (e) applicable law; (ii) exercise all rights of the Company under the EPC Contract and any other contracts for the construction of the interconnection or other facilities related to the Facility (including, but not limited to, operational responsibilities arising prior to the Commercial Operation Date); and (iii) use commercially reasonable efforts to provide the services and perform the obligations the Company is then obligated to provide and perform under the EPC Contract and to procure or provide any goods and services necessary for the completion of the Facility for which provision is not made in the EPC Contract. SECTION 2.2 PAYMENT FOR DEVELOPMENT AND CONSTRUCTION MANAGEMENT SERVICES. (a) On the tenth (10th) Business Day of each calendar month following the date of this Agreement, the Company, upon receipt of an invoice, shall pay in arrears to the Operator, in consideration for the services provided in the previous month and described in Section 2.1, as follows: (i) Until the first calendar month following the Commercial Operation Date, all Operator Costs after the Effective Date up to said calendar month, to the extent the Operator has not been previously paid therefor and to the extent it submits cost substantiation therefor, it being understood that payment of certain cost items included in Operator Costs may be made by the Collateral Agent pursuant to the Financing Documents; and (ii) A Management Fee of [$125,000] for each calendar month (or a pro rata portion of such fee for any portion of each calendar month) from the Effective Date through the Commercial Operation Date (at which date such fee shall cease) for services rendered during such calendar month (or portion thereof). (b) The Operator may suspend the performance of its obligations hereunder during such time as any amount payable pursuant to Sections 2.2(a)(i) or (ii) is more than 60 days past due; PROVIDED, HOWEVER, that the Operator shall not so suspend performance of its obligations hereunder if the amount payable that is more than 60 days past due hereunder is subject to a good 4 faith dispute by the Company as to whether the cost in question was in fact incurred by the Operator. ARTICLE III OPERATION AND MAINTENANCE SECTION 3.1 OPERATING AND MAINTENANCE PERSONNEL AND OTHER SERVICES. The Parties acknowledge that, under the Financing Documents and the Project Contracts, the Company has certain obligations to maintain and operate the Facility and in order to assist the Company therewith, but subject to Section 3.2(c), the Operator shall provide operating personnel and other support services necessary for the Company to perform its obligations arising out of or in connection with, the ownership, management, maintenance and operation of the Facility, including without limitation the following obligations: (a) Operating and maintaining the Facility in accordance with the Power Purchase Agreement, the Financing Documents and the practices, standards and procedures customary in the independent power industry with respect to natural gas-fired combined cycle electric generating facilities; (b) Obtaining and maintaining insurance as required under the Financing Documents and the Project Contracts, without limiting the rights of each of the Company and the Operator to provide independently for its own additional insurance coverage; (c) Maintaining full and complete records of accounts and of technical operations of the Facility and preparing all reports, statements, data and information that may be required from time to time under the Financing Documents, the Project Contracts or by any federal, state, or local governmental authorities, and retaining records relating to a given year during the term hereof, other than those records which are necessary to provide a history of the operation and maintenance of the Facility (which the Operator agrees to retain for the full term of this Agreement), for a period of at least three years after the end of such year; (d) Opening and maintaining bank accounts and performing cash management functions in connection with the operation of the Facility, including, subject to the provisions of the Financing Documents, the receipt of revenues generated by the Company and the payment of all costs, expenses, rentals and taxes incurred by the Company; (e) Preparing all federal, state and local tax returns of the Company; and (f) Inspecting and testing metering devices used to measure and record natural gas delivered to the Facility pursuant to the Power Purchase Agreement and electricity delivered to the Electric Delivery Point pursuant to the Power Purchase Agreement. SECTION 3.2 PAYMENT FOR OPERATING AND MAINTENANCE SERVICES. (a) (i) On the tenth (10th) Business Day of each calendar month following the Commercial Operation Date through the remaining term of this Agreement, the 5 Company shall pay in arrears to the Operator, in consideration for the services provided in the previous month and described in Section 3.1, all Operator Costs incurred prior to and after the Commercial Operation Date up to said calendar month to the extent the Operator has not been previously paid therefor and to the extent it submits cost substantiation therefor, it being understood that payment of certain cost items included in Operator Costs may be made by the Collateral Agent directly pursuant to the Financing Documents; and (ii) On each Bond Payment Date commencing with the first Bond Payment Date after the Commercial Operation Date, and through the remaining term of this Agreement, the Company shall pay in arrears to the Operator, in consideration for the services provided in the most recent quarter and described in Section 3.1, a quarterly Operating and Maintenance Fee of $375,000, as adjusted pursuant to Section 3.2(b), (or a pro rata portion of such fee for any portion of each calendar quarter) for services rendered during such calendar quarter (or portion thereof); PROVIDED, HOWEVER, the Operating and Maintenance Fee shall be payable to the Company only to the extent that funds are available for such payment pursuant to the Collateral Agency Agreement and in accordance with Section 4.1. (b) (i) Effective on each Annual Adjustment Date, the Operating and Maintenance Fee shall be adjusted in accordance with the following formula: AOMF = [$375,000] x EGDP -------------------------- O&M Base GDP WHERE: AOMF = The adjusted Operating and Maintenance Fee. EGDP = The Manager's good faith estimate of the GDPIPD for the calendar quarter immediately preceding such Annual Adjustment Date. O&M Base GDP = The GDPIPD for the first quarter 2000. (ii) Effective on each Annual Revision Date, the Operating and Maintenance Fee for the calendar year in which such calculation is made shall be recalculated in accordance with the following formula: RAOMF = [$375,000] x AGDP -------------------------- O&M Base GDP WHERE: RAOMF = The readjusted Operating and Maintenance Fee. AGDP = The actual GDPIPD for the calendar quarter immediately preceding such Annual Adjustment Date. 6 O&M Base GDP = The GDPIDP for the first quarter 2000. (iii) The Operating and Maintenance Fee payable pursuant to Section 3.2(a)(ii) for the first calendar quarter of each calendar year shall be calculated in accordance with Section 3.2(b)(i). The Operating and Maintenance Fee payable pursuant to Section 3.2(a)(ii) for each quarter of each calendar year commencing with the second quarter of such calendar year shall be calculated in accordance with the formula set forth in this Section 3.2(b)(ii) and the quarterly amounts to be paid to the Operator by the Company over the remainder of such calendar year shall be equitably adjusted by an allocation thereover of the amount equal to the difference between (x) the sum of the quarterly fee calculated pursuant to Section 3.2(b)(i) and payable in accordance with the first sentence of this Section 3.2(b)(iii) for the first quarter of such calendar year and (y) the quarterly fee that would have been payable for the first quarter of such calendar year if such quarterly fee had been calculated pursuant to Section 3.2(b)(ii). (c) The Operator may suspend performance of its obligations during such time as any amount payable pursuant to Section 3.2(a)(i) is more than 60 days past due; PROVIDED, HOWEVER, that the Operator shall not so suspend performance of its obligations hereunder if the amount payable that is more than 60 days past due hereunder is subject to a good faith dispute by the Company as to whether the cost in question was in fact incurred by the Operator. (d) The Operator may suspend the performance of its obligations hereunder during such time as any amount payable pursuant to Section 3.2(a)(ii) is past due for more than 60 days; PROVIDED, HOWEVER, that the Operator shall not so suspend performance of its obligations if the amount payable pursuant to Section 3.2(a)(ii) is past due as a result of the application of Section 4.1 of this Agreement and the provisions of the Collateral Agency Agreement. ARTICLE IV PAYMENT OF FEES SECTION 4.1 PAYMENT OF FEES. Notwithstanding anything to the contrary contained herein, the Operating and Maintenance Fee payable pursuant to Section 3.2(a)(ii) shall be payable by the Company if and to the extent that funds are available in the Revenue Account for such payment after giving effect to the transfers and payments (other than payment of such Operating and Maintenance Fee) specified in paragraphs FIRST through FIFTH of Section 3.10(b) of the Collateral Agency Agreement. In the event that the Company is at any time unable to make payment of the Operating and Maintenance Fee due pursuant to Section 3.2(a)(ii) because of the unavailability of funds under the Collateral Agency Agreement, such unpaid Operating and Maintenance Fee shall accumulate and shall accrue interest at the Prime-Based Rate (or, if lower, the maximum rate permitted by applicable law), compounded annually (the "UNPAID FEE AMOUNT"). Until such time as the Unpaid Fee Amount equals zero, if any amount of funds are available therefor pursuant to Section 3.10(b) of the Collateral Agency Agreement, the Company shall, after payment of the current quarter's Operating and Maintenance Fee on a Bond Payment Date, pay 7 to the Operator, on such Bond Payment Date (but only to the extent that funds are available therefor pursuant to the Collateral Agency Agreement and this Section 4.1), an amount equal to the lesser of such available funds and the Unpaid Fee Amount. ARTICLE V TERM, TERMINATION AND RELATIONSHIP OF PARTIES SECTION 5.1 TERM. The term of this Agreement shall commence as of the Effective Date and, except as otherwise provided herein, shall terminate upon the earlier of (i) the last day of the month in which the thirty-second anniversary of the Effective Date occurs, (ii) the date which is sixty (60) days after receipt by Operator of a notice from the Collateral Agent specifying that (a) a Trigger Event under the Collateral Agency Agreement has occurred and the Collateral Agent, any Financing Party or any agent, assignee or designee thereof has commenced the exercise of remedies in respect of such Trigger Event and (b) the Collateral Agent has been devoted by the Required Senior Partner to terminate this Agreement, and (iii) the date specified by mutual written agreement of the Parties hereto. SECTION 5.2 TERMINATION. This Agreement may be terminated by either Party upon the failure of the other Party to perform any of its material obligations hereunder; PROVIDED, that the Party seeking to terminate this Agreement under this Section 5.2 has given the breaching Party 120 days' prior written notice of such breach, and such breach has not been remedied within such 120-day period. Furthermore, this Agreement may be terminated upon written notice by either Party upon the bankruptcy, reorganization, dissolution or liquidation of the other Party. Upon termination of this Agreement pursuant to this Section 5.2, the Operator agrees to provide to the Company originals or copies of all records retained by the Operator in accordance with Section 3.1(c) pertaining to the services rendered by the Operator hereunder up to and including the date of such termination. ARTICLE VI REPRESENTATIONS AND WARRANTIES SECTION 6.1 REPRESENTATIONS AND WARRANTIES OF THE OPERATOR. Operator represents and warrants as follows: (a) It is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware and is duly qualified to do business and is in good standing in the State of New Jersey; (b) It has taken all necessary corporate action to authorize the execution, delivery and performance of this Agreement, which action has not been superseded or terminated, and this Agreement constitutes the legal, valid and binding obligation of the Operator, enforceable 8 against the Operator in accordance with the terms hereof, except as the enforceability hereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other such laws affecting the rights of creditors generally or by general equitable principles; (c) The execution, delivery and performance of this Agreement do not violate (i) the Operator's certificate of formation or Limited Liability Company Agreement or any resolution of its members, (ii) any contract to which it is a party or (iii) any law, rule, regulation, order, writ, judgment, injunction, decree or determination binding upon the Operator or any of its properties; and (d) No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body (other than those which have been obtained) are required for the due execution, delivery and performance by the Operator of this Agreement. SECTION 6.2 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and warrants as follows: (a) It is a limited liability company duly organized and validly existing and in good standing under the laws of the State of Delaware and is duly qualified to do business and is in good standing in the State of New Jersey; (b) It has taken all necessary Company action to authorize the execution, delivery and performance of this Agreement, which action has not been superseded or terminated, and this Agreement constitutes the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with the terms hereof, except as the enforceability hereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other such laws affecting the rights of creditors generally or by general equitable principles; (c) The execution, delivery and performance of this Agreement do not violate (i) the Company's certificate of formation or Limited Liability Company Agreement or any rules of any committee charged thereunder with the governance of its affairs, (ii) any contract to which it is a party or (iii) any law, rule, regulation, order, writ, judgment, injunction, decree or determination binding upon the Company or any of its properties; and (d) No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body (other than those which have been obtained) are required for the due execution, delivery and performance by the Company of this Agreement. ARTICLE VII ARBITRATION SECTION 7.1 ARBITRATION. In the event of a dispute between the Parties under this Agreement, such dispute shall be submitted to a single arbitrator pursuant to the commercial arbitration rules of the American Arbitration Association, and the Parties shall proceed diligently so that the arbitrator shall render 9 a decision within 90 days from the filing of a demand for arbitration. This Agreement shall not be terminated on the basis of any disputed matter until the arbitrator has rendered his decision. Such arbitration shall be conducted in Washington, D.C., unless a related arbitration shall be contemplated under the provisions of any of the Financing Documents or Project Contracts, in which event arbitration hereunder shall be conducted where such related arbitration is conducted and, whenever expedient, shall be consolidated with such related arbitration. ARTICLE VIII LIMITATIONS OF LIABILITY SECTION 8.1 NO CONSEQUENTIAL DAMAGES. Neither Party shall be liable to the other for any indirect, special, incidental or consequential damages arising from or connected with its performance hereunder or any breach of its obligations hereunder. SECTION 8.2 LIMITATION OF OPERATOR'S LIABILITY. The total aggregate liability of the Operator to the Company for all liability, including without limitation the Operator's indemnity obligations hereunder, arising out of or in connection with the performance of services under this Agreement in any calendar year shall not exceed the amount of the Operator Fees earned and paid for that calendar year. ARTICLE IX FORCE MAJEURE SECTION 9.1 FORCE MAJEURE. Notwithstanding any other provision of this Agreement to the contrary, if the performance of the obligations of either Party under this Agreement, or the fulfillment of any of the conditions hereof, shall be wholly or partially prevented by any act or event beyond the reasonable control of the Party alleging disability to perform obligations or fulfill conditions under this Agreement, including without limitation, an act of God, nuclear emergency, explosion, fire, epidemic, landslide, lightning, earthquake, flood or similar cataclysmic occurrence, an act of public enemy, war, blockade, insurrection, riot, civil disturbance, sabotage, unavailability of labor, fuel, power or raw materials, strike, lockout or other labor disturbance, restrictions or restraints imposed by law or by rule, regulation, or order of governmental authorities, whether federal, state, or local, delays or interruptions in transportation and interruption or loss of utilities ("FORCE MAJEURE EVENT"), the Party alleging inability to perform obligations or fulfill conditions hereunder shall be excused from whatever performance is affected by the Force Majeure Event to the extent so affected; PROVIDED, HOWEVER, that (i) economic hardship shall not constitute a Force Majeure Event and (ii) no obligations of either Party which arose before the Force Majeure Event causing the suspension of performance and no payment obligations of either Party shall be excused as a result of the Force Majeure Event. In the event that a Force Majeure Event occurs: 10 (a) the non-performing Party shall give the other Party prompt written notice describing the particulars of the Force Majeure Event, including but not limited to the nature of the occurrence and its expected duration, and shall continue to furnish timely regular reports with respect thereto during the period of the Force Majeure Event; (b) the suspension of performance shall be of no greater scope and of no longer duration than is required by the Force Majeure Event; and (c) the non-performing Party shall use its best efforts to remedy its inability to perform. ARTICLE X INDEMNIFICATION SECTION 10.1 INDEMNIFICATION. Each Party shall indemnify, defend and hold the other Party and its successors, assigns and agents harmless from and against all damages, losses or expenses of every kind or character suffered or paid as a result of any and all claims, demands, suits, penalties, causes of action, proceedings, judgments, administrative and judicial orders and liabilities (including reasonable counsel fees incurred in any litigation or otherwise) assessed, incurred or sustained by or against such other Party and its successors, assigns and agents to the extent arising out of any negligence or willful misconduct by the indemnifying Party in performing its obligations hereunder. ARTICLE XI MISCELLANEOUS SECTION 11.1 FURTHER ASSURANCES. If either Party reasonably determines or is reasonably advised that any further instruments (including without limitation a consent to assignment for the benefit of the Financing Parties or any similar documents) or actions are necessary or desirable to carry out the terms of this Agreement, the other Party shall execute and deliver all such instruments and perform all such actions reasonably necessary and proper to carry out the terms of this Agreement. SECTION 11.2 ENTIRE AGREEMENT. This Agreement contains the entire agreement between the Parties with respect to the subject matter hereof and supersedes all prior agreements, negotiations and understandings. Neither of the Parties shall be bound by or be deemed to have made any representations, warranties or commitments except those contained herein. 11 SECTION 11.3 COUNTERPARTS. This Agreement may be executed in any number of counterparts and each such counterpart shall be deemed to be an original instrument, but all such counterparts together shall constitute one agreement. SECTION 11.4 GOVERNING LAW. This Agreement shall be construed in accordance with and governed by the laws of the State of New York, without regard to principles of conflicts of laws. SECTION 11.5 ASSIGNABILITY. Neither this Agreement, nor the respective rights, obligations and duties of either Party hereunder are assignable by such Party without the prior written consent of the non-assigning Party, and any assignment without such written consent shall be void, except (i) that the Operator may engage agents or subcontractors to provide the services described herein, and may enter into the Services Agreement, (ii) the Operator may assign any and all of its rights to payments made, due or to become due hereunder, and (iii) the Company may assign its rights and obligations hereunder to the Financing Parties pursuant to the Financing Documents. SECTION 11.6 BINDING EFFECT. This Agreement shall be binding upon and shall inure to the benefit of the Parties hereto and their respective successors and permitted assigns. This Agreement is not made for the benefit of any person or entity not a Party hereto, and nothing in this Agreement shall be construed as giving any person or entity, other than the Parties hereto and their respective successors and permitted assigns, any right, remedy or claim under or in respect of this Agreement or any provision hereof. SECTION 11.7 HEADINGS. The headings used in this Agreement are for convenience only and shall not affect the construction of any of the terms of this Agreement. SECTION 11.8 NOTICES. All notices or other communications which are required or permitted hereunder shall be in writing and shall be deemed sufficiently given (i) upon delivery, if delivered personally, (ii) five days after deposit in a U.S. Postal Office mail box, (iii) the day it is received, if it is delivered by overnight courier or (iv) upon the effective sending of electronic transmission, facsimile, telex or telegram, to the addresses set forth below or such other address as the addressee may have specified in a notice duly given to sender as provided herein: 12 If to the Operator: AES Sayreville, L.L.C. 1001 N. 19th Street Arlington, VA 22209 Attention: Patricia L. Rollin, Vice President (Telephone): 703-358-0538 (Facsimile): 703-528-4510 If to the Company: AES Red Oak, L.L.C 1001 North 19th Street Arlington, VA 22209 Attention: Project Manager (Telephone): 703-525-1315 (Facsimile): 703-528-4510 SECTION 11.9 AMENDMENT. Neither Party hereto shall be bound by any termination, amendment, supplement, waiver or modification of any term hereof unless such Party shall have consented thereto in writing. This Agreement may not be amended, modified or supplemented without the consent of the Financing Parties to the extent such consent is required under the Financing Documents. SECTION 11.10 NO IMPLIED WAIVER. No delay or failure on the part of either Party in exercising any rights hereunder, and no partial or single exercise thereof, shall constitute a waiver of such rights or of any other rights hereunder. SECTION 11.11 OVERDUE OBLIGATIONS TO BEAR INTEREST. Except as provided in Section 4.1, all amounts due hereunder, whether as damages, credits, revenue or reimbursements, that are not paid when due shall bear interest at the Prime-Based Rate or, if lower, the maximum interest rate permitted by law, on the amount outstanding from time to time, on the basis of a 365-day year and the actual number of days elapsed. SECTION 11.12 INDEPENDENT CONTRACTOR. The Operator shall at all times act as and be deemed an independent contractor and shall not act as nor be deemed to be an agent, servant or employee of the Company. SECTION 11.13 ACCESS. The Company and its representatives shall have the right at all times to visit and inspect the Facility and the Site, and shall have the right, upon reasonable notice and at reasonable times, to take visitors onto the Site and into the Facility; PROVIDED, HOWEVER, that such visits shall be 13 conducted in a manner so as to minimize interference with the Operator's performance hereunder and to be in accordance with reasonable rules and procedures prescribed by the Operator for such visits; and PROVIDED, FURTHER, that the Company and its representatives and invitees shall have the right to enter the Facility and the Site without notice or obligation to minimize interference with the Operator's performance in the event of an emergency, including fire, vandalism or other threats to public health or safety. During the term of this Agreement, the Company shall provide the Operator and its agents, employees, subcontractors and consultants full and free access at all times to the Facility to the extent required to perform the services required by this Agreement. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 14 IN WITNESS WHEREOF, each of the Parties hereto, intending to be legally bound, has caused this Agreement to be duly executed on its behalf on the date first above written. AES SAYREVILLE, L.L.C. By: -------------------------------------------- Name: Title: AES RED OAK, L.L.C. By: -------------------------------------------- Name: Title: EX-10.8 8 ex-10_8.txt EXHIBIT 10.8 Exhibit 10.8 GENERATION FACILITY TRANSMISSION INTERCONNECTION AGREEMENT BETWEEN JERSEY CENTRAL POWER & LIGHT COMPANY d/b/a GPU ENERGY AND AES RED OAK, L.L.C. TABLE OF CONTENTS
PAGE ---- ARTICLE 1: DEFINITIONS........................................................2 ARTICLE 2: EFFECTIVE DATE AND TERM............................................8 ARTICLE 3: RESPONSIBILITIES OF THE COMPANY...................................10 ARTICLE 4: RESPONSIBILITIES OF THE POWER PRODUCER............................11 ARTICLE 5: MODIFICATIONS TO FACILITIES, INTERCONNECTIONS.....................14 ARTICLE 6: OPERATION.........................................................17 ARTICLE 7: MAINTENANCE NOTIFICATION AND COORDINATION.........................18 ARTICLE 8: REVENUE METERING..................................................20 ARTICLE 9: LAND RIGHTS AND ACCESS............................................23 ARTICLE 10: INSURANCE.........................................................23 ARTICLE 11: PERFORMANCE.......................................................26 ARTICLE 12: LIABILITY AND DEDICATION..........................................27 ARTICLE 13: INDEMNIFICATION...................................................29 ARTICLE 14: REPRESENTATIONS, WARRANTIES AND COVENANTS.........................32 ARTICLE 15: EVENTS OF DEFAULT.................................................33 ARTICLE 16: ASSIGNMENT........................................................37 ARTICLE 17: NOTICES...........................................................38 ARTICLE 18: AMENDMENT AND MODIFICATION........................................39 ARTICLE 19: DISPUTES..........................................................39 ARTICLE 20: MISCELLANEOUS.....................................................40
APPENDIX A - DESCRIPTION OF FACILITY APPENDIX B - INTERCONNECTION FACILITIES APPENDIX C - TRANSMISSION OPERATION INTERCONNECTION REQUIREMENTS APPENDIX D - SYSTEM PROTECTION AND CONTROL INTERCONNECTION REQUIREMENTS APPENDIX E - INTERCONNECTION INSTALLATION AGREEMENT GENERATION FACILITY TRANSMISSION INTERCONNECTION AGREEMENT THIS AGREEMENT, made and entered into this 27th day of April, 1999, by and between Jersey Central Power & Light Company d/b/a GPU Energy ("Company"), a corporation and a public utility organized and existing under the laws of the State of New Jersey, and AES Red Oak, L.L.C., an entity organized and existing under the laws of the State of Delaware ("Power Producer"), both Company and Power Producer hereinafter sometimes referred to collectively as the "Parties", or individually as a "Party". The Parties acknowledge that GPU Service, Inc., shall act as agent for the Company concerning the administration of this Agreement. RECITALS WHEREAS, the Company is a public utility engaged in the production, transmission, distribution and sale of electric energy; and WHEREAS, the Company is a member of the PJM Interconnection, L.L.C. ("PJM") operated under the PJM Agreement; and WHEREAS, the Company is a member of the Mid-Atlantic Area Council ("MAAC"), a reliability council under Section 202 of the Federal Power Act established pursuant to the Mid-Atlantic Coordination Agreement, dated December 26, 1967, and as amended and restated as of August 1, 1994 by the MAAC Executive Board, and as may be further amended from time to time thereafter; and WHEREAS, the Power Producer is an entity engaged or intending to be engaged in 1 the production and sale of electric energy and/or capacity from an electric power generation facility to be located in the State of New Jersey, and more fully described in Appendix A; and WHEREAS, in order for the Power Producer to sell electric energy and capacity generated from the Facility, it must be interconnected with the Transmission System; and WHEREAS, the Parties are willing to enter into this agreement under which the Facility will be interconnected with the Transmission System, subject to terms and conditions hereinafter set forth. NOW, THEREFORE, in consideration of the mutual representations, covenants, promises, and agreements hereinafter set forth, the Parties hereto, intending to be legally bound, hereby covenant, promise and agree as follows: ARTICLE 1 DEFINITIONS 1.1 Any capitalized or abbreviated term not elsewhere defined in this Agreement shall have the definition set forth below: (a) Affiliate - With respect to a corporation, partnership or other entity, each such other corporation, partnership or other entity that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such corporation, partnership or other entity. (b) Agreement - This Generation Facility Transmission Interconnection Agreement including all appendices attached hereto, and all amendments and supplements. (c) BPU - The New Jersey Board of Public Utilities or any successor agency thereto. 2 (d) Capacity - The maximum generating capability of the Facility, measured in megawatts at a defined ambient air temperature, as set forth in Appendix A. (e) Company Interconnection Facilities - All structures, facilities, equipment, devices and apparatus owned or leased by, or under contract to, the Company or its Affiliates, as identified in Appendix B, which facilities are necessary, together with the Power Producer Interconnection Facilities, to allow the interconnection of the Facility to the Transmission System. (f) Emergency - A condition or situation which the PJM OI, the Company or the Power Producer deem imminently likely to (i) endanger life or property; (ii) adversely affect or impair the Transmission System, or imminently will affect or impair, the Company's electrical system or the electrical or transmission systems of others to which the Company's electrical system is directly or indirectly connected; or (iii) adversely affect or impair the Facility. Such a condition or situation includes, but is not limited to, overloading or potential overloading of or excessive voltage drop on the Company's or regional transmission and/or distribution circuits, unusual operating conditions on either the Company's, regional or the Power Producer's electrical system or conditions such that the output of the Power Producer's Facility must be adjusted to avoid jeopardizing the Facility, the Company's electrical system or the electrical systems of others to which the Company's electrical system is directly or indirectly connected. (g) Facility - The real and personal property owned by the Power Producer at the electric power generating facility including, but not limited to, the following assets: (a) the real property (including all buildings, structures and other improvements thereon); (b) the turbines 3 machinery, equipment, vehicles, furniture, and other personal property located on the Power Producer's property, and shall include any additions, modifications or replacements thereto, as further defined in Appendix A. (h) FERC - The Federal Energy Regulatory Commission or any successor agency thereto. (i) Force Majeure - Shall mean an event or occurrence or circumstance beyond the reasonable control of and without the fault or negligence of the Party claiming Force Majeure, including, but not limited to, acts of God, labor dispute (including strike), acts of public enemy, war, civil disturbance, riot, fire, storm, flood, explosion, earthquake, lightning, epidemic, sabotage, breakage or accident to machinery or equipment, electric system disturbance, change in law or applicable regulation subsequent to the date hereof and action or inaction by any federal, state or local legislative, executive, administrative, military, or judicial agency or body which, in any of the foregoing cases, by exercise of due foresight such Party could not reasonably have been expected to avoid, and which, by the exercise of due diligence, is unable to overcome, and which wholly or in substantial part prevents such Party from performing its obligations under this Agreement. The settlement of strikes and labor disturbances shall be wholly within the discretion of the Party experiencing the event. Economic hardship of either Party shall not constitute a Force Majeure under this Agreement. (j) Generator Forced Outage - Shall have the meaning given that term in the PJM Agreement. (k) Generator Maintenance Outage - Shall have the meaning given that term in the 4 PJM Agreement. (l) Generator Planned Outage - Shall have the meaning given that term in the PJM Agreement. (m) Good Utility Practice - (i) Any of those practices, methods and acts engaged in or approved by a significant portion of the electric utility industry in North America during the relevant time period, or any of the practices, methods and acts which, in the exercise of reasonable judgment in light of the facts known at the time the decision was made, could have been expected to accomplish the desired result at a reasonable cost consistent with good business practices, reliability, safety and expedition; and (ii) any of those practices, methods, standards and equipment commonly used, from time to time, in electrical engineering and operations to operate electrical equipment lawfully and with safety, dependability and efficiency and in accordance with the National Electrical Safety Code and the National Electrical Code and Standards of the Institute of Electrical and Electronic Engineers, and standards established by the National Electrical Manufacturers Association, the PJM OI, the Mid-Atlantic Area Council ("MAAC"), the American National Standards Institute and any such other standards practiced by the industry and electrical equipment manufacturers in North America in a manner sufficient to provide safe and reliable service. Good Utility Practice is not intended to be limited to the optimum practice, method, or act to the exclusion of all others, but rather to be acceptable practices, methods or acts generally accepted and consistently adhered to in the MAAC region. (n) Interconnection Facilities - The Company Interconnection Facilities and the Power Producer Interconnection Facilities, together. 5 (o) Lenders - Those entities, including their successors and assigns and any trustee or agent acting on their behalf, who have advanced or who will advance to the Power Producer, directly or indirectly, the economic resources (whether on a senior or unsubordinated basis) for the development and construction of the Facility or the Interconnection Facilities. The Power Producer shall notify the Company of the name and addresses of the Lenders for the purposes of this Agreement. (p) NERC - The North American Electric Reliability Council or any successor thereto. (q) PJM Agreement - Shall mean the Amended and Restated Operating Agreement of PJM Interconnection, L.L.C., dated as of June 2, 1997, and revised as of December 31, 1997, January 30, 1998, and March 17, 1998, and as may be further amended or superseded from time to time. (r) PJM Control Area - The control area recognized by NERC as the PJM Control Area. (s) PJM Interconnection, L.L.C. - The entity formerly known as the PJM Interconnection Association, converted into a limited liability company pursuant to the Delaware Limited Liability Company Act, Title 6, Sections 18-101 et seq. of the Delaware Code, by virtue of the filing of both the Certificate of Formation and Certificate of Conversion with the Recording Office, effective as of March 31, 1997. The L.L.C. operates in accordance with the FERC requirements as an Independent System Operator, comprised of the PJM Board, the PJM OI, and the PJM Members Committee. 6 (t) PJM OI - The Office of the Interconnection as supervised by the Board of Managers of the PJM Interconnection, L.L.C., acting pursuant to the PJM Agreement. The PJM OI has the responsibility for the continued operation of the PJM Control Area and the administration of the PJM Tariff, subject to regulation by the FERC. (u) PJM Tariff - The PJM Open Access Transmission Tariff filed by the PJM Interconnection L.L.C. with FERC on July 14, 1997, in Docket No. OA97-261-000 as amended and effective April 1, 1998, and as may be further modified, amended or superseded from time to time, under which transmission service is provided within the PJM Control Area. (v) Point of Interconnection - Each ownership point of demarcation on the Transmission System where capacity, energy, and ancillary services each are transferred between the Facility and the Transmission System. The Point of Interconnection shall be located as shown on the interconnection one line diagram attached hereto as Appendix A. (w) Power Producer Interconnection Facilities - All structures, facilities, equipment, devices and apparatus owned or controlled by Power Producer, as identified in Appendix B, and as may be amended from time to time. (x) Protective Apparatus - All equipment and apparatus included in the Interconnection Facilities, including but not limited to protective relays, circuit breakers and the like, as set forth in Appendix B, necessary to isolate the Facility from the Company's electrical system consistent with Good Utility Practice. (y) Revenue Meters - All MWh, MVARh meters, pulse isolation relays, pulse conversion relays and transducers used by the PJM OI or the Company for billing purposes, and 7 associated totalizing equipment and appurtenances (including voltage transformers and current transformers) used to measure the transfer of energy and the applicable ancillary services between the Parties. (z) Transmission System - The electric transmission facilities owned, controlled, or operated by the Company at or above 34.5 kV delta for purposes of providing transmission service, including services under the PJM Tariff and the PJM Agreement. 1.2 Unless a different interpretation arises from the context: (a) the reference to any article, section, paragraph or appendix is a reference to an article, section, paragraph or appendix of this Agreement, (b) with respect to the definitions set forth in Article 1, whenever applicable the singular shall include the plural and vice-versa; and (c) the words "includes" or "including" mean "including, but not limited to" and are not limiting. Any conflict between an article or section of the Agreement and any provision of an appendix shall be resolved by reference to the article or section of this Agreement. ARTICLE 2 EFFECTIVE DATE AND TERM 2.1 This Agreement shall become effective on the effective date established by the FERC, and shall continue in full force and effect until a mutually agreeable termination date not to exceed the retirement date for the Facility, unless terminated on an earlier date by mutual agreement of the Parties or otherwise in accordance with the terms set forth in this Agreement. 2.2 The applicable provisions of this Agreement shall continue in effect after cancellation or termination hereof to the extent necessary to provide for final billings, billing adjustments, and 8 the determination and enforcement of liability and indemnification obligations arising from acts or events that occurred while this Agreement was in effect. 2.3 In the event that the FERC (i) fails to accept this Agreement without suspension or (ii) finds that this Agreement is not just and reasonable or imposes conditions that are not acceptable to either Party, the Parties will use commercially reasonable efforts to agree upon amendments or modifications of this Agreement that would eliminate any such condition or result in a just and reasonable finding by the FERC. If the Parties are unable to mutually agree upon such amendment or modification within a reasonable period of time, the Parties agree to proceed pursuant to Article 19 in order to attempt to resolve any impasse or dispute. 2.4 In the event that this Agreement is terminated the Power Producer agrees that it will reimburse the Company for all unpaid costs and expenses expended by the Company in the installation of the Company's Interconnection Facilities, up to the date of termination, plus actual removal costs and less actual salvage value. The Company agrees not to order any equipment or to incur any significant expenditure on Power Producer's behalf prior to receiving a "notice to proceed" from the Power Producer. The Power Producer shall deliver the "notice to proceed" in accordance with Article 17 hereof. 2.5 In the event of a changing law or regulation or the issuance of an order or other directive by a regulatory authority with jurisdiction over either Party that affects or may reasonably be expected to affect either Party's performance under this Agreement, the Parties will negotiate in good faith any amendment or amendments to this Agreement necessary to adapt the terms of this Agreement to such change, order, or directive provided that the Parties are not 9 obligated to agree to such amendment which may adversely affect their current economic positions as of the effective date of this Agreement. In the event that the Parties are unable to mutually agree to such an amendment within a reasonable time period, the Parties agree to proceed pursuant to Article 19 in order to attempt to resolve any impasse or dispute. Nothing in this Agreement shall limit the rights of the parties or the FERC under Section 205 or 206 of the Federal Power Act and FERC's Rules and Regulations thereunder. ARTICLE 3 RESPONSIBILITIES OF THE COMPANY 3.1 The Company shall: (a) Install all Company Interconnection Facilities at the Power Producer's sole cost and expense in accordance with the terms and conditions and the schedule set forth in Appendix E which is attached hereto and made a part hereof. Payment of such costs and expenses shall be in accordance with the schedule set forth in Appendix E hereof. The Company shall use reasonable efforts to install all Company Interconnection Facilities within the estimated costs set forth in Appendix E and shall inform the Power Producer of the amount and reason for any increase in such estimated cost promptly after Company learns of such cost increase. If the Company is materially delayed in meeting the milestone dates set forth in Appendix E hereof for any reason, excluding an event of Force Majeure, the Company, following its receipt of the Power Producer's demand for adequate assurance, shall promptly take all reasonable steps necessary to rectify the delay condition (b) Own, maintain, and operate Company Interconnection Facilities. The Power 10 Producer shall reimburse the Company for all actual and verifiable costs and expenses including, but not limited to, overheads and applicable taxes, directly associated with the maintenance and operation of the Company Interconnection Facilities. (c) Operate and maintain all Company Interconnection Facilities and the Transmission System as part of the single PJM Control Area in accordance with the provisions of the PJM Agreement and PJM Tariff, using due diligence, in accordance with Good Utility Practice. (d) Provide to the Power Producer all design specifications and equipment characteristics for the interconnection of the Facility with the Transmission System. (e) Maintain in full force and effect at the Power Producer's sole cost and expense all permits, licenses, rights of way and other authorizations as may be required to maintain and operate the Company Interconnection Facilities. (f) Upon the expiration of the Agreement and retirement of the Facility, remove all Company Interconnection Facilities at the Power Producer's sole cost and expense less salvage value. 3.2 Unless otherwise required by law, regulation, or Good Utility Practice, the Company shall not be required at any time, at its expense or otherwise, to upgrade or otherwise modify the Transmission System in order to accommodate the interconnection of the Facility with the Transmission System. 3.3 The Company does not guarantee the non-occurrence of, or warrant against, and the Power Producer releases the Company from, any claims or damages associated with: (a) any interruption in the availability of Company Interconnection Facilities or the Transmission 11 System; or (b) damage to the Facility resulting from electrical transients including, without limitation, short circuits (faults), solar magnetic disturbances, or events of Force Majeure, except to the extent caused by the Company's gross negligence or willful misconduct. ARTICLE 4 RESPONSIBILITIES OF THE POWER PRODUCER 4.1 The Power Producer shall: (a) Own, maintain and operate the Power Producer Interconnection Facilities and Protective Apparatus at its sole cost and expense. (b) Maintain in full force and effect at its sole cost and expense all permits, licenses, rights of way and other authorizations as may be required to maintain and operate the Power Producer Interconnection Facilities and Protective Apparatus unless otherwise required by law or regulation. (c) Install, at its sole cost and expense, any and all equipment in order to maintain the reliability of the Facility and all Interconnection Facilities. (d) Subject to any right of the Power Producer, or any entity purchasing the output of the Facility, to schedule and sell ancillary services under the PJM Agreement or the PJM Tariff, operate the Facility in accordance with the appropriate voltage schedules and/or reactive schedules developed as specified in Appendix C. Subject to the foregoing, if the Power Producer fails to operate the Facility in accordance with Appendix C, the Company will provide written notice to the Power Producer of the Company's intent to remedy that failure. If the Power Producer does not promptly commence appropriate action after receiving such notice, the 12 Company may then take necessary action at the Power Producer's expense to remedy such failure, including the installation of capacitor banks or other reactive compensation equipment necessary to ensure the proper voltage or reactive supply at the Facility. The Company shall take, to the extent feasible, reasonable efforts to minimize the impact of such action, in accordance with Good Utility Practice on the operation of the Facility. (e) Make or assure that all necessary arrangements have been made under the applicable tariffs for transmission service (i.e., from the Point of Interconnection to Power Producer's load serving or end use customers), losses, and ancillary services associated with the delivery of the capacity and/or energy produced by the Facility, which services shall not be provided under this Agreement. (f) Obtain capacity and/or energy for the purpose of satisfying the Facility station service requirements or for any other uses by the Power Producer. (g) Make or assure that all necessary arrangements have been made under the applicable tariffs for transmission service, losses, and ancillary services associated with the use of the Transmission System for the delivery of capacity and/or energy to the Facility for the purpose of supplying generation station service or for any other service which is available and/or required under the PJM Tariff or any retail wheeling tariff, including any distribution service tariff or contract, in each case as may be amended from time to time. (h) Operate, install and maintain at its sole cost and expense all equipment required to control the Facility in accordance with Section 6.1. (i) Maintain or cause to be maintained such records relating to the Power Producer 13 Interconnection Facilities as may be required by Good Utility Practice or applicable law. 4.2 The Power Producer acknowledges that this Agreement does not encompass transmission service for the output of the Facility under the PJM Tariff and that, to the extent the Company is required under the PJM Tariff or the PJM Agreement, including any direction of the PJM OI pursuant thereto, to upgrade, reinforce or otherwise modify its Transmission System (other than the installation of the Company Interconnection Facilities) to provide such transmission service on behalf of the Power Producer, the Power Producer will be responsible for the costs of such upgrades, reinforcements or modifications in accordance with the terms of the PJM Tariff, the PJM Agreement or any other applicable PJM agreements. ARTICLE 5 MODIFICATIONS TO FACILITIES, INTERCONNECTIONS 5.1 In the event the Power Producer plans additions, modifications or replacements to the Facility, Power Producer Interconnection Facilities or Protective Apparatus that will increase the Capacity of the Facility, the Power Producer shall submit to the Company any and all plans and specifications that the Company may reasonably request related to such additions, modifications or replacements. Such specifications and plans shall be submitted by the Power Producer not later than eighteen (18) months prior to the respective commercial operation date for additions, modifications, or replacements to the Facility, except as otherwise agreed to by the Company. Any such additions, modifications, or replacements shall comply with the criteria imposed by the PJM OI, the MAAC Reliability Principles and Standards, Good Utility Practice, and the criteria included in Appendix C and Appendix D. 5.2 If the Power Producer plans any additions, modifications or replacements to the 14 Facility, Power Producer Interconnection Facilities or Protective Apparatus that in the Company's view will not increase the amount of Capacity to be delivered to the Company's electrical system, but could reasonably be expected to affect the Transmission System, the Company Interconnection Facilities, the operation of the Facility, the availability of Capacity and/or the delivery of electric energy and capacity from the Facility, the Power Producer shall give the Company reasonable notice, but not less than sixty (60) days prior written notice thereof; PROVIDED, however, that the Power Producer shall provide the Company with at least nine (9) months prior written notice, and shall submit to the Company any and all plans and specifications which the Company may reasonably request related to such additions, modifications or replacements which involves Power Producer Interconnection Facilities or which the Power Producer anticipates will result in an outage of the Facility for thirty (30) days or more. All such additions, modifications, or replacements shall: (a) comply with the criteria imposed by the PJM OI, the PJM Agreement, the MAAC Reliability Principles and Standards, Good Utility Practice, and the criteria included in Appendix C and Appendix D; (b) be accompanied by appropriate information and operating instructions; and (c) be subject to review and approval of the Company, which review shall be based on Good Utility Practice. Failure by the Company to object to any such proposed addition, modification or replacement within thirty (30) days and, in the case of the proviso to the first sentence of this Section, ninety (90) days following the Company's receipt of notice thereof shall be deemed acceptance thereof by the Company. 5.3 The Company shall inform the Power Producer of any additions, modifications, or 15 replacements to the Transmission System or the Company Interconnection Facilities that are necessary as a result of the addition, modification, or replacement to the Facility made pursuant to Sections 5.1 or 5.2. The Power Producer shall reimburse the Company for all costs incurred by the Company associated with any modifications, additions, or replacements made to the Company Interconnection Facilities or the Transmission System related to any proposed additions, modifications, or replacements of the Facility to the extent reasonably required by the Company including, but not limited to those necessary to meet different voltage requirements of the Transmission System or to enhance the Transmission System, regardless of whether the expanded Facility enters into (or has entered into) service or is interconnected with the Transmission System. The Company shall provide an estimate as early as practicable. 5.4 The Company's acceptance of the Power Producer's interconnection plans and specifications for any proposed additions, modifications, or replacement of the Power Producer's Facility whether pursuant to this Agreement and the Company's participation in interconnected operations with the Power Producer are not, and shall not be construed as its: (a) confirmation or endorsement of the design of the Facility, Power Producer Interconnection Facilities or Protective Apparatus; (b) warranty of safety, durability or reliability of the Facility or equipment appurtenant thereto; (c) assumption of responsibility for strength, details of design, adequacy, or capability of the Facility, Power Producer Interconnection Facilities or Protective Apparatus; or (d) endorsement or warranty. 5.5 The Power Producer shall modify, at its sole cost and expense (only to the extent responsibility for such costs and expenses are not allocated to the Company or a third party 16 consistent with FERC policy), the Interconnection Facilities and/or Protective Apparatus as may be reasonably required to conform with changes to Good Utility Practice or to conform with additions, modifications, or replacements required by PJM Interconnection L.L.C. 5.6 The Power Producer shall compensate the Company for all reasonable costs and fees required to enable the Company to fulfill its obligations under this Agreement including any tax liability, any costs of acquiring land necessary for the Interconnection Facilities, the costs and fees of all permits, licenses, franchises or regulatory or other approvals necessary for the construction, maintenance and operation of any Interconnection Facilities. 5.7 The Company may undertake additions, modifications, or replacements of its Transmission System or Company Interconnection Facilities. If such additions, modifications, or replacements might reasonably be expected to affect the Power Producer's operation of the Facility, the Company shall provide written notice to the Power Producer in a manner consistent with FERC Order No. 889 prior to undertaking such additions, modifications, or replacements. Any such additions, modifications, or replacements shall comply with Good Utility Practice. The Company shall use reasonable efforts with respect to such addition, modification, or replacement to minimize any adverse impact on the Facility. ARTICLE 6 OPERATION 6.1 The Facility, all Interconnection Facilities and Protective Apparatus shall be operated and maintained in accordance with Good Utility Practice, including, without limitation, those with regard to synchronization, voltage and reactive power control, and in compliance with all 17 permits, licenses, laws, rules and regulations applicable thereto. Operation and maintenance of the Facility and all Interconnection Facilities shall at all times conform to applicable requirements and guidelines adopted by the PJM OI and the Company as set forth in Appendix C and Appendix D, and modified by the PJM OI and/or the Company respectively from time to time. 6.2 The Power Producer shall be required to comply with the requests, orders, and directives of the Company to the extent such requests, orders or directives are (a) necessary to comply with Good Utility Practice, and (b) in accordance with applicable tariffs and the PJM Agreement. 6.3 In the event the Power Producer believes that a request, order, or directive of the Company exceeds the limitations in Section 6.2, it shall nevertheless comply with the request, order, or directive of the Company pending resolution of the dispute under Article 19. The Parties agree to cooperate in good faith to expedite the resolution of any disputes arising under Sections 6.2 and 6.3. 6.4 If it appears to the Company at any time, in the reasonable exercise of its judgment in accordance with Good Utility Practice, that the operation of the Facility or any Interconnection Facility is adversely affecting or may adversely affect the quality of service rendered by the Company (including transmission or distribution services and services provided to end users), or is interfering or may interfere with the safe and reliable operation of the Transmission System or the regional transmission system, the Company may, upon such notice specified below, disconnect the Facility from the Transmission System and/or curtail, interrupt, or reduce energy 18 deliveries from the Facility until the condition has been corrected. In the event of an Emergency, the Company may immediately take any and all steps it reasonably believes to be necessary to mitigate or cure the Emergency condition including, without limitation, disconnecting the Facility from the Transmission System. The Company shall use reasonable efforts to (i) minimize, to the extent practicable under the circumstances, any such disconnection, curtailment, interruption, or reduction, (ii) provide the Power Producer with prior notification of any such disconnection, curtailment, interruption, or reduction, to the extent practicable, (iii) resume acceptance of electric energy as promptly as practicable following elimination of the condition causing the disconnection, curtailment, interruption, or reduction, and (iv) confer with the Power Producer regarding the interfering conditions that gave rise to the disconnection, curtailment, or reduction. ARTICLE 7 MAINTENANCE NOTIFICATION AND COORDINATION 7.1 The Power Producer shall maintain, at its own expense, the Power Producer Interconnection Facilities and Protective Apparatus. The Company shall maintain the Company Interconnection Facilities. The Power Producer shall reimburse the Company for all actual and verifiable costs and expenses including, but not limited to, overheads and applicable taxes directly associated with the maintenance and operation of the Company Interconnection Facilities. 7.2 In accordance with Good Utility Practice, the Company may remove the Interconnection Facilities from service as necessary, in the reasonable exercise of the Company's 19 judgment, to perform maintenance or testing or to install or replace equipment on the Company Interconnection Facilities or the Transmission System. Unless an Emergency exists or the risk of one in the Company's view is imminent, the Company shall, if practical, give the Power Producer prior notice of the removal. The Company shall use due diligence to restore the Interconnection Facilities to service as promptly as practicable. 7.3 If the Company determines, in its sole judgment, that the Power Producer is maintaining the Power Producer's Interconnection Facilities and Protective Apparatus in a manner which may lead to an Emergency condition, the Power Producer, within thirty (30) days of notification thereof from the Company, shall take all reasonable steps to conform its maintenance practices to the requirements of Good Utility Practice and this Agreement. 7.4 At any reasonable time upon advance notice, each Party shall permit the representatives of the other Party access to the records for its interconnection facilities in order to examine, inspect and test such records. In the event of an Emergency, the Power Producer shall ensure that Company representatives have immediate and unimpeded access to the Power Producer Interconnection Facilities as necessary to address the Emergency in accordance with Good Utility Practice working with the Power Producer. The Power Producer hereby grants to the Company the right to enter upon the Power Producer's property for such purposes. ARTICLE 8 REVENUE METERING 8.1 The Company shall utilize Revenue Meters to measure the electrical energy on an hour-by-hour basis, or such shorter intervals as may be agreed upon, at the Point of 20 Interconnection in order to determine the transfer of energy between the Parties. 8.2 All Revenue Meters shall be of advanced meter design that have an internal recorder and a communications capability that the Company can utilize to retrieve diagnostic messages, the recorded transfer of energy between the Parties, and any other information deemed necessary by the Company. The Power Producer may, at its sole cost and expense, install telemetering or other communications equipment to retrieve such information as is deemed necessary by the Power Producer. 8.3 The Parties shall agree that, if the Revenue Meters and analog equipment and the Point of Interconnection are not at the same location electrically, the metering data shall be adjusted, or the Revenue Meters shall be compensated, as the Company shall deem appropriate, to record delivery of electricity in a manner that accounts for the total (load plus no-load) electrical energy losses occurring between the metering point and the Point of Interconnection, both when the Power Producer is delivering energy to the Company and when the Company is delivering station service energy to the Facility, or for any other use. 8.4 In the event that the Company's Revenue Meters at any time fail to register, or should their registration be so erratic so as to be meaningless, the hourly energy transferred between the Parties shall be determined from the best information available, including, but not limited to, the Power Producer's meters, operator's logs and real-time communications data of the meter results. 8.5 If at any time, any Revenue Meters and analog equipment is found to be inaccurate by a margin greater than that allowed under the applicable criteria, rules, and standards, the Company shall cause the Revenue Meters and analog equipment to be made accurate or replaced 21 at the Power Producer's expense. Meter readings for the period of inaccuracy shall be adjusted insofar as the extent of the inaccuracy can be reasonably ascertained; provided, however, no adjustment shall be made for meter readings made prior to the point in time halfway between the time of the last test that showed the Revenue Meters and analog equipment in question to be functioning accurately and the time the subsequent inaccuracy is corrected, except by agreement of the Parties. 8.6 The Company shall read and report Revenue Meter data to the Power Producer. The Power Producer shall have the right to read the Revenue Meters upon reasonable notice to the Company. 8.7 The Parties shall each keep and maintain accurate and detailed records relating to the Revenue Meters for a period of not less than seven (7) years. Such records shall be made available for inspection by either Party or any governmental agency having jurisdiction with respect thereto during normal business hours upon reasonable notice. 8.8 The Company shall at the Power Producer's expense (i) install, own, maintain, and repair and have the right to change the location of all Revenue Meters, instrument transformers and appurtenances associated with the Revenue Meters, and analog equipment (transducers and telemetry) and (ii) install, own, maintain, and repair all additional or updated metering and associated equipment, as mutually agreed upon by the Parties, needed to update its metering facilities, in accordance with Good Utility Practice. 8.9 The Company shall, at the Power Producer's expense, test all Revenue Meters and analog equipment at such time as Company deems reasonably necessary in accordance with all 22 applicable regulatory requirements or standards. However, all Revenue Meters and analog equipment shall be tested at least once every two (2) years. 8.10 Upon written request by the Power Producer, the Company shall test designated Revenue Meters and analog equipment more frequently than once every two (2) years. In the event a test requested by the Power Producer establishes such Revenue Meters to be registering inaccurately by more than one (1%) percent of full scale, the cost of said test shall be borne by the Company. In all other instances, the cost of any such test, regardless of which Party requests it or the results thereof, shall be paid by the Power Producer. 8.11 The Company shall give reasonable notice to the Power Producer of the time when any Revenue Meters and analog equipment test shall take place, and the Power Producer may have representatives present at said test. Any Revenue Meters found to be inaccurate by more than one (1%) percent of full scale or defective shall be adjusted, repaired or replaced, at the sole cost and expense of the Power Producer. 8.12 The Company shall install, own, and maintain, at the Power Producer's expense, equipment, except for associated telephone link(s) which shall be the sole responsibility of the Power Producer, for real-time communications, real-time reactive power, hourly MWh information, interval revenue data and such other information as the Company or the PJM OI may require. The Power Producer shall install, operate, maintain and repair, at its own expense, an operating telephone link(s) to provide information deemed necessary by the Company or the PJM OI, or as reasonably deemed necessary by the Company, to integrate operation of the Facility with the Transmission System. 23 ARTICLE 9 LAND RIGHTS AND ACCESS 9.1 The Power Producer hereby grants, or confirms its prior grant to the Company, for nominal consideration, all necessary rights of way, easements, and licenses as the Company may require to install, operate, maintain, replace and remove the Company's metering equipment and other Company Interconnection Facilities, including adequate and continuing access rights to the Power Producer's property for any purpose reasonably related to this Agreement. The Power Producer hereby agrees to execute such grants, deeds, licenses, instruments and other documents as the Company may require to enable it to record such rights of way, easements and licenses. ARTICLE 10 INSURANCE 10.1 The Power Producer shall keep the Facility continuously insured against loss or damage in amounts and for risks that property of similar character is usually so insured by entities owning and operating like properties. 10.2 The Power Producer, the operator of the Facility, and their respective successors and assigns shall procure or cause to be procured and shall maintain in effect continuously during the term of the Agreement the following minimum insurance coverages:
TYPE OF COVERAGE LIABILITY LIMITS ---------------- ---------------- Worker's Compensation Statutory
24 Employer's Liability $500,000 per occurrence/injury Comprehensive/General $1,000,000 combined single limit, Liability including: each occurrence $2,000,000 aggregate limit applicable for the Facility Bodily Injury Property Damage Blanket Contractual Underground Explosion and Collapse Hazard Products and Completed Operations Hazard Broad Form Property Damage Personal Injury Automobile Liability (Owned, Hired, Non-Owned) Bodily Injury $1,000,000 combined single limit Property Damage Commercial Umbrella Liability $9,000,000 per occurrence following form of Commercial General Liability, Automobile Liability and Employers Liability
10.3 In order to meet changed circumstances or changes in industry practice in a manner consistent with the requirements of Section 10.1, the Company may notify the Power Producer of a proposed change to the types of coverage or the liability limits set forth in Section 10.2. The Parties agree to negotiate in good faith to revise the provisions of Section 10.2 within ninety (90) days of such notice or such other time period as the Parties agree upon for such negotiations. 10.4 All insurance policies identified in Section 10.2, except Worker's Compensation Insurance, shall name the Company as an additional insured. 25 10.5 The Power Producer's liability insurance (other than its Worker's Compensation Insurance) shall include provisions or endorsements (i) stating that such insurance is primary insurance with respect to the interest of the Company and that any insurance maintained by the Company is excess and not contributory insurance with the insurance required hereunder, and (ii) providing that such policies shall not be canceled or their limits of liability reduced except upon thirty (30) days prior written notice to the Company. 10.6 The Power Producer shall provide and shall continue to provide to the Company during the term the Agreement (including any extensions), by delivering to its corporate office at 2800 Pottsville Pike, P.O. Box 16001, Reading, Pennsylvania 19640-0001, Attention: Manager - Transmission Investment Planning, properly executed and current certificates of insurance relative to insurance policies. Certificates of insurance shall provide the following information: (i) Name of insurance company, policy number and expiration date. (ii) The coverage required and the limits on each, including the amount of deductibles or self-insured retentions, which shall be for the account of the Power Producer. (iii) A statement indicating that the Company shall receive at least thirty (30) days prior written notice of cancellation or reduction of liability limits with respect to said insurance policies, and (iv) To the extent applicable, a statement indicating that the Company has been named as an additional insured. 10.7 A copy of each insurance policy, certified as a true copy by an authorized representative of the issuing insurance company, or in lieu thereof or in addition thereto, at the 26 Company's discretion, a certificate in form satisfactory to the Company certifying to the issuance of such insurance, shall be furnished to the Company not less than ten (10) days prior to the interconnection of the Facility and fifteen (15) days prior to the expiration date of each such policy and/or certificate. 10.8 The Company shall have the right to inspect the original policies of insurance applicable to this Agreement at the Power Producer's place of business during regular business hours. ARTICLE 11 PERFORMANCE 11.1 If at any time the Power Producer fails to operate, maintain, administer, or insure the Facility, the Power Producer Interconnection Facilities or Protective Apparatus, the Company may, following prior written notice and the right of the Power Producer to cure such condition within thirty (30) days after the Power Producer's receipt of notice, immediately disconnect the Facility from the Transmission System or otherwise refuse to accept electric energy and capacity for delivery. 11.2 If, in the sole judgment of the Company exercised in accordance with Good Utility Practice, operation of the Facility, the Power Producer Interconnection Facilities or Protective Apparatus endangers the safety of the Company's personnel or the safe operation of the Company's electrical system or the electrical systems of others to which the Company's electrical system is directly or indirectly interconnected, the Company may immediately disconnect the Facility from the Transmission System or otherwise refuse to accept electric energy and capacity 27 for delivery therefrom until such condition has been corrected to the Company's satisfaction in a manner consistent with Good Utility Practice. 11.3 The Power Producer shall be solely responsible for correcting any condition necessitating such disconnection. If the condition is corrected in accordance herewith, the Company shall use reasonable efforts to promptly reconnect the Facility. 11.4 The Parties shall use due diligence to perform their respective obligations under this Agreement. However, in the event that either Party is delayed in or prevented from performing or carrying out its obligations under this Agreement by reason of Force Majeure as defined herein, such Party shall not be liable to the other Party for or on account of any loss, damage, injury or expense resulting from or arising out of such delay or prevention; provided, however, that the Party encountering such delay or prevention shall use due diligence to remove the cause or causes thereof. ARTICLE 12 LIABILITY AND DEDICATION 12.1 Nothing in this Agreement shall be construed to create any duty to, standard of care with respect to, or any liability to any person not a Party to this Agreement. 12.2 Neither the Company nor the Power Producer, nor their respective officers, directors, partners, agents, employees, or Affiliates, shall be liable to the other Party or its Affiliates, officers, directors, partners, agents, employees, successors or assigns, for claims for incidental, special, indirect or consequential damages of any nature connected with or resulting from performance or non-performance of this Agreement or the inability of Power Producer to 28 transmit power from the Facility to the Transmission System for delivery to its load when the Company Interconnection Facilities are not in service, including without limitation, claims in the nature of lost revenues, income or profits or losses, damages or liabilities under any financing, lending, construction, or maintenance contracts, back-up power or such other agreements or arrangements to which the Power Producer may be party irrespective of whether such claims are based upon warranty, negligence, strict liability, contract, operation of law or otherwise. Further, the Power Producer releases and holds the Company harmless for any and all damages associated with the inability to transmit power from the Facility to the Transmission System when any of the Company Interconnection Facilities are not in service, other than any damages that are ultimately determined to be based upon the gross negligence or willful misconduct of the Company, including but not limited to, Power Producer's or any third party's lost revenues, income or profits or losses, damages or liabilities under any financing, lending, agreements or arrangements to which the Power Producer's or third party may be a party irrespective of whether such claims are based upon warranty, negligence, strict liability, contract, operation of the law or otherwise. The provisions of this section 12.2 shall survive the termination, cancellation, suspension, completion or expiration of this Agreement. 12.3 No undertaking by either Party under any provision of this Agreement shall constitute the dedication of that Party's electrical system, equipment or facilities, or any portion thereof, to the other Party or to the public, nor affect the status of the Company as a public utility corporation. 12.4 The Company does not, by acceptance of the Power Producer's interconnection plans 29 and specifications or by engaging in interconnected operations with the Power Producer, assume any responsibility or liability for damage or physical injury to (a) Company property or electrical equipment; (b) the real or personal property of third persons or corporations not a party to this Agreement; (c) the Facility, real property, equipment and/or facilities and/or any appurtenances thereto of the Power Producer; and (d) any persons who may come into contact with or upon the Facility, real property, equipment and/or facilities(electric or gas) and/or any appurtenances thereto. ARTICLE 13 INDEMNIFICATION 13.1 The Power Producer shall indemnify, hold harmless and defend the Company, and its Affiliates, as the case may be, and their respective officers, directors, employees, agents, partners, subcontractors, invitees and successors, from and against any and all claims, liabilities, costs, damages, losses, and expenses (including, without limitation, reasonable attorney and expert fees, and disbursements incurred by the Company in any action or proceeding between the Company and a third party, the Power Producer, or any other party) for damage to property, injury to or death of any persons, including the Company's employees or any third parties (collectively, "Company's Damages"), to the extent caused wholly or in part by any act and/or omission, negligent or otherwise, relating to the design, construction, ownership, operation, or maintenance of the Facility, Power Producer Interconnection Facilities and Protective Apparatus used in connection with this Agreement and provided, however; that Power Producer, or its respective Affiliates, and successors, and their respective officers, agents, directors, partners or 30 employees shall not be liable to the Company, its Affiliates, and successors, and their respective agents, officers, directors, partners or employees for incidental, special indirect or consequential damages of any nature connected with or resulting from performance or non-performance of this Agreement. Company hereto will furnish the Power Producer with written notification after the Company becomes aware of any event or circumstances, or the threat thereof (but in no event later than ten (10) days prior to the time any response is required by law), which might give rise to such indemnification. At the Company's request, the Power Producer shall defend (with counsel reasonably acceptable to the Company) any suit asserting a claim covered by this indemnity and shall pay all costs and expenses (including the cost of investigation and attorney's fees and expenses) that may be incurred in enforcing this indemnity. The Company may, at its own expense, retain separate counsel and participate in the defense of any such suit or action. 13.2 The indemnity in Section 13.1 shall apply to all claims against the Company including, but not limited to, all claims made or threatened by, or in the name of or on behalf of the Company's employees for personal injuries (including death) which arise in the course of their employment; provided, however that said indemnity shall not apply to any liability ultimately determined to be based upon the negligence of the Company. The Power Producer hereby waives any defense it may otherwise have under applicable workers' compensation laws. 13.3 In addition to Sections 13.1 and 13.2 above, the Power Producer shall indemnify, hold harmless and defend the Company from and against any and all liability, loss, cost, damage and expense, associated with any and all Federal, State and/or local tax liability, arising out of, resulting from or in connection with Power Producer's payment (or failure to pay) to the 31 Company, of the costs associated with the purchase and installation of any portion of the Company's Interconnection Facilities, Protective Apparatus and/or any and all associated and/or related structures, equipment, facilities and devices in performance of, pursuant to or in connection with this Agreement, including any expense resulting from such payment being deemed to be a Contribution In Aid of Construction ("CIAC") pursuant to U.S. Internal Revenue Service Notices 88-129 and 90-60 (and any future applicable U.S. Internal Revenue Service notices), which Notices are incorporated by reference herein. The foregoing indemnification obligations of the Power Producer shall not, however, apply with respect to any of the equipment or facilities referred to immediately above which the Company has included in its rate base and is collecting revenues from its customers. The Parties expressly acknowledge and agree that Sections 13.1, 13.2 and 13.3 shall survive the termination or expiration of this Agreement. 13.4 Power Producer shall provide the Company with an Independent Engineering Certification (i.e., the professional engineer's seal shall be affixed), as specified in IRS Notice 88-129, attesting that the anticipated power flows through the Interconnection Facilities to the Power Producer for the first ten years commencing with the taxable year in which the Interconnection Facilities are placed in service, (or alternatively, for the first nine years ignoring the year such facilities are placed in service) will comprise no more than 5% of the projected total power flows over the Interconnection Facilities. This engineering certification will be provided to the Company within forty-five days of the execution of this Agreement. In the event this certification is not provided to the Company, the Company retains the right to include the tax gross-up in the final billing for the actual costs of the Interconnection Facilities. In the event the 32 5% test, as specified in IRS Notice 88-129, is exceeded during any measuring period, described in section 4(A) of Notice 88-129 (a "disqualifying event"), Power Producer agrees to make the Company whole for any increase in the Company's Federal and State income tax liabilities arising from this condition. This increase in the Company's Federal and State income tax liabilities will be determined in accordance with the requirements of IRS Notice 90-60, as amended or supplemented. ARTICLE 14 REPRESENTATIONS, WARRANTIES AND COVENANTS 14.1 The Power Producer hereby represents and warrants as follows: (a) The Power Producer is a limited liability company duly organized validly existing and in good standing under the laws of the State of Delaware and is duly registered and authorized to do business and in good standing in the State of New Jersey; (b) The Power Producer has all requisite power and authority to carry on the business to be conducted by it and to enter into and perform its obligations under this Agreement; (c) The execution and delivery of this Agreement and the Power Producer's performance of its obligations hereunder have been duly authorized by all necessary action on the part of the Power Producer and do not and will not conflict with or result in a breach of the Power Producer's charter documents or by-laws or any indenture, mortgage, other agreement or instrument subject to receipt of all necessary regulatory approval, or any statute or rule, regulation, order, judgment or decree of any judicial or administrative body to which the Power Producer is a party or by which the Power Producer or any of its properties is bound or subject. 33 14.2 The Company hereby represents and warrants as follows: (a) The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of New Jersey. (b) The Company has the corporate power and authority to own its properties, carry on its electric utility business as now being conducted, enter into this Agreement and the transactions contemplated hereby, and perform and carry out all covenants and obligations on its part to be performed under and pursuant to this Agreement. (c) The execution and delivery of this Agreement by the Company and the performance of its obligations hereunder have been duly authorized by all necessary corporate action on the part of the Company. (d) This Agreement is the valid and binding obligation of the Company, enforceable with its terms except that, in the Company's view, (i) such enforceability may be limited by applicable bankruptcy, insolvency or similar laws from time to time in effect that affect creditors' rights generally or by general principles of equity, and (ii) contracts entered into by the Company may be subject to the power and authority of state and/or federal regulatory agencies. ARTICLE 15 EVENTS OF DEFAULT 15.1 Any one of the following shall constitute an event of default under this Agreement: (a) A breach of any material term or condition of this Agreement, including but not limited to any material breach of a representation, warranty or covenant made in this Agreement, including the Appendices. Failure by a Party to provide any required schedule, report or notice 34 hereunder may constitute a material breach hereof if such failure is not cured within sixty (60) days after notice to the defaulting Party. (b) The failure or refusal of a Party to permit the representatives of the other Party access to the maintenance records, or its Interconnection Facilities or Protective Apparatus in order to examine, inspect and test such records. (c) A receiver or liquidator or trustee of either Party or of any of its property shall be appointed by a court of competent jurisdiction, and such receiver, liquidator or trustee shall not have been discharged within sixty (60) days; or by decree of such a court, a Party shall be adjudicated bankrupt or insolvent or any substantial part of its property shall have been sequestered, and such decree shall have continued undischarged and unstayed for a period of sixty (60) days after the entry thereof; or a petition to declare bankruptcy or to reorganize a Party pursuant to any of the provisions of the Federal Bankruptcy Code, as now in effect or as it may hereafter be amended, or pursuant to any other similar state statute as now or hereafter in effect, shall be filed against a Party and shall not be dismissed within (60) days after such filing; or (d) A Party shall file a voluntary petition in bankruptcy under any provision of any federal or state bankruptcy law or shall consent to the filing of any bankruptcy or reorganization petition against it under any similar law; or, without limiting the generality of the forgoing, a Party shall file a petition or answer or consent seeking relief or assisting in seeking relief in a bankruptcy under any provision of any federal or state bankruptcy law or shall consent to the filing of any bankruptcy or reorganization petition against it under any similar law; or, without limiting the generality of the foregoing, a Party shall file a petition or answer or consent seeking 35 relief or assisting in seeking relief in a proceeding under any of the provisions of the Federal Bankruptcy Code, as now in effect or as it may hereafter be amended, or pursuant to any other similar state statute as now or hereafter in effect, or an answer admitting the material allegations of a petition filed against if in such a proceeding; or a Party shall make an assignment for the benefit of its creditors; or a Party shall admit in writing its inability to pay its debts generally as they become due; or a Party shall consent to the appointment of a receiver, trustee, or liquidator of it or of all or any part of its property. (e) The failure of either Party to provide the other Party reasonable written assurance of its ability to perform fully and completely any of its material duties and responsibilities under this Agreement within sixty (60) days of any reasonable request for such assurances by a Party hereto. 15.2 (a) Upon the occurrence of an event of default, the Party not in default may give written notice of the default to the defaulting Party. Such notice shall set forth, in reasonable detail, the nature of the default and, where known and applicable, the steps necessary to cure such default. The defaulting Party shall have sixty (60) days following receipt of such notice either to (i) cure such default or (ii) commence in good faith all such steps as are appropriate to cure such default in the event such default cannot, in the reasonable judgment of such non-defaulting Party, be completely cured within such sixty (60) day period. (b) If the defaulting Party fails to cure such default or take such steps as provided under subparagraph (a) above, this Agreement may be terminated by written notice to the Party in default hereof. This Agreement shall thereupon terminate and the non-defaulting Party may 36 exercise all such rights and remedies as may be available to it to recover damages caused by such default. (c) Notwithstanding the foregoing, upon the occurrence of any such event of default, the non-defaulting Party shall be entitled (i) to commence an action to require the defaulting Party to remedy such default and specifically perform its duties and obligations hereunder in accordance with the terms and conditions hereof and (ii) to exercise such other rights and remedies as it may have at equity or at law subject however to the provisions of Article 12. 15.3 The Company shall be entitled to operate and/or purchase from the Power Producer such DC power systems, protection and metering circuit components, Supervisory Control and Data Acquisition ("SCADA") equipment, transformers, secondary systems, communications equipment, building facilities, software, documentation, structural components; and other facilities and appurtenances that are necessary for the Company to operate and maintain the Transmission System if: (a) the Power Producer shall commence any case under federal bankruptcy laws or other proceeding under any similar law or any jurisdiction for the relief of debtors, or shall petition or apply for the appointment of a trustee or other custodian, liquidator, or receiver for the Power Producer or for any substantial part of the Power Producer's Facilities; (b) a decree or order for relief shall be entered in respect of the Power Producer in an involuntary case under federal bankruptcy laws or in any other proceeding under any similar law of any jurisdiction for the relief of debtors or a decree or order shall be entered appointing a trustee or other custodian, liquidator, or receiver for the Power Producer or for any substantial part of the Power Producer's Facilities and such a decree or order is not dismissed within sixty (60) days 37 after it is entered; or (c) the Power Producer shall cease its operations for more than thirty (30) consecutive days without having an assignee, successor, or transferee in place. Upon the occurrence of any of the foregoing events, the Company shall give the Power Producer or the Power Producer's assignee, successor or transferee written notice, pursuant to Article 17, of its intent to implement its rights under this Section 15.3, which notice shall specify the actual or alleged failure of the Power Producer to comply with its obligations or duties. If the failure endangers life or property, or impairs or creates a significant risk to the safety, reliability, stability, or integrity of the Transmission System, the Company may implement this Section 15.3 without such prior notice as necessary in its judgment to avert such condition. ARTICLE 16 ASSIGNMENT 16.1 No Party may assign, transfer or otherwise encumber or dispose of this Agreement or any rights, duties, interests or obligations hereunder without the prior written consent of the other Party; PROVIDED, however, that the Company may at any time and without the consent of the Power Producer, assign this Agreement together with its rights, interests, duties or obligations hereunder to any Affiliate of the Company or any successor entity; PROVIDED, further, that in any event the assignee shall agree to be bound by all of the terms and conditions hereof to the same extent as the Company. Notwithstanding the foregoing, the Power Producer may assign and encumber its respective rights under this Agreement in favor of the Lenders without the consent of the Company. The Lenders may further assign this Agreement to other persons following the prior consent of the Company which shall not be unreasonably withheld. PROVIDED, further, that 38 in any event the assignee shall agree to be bound by all of the terms and conditions hereof to the same extent as the Power Producer. Each Party shall give its consent to assignments made in accordance with this Article in the form reasonably requested by the interested Party. In the event of an assignment without consent as set forth above, the assigning Party agrees to provide the other Party with prompt notice of such assignment. 16.2 In the event of any sale, transfer, assignment, lease or any other disposition of the Facility or any substantial portion thereof by the Power Producer, or upon termination of the Agreement, or termination of any operation at the Facility, the Power Producer hereby agrees to indemnify and hold harmless the Company for any and all costs, expenses, liabilities and damages (including reasonable attorneys' fees) for which the Company may be obligated in order to comply with any applicable requirements of the federal, state, or local regulations. ARTICLE 17 NOTICES 17.1 All notices required or permitted under this Agreement shall be in writing and shall be personally delivered or sent by certified United States mail, postage prepaid, telex, facsimile transmission, or overnight express mail or courier service addressed as follows: If to the Power Producer to: Louis J. Anatrella Vice President AES Red Oak, L.L.C. 1001 North 19th Street Arlington, VA 22209 If to the Company to: Manager - Transmission Investment Planning 39 GPU Energy 2800 Pottsville Pike Post Office Box 16001 Reading, PA 19640-0001 and GPU Energy Legal Department 2800 Pottsville Pike Post Office Box 16001 Reading, PA 19640-0001 or to such other person at such other address as a Party shall designate by like notice to the other Party. 17.2 Unless otherwise provided herein, all notices hereunder shall be deemed to be given when sent pursuant to Section 17.1 mailed or personally delivered. ARTICLE 18 AMENDMENT AND MODIFICATION 18.1 This Agreement may not be amended or modified except by a written instrument signed by each of the Parties hereto. 18.2 Nothing contained in this Agreement shall be construed as affecting in any way the right of the Company to unilaterally make application to FERC for a change in rates, terms and conditions, charges, classification of service, rule or regulation under Section 205 of the Federal Power Act or applicable laws and requirements. 18.3 Nothing contained in this Agreement shall be construed as affecting in any way the ability of the Power Producer to exercise its rights under the applicable rules and requirements of the Federal Power Act and pursuant to FERC's rules and regulations promulgated thereunder. 40 ARTICLE 19 DISPUTES 19.1 Any claim or dispute, which either Party may have against the other, arising out of the Agreement shall be submitted in writing to the other Party not later than thirty (30) days after the circumstances which gave rise to the claim or dispute have taken place. The submission of any claim or dispute shall include a concise statement of the question or issue in dispute, together with relevant facts and documentation to fully support the claim. 19.2 If any such claim or dispute arises, the parties shall attempt to resolve the claim or dispute, initially through good faith negotiations or upon the failure of such negotiations, through Alternative Dispute Resolution ("ADR") techniques in accordance with the Model Procedure for Mediation of Business Disputes as published by the Center for Public Resources; however, either Party may terminate its participation in ADR during any stage of ADR and proceed under section 19.3. 19.3 If any claim or dispute arising hereunder is not resolved pursuant to section 19.2, either Party may, upon giving the other Party at least ten (10) days prior written notice, initiate litigation to submit such claim or dispute for decision by a court of competent jurisdiction of the Commonwealth of Pennsylvania in accordance with the laws of the State of New Jersey. 19.4 Nothing in this Article 19 shall restrict the rights of any Party to file a complaint with FERC under relevant provisions of the Federal Power Act. 41 ARTICLE 20 MISCELLANEOUS 20.1 Except as may be otherwise provided herein, the duties, obligations and liabilities of the Parties hereto are intended to be several and not joint or collective. Nothing contained in this Agreement shall ever be construed to create an association, trust, partnership, or joint venture or impose a trust or partnership duty, obligation or liability or agency relationship on or with regard to either Party. Each Party shall be individually and severally liable for its own obligations under this Agreement. 20.2 Any waiver at any time by either Party of its rights with respect to a default under this Agreement, or with respect to any other matters arising in connection with this Agreement, shall not be deemed a waiver with respect to any subsequent default or any other matter. 20.3 All indexes, titles, subject headings, section titles and similar items are provided for the purpose of reference and convenience only and are not intended to be inclusive, definitive or to affect the meaning of the contents or scope of this Agreement. 20.4 The Company shall prohibit its employees from using their official position for personal financial gain, or from accepting any personal advantage from anyone under circumstances which might reasonably be interpreted as an attempt to influence the recipients in the conduct of their official duties. The Power Producer and its employees and representatives shall not, under circumstances which might reasonably be interpreted as an attempt to influence the recipients in the conduct of their duties, extend any gratuity or special favor to employees of the Company. 20.5 This Agreement shall be governed by and construed in accordance with the laws of the 42 State of New Jersey applicable to contracts made and to be performed in that State, irrespective of the application of any conflicts of laws provisions. 20.6 This Agreement supersedes any and all oral or written agreements and understanding heretofore made relating to the subject matter hereof. 20.7 (a) Upon the Power Producer's written request, the Company shall maintain and not disclose to any Party, except Authorized Parties, as defined below, Confidential Information, as defined below, which is disclosed to the Company by the Power Producer hereunder. (b) For purposes hereof, "Confidential Information" means contracts, insurance policies, documents, plans, drawings, specifications and other information which the Power Producer maintains as confidential and which is clearly so marked or identified when it is disclosed to the Company, except that Confidential Information shall not include information which (i) is available to the public, (ii) becomes available to the public other than as a result of a breach by the Company of its obligations hereunder, (iii) was known to the Company prior to its disclosure to the Company by the Power Producer, or (iv) is required to be disclosed pursuant to statute, rule, regulation or order or any court, governmental authority or regulatory body. (c) For purposes hereof, "Authorized Party" means any officer, employee, representative, agent or attorney of the Company or any officer, employee, representative, agent or attorney of any Affiliate of the Company whose duties include the negotiation, evaluation, approval, performance or administration of this Agreement and who needs to know the Confidential Information in order to perform his duties. 20.8 No information relating to this Agreement may be published or released for 43 publication by the Power Producer without the prior written approval of the Company, which shall not be unreasonably withheld; PROVIDED, however, that the foregoing shall not restrict the Power Producer from making any filing or public disclosure with respect to this Agreement which may be required by applicable law. 20.9 This Agreement may be executed in any number of counterparts, and all such counterparts executed and delivered, each as an original, shall constitute but one and the same instrument. 20.10 Should any provision of this Agreement be held invalid or unenforceable, such provisions shall be invalid or unenforceable only to the extent of such invalidity or unenforceability without invalidating or rendering unenforceable any other provision hereof. 20.11 The Company shall furnish such information, certificates, opinions of counsel, consents to assignment or pledge and other documents and assistance as may be reasonably requested by the Lenders in connection with the financing of the Facility. The Company agrees to negotiate in good faith concerning any reasonable amendment or addition to this Agreement required by any Lender in connection with the financing of the Facility. The Power Producer shall reimburse the Company for any and all costs associated with furnishing such information including reasonable attorneys fees. 44 IN WITNESS WHEREOF, the Parties by their authorized representatives have executed this Agreement as of the day and year first set forth above.
ATTEST: AES RED OAK, L.L.C. /s/ Charles Falter By: /s/ Louis J. Anatrella - ------------------------------- ------------------------------- ATTEST: JERSEY CENTRAL POWER & LIGHT COMPANY d/b/a GPU ENERGY /s/ William C. Matthews By: /s/ R.S. Zechman - ------------------------------- -------------------------------
45 APPENDIX A DESCRIPTION OF FACILITY 1. Written Description of the Facility to include the location, type, size and capacity of the Facility 2. Topographical Map to locate the facility 3. One-Line Interconnection Diagram that includes a description of the Company and Power Producer Interconnection Facilities A1 RED OAK FACILITY DESCRIPTION Net Facility Capacity at 92F = 760.5 MW plus/minus 10% Expected Capacity at ISO conditions (59F) = 815.8 MW plus/minus 10% The Site is located off Jernee Mill Road, in the Borough of Sayreville, Middlesex County, NJ. The Site elevation ranges from 25 to 75 feet above sea level. With the exception of the multi-flue stack and the HRSG drums, all buildings and structures comprising the Facility are not more than 65 feet tall. The Facility main power block consists of three Siemens Westinghouse Power Corporation (SWPC) 501F combustion-turbine generators with their associated heat recovery steam generators and ancillary plant, and a single 290 MW steam turbine generator. The four turbine generators are arranged in the turbine building, which is connected to the control building. The heat recovery steam generators are located outside of the turbine house. Other plant buildings and structures outside of the main power block include the following: Water Treatment facility Cooling towers Gas metering station Administration building Warehouse and maintenance shop Switchyard Pumphouse The turbine generators will be nominally rated at 342 MVA, 0.85 power factor lagging and can operate at approximately 0.95 power factor leading (as measured at the generator), 18KV at 60Hz.,0.53 short circuit ratio, and 60 psi rated hydrogen pressure. The Facility will be capable of operation with a voltage range of plus/minus 5% on the 230KV system. The Facility will be supplied with four generator step-up transformers, three rated at 200MVA and one rated at 324MVA, 10% impedance, with offline tap changing, and two auxiliary transformers. Interconnection with the GPU system will be via a 230KV single bus, single breaker out door substation for each of the two transmission lines. The Facility has no black start capability. A2 TOPOGRAPHICAL MAP AES RED OAK TOPOGRAPHICAL MAP SHOWING THE LOCATION OF THE AES RED OAK SITE LOCATION MAP A3 INTERCONNECTION ONE LINE DIAGRAM AES RED OAK AES RED OAK/JCP&L INTERCONNECTION DIAGRAM POINT OF INTERCONNECTION A4 APPENDIX B INTERCONNECTION FACILITIES The following information is included in Appendix B: 1. Detailed one-line diagram 2. List of equipment 3. Design characteristics It is understood by the Parties that the information contained in Appendix B is preliminary and included to show the general concepts of the Interconnection Facilities. Additional items for interconnection and reinforcement may be identified, the interconnection configuration may change, and specific material items and quantities may change. B1 INTERCONNECTION ONE LINE DIAGRAM AES RED OAK AES RED OAK/JCP&L INTERCONNECTION DIAGRAM SYSTEM AROUND INTERCONNECTION B2 EQUIPMENT TO BE PROVIDED BY THE POWER PRODUCER DESCRIPTION 230 KV Switchyard (including but not limited to the following): One 324 MVA Generator Step-up Transformer Three 200 MVA Generator Step-up Transformers Two Station Auxiliary Transformers Power Circuit Breakers Disconnect Switches Surge Arrestors Instrument Transformers Control and Protective Relay Panels Switchyard Storage Battery Switchyard Battery Charger Low Voltage Switchyard Miscellaneous Switchyard Equipment Switchyard Equipment Installation Design and Fabrication of Substation Structures Cast in place concrete for substation structures Excavation and Fill Aggregate Surfacing Chain Link Fence Revenue Metering System Backup Metering System Voice and Data Telephone circuits SCADA system equipment Protective Relaying as required by Appendix D to this Agreement B3 EQUIPMENT TO BE PROVIDED BY THE COMPANY QUANTITY DESCRIPTION RED OAK 230 KV SUBSTATION 2 230 kV 3000A 40kA 2-cycle Breakers w/12 CT's/Annunciator/TravelCheck 1 Days Breaker Field Services (Pre-Installation Check-Out) 12 Doble Test Links & Adapter Plates, 3000A (for 230-kV breakers) 4 230 kV 3000 A GOAB Switches (for visual disconnect for breakers) 4 230 kV Switch Stand 2 230kV CCVT, w/Carrier Acc., 1200/2000:1, 0.01 mfd 2 230kV CCVT, w/o Carrier Acc., 1200/2000:1, 0.01 mfd 3 230kV Line Trap, 3000A 2 230kV CCVT/Wave Trap Rack (Steel) + shipping 2 230kV CCVT Rack (Steel) + shipping 2 Line Tuning Unit, Dual Frequency 1 Lot 4" Bus Tubing (approx. 700') and 3-Phase Bus Stands (approx 24) 2 230 kV Line Termination/Structures 1 Lot Yard Lighting 1 Building, 20x32, +Installation, w/Heat Pump 1 Building general wiring and lighting 1 Lot Telephone Protection Equipment 1 125 Vdc Charger (12A) 1 125Vdc Battery and Rack (60 Cells, 100Ah) 1 AC Panel & associated equipment 1 DC Panel & associated equipment 2 HV Line Panels 1 RTU 1 Station Service Transformer & Associated Equipment 1 Miscellaneous Purchases RED OAK REMOTE TERMINALS 4 230 kV CCVT, w/Carrier Acc., 1200/2000:1, 0.01 mfd 4 230 kV Line Trap, 3000A 4 Line Tuning Unit, Dual Frequency 4 1 230 kV CCVT/Wave Trap Rack (Steel) + shipping 4 New HV Line Relay Panel 4 Miscellaneous Purchases B4 APPENDIX C TRANSMISSION OPERATION INTERCONNECTION REQUIREMENTS C1 GPU ENERGY'S TRANSMISSION OPERATION INTERCONNECTION REQUIREMENTS FOR GENERATION FACILITIES I. DEFINITIONS The definitions set forth in the Generation Facility Transmission Interconnection Agreement are incorporated herein by reference. In addition, the following definitions apply: PJM MANUALS - The instructions, rules, procedures and guidelines established by the PJM OI for the operation, planning, and accounting requirements of the PJM Control Area and PJM interchange energy market. SUPERVISORY CONTROL AND DATA ACQUISITION (SCADA) - A system of remote control and real-time communications used to monitor and control the Transmission System. TRANSMISSION OPERATOR - The Company person(s), who coordinates the day-to-day interconnection and operation of the Facility with the Transmission System. II. POLICY Every Facility which is interconnected with and synchronized to the Transmission System shall at all times coordinate its operation with the assigned Company control center and provide all necessary and requested information and equipment to assure that the Company can operate its electrical system in a safe and reliable manner. Continuous cooperation and communication between the Power Producer and the Company are essential to assure that the Transmission System is operated in a safe and reliable manner. The Power Producer shall develop the operating principles and procedures which shall be coordinated with the Company's requirements, provide the necessary training for all employees, and provide for the necessary communication of information between the Power Producer and the Company. This includes the following: (a) Provide the following information necessary to ensure the safe and reliable operation of the Company's electrical system: (i) a copy of the Power Producer's switching procedures; (ii) a completed Generator Data Form (Attachment 1) for each generating unit, unit step-up transformer and auxiliary transformer. (b) Implement Facility practices and procedures which are consistent with the Company and PJM OI transmission requirements as defined in the PJM Manuals and/or herein. (c) Implement operating principles and procedures which shall be coordinated with C2 the Company's and the PJM OI's requirements for normal operating conditions as defined in the PJM Manuals and/or herein. (d) Implement operating principles and procedures which shall be coordinated with the Company's and the PJM OI's requirements for emergency operating conditions as defined in the PJM Manuals and/or herein. (e) Provide data to the Company regarding the operation and maintenance of the Facility in accordance with the Operating Agreement of PJM Interconnection, L.L.C. III. SYSTEM REQUIREMENTS A. RELIABILITY The Power Producer shall deliver the electric energy generated by the Facility to the Company at the point(s) of interconnection in the form of 3 phase, 60 Hertz alternating current at the nominal system voltage at the point of interconnection. At no time shall the operation of the Facility, including the associated generators or any of their auxiliary devices, result in an electrical output in which individual harmonic distortion exceeds 1% of the Company's voltage wave form or the sum of all harmonics exceeds 1.5% of the Company's wave form, as measured at the point of interconnection. The Facility shall be operated with all of the Power Producer's Protective Apparatus in service whenever the Facility is connected to or operating in parallel with the Company's electric system. B. SWITCHING The Power Producer shall be responsible for switching all equipment it owns, operates or controls. A specified device(s) to isolate the Facility from the Transmission System shall be switched by the Power Producer whenever requested by the Company, and locked and tagged by the Company to provide safety clearance. The Power Producer's switching procedures shall at all times be followed precisely by the Power Producer and be closely coordinated between the Power Producer and the Transmission Operator. The Company shall provide a copy of its written switching procedures to the Power Producer upon request. If requested by the Power Producer, specified Company devices shall be operated and tagged by the Company according to the Company's switching and tagging practices and safety rules. Company switching and tagging practices and safety rules shall apply to (i) all situations involving the Company and (ii) any Power Producer personnel involved with Company switching and tagging. C3 C. RELAYING The Facility relaying systems shall be consistent with the PJM OI and Company relaying practices as defined in the PJM Manuals and Appendix D of the Generation Facility Transmission Interconnection Agreement. Any changes to the design and/or setting of the protective relay system shall be subject to the prior review and acceptance by the Company. The relaying system for the Facility shall be sufficient to prevent or limit equipment damage for contingencies (i) within the facility and (ii) external to the Facility and on the Company system. D. REAL-TIME COMMUNICATIONS The Power Producer shall provide data via a SCADA system and an associated, dedicated communications channel to the Company's Energy Management System computer. Data shall include, but is not limited to: MW; MVAR; MWh; voltage; 3 phase amps; and equipment status (i.e., open/close, on/off, etc.). SCADA system and metering shall be consistent with the Company's practices, and compatible with the Company's computer and communication systems. In addition, the Company may require the ability to disconnect the Facility from the Company's system via the SCADA system. It is required that data shall be sent to the Company automatically. In the event that the data is not automatically received by the Company on a temporary basis, the Power Producer shall call the Company with the operating data at intervals specified by the Company. The Power Producer shall correct any problems associated with the failure of equipment within a reasonable time. E. COMMUNICATIONS OF INFORMATION The Power Producer and Transmission Operator shall promptly exchange all information relating to all conditions which affect (or could affect) the operations of the Facility and/or the Company's electrical system and facilities. The Power Producer shall provide adequate and reliable telephone communication channels, manned by responsible personnel, to integrate the Facility operation with the system under both normal and emergency conditions. The Power Producer shall communicate the outage of any electrical equipment connecting the Facility to the Company's system in accordance with the following requirements: C4 a. Each Facility will be assigned one of the Company operations centers as its primary contact. This assignment is based upon the voltage level of the connection to the Transmission System and the geographic location of the Facility. b. All planned and maintenance outages of electrical equipment requiring Company personnel involvement must be requested by the Power Producer, providing the appropriate information in a format as defined by the Company and shown on Attachment 2. c. Advance notifications of planned and maintenance outages shall conform to the requirements as defined in the PJM Manuals. The Power Producer shall keep and maintain accurate and complete records for Power Producer Interconnection Facilities containing such information regarding the operation and maintenance of all equipment as is appropriate and consistent with industry practice and as may be necessary for the Company to comply with its applicable requirements. The Company will advise the Power Producer of such requirements as in effect from time to time. The Power Producer shall make such records available to the Company for inspection and copying from time to time as the Company may reasonably request. IV. NORMAL OPERATION REQUIREMENTS A. GENERATOR GOVERNOR CONTROL For any Facility engaged in parallel operation with the Company, the Facility shall: 1. Operate on automatic governor control, except for the periods immediately before generating equipment is being removed from service and immediately after it has been placed in service, and 2. Minimize governor outages during periods of operation. B. SYNCHRONIZATION AND DISCONNECTION PROCEDURES When synchronizing the Facility to or disconnecting the Facility from the Company's electrical system: 1. The Power Producer shall obtain the Transmission Operator's prior approval (i.e., at least 30 minutes), EXCEPT THAT EQUIPMENT MAY BE DISCONNECTED FROM THE SYSTEM WITHOUT COMPANY APPROVAL TO PREVENT INJURY TO PERSONNEL OR EQUIPMENT DAMAGE. If for any reason the disconnection occurs without prior Company approval, the Power C5 Producer shall immediately notify the Transmission Operator as to the energy reduction and the expected return time. 2. In order to support the Transmission Operator's responsibility to plan and operate the normal and emergency operations of the transmission system, the Power Producer shall keep the Transmission Operator informed at all times of the Facility's availability or any change(s) to its status. C. VOLTAGE AND REACTIVE CONTROL PROCEDURES 1. The Power Producer shall operate the Facility with automatic voltage regulation equipment in service at all times, except for outages of the regulator for maintenance or equipment failure. Such operation will normally involve a prescribed voltage limited to +/- 1% of schedule. The Power Producer, at the option of the Company, shall operate the Facility either (i) according to a predefined voltage schedule provided by the Company or (ii) according to a reactive power schedule as provided by the Company, consistent with the Facility's generation capability and the Company's electrical system. From time to time, the Company may request alternate schedules consistent with the Facility's generation capability and the Company's electrical system. 2. The Power Producer shall notify the Transmission Operator prior to performing all voltage regulator maintenance. The Power Producer shall notify the Company of the outage with as much lead time as possible. The Power Producer shall minimize the duration of regulator equipment outages. The Power Producer shall notify the Transmission Operator at least 30 minutes prior to removing the voltage regulator from service, or returning the voltage regulator to service. 3. The Power Producer may be requested by the Company to deviate from prescribed voltage or reactive power schedules if, in the Company's sole judgment, conditions warrant such changes including, without limitation, operating the Facility in the leading, lagging, or unity power factor mode, but within the capability of the machine. 4. The Power Producer shall operate automatic voltage regulation to a tolerance of +/- 1% of scheduled voltage, except for regulator maintenance outages or equipment failures, or conditions prevailing on the system and/or the Power System which necessitate other voltage levels. 5. The Power Producer shall provide manual voltage regulation to maintain the prescribed voltage schedule or reactive power schedule during voltage regulator equipment outages. C6 6. Momentary voltage fluctuations shall be permitted, provided that they neither disturb service provided by the Company or the Power Producer on their respective systems nor hinder the Company from maintaining proper voltage conditions on their respective systems. D. MAINTENANCE SCHEDULING 1. The Power Producer shall provide the Company with at least thirty (30) days prior written notice of its intent to take a Generator Planned Outage or Generator Maintenance Outage of the Facility, including turbine, generator, and boiler overhauls or inspections, testing, and nuclear refueling. 2. The Power Producer shall provide the Company with at least thirty (30) days prior written notice of its intent to test Protective Apparatus associated with Power Producer Interconnection Facilities, including circuit breakers, relays and auxiliary equipment. Company personnel may observe such testing. 3. The Power Producer shall notify the Transmission Operator of its intent to remove electrical equipment from service by 10:00 a.m. five (5) working days prior to, and again 30 minutes before the Generator Planned Outage or Generator Maintenance Outage begins. The Transmission Operator may request the Power Producer to delay or reschedule the Generator Planned Outage or Generator Maintenance Outage if system reliability conditions warrant. To the extent practical, the Company shall provide to the Power Producer not less than one week advance notice of its intention to perform planned maintenance on its facilities that may affect the Facility's operations. The Company shall notify the Power Producer when any changes occur. E. POWER PRODUCER GENERATOR FORCED OUTAGES The Power Producer may remove any of its equipment from service without prior notification to the Transmission Operator due to a Generator Forced Outage. However, if the Power Producer has advance knowledge of a Generator Forced Outage, the Power Producer shall notify the Transmission Operator with as much lead time as practical. For reliability reasons the Power Producer shall notify the Transmission Operator as soon as reasonably possible of the following: - the starting time of the Generator Forced Outage - the energy reduction resulting (or expected to result) from the Generator Forced Outage - the estimated time the equipment incurring the Generator Forced Outage C7 is expected to return to service - the time the Power Producer equipment is actually returned to service. F. FACILITY EQUIPMENT AND CONTRACT DATA In order to ensure that all Company personnel responsible for the design and operation of the Company's system affected by the Facility are familiar with its equipment configurations, capabilities and operating parameters, the Company may from time to time request, and the Power Producer shall provide in a timely manner to the Company, detailed information about the type, nature, and operating characteristics of the Facility and all related equipment. V. EMERGENCY OPERATION REQUIREMENTS THE POWER PRODUCER AND COMPANY SHALL MAINTAIN COMMUNICATIONS AND CONTACT DURING ALL COMPANY OR PJM EMERGENCY OPERATIONS. A. SYSTEM EMERGENCY CONDITIONS During an Emergency, as determined/declared by the Company or the PJM OI, the Power Producer shall respond as promptly as possible to all directives from the Transmission Operator with respect to all matters affecting the operation of the Facility including, without limitation, the following: a. Thermal overload of electrical circuits (actual or contingency) b. High or low voltage conditions (actual or contingency) The Transmission Operator may also direct the Power Producer to (i) adjust (increase or decrease) the Facility energy and/or reactive output (ii) connect or disconnect the Facility from the Company's electrical system and/or (iii) deviate from the prescribed voltage or reactive schedules. If safety or system reliability conditions warrant, the Transmission Operator may isolate the Facility from the Company's electrical system without prior notice to the Power Producer or upon such notice as is possible under the circumstances. The Transmission Operator shall advise the Power Producer as soon as possible of any forced outages of the Company's electrical system which affect the Facility's operations. When the Transmission Operator has determined that the emergency conditions have been alleviated, he/she shall inform the Power Producer and allow the Facility to return to normal operations consistent with Good Utility Practice. In order to safely and rapidly restore the Transmission System following an outage of any or all of that system, a Facility that has been isolated from the Company's electrical system shall be allowed to reconnect only under the direction of the Transmission Operator. In all cases, the Facility shall be made C8 ready to return to service and provide energy to the Company as soon as possible. Unless the Company requests a manual adjustment, the Power Producer shall maintain the Facility automatic voltage regulator in service during an Emergency. The Power Producer shall participate in any voltage reduction declared by the Company at any time, and operate the Facility at the voltage level then requested by the Transmission Operator. C9 APPENDIX C ATTACHMENT 1 GENERATOR DATA FORM Station Name ________________________ Unit No. __________ Generator ____________________ Rated Capacity __________ MVA Operating Limits: Minimum KV _________ Maximum KV _________ Alarm Limits: Minimum KV _________ Maximum KV _______ Alarm Action: Minimum: ___________________________ Maximum: ___________________________ Max. Output (Installed Capacity) ________ MW Max. Gross Output ________ MW Capability LAG Curve Breakpoint __________ MW __________ MVAR Rated Stator Voltage _______ Rated Stator Current _______ Amps Generator Terminal Voltage - High Limit ______ Low Limit ______ Rated Field Current _________ Amps D.C. @ _________ Volts D.C. Rated Hydrogen Pressure _______ PSIG Power Factor _________ Field Current High Limits: Rated ________ Amps D.C. Field Voltage High Limits: Rated ________ Volts D.C. Maximum: _______ Volts Field Limit Alarms: Volts _______ Amps _______ Temp. _______ Alarm Action: Volts _______________________________________ Amps _______________________________________ Temperature _____________________________________ Line Drop Compensation: Type ________________________________ Setting _______________________________ Generator Stator Current High Limit _________ C9 SYSTEM VOLTAGE: Nominal KV _______ Min. _______ Max. _______ Alarm Limits: Minimum _____________ Maximum ________________ Alarm Action: Minimum _______________________________________ Maximum _______________________________________ Other Limitations ___________________________________________________ Misc. Important Information ________________________________________ ___________________________________________________________________ GENERATOR UNIT STEP-UP TRANSFORMER DATA Station Name ________________________ Unit No. __________ Unit Step-Up Transformer __________________________ Phase ________________ Connection _____________ __________ Class ________________ Rated Capacity ________ MVA at __________ C Rise ________ MVA at __________ C Rise Rated Winding Voltage: (Primary) _________ KV (Secondary) _________ KV AVAILABLE TAPS/IMPEDANCE (XT AT RATED MVA)
POSITION PRIMARY KV SECONDARY KV IMPEDANCE % MAX. AMPS - -------- ---------- ------------ ----------- --------- - -------- ---------- ------------ ----------- --------- - -------- ---------- ------------ ----------- --------- - -------- ---------- ------------ ----------- --------- - -------- ---------- ------------ ----------- --------- - -------- ---------- ------------ ----------- --------- - -------- ---------- ------------ ----------- --------- - -------- ---------- ------------ ----------- --------- - -------- ---------- ------------ ----------- --------- - -------- ---------- ------------ ----------- ---------
Alarm Limits: KV _______________________ C10 Amps _______________________ MVA _______________________ Temperature _______________________ Primary Tap Setting ___________ Secondary Tap Setting ___________ Voltage Limits (if applicable) Primary ____________ Secondary ____________ Loading Limitations (if any) ________________________________________________________________________________ ________________________________________________________________________________ AUXILIARY TRANSFORMER DATA Station Name __________________________ Unit No. __________ Auxiliary Transformer ________________ Connection _______ _______ Class ________________ Rated Capacity ________ MVA at __________ C Rise ________ MVA at __________ C Rise Rated Winding Voltage: (Primary) _________ KV (Secondary) _________ KV AVAILABLE TAPS/IMPEDANCE (XT AT RATED MVA)
POSITION PRIMARY KV SECONDARY KV IMPEDANCE % MAX. AMPS - -------- ---------- ------------ ----------- --------- - -------- ---------- ------------ ----------- --------- - -------- ---------- ------------ ----------- --------- - -------- ---------- ------------ ----------- --------- - -------- ---------- ------------ ----------- --------- - -------- ---------- ------------ ----------- --------- - -------- ---------- ------------ ----------- --------- - -------- ---------- ------------ ----------- --------- - -------- ---------- ------------ ----------- --------- - -------- ---------- ------------ ----------- ---------
C11 Alarm Limits: KV _______________________ Amps _______________________ MVA _______________________ Temperature _______________________ Primary Tap Setting ___________ Secondary Tap Setting ___________ Automatic Tap Changer Range ______________ to _____________ Volts Raise Positions _____________ Lower Positions _____________ Voltage Limits (if applicable) Primary High ____________ Low ____________ Secondary High ____________ Low ____________ Load at Max. Generation _________ MW _________ Amps (Avg) _________ MVAR _________ Volts Load at Min. Generation _________ MW _________ Amps (Avg) _________ MVAR _________ Volts Loading Limitations (if any) ___________________________________________________ ________________________________________________________________________________ C12 MISCELLANEOUS INFORMATION REQUIRED 1. A copy of the Generator Reactive Capability Curve 2. A copy of the Generator VEE Curve 3. A copy of the Generator Saturation Curve 4. A report of any special Operating Restrictions - such as vibration or field problems 5. A report of any Environmental Restrictions - such as SO2 emissions or river flow or temperature 6. A report of any known limiting facilities C13 APPENDIX C ATTACHMENT 2 APPLICATION FOR PROTECTIVE TAGGING ON LINES OR EQUIPMENT
DATE SUBMITTED ________________ W.O. NO. ________________________ APPLICATION NO.________________ APPLICANT: SWITCH-HOURS ______________ DATE _________ DAY ___________ FINISH-HOURS A________ DATE _________DAY _______ START-HOURS ______________ DATE _________ DAY ___________ FINISH-HOURS A________ DATE _________DAY _____ APPARATUS/LINE REQUESTED:__________________________________________________________________________________ LOCATION:__________________________________________________________________________________________________ ___________________________________________________________________________________________________________ WORK TO BE DONE:___________________________ _________________________________________ _____________________ ___________________________________________________________________________________________________________ SWITCHES REQUIRED:_________________________________________________________________________________________ ___________________________________________________________________________________________________________ ___________________________________________________________________________________________________________ REMARKS:___________________________________________________________________________________________________ ___________________________________________________________________________________________________________ ___________________________________________________________________________________________________________ EMERGENCY CLEARANCE TIME ______________________________________ TRUCK OR PHONE NO. ________________________ TAGS PLACED FOR ________________________________________________ SIGNED____________________________________ CAN DO THE REQUIRED SWITCHING? YES NO COUNTER SIGNED________________________ OUT OF SERVICE OVERNIGHT? YES NO SYSTEM OPERATOR: SWITCHES TO BE TAGGED:_____________________________________________________________________________________ ___________________________________________________________________________________________________________ ___________________________________________________________________________________________________________ SYSTEM OPERATOR APPROVAL (1) __________________________________ (2) _______________________________________ DATE ______________ CLEARANCE @ ______________ BY ______________ CLEAR @ ______________ BY ________________ DATE ______________ CLEARANCE @ ______________ BY ______________ CLEAR @ ______________ BY ________________ DATE ______________ CLEARANCE @ ______________ BY ______________ CLEAR @ ______________ BY ________________ DATE ______________ CLEARANCE @ ______________ BY ______________ CLEAR @ ______________ BY ________________ DATE ______________ CLEARANCE @ ______________ BY ______________ CLEAR @ ______________ BY ________________ APPLICATION COMPLETED @ _________________ DATE _______________ DATE ______________ TIME _____________ PARTY NOTIFIED ________________ BY _______________ REMARKS _________ DATE ______________ TIME _____________ PARTY NOTIFIED ________________ BY _______________ REMARKS _________ DATE ______________ TIME _____________ PARTY NOTIFIED ________________ BY _______________ REMARKS _________ DATE ______________ TIME _____________ PARTY NOTIFIED ________________ BY _______________ REMARKS _________
C14 APPENDIX D SYSTEM PROTECTION AND CONTROL INTERCONNECTION REQUIREMENTS D1 GPU ENERGY'S SYSTEM PROTECTION AND CONTROL INTERCONNECTION REQUIREMENTS Revised: November 17, 1997 A. DEFINITIONS GPU Energy - The trade name used individually and collectively by the three operating electric utilities in the GPU System (i.e., Jersey Central Power and Light Company, Metropolitan Edison Company, and Pennsylvania Electric Company). GPU System - The transmission and distribution facilities owned by GPU Energy. Generation Facility - A facility for generating electricity which is connected to the GPU system. Generation - The electrical energy being produced by: rotating generators driven by steam turbines, internal combustion engines, hydraulic turbines, windmills, etc; fuel cells, photovoltaic or battery arrays with a DC or AC inverter; or any other electric generating device. Power Producer - The owner or operator of the Generation Facility. B. OBJECTIVES This document was prepared to assist GPU Energy engineers and Power Producers when planning protection and control requirements for interconnection between GPU Energy and the Generation Facility. To ensure all proposed installations are handled uniformly and to minimize the possibility of misinterpreting GPU Energy`s requirements, this document outlines the MINIMUM PROTECTION REQUIREMENTS for the safe and effective operation of this interconnection, and provides technical and administrative guidelines. C. GENERAL POLICY The minimum protection requirements stated in this document are intended to achieve the following goals: - Insure the safety of the general public and GPU Energy personnel. - Minimize the possible damage to the property of the general public, GPU D2 Energy , GPU Energy customers, and neighboring utility systems. - Minimize adverse conditions on the GPU System. - Permit the Power Producer to operate its generating equipment in parallel with the GPU System in a safe and reliable manner. In order to achieve these goals, certain protective devices (relays, circuit breakers, etc.) must be installed to promptly disconnect the Generating Facilities from the GPU System whenever a fault or abnormality occurs. The determination of what type of protective devices are required depends primarily on three (3) major factors: 1) The type and size of the Generation Facility. 2) The location of the Generation Facility on the GPU System. 3) The manner in which the installation will operate. In addition to the protective devices, certain modifications and/or additions may be required to be made to the GPU System due to the addition and/or modification of the Generation Facility. EACH REQUEST WILL BE HANDLED INDIVIDUALLY, and the final determination of the protective devices, modifications, and/or additions required will be made by GPU Energy. Any modifications to the GPU Energy distribution or transmission systems necessitated by these changes to the Generation Facility will be specified, purchased, and installed by GPU Energy at the expense of the Power Producer. GPU Energy will work with the Power Producer to achieve an installation which meets the requirements of both the Power Producer and GPU Energy. GPU Energy cannot assume any responsibility for protection of the Generation Facility's generating equipment, or any portion of the Generation Facility's equipment. The Power Producer is solely responsible for protecting its equipment in such a manner that faults, imbalances or other disturbances on the GPU System do not cause damage to the Generation Facility's equipment. It is the responsibility of the Power Producer to comply with all applicable Federal, State, and Local Regulatory Agencies and all electrical and safety codes. Further, the Power Producer may be required, in GPU Energy's sole and exclusive judgement, to retrofit its interconnection protection systems due to obsolescence, operational problems, enhancements in microprocessor/solid state technology leading to improved sensitivity, modifications to the GPU system or the Generation Facility, and in accordance with the most recently published industry standards and practices. Any interconnection of a Generation Facility to the GPU System must not impair the quality and quantity of transmission or distribution service available to its customers, create reliability problems, or interfere with the operation and economic dispatch of power sources in which GPU Energy has entitlement or with GPU Energy's ability to carry out its obligations under pre-existing agreements. A Generation Facility will not be permitted to be connected to the GPU Energy low voltage ( LESS THAN 1 kV) looped network system. A GPU Energy controlled disconnecting device is required on the GPU Energy side of all Generation Facility interties. A Generation Facility's disconnecting device used to isolate the facility's generation from the GPU System shall be blocked from closing in on a de-energized utility circuit. D3 The Power Producer is responsible for properly synchronizing its generation with the GPU System. D. REVIEW PROCESS In order to process all Power Producer requests in an efficient and consistent manner, the following Review Process for Protection Requirements must be followed. 1. PRELIMINARY PROTECTION REQUIREMENTS REVIEW The GPU Energy System Relay and Control Engineering Department will have primary responsibility for the review and comment of all required protection design and associated settings. The following information shall be supplied to GPU Energy : a) Detailed One-Line Diagram of entire Generation Facility system. b) A potential schematic of Generation Facility. c) A current schematic of Generation Facility. d) A control schematic of Generation Facility. e) A connection diagram indicating all external connections to individual components of the protective scheme. f) A three-line diagram of Generation Facility. g) Instruction manuals for all protective equipment. Component specifications and internal wiring diagrams shall be included if not provided in manuals. h) All protective equipment ratings. i) Generator data, complete Attachment 2. j) Equipment specifications and details of transformers, circuit breakers, current transformers, voltage transformers, and any other major equipment or special items. k) Specific setting information on all the Generation Facility's protective relays associated with the generator protection and generator step-up transformer protection or auxiliary transformer protection. One set of all the above information is required. GPU Energy may in its discretion require that meeting(s) be held between GPU System Relay and Control Engineering personnel and the Power Producer's Consulting Engineer, Contractor, etc. during this process. Upon completion of the Preliminary Protection Requirements Review process, the Power Producer's representative will be notified of any modifications and/or additions, required to the GPU System or to the Generation Facility. The Power Producer's representative shall also be notified by GPU Energy that the Preliminary Protection Requirements Review process is to be accomplished in a timely manner and that it must represent an as accurate as possible determination of protection requirements, however the Power Producer's representative shall be notified that the information submitted will be subject to change modification and/or addition by GPU Energy, in its sole and exclusive discretion. 2. FINAL PROTECTION REQUIREMENTS REVIEW The Final Protection Requirements Review process will proceed in the same manner as the Preliminary Protection Requirements Review process outlined in Section D-1 above. D4 The information identified in Section D-1, including any modifications and/or additions made by GPU Energy during the Preliminary Protection Requirements Review process, will be required in triplicate. The Instruction manuals for all protective equipment required pursuant to Section D.1.(g) must contain at least one vendor original copy. All information supplied for this review process shall be Final\As-Built submittal information. Upon GPU Energy's completion of its initial review of the Power Producer's final submittal, the Power Producer's representative will be notified of any final modifications and/or additions required to the GPU System or to the Generation Facility. Upon the Generation Facility's satisfactory completion, as determined by GPU Energy in its sole and exclusive judgement, of any required final modifications and/or additions, GPU Energy will notify the Power Producer's representative that the Final Protection Requirements Review process has been completed. E. DESIGN CONSIDERATION 1. AUTOMATIC RECLOSING The need for automatic reclosing modifications is directed towards protection of the GPU System and the equipment of GPU Energy customers from potential damage. It is the Power Producer's responsibility to evaluate the potential effect of GPU Energy's reclosing practices on its generator and to provide suitable protection. GPU Energy normally provides automatic multiple shot reclosing with no intentional time delay on the first shot on all distribution line circuit breakers. Additionally, automatic sectionalizing for faults is provided on the distribution system with electronic and hydraulic reclosers that reclose in approximately 2 seconds following a trip operation. To protect both GPU Energy and GPU Energy customers' equipment from possible damage due to out-of-phase reclosing, the substation distribution line circuit breaker and the line reclosers may have to be modified, at the expense of the Power Producer, with voltage check relays unless the size and characteristics of the generator indicate that immediate reclosing would not be hazardous to the GPU System. These relays will block reclosing until the parallel generation on a line or line section is de-energized. Lines operated at 34.5 kV Delta and above also utilize multi-shot automatic reclosing with the first shot delayed approximately 20 cycles. Reclosing logic for these lines must be modified, at the expense of the Power Producer, to include synchronism checking. 2. PROTECTION REQUIREMENTS Typical protection is illustrated in Appendix A Figures 1 and 2 inclusive. The design of the Isolation and Fault Protection shall be based upon a single failure philosophy, i.e., the failure of any single component shall not render the protection inoperative. Isolation and fault protective relays shall be purchased, installed and owned by the Power Producer. The required fault and isolation protection shall be utility grade and conform to the most recent ANSI Standard C37.90. Only solid state/microprocessor based relay models are acceptable. D5 ISOLATION PROTECTION All relay settings associated with the Isolation Protection shall be specified by GPU Energy . GPU Energy shall have exclusive control and access to the Isolation Protection. a) UNDERVOLTAGE (27) WITH TIME DELAY (62). Relay to be set at approximately 90% of nominal voltage (108 secondary volts on a 120 volt base). Time delay to be set at approximately 2.0 seconds in order to provide coordination with motor starting and system faults. b) OVERVOLTAGE (59) WITH TIME DELAY (62). Relay to be set at approximately 110% of nominal voltage (132 secondary volts on a 120 volt base). Time delay to be set at approximately 2.0 seconds to over-ride relay response to transients and external fault clearing which may cause nuisance operations. c) OVERFREQUENCY (81O). Relay to be set at 60.5 Hertz with no intentional time delay in its operation. d) UNDERFREQUENCY (81U) WITH TIME DELAY (62). Relay to be set at 57.5 Hertz with a 5.0 second time delay. This setting is necessary in order to coordinate with GPU Energy 's system loadshedding underfrequency relaying. GPU Energy , as a member of the Pennsylvania- New Jersey-Maryland Interconnection (PJM) agreement, has agreed to trip generators connected to its system at a frequency of 57.5 Hertz after a delay of 5.0 seconds. Therefore, the Power Producer must also comply with this agreement. The Power Producer is responsible to insure that setting is compatible with all equipment purchased, installed and operated at the Generation Facility. FAULT PROTECTION Generation Facility's fault protection shall coordinate with GPU System protective devices for faults. All fault protection settings are to be specified by the Power Producer and approved by GPU Energy for COORDINATION PURPOSES ONLY. e) OUT-OF-STEP RELAYING (21 ZOS). Relays maybe required to isolate the generator from the GPU System during unstable conditions. The need for out-of-step relaying will be based on the results of stability studies. The Power Producer will be responsible for providing the appropriate relay and settings. f) SYNCHRONISM CHECK (25). A synchronism check relay will be required on all breakers that may be used to synchronize the generator to the system. The synchronism check relay shall be capable of being set for an angular difference of 10-60 degrees and have an internal timer function allowing a time delay setting between 0.5-5 seconds. The relay chosen must also have an optional hot-bus dead-line; dead-bus hot-line accessory. g) NON-DIRECTIONAL PHASE OVERCURRENT (50/51), NON-DIRECTIONAL GROUND OVERCURRENT (50/51G), AND NON-DIRECTIONAL NEUTRAL OVERCURRENT (51N) RELAYS. Where high-side of transformer (GPU System side) is connected to the GPU System via a device other than a fuse, the above mentioned protective relays are required. D6 Current transformers for the 50/51 and 50/51G relays shall be located on the high-side of the transformers protective device (breaker, circuit switcher, etc.) If high-side grounding of the transformer is provided, the 51N relay shall be connected to a current transformer installed in the neutral connection of the transformer. h) VOLTAGE CONTROLLED TIME OVERCURRENT RELAYS (51V). In applications where the Generation Facility is interconnected to GPU Energy's distribution system (34.5 kV Wye and below), voltage - controlled time overcurrent relays must be provided. These relays shall be connected to current transformers located on the generator or its associated breaker. These relays shall receive potential from the generator voltage transformers. i) SYSTEM BACKUP IMPEDANCE (21) RELAY(S). In applications where the Generation Facility is interconnected to GPU Energy's transmission system (34.5 kV Delta and above), an impedance relay must be provided as a backup function to clear faults on the GPU Energy System. This relay(s) shall be connected to current transformers located on the generator or its associated breaker. These relays shall receive potential from the generator voltage transformers. An external timer (0.1 - 5.0 sec) must be provided if not provided internal to the impedance relay design. Time delay will be typically set between 1.0 and 2.0 seconds. F. CONTROL SYSTEMS The Power Producer has the option to use either an AC or DC control system, as described below. 1. AC SYSTEM The AC control system supply must use 60 Hz power derived from the GPU Energy line. The system must be designed to be fail-safe and the failure of any SINGLE component must result in a trip of the generator breaker. NOTE: In AC powered schemes, the generator breaker will probably be a contactor. In such cases, a latching contactor is not acceptable. The AC System shall use continuously energized auxiliary relays with contacts arranged to trip the generator circuit breaker whenever the relays drop out. If a molded case circuit breaker (or equal) is used, it MUST be equipped with an undervoltage trip option. All installations must isolate (trip) the generator in such a manner that: a manual operation or a time-delayed automatic synchro-check or voltage check supervised operation is required to close the generator or point-of-contact breaker (contactor) after the GPU Energy source has returned to normal. D7 Under no circumstances is the generator contactor (breaker) to close immediately upon restoration of the GPU Energy source. A white lamp should be provided to monitor the AC source and shall have a nameplate. 2. DC SYSTEM This system must use a battery of 48 or 125 VDC to supply tripping energy to the generator circuit breaker. All such installations must isolate (trip) the generator in such a manner that: a manual operation or a time-delayed automatic synchro-check or voltage check supervised operation is required to close the generator or point-of-contact breaker (contactor) after the GPU Energy source has returned to normal. Under no circumstances is the generator contactor (breaker) to close immediately upon restoration of the GPU Energy source. An amber or yellow lamp shall provided to monitor the DC source and shall have a nameplate. G. TARGETS All protective relays shall be equipped with targets that indicate operation. These targets are to be arranged in the control circuit to operate only when the associated relays trip the generator or point-of-contact circuit breaker. H. REMOTE TERMINAL UNIT (RTU) For all Generation Facility installations, a Remote Terminal Unit (RTU) will be purchased and installed by GPU Energy at the expense of the Power Producer. This RTU will utilize the CDC II protocol and provide the necessary point counts required by the Energy Management System (EMS) of GPU Energy to operate and monitor the generation and interconnection facilities at the Generation Facility site. Point count will include, but not be limited to, analog, MWH, control, and status. The Power Producer will provide an indoor weather controlled location to mount an RTU and supply a four (4) wire data telephone circuit in order for the RTU to communicate with the GPU Energy EMS. Furthermore, a telephone and telephone circuit must be provided in the location of the RTU in order that GPU Energy personnel may communicate with the distribution or transmission operator for installation and maintenance purposes. D8 If necessary, provisions shall be made at the bottom of each enclosure to allow all cables to be wired to the RTU. The Power Producer must also supply the power necessary for the RTU. The supply power can be, but not limited to, 125 VDC, 120 VAC, and 48 VDC. I. GROUNDING Neutral and ground are not to be confused. ALL current and potential NEUTRALS are to be isolated from all other circuits. Each neutral is to be grounded at ONE point only. The preferred grounding location will be at the protective relay cabinet, on the internal side of the States links. J. WIRING All wiring must agree exactly with schematics and wiring drawings. All wires must be anchored to the cabinet or bundled when running between devices. Bundling is permitted but all wiring must be traceable. Wiring must be installed so that it can be visually traced and checked. Use of conduit, or equal, wire trough is generally acceptable but must be verified with GPU Energy. Wiring shall be installed so as to avoid damage to the cable and its insulation. Movement of the hinged panel shall not damage the cable or its insulation or cause stress to the termination points on the panel or on the door. Wiring and device location shall not prevent the removal of any equipment, block access to equipment for inspection and maintenance, nor block spare space in the cabinet. All equipment shall be mounted and wired in such a manner that no energized terminals or connections are exposed or accessible to personnel with the hinged relay panel in a closed position. Any protective relay not equipped with internal isolation device must be connected through an external test device (i.e., ABB FT-1 or sliding link terminal blocks as determined and approved by GPU Energy .) All incoming and outgoing cables/conductors will terminate on sliding link terminal blocks located in the protective relay cabinet. Terminal blocks shall be the States Company Type NT or equivalent. The incoming side shall have one (1) nut, for mounting incoming cables. The internal panel side shall have double nuts for mounting of internal wires and marker tags. Marker tags should carry wire or cable conductor identification. Terminal blocks shall be mounted such that the connections and lines are accessible and not blocked by projecting equipment. D9 Terminal blocks shall be mounted a minimum of 6" from side walls and adjacent equipment and a minimum of 4" above the bottom of the housing. Terminal blocks shall be mounted such that the sliding link: Falls closed when loosened, if mounted in horizontal rows; Moves toward the front of the cabinet when opened, if mounted in vertical rows on side panels; Moves away from the panel centerline when opened, if mounted on the rear panel. There shall be a minimum of 10% or 2, whichever is greater, spare terminals included in the cabinet for modifications. Pressure type connections with insulated sleeves shall be used. Ring tongue lugs which completely encircle the screw or the stud shall be used. The crimping tool must be one approved by the Manufacturer for use on the connector. No soldered terminals or connections shall be used. K. DRAWINGS CONTENT 1. ONE-LINE DIAGRAM This drawing shows the functional arrangement, using single line and standard symbol notations (per ANSI 432.2-1970, 41.1-1972) for the following equipment and accompanying information: a) Equipment Names and/or Numerical Designations for all circuit breakers, contactors, switches, transformers, generators, transmission lines, etc., associated with the generation as required by GPU Energy to facilitate switching. b) Power Transformers - Name or designation, nominal KVA, nominal primary, secondary, tertiary voltages, vector diagram, impedance and tap settings. c) Station Service/Operating Transformers - Designate phase(s) connected to, and estimated KVA load. D10 d) Instrument Transformers - Voltage and current, used to supply the Protective Relay cabinet and phase connections. e) Lightning Arresters/Spill Gaps/Surge Capacitors - Ratings. f) Capacitor Banks - kvar rating. g) Switches - Indicate status normally open with a (N.O.) and type of operation manual or motor. h) Safety Switch - Continuous ampere and interrupting ratings. i) Circuit Breakers and/or Contactors - Interrupting rating, continuous rating, operating times. j) Generator(s) - Include type, connection, KVA, voltage, current, rpm, PF, etc. k) Point of interconnection to the GPU System and phase identification. l) Fuses - Size, type location. m) Grounding. n) Relay Nomenclature - A "1" outside a relay function shall indicate a single phase relay and a "3" shall indicate a three phase relay or three individual relays. 2. CONTROL SCHEMATIC Control schematics are to be functionally complete schematics. They shall be as simple and uncluttered as possible, and shall contain the following information: a) Terminal designation of all devices - relay coils and contacts, switches, transducers, etc. If a device is not supplied with terminal numbers, the cabinet supplier shall number the device terminals clearly and use those numbers on all drawings. b) Relay functional designation - per latest ANSI Standard. The same functional designation shall be used on all drawings showing the relay. c) Complete relay type, manufacturer, style number, and relay range. d) Numbers or wire designations for all cable connections. D11 e) Switch contacts shall be referenced to the switch development if development is shown on a separate drawing. f) Switch developments and escutcheons shall be shown on the drawing where the majority of contacts are used. Where contacts of a switch are used on a separate drawing, that drawing shall be referenced adjacent to the contacts in the switch development. Any contacts not used shall be referenced as spare. All switch developments shall include the manufacturer name, complete style number and notations indicating spring return to normal operation, when appropriate. g) All switch contacts are to be shown open with each labeled to indicate the positions in which the contact will be closed. h) Explanatory notes defining switch coordination and adjustment where misadjustment could result in equipment failure or safety hazard. i) Auxiliary relay contacts shall be referenced to the coil location drawing if coil is shown on a separate drawing. All contacts of auxiliary relays must be shown and the appropriate drawing referenced adjacent to the respective contacts. j) Device auxiliary switches (circuit breakers, contactor) must be referenced to the drawing where they are used. k) Any interlocks electromechanical, key, etc., associated with the generation. l) Ranges of all timers, and setting if dictated by control logic. m) All target ratings (on dual ratings underline the appropriate tap setting). n) Complete internal for all protective relays. Solid-state relays may be shown as a "black box" but manufacturers instruction book number shall be referenced, and terminal connections shown. o) Isolation points (States links or FT-1 blocks) including terminal identification. p) All circuit elements and components, with device designation, rating and setting where applicable. Coil voltage is shown only if different from nominal control voltage. q) Size, type, rating and designation of all fuses. 3. CURRENT SCHEMATIC NOTE: This drawing is a primary three line and shall contain the following information: D12 a) Relay functional designation per latest ANSI Standard. The same functional designation shall be used on all drawings showing the relay. b) Terminal designations of all devices - relay coils and contacts, switches, transducers, etc. c) Numbers or wire designations for all cable connections. d) Phases shall be designated as A, B, C, N and rotation (sequence) indicated as ABC or CBA. e) Switch developments and escutcheons shall be shown on the drawing where the majority of contacts are used. Where contacts of a switch are used on a separate drawing, that drawing shall be referenced adjacent to the contacts in the switch development. Any contacts not used shall be referenced as spare. All switch developments shall include the manufacturer name, complete style number and notations indicating spring return to normal operation, where appropriate. f) Auxiliary relay contacts shall be referenced to the coil location drawing if coil is shown on a separate drawing. Switch contacts shall be referenced to the switch development drawing if development is shown on a separate drawing. g) Current transformers (CT) - polarity marks, rating, tap, ratio and connection. h) Auxiliary CT ratios, connection, winding current rating and arrows to indicate assumed current flow. I) Grounding of cables, CT's, etc. j) Isolating points (States links, test switches, etc.). k) Complete relay type, manufacturer, style number and relay range. l) All circuit elements and components, with device designation, size, rating and setting where applicable. 4. POTENTIAL SCHEMATIC This drawing is a primary three line SCHEMATIC with only switching devices shown and shall contain the following information: a) Terminal designations of all devices - relay coils and contacts, switches, transducers, etc. b) Relay functional designation - per latest ANSI Standard. The same functional D13 designation shall be used on all drawings showing the relay. c) Complete relay type, manufacturer, style number and relay range. d) Numbers or wires designations for all cable connections. e) Phases shall be designated as A, B, C, N and rotation (sequence) indicated as ABC or CBA. f) Auxiliary relay contacts shall be referenced to the coil location drawing if coil is shown on a separate drawing. All contacts of auxiliary relays shall be shown with each referenced to the appropriate drawing. g) Switch developments and escutcheons shall be shown on the drawing where the majority of contacts are used. Where contacts of a switch are used on a separate drawing, that drawing must be referenced adjacent to the contacts in the switch development. Any contacts not used shall be referenced as spare. All switch developments shall include the manufacturer name, complete style number and notations indicating spring return to normal operation, when appropriate. h) Switch contacts shall be referenced to the switch development drawing if development is shown on a separate drawing. I) All switch contacts are to be shown in the open position, and labeled to indicate closed position(s). j) Explanatory notes defining switch coordination and adjustment where misadjustment could result in equipment failure. k) Ranges of all timers, and setting if dictated by control logic. l) Isolating points (States links, test switches, etc.). m) Grounding of cables, VTs, etc. n) Potential transformers (PTs, VTs), nameplate ratio, polarity marks, rating, primary and secondary connections. o) All circuit elements and components, with device designation, rating and setting where applicable. Coil voltage is shown for all auxiliary relays. p) Size, type, designations of all fuses. 5. PANEL WIRING DRAWING D14 NOTE: Wiring diagrams shall follow the physical equipment layout. The following equipment must be identified on this drawing. a) Front view sketch with functional designation and device type for all components and nameplates. b) External cables, wire designations (number, destination and drawing number). Each wire designation shall be unique. c) Terminal block location and number. d) Equipment identification - functional designation and device wiring designation (ratings shall appear by components only when required for specific identification and clarity). e) Reference to relay internals, schematic, and Instruction Book(s). f) Current transformer tap ratio tables where applicable. g) Ground bus and connections. h) Current circuits must be identified with asterisks. i) Reference to switch developments. j) Complete panel wiring details for all equipment included on panel. k) When external devices are connected to the protective relaying cabinet, wiring drawings must be supplied for those devices. 6. THREE-LINE DIAGRAM This drawing must include all the equipment shown on the one line diagram and all information necessary for correct phasing. a) Phases shall be designated as A, B, C, N and rotation (sequence) indicated as ABC or CBA. b) Both GPU Energy and Generation Facility phase designations, rotation (sequence), as well as necessary interconnections shall be designated. c) Terminal numbers shall be identified for all primary equipment (i.e., breakers, transformers, generators, etc.) shown on the one-line diagram. D15 d) Bushing designations shall be identified for all circuit breakers and transformers. L. PROTECTIVE RELAY TEST REQUIREMENTS 1. Commissioning as well as periodic and functional testing of required fault protection (21 ZOS, 25, 50/51, 50/51G, 51N, 51V, 21, 62, 27, 59, 81, etc.) shall be performed and documented by the Power Producer at intervals specified by GPU Energy and to specifications established by the manufacturer. All required testing of the fault protection shall be performed and certified by a qualified testing organization acceptable to GPU Energy. See Attachment 3. A maintenance and test log will be developed and maintained by the Power Producer. This log will detail all maintenance information recommended by the manufacturers and then instruction manuals. This log will contain specific information pertinent to the equipment maintained, e.g. location, manufacturer, year, type, serial number, date and type of test (functional trip test calibration test results, etc.) and any corrective action taken due to test/maintenance findings. This log shall be available for inspection by GPU Energy at any reasonable time. Each year, a letter indicating that all required testing and maintenance has been completed with acceptable results shall be submitted to GPU Energy. GPU Energy has the right upon request to inspect all required protective equipment associated with the Generation Facility's interconnection(s). 2. GPU Energy shall reserve the right to specify settings of all isolation devices which are part of the Generation Facility's system. 3. GPU Energy shall require initial inspection and testing as well as subsequent inspection and testing of the Generating Facility's isolation and fault protection systems (27-62, 59-62, 81o, 81u-62, etc.) at the Generation Facility's expense on an annual basis. All required testing shall be performed and certified by a qualified testing organization acceptable to GPU Energy (Attachment 3). GPU Energy reserves the right to observe any tests performed. Maintenance of these systems must be performed and documented by the Power Producer at specified intervals to the satisfaction of GPU Energy. GPU Energy shall reserve the right to disconnect the Generation Facility and/or the cogeneration equipment from the GPU system for failure to comply with these inspections, testing and maintenance requirements. M. FINAL INTERCONNECTION APPROVAL Final interconnection approval will be given upon: 1. Positive engineering review of the Generation Facility's Electrical Plans (See Section C2). 2. Receipt of all information required in Section C1 in triplicate. 3. Written certification from an approved relay testing organization (Attachment 3) that all fault protection relays have been successfully acceptance tested, commissioned, set, and functionally trip tested. D16 4. Settings, acceptance testing, commissioning and functional trip testing of all Isolation Protection Relays shall have been successfully completed by the relay testing organization and approved by GPU Energy. D17 Attachment 1 PROTECTION REQUIREMENTS FIGURE 1 Generation Connected to System Voltages 34.5 kV Wye and Below 2 Generation Connected to System Voltages 34.5 kV Delta and Above with Wye-Wye and Delta-Wye Transformer Connections 3 Generation Connected to System Voltages 34.5 kv Delta and Above with Wye-Delta and Delta-Delta Transformer Connections D18 FIGURE 1 Diagram of Generation Connected to System Voltages 34.5 kV Wye and Below D19 FIGURE 2 Diagram of Generation Connected to System Voltages 34.5 kV Delta and Above D20 FIGURE 3 Diagram of Generation Connected to System Voltages 34.5 kV Delta and Above D21 Attachment 2 GENERATOR DATA FOR STABILITY CALCULATIONS Machine MVA base for each machine: __________ __________ __________ Step-up transformer percent impedance and MVA base _________ % R + J _________ % X _________ MVA _________ % R + J _________ % X _________ MVA
Value* Description (for each machine) ----------- ------------------------------------------------------------------------------------- T'do (sec. 0) ---------- T'do (sec. 0) ---------- T'do (sec. 0) ---------- T'do (sec. 0) ---------- Inertia H Total Shaft Inertia (Turbine, exciter, generator) ---------- Speed Damping D If unavailable, program defaults to 0.0 ---------- Xd ---------- ----------------------------------------- EXCITATION SYSTEM Xq Brand Name ---------- -------------------- Type ------------------------- X'd ---------- ----------------------------------------- X'q ---------- X"d = X"q ---------- X1 If unavailable, program defaults to 0.05Xd ---------- S(1.0) Saturation values 1.0 p.u. voltage; if unavailable, program defaults to 0.11 ---------- S(1.2) Saturation values 1.2 p.u. voltage; if unavailable, program defaults to 0.48 ----------
* Xd, Xq, X'd, X'q, X"d, X"q, X1, H, and D are in p.u. machine base. X"q must be equal to X"d. D22 Attachment 3 ACCEPTED RELAY TESTING ORGANIZATIONS GPU ENERGY ABB Power T&D Company One Bala Plaza Bala Cynwyd, Pennsylvania 10994 Doble Engineering Company 85 Walnut Street Watertown, Massachusetts 02172 General Electric Company 205 Great Valley Parkway Malvern, Pennsylvania 19355 GPU Energy Company 2800 Pottsville Pike Post Office Box 16001 Reading, PA 19640-0001 MET Electrical Testing Company, Inc. 916 W. Patapsco Avenue Baltimore, Maryland 21230 Multi-Amp Corporation 4271 Bronze Way Dallas, Texas 75237 Addresses identified above are GPU Energy's regional contacts for relay testing services. Other regional contacts may be more appropriate for THE consulting engineer. D23 REFERENCES 1. Guide for Interconnection Requirements and Parallel Operation of Customer-Owned Generation Georgia Power Company - Electric Operations Bulletin No. 51 2. Protection Requirements for Parallel Operation of Non-Utility Generation, Pennsylvania Power & Light Company - Revision #5 dated June 20, 1988 D24 APPENDIX E INTERCONNECTION INSTALLATION AGREEMENT BETWEEN JERSEY CENTRAL POWER & LIGHT COMPANY d/b/a GPU ENERGY AND AES RED OAK, L.L.C. TABLE OF CONTENTS
ARTICLE TITLE OF ARTICLE PAGE NO. - ------- ---------------- -------- I Scope of Work E2 II Schedule of Work E2 III Payment E3 IV Bonus/Liquidated Damages E4 V General Provisions E5 VI Notices E5 VII Authorization for Changes and Approvals E6 VIII Entire Agreement E6
Attachment I Scope of Work Attachment II Schedule of Work Attachment III General Provisions INTERCONNECTION INSTALLATION AGREEMENT THIS AGREEMENT ("Installation Agreement"), entered into this 27th day of April, 1999, between Jersey Central Power & Light Company d/b/a GPU Energy, (hereinafter referred to as the "Company") and AES Red Oak, L.L.C., (hereinafter referred to as "Power Producer"), collectively "Parties". The Parties acknowledge that GPU Service, Inc., shall act as agent for the Company concerning the administration of this Installation Agreement. RECITALS WHEREAS, Power Producer desires to build the Red Oak power plant and interconnect with the Transmission System; and WHEREAS, the Company is willing to design, furnish, install and own certain facilities required to interconnect Power Producer's Facility with the Transmission System, as more fully defined and described in the Generation Facility Transmission Interconnection Agreement between the Parties ("Company Interconnection Facilities"). WHEREAS, Power Producer has placed a high priority on the Schedule of Work and desires that the Company accept Bonus/Liquidated Damages provisions relating to this Installation Agreement. WHEREAS, the Company is willing to accept Bonus/Liquidated Damages provisions relating to this Installation Agreement. NOW, THEREFORE, in consideration of the mutual representations, covenants, promises and agreements hereinafter set forth, the Parties hereto, intending to be legally bound, hereby covenant and agree as follows: ARTICLE I - SCOPE OF WORK The Company shall, in accordance with the provisions set forth herein, provide all labor, supervision, materials and equipment necessary to perform the interconnection installation as more fully described in Attachment I, attached hereto and made a part hereof, entitled "Scope of Work". ARTICLE II - SCHEDULE OF WORK The Company shall use reasonable efforts to perform the Scope of Work on a timely basis, completing the installation within 18 months of the date Power Producer issues a notice to proceed, all in accordance with the milestone schedule set forth in Attachment II, which is attached hereto and made a part hereof, entitled "Schedule of Work". The Company and Power Producer shall conduct monthly informational meetings to update the status of the project, scheduled events in the upcoming months, all monies previously committed by Company on behalf of the Power Producer's Project, and all monies to be committed in the upcoming months. The Company will provide and update a list of all interconnection equipment (as identified in Appendix B) already ordered, all equipment received, the actual delivery date or estimated delivery date if still outstanding, and the return/restocking fee prior to delivery. Notwithstanding the foregoing, if the Power Producer does not issue a notice to proceed prior to December 31, 1999, the Company shall be entitled to revise the milestone schedule set forth in Attachment II by extending the date for completing the installation by up to four (4) months, and adjusting the milestones accordingly, as may be necessary to permit the completion of the installation consistent with the maintenance and outage schedule approved by PJM for the Transmission System. The Company agrees that if extension of the schedule or adjustment of the milestones is necessary, as stated above, the Company will use all reasonable E2 methods to mitigate the length of the extension. Furthermore, the Company will not extend the schedules or adjust the milestones to achieve the bonus described in Article IV of this Installation Agreement. ARTICLE III - PAYMENT Power Producer shall pay the Company for the actual costs of all services performed by the Company, as specified in Attachment I - Scope of Work. Costs shall include, but not be limited to, all labor charges, expenses, materials and equipment charges, subcontractor costs, overheads and all applicable permits, fees and sales, use or any other taxes. Power Producer shall provide an advanced payment of $100,000 at the time this Installation Agreement is executed, a second payment of $200,000 at the time of the issuance of the notice to proceed, and a third payment of $1.7 million within 60 days of the notice to proceed. The Company agrees that it will not exceed $200,000 in expenditures during said 60 day period. The total amount shall be used by the Company during the execution of the work first to offset AFUDC charges, then to offset the final invoiced costs. The Company shall submit monthly invoices for work performed. Each invoice shall include supporting documentation and shall state the dates of performance covered by the invoice. Invoices in the final stages of the project will be adjusted to credit for the application of advance payment. Terms of payment shall be net 30 days from the date of invoice issuance. Interest shall be assessed on payments received after their due date at the interest rate applied to prime commercial loans then in effect at the main office of Citibank N.A., located in New York, N.Y. or its successor, calculated from the due date to the date of payment. Power Producer may, at any time, assign its payment obligations in this Installation E3 Agreement to the purchaser of the output of the Red Oak facility. Power Producer shall provide the Company with such notice of such assignment, identifying the assignee. Following receipt of such notice, the Company shall direct its invoices under this Installation Agreement to the assignee with a copy to Power Producer. No such assignment, however, shall release or in any way discharge Power Producer from the performance of its obligations (including any or all payment obligations) under this Installation Agreement. ARTICLE IV - BONUS/LIQUIDATED DAMAGES If the actual completion date for the installation varies from the date shown in the Schedule of Work Attachment II, the following provisions shall apply: 1. If the actual completion date is later than the scheduled completion date (i.e., 540 days from the notice to proceed), the Company will pay Power Producer Liquidated Damages in the amount of $5,000 per day for each day by which the installation of the work is not complete for up to and including 45 days. 2. If the actual completion date is earlier than the scheduled completion date (i.e., 540 days from the notice to proceed), Power Producer will pay the Company a Bonus for early completion in the amount of $5,000 per day for each day by which the installation of the work is completed early, for up to and including 30 days. It is understood by the Parties that the Company will utilize overtime from time to time during the installation of the Interconnection Facilities for the purpose of properly scheduling the work. Examples of this are the use of overtime when working in active substations as required to minimize the duration of substation outages or to complete work activities which are better completed in one day rather than extending the work into a second day. It is also understood by the parties that overtime is not intended to be used purely for E4 the benefit of accelerating schedule to achieve the Bonus. If overtime is used for this purpose, the premium portion of overtime cost will be deducted from the Bonus amount. If it becomes apparent at any time that the Company will not complete the installation of the work within 45 days after the scheduled completion date (i.e., 540 days from the notice to proceed), and the Company cannot within 30 days (of the delay becoming known) propose a recovery plan reasonably acceptable to Power Producer, then Power Producer shall have step in rights to complete the work in accordance with Company's specifications and pursuant to Good Utility Practice, provided that Power Producer can demonstrate that they could complete more quickly than the Company. ARTICLE V - GENERAL PROVISIONS The terms and conditions contained in Attachment III, attached hereto and made part hereof, entitled "General Provisions", dated March 18, 1999 shall apply to all services performed under this Installation Agreement. The terms not otherwise defined in the Installation Agreement shall have the meanings set forth in the Generation Facility Transmission and Interconnection Agreement between the Parties. ARTICLE VI - NOTICES Any notice required under this Installation Agreement shall be deemed to have been given at the time it is received in writing by the party being notified. The designees authorized to give and receive such notices are as follows: 1. The Company designees authorized to give and receive such notices are as follows: Bradley J. Breidinger Manager - Transmission Investment Planning 2800 Pottsville Pike Reading, PA 19605 Or Post Office Box 16001 Reading, PA 19604-0001 E5 2. The Power Producer designees authorized to give and receive such notices are as follows: Louis J. Anatrella Vice President AES Red Oak, L.L.C. 1001 North 19th Street Arlington, VA 22209 ARTICLE VII - AUTHORIZATION FOR CHANGES AND APPROVALS A. This Installation Agreement may not be amended or modified except by a written instrument signed by each of the Parties hereto. B. The Company designated representatives listed below are the only persons authorized to bind the Company under this Installation Agreement, including any written direction or amendment hereto: Robert S. Zechman VP - Engineering & Operations ARTICLE VIII - ENTIRE AGREEMENT This Installation Agreement, together with that certain Generation Facility Transmission Interconnection Agreement between the Parties of even date herewith, constitute the entire agreement between the Company and the Power Producer with respect to the performance by the Parties of the interconnection installation described herein. They supersede all prior or contemporaneous communications, representations, or agreements, representations, statements, or agreements other than those herein expressed, whether oral or written, with respect to the subject matter hereof and has been induced by no representations, statements, or agreements other than those herein expressed. E6 IN WITNESS WHEREOF, the Parties hereto have executed this Agreement by the undersigned thereunto duly authorized as of the date first written above. ATTEST: AES RED OAK, L.L.C. BY: /s/ Charles Falter BY: /s/ Louis J. Anatrella ---------------------------------- ------------------------------- TITLE: TITLE: VP ------------------------------- ---------------------------- DATE: DATE: 4-27-99 -------------------------------- ----------------------------- JERSEY CENTRAL POWER & LIGHT COMPANY d/b/a GPU ENERGY ATTEST: BY: /s/ William C. Matthews By: /s/ R. S. Zechman ---------------------------------- ------------------------------ TITLE: TITLE: Vice-President ------------------------------- ---------------------------- DATE: DATE: April 27, 1999 -------------------------------- ----------------------------- Executed in duplicate. E7 Attachment I Page 1 INTERCONNECTION INSTALLATION AGREEMENT SCOPE OF WORK Services to be performed by the Company: The Company will provide all labor, supervision, materials, equipment and tools needed to design, furnish and install the Company Interconnection Facilities for the Red Oak project. It is understood by the Parties, additional items for interconnection and reinforcement may be identified, the interconnection configuration may change, and the actual costs will differ from the estimated costs shown below. In addition, it is understood by the Parties that the Power Producer will pay for all actual costs incurred by the Company under this installation Agreement. AES RED OAK - RADIAL TAP
ITEM DESCRIPTION ESTIMATED COST - ---- ----------- -------------- 1 Transmission Tap $ 325,000 2 Terminals 4 @ $422,000 $1,688,000 3 New 230 kV Switching Station $2,569,000 4 Wave Trap at Freneau $ 38,000 5 Fiber Optic Line (4 miles) $ 200,000 SUB TOTAL $4,820,000 Return (8.64%) $ 416,448 TOTAL $5,236,448
Note: In developing this estimate no subsoil samples have been taken and evaluated. If the subsoil proves unstable, steel pole foundation costs may rise and increase the total cost. Attachment II Page 1 INTERCONNECTION INSTALLATION AGREEMENT SCHEDULE OF WORK GPU ENERGY COMMITMENTS: INSTALLATION - MILESTONES
SUBSTATION NOTICE TO PROCEED DATE PLUS ---------- --------------------------- Requisition Circuit Breakers 47 DAYS Complete Design & Engineering 309 DAYS Finish Foundations 324 DAYS Receive Materials 331 DAYS TAP INTERCONNECTION ------------------- Complete Design & Engineering 272 DAYS Finish Foundations 345 DAYS Receive Materials 391 DAYS Complete Structures & Electrical Construction 451 DAYS Provide those Company Interconnection Facilities 540 DAYS (18 MONTHS)* necessary to permit the Power Producer to energize the switchyard and commence commissioning of the Facility.
*Completion of installation. NOTES: 1) If the notice to proceed occurs after December 31, 1999, the Company shall be entitled to extend the date for completing the Scope of Work by up to four (4) months and adjust the milestones accordingly. 2) The Power Producer must provide the area for the GPU Substation in a final sub-grade condition ready for the start of construction within seven (7) months of the issue of the notice to proceed, plus provide an easement and continuous access to that area and the area over which the transmission line travels to the edge of the existing GPU right-of-way. Any delay on behalf of the Power Producer will delay the Company in meeting their commitment dates on a day-for-day basis. Attachment III Dated March 18, 1999 Page 1 INTERCONNECTION INSTALLATION AGREEMENT GENERAL PROVISIONS INSURANCE The Company shall, at its sole expense, obtain and maintain in effect at all times on and after the date hereof the insurance described below, with insurers reasonably acceptable to Power Producer, and shall provide Power Producer with evidence of such insurance upon request. All insurance policies identified herein, except Worker's Compensation Insurance, shall name the Power Producer as an additional insured: (a) workers' compensation insurance in forms and within statutory limits and employer's liability with limits of not less than $1,000,000; (b) comprehensive general liability insurance (excluding automobile liability) covering personal injury and property damage to third parties and having a limit of not less than $1,000,000 per occurrence and $1,000,000 in the aggregate; and (c) automobile liability insurance covering owned and leased vehicles used in the performance of services pursuant to this Installation Agreement, covering personal injury and property damage to third parties, with a limit of not less than $1,000,000 per occurrence. LIMITATION OF LIABILITY A. Notwithstanding any other provisions of this Installation Agreement, in no event shall the Company nor its respective officers, directors, partners, agents, employees or Affiliates, be liable to the Power Producer or its Affiliates, officers, directors, partners, agents, employees, successors or assigns, for claims for incidental, special, indirect or consequential damages of any nature connected with or resulting from performance or non-performance of this Installation Agreement, including without limitation, claims in the nature of lost revenues, income or profits or losses, damages or liabilities under any financing, lending, construction, or maintenance contracts, agreements or arrangements to which the Power Producer may be party irrespective of whether such claims are based on warranty, negligence, strict liability, contract, or operational loss or otherwise. Provisions of this Section A shall survive the termination, cancellation, suspension or completion or expiration of this Installation Agreement. B. The total liability of the Company under this Installation Agreement for all claims of any kind, whether based on contract, indemnity, warranty, tort (including negligence), strict liability, duty to warn, or otherwise, for all damages or losses relating to or resulting from the performance of services by the Company pursuant to this Installation Agreement, or the performance of or failure to perform the services described more fully under Attachment III Dated March 18, 1999 Page 2 the Scope of Work within this Installation Agreement is limited to the amount of money paid to the date of the claim. For purposes of this Installation Agreement the Company includes Metropolitan Edison Company, its parent and affiliates and officers, directors, employees, representatives, associates, agents, successors and assigns of all such companies. Also, the remedies expressed in this Installation Agreement are the only remedies for any claims made in connection with this Installation Agreement. C. The provisions of this paragraph and any other provisions of this Installation Agreement providing for limitation of or protection against liability shall apply to the full extent permitted by law. D. The provisions of this paragraph and any other provisions of this Installation Agreement providing for limitation of or protection against liabilities between the Parties hereto shall survive termination of this agreement or completion of the work as described herein. GRATUITIES The Company prohibits their employees from using their official position for personal financial gain, or from accepting any personal advantage from anyone under circumstances which might reasonably be interpreted as an attempt to influence the recipients in the conduct of their official duties. Power Producer or its employees shall not, under circumstances which might reasonably be interpreted as an attempt to influence the recipients in the conduct of their duties, extend any gratuity or special favor to employees of the Company. CLAIMS/DISPUTES/GOVERNING LAWS A. Any claim or dispute which either party may have against the other party, arising out of this Installation Agreement or the Scope of Work, shall be presented by the claimant in writing to the other party no later than Thirty (30) Days after circumstances which give rise to the claim or dispute have taken place. The claim or dispute shall contain a concise statement of the question or dispute, together with relevant facts and data to fully support the claims. B. In the event of any such claim or dispute, the Parties shall use their best effort to resolve the claim or dispute, initially, through good faith negotiations or upon the failure of such negotiations, through Alternative Dispute Resolution (ADR) techniques in accordance with the Model Procedure for Mediation of Business Disputes as published by the Center for Public Resources; provided however, that nothing therein contained shall prohibit either party from terminating its participation in ADR during any stage of ADR or if either party believes that the dispute is not suitable for ADR techniques or if such techniques do not produce results satisfactory to the Parties from proceeding in accordance with Paragraph C hereof. C. If any claim or dispute arising hereunder is not resolved in accordance with Paragraph B above, either party may, upon giving the other party at least ten (10) days prior written notice, initiate litigation to submit such claims or disputes for decision by a court of competent jurisdiction of the Commonwealth of Pennsylvania in accordance with and governed by the laws of Pennsylvania. Attachment III Dated March 18, 1999 Page 3 ACCESS The Power Producer will allow access to any premises under the Power Producer's immediate control and obtain appropriate permission to allow the Company's employees or subcontractor's access to premises not under the Power Producer's control that the Company finds necessary to access in order to perform the services more fully described herein. WORKMANSHIP A. The Company represents to the Power Producer that it will perform the services as described in this agreement, in a good and workmanlike manner and in accordance with all applicable laws, rules, regulations, orders and policies. B. POWER PRODUCER ACKNOWLEDGES THAT THERE ARE NO IMPLIED WARRANTIES FROM THE COMPANY AND/OR WAIVES ANY WARRANTIES THAT MAY ARISE BY OPERATION OF LAW, CUSTOM, USAGE, INCLUDING AMONG OTHER THINGS, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. C. Damages resulting from any and all causes whatsoever, including but not limited to, breach of contract, breach of warranty, negligence, or strict product liability, will be exclusively limited to this paragraph and the Limitation of Liability paragraph contained herein. EX-10.23 9 ex-10_23.txt EX-10.23 EXHIBIT 10.23 An asterisk ([*]) indicates that confidential information has been omitted and filed separately with the Securities and Exchange Commission as part of a Confidential Treatment Request. GUARANTY BY THE WILLIAMS COMPANIES, INC. GUARANTY (this "GUARANTY"), dated as of March 1, 2000, by The Williams Companies, Inc., a Delaware corporation (the "GUARANTOR"), in favor of AES Red Oak, L.L.C., a Delaware limited liability company ("GUARANTEED PARTY"), pursuant to Section 18.3 of that certain Fuel Conversion Services, Capacity and Ancillary Services Purchase Agreement, dated as of September 17, 1999, by and between Guaranteed Party and Williams Energy Marketing & Trading Company, a Delaware corporation and a subsidiary of Guarantor (the "COMPANY"), as modified or supplemented from time to time (the "PPA"). RECITALS WHEREAS, Guaranteed Party has agreed to enter into the PPA in reliance upon the Guarantor's agreement, pursuant to the terms and conditions set forth below, to provide this Guaranty to Guaranteed Party; and WHEREAS, Guarantor is willing to provide this Guaranty to Guaranteed Party, on the terms and conditions set forth below, as an inducement to Guaranteed Party to enter into the PPA with the Company. NOW, THEREFORE, in consideration of the above premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be bound hereby, the Guarantor agrees as follows: 1. OBLIGATIONS OF GUARANTOR. Subject to the Guaranty Cap set forth in Section 2 of this Guaranty, the Guarantor unconditionally and irrevocably guaranties, as primary obligor and not merely as surety, to and for the benefit of Guaranteed Party, the prompt payment and performance when due of all present and future obligations (i) of the Company to make Total Fixed Payments pursuant to, and as such term is defined in, the PPA and (ii) to pay damages arising under the PPA in respect of the Company's obligation to make Total Fixed Payments under the PPA (including damages related to the loss by Guaranteed Party of the Total Fixed Payments arising from any breach by the Company of the PPA or a termination of the PPA for cause by Guaranteed Party) together with any and all reasonable expenses (including reasonable attorneys' fees and expenses) incurred by Guaranteed Party in enforcing this Guaranty (the obligations referred to in clauses (i) and (ii) collectively and individually, the "OBLIGATIONS"). Subject to the Guaranty Cap set forth in Section 2 of this Guaranty, the Guarantor agrees, that upon the failure of the Company to pay any of the Obligations when they become due, the Guarantor will, upon written demand by Guaranteed Party, pay, or cause to be paid, to Guaranteed Party any and all such unpaid Obligations. 2. MAXIMUM GUARANTEED AMOUNT. (a) The aggregate liability of the Guarantor under this Guaranty and Guaranteed Party's right of recovery hereunder is limited to a total aggregate amount of [*] [*] (the "GUARANTY CAP"). (b) [*] 3. NATURE OF OBLIGATIONS. The Guarantor guaranties that the Obligations shall be paid strictly in accordance with the terms of the PPA, regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of Guaranteed Party with respect thereto. The duties of the Guarantor under this Guaranty are independent of the Obligations, and a separate action or actions may be brought and prosecuted against the Guarantor to enforce this Guaranty, irrespective of whether any action is brought against the Company or whether the Company is joined in any such action or actions. Guaranteed Party shall not be obligated to file any claim relating to the Obligations if the Company becomes subject to a bankruptcy, reorganization or similar proceeding and neither the failure of Guaranteed Party to so file, nor the existence of any such proceeding, shall affect the Guarantor's obligations hereunder. The liability of the Guarantor under this Guaranty as specified in Section 1 of this Guaranty shall, to the fullest extent permitted by law, be absolute and unconditional irrespective of: (i) any change in the time, manner or place of payment of, or in any other term of, all or any of the Obligations, or any other amendment or waiver of or any consent to departure from the PPA, including, without limitation, any increase in the Obligations; provided, however, no action taken pursuant to this Section 3(i) shall be construed to extend the term of this Guaranty or increase the amount of the Guaranty Cap; (ii) any manner of sale or other disposition of assets of the Company or any of its Affiliates (as such term is defined in the PPA); or (iii) any change, restructuring or termination of the structure or existence of the Company or any of its Affiliates. The Guarantor shall not contest the amount, Guaranteed Party's right to collect, or Guaranteed Party's collection of, the Obligations (as they may be revised from time to time as provided for herein) in any future proceeding including, without limitation, civil, criminal, regulatory, administrative, judicial, equitable, or appellate, on the basis that the Obligations constitute a penalty, are or will result in a forfeiture, or are otherwise unlawful; provided, however, that, notwithstanding anything to the contrary contained herein, the Guarantor may 2 assert that Guaranteed Party's actual damages are less than the Obligations, contest liability or assert any other claim or defense that the Company could assert, except as expressly limited herein, so long as the Guarantor does not duplicate or reassert any claims or initiate any proceedings that were resolved or concluded previously by the Company. The Guarantor agrees that the obligations of the Guarantor set forth in this Guaranty shall be direct obligations of the Guarantor, and such obligations shall be absolute and unconditional and shall not be subject to any counterclaim, set-off, deduction, diminution, abatement, recoupment, suspension, deferment, reduction or defense (other than full and strict compliance by the Guarantor with its obligations hereunder) based upon any claim the Guarantor or any other Person (as such term is defined in the PPA) may have against Guaranteed Party or the Company. This Guaranty shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any of the Obligations is rescinded or must otherwise be returned upon the insolvency, bankruptcy or reorganization of the Company or otherwise, all as though such payment had not been made. 4. WAIVER. The Guarantor hereby waives demand, promptness, diligence, presentment, notice of acceptance, notice of protest for non-payment and any other notice or similar action with respect to any of the Obligations and this Guaranty and any requirement that Guaranteed Party exhaust any right or take any action against the Company or any other Person. 5. SUBROGATION. The Guarantor shall not exercise any rights which it may acquire by way of subrogation under this Guaranty, by any payment made hereunder or otherwise, until all Obligations and all other amounts payable under this Guaranty shall have been paid in full to Guaranteed Party. If any amount shall be paid to the Guarantor on account of any subrogation rights at any time prior to the payment in full of the Obligations and all other amounts payable under this Guaranty, such amount(s) shall be paid immediately to Guaranteed Party to be credited and applied to the Obligations, whether matured or unmatured, in accordance with the terms hereof and the PPA. Upon full payment of the Obligations and all other amounts payable under this Guaranty, Guarantor shall be subrogated to the rights of Guaranteed Party, and Guaranteed Party shall take all such reasonable actions, at the Guarantor's sole expense, as Guarantor shall reasonably request to effect such subrogation rights. 6. CERTAIN RIGHTS AND POWERS OF GUARANTEED PARTY. Guaranteed Party shall have all of the rights and remedies available under applicable law and may proceed by appropriate court action to enforce the terms hereof and to recover damages for the breach hereof. Each and every remedy of Guaranteed Party shall, to the extent permitted by law, be cumulative and shall be in addition to any other remedy now or hereafter existing at law or in equity. At the option of Guaranteed Party and upon notice to the Guarantor, the Guarantor may be joined in any action or proceeding commenced by Guaranteed Party against the Company in respect of any Obligation, and recovery may be had against the Guarantor in such action or proceeding or in any independent action or proceeding against the Guarantor, without any requirement that Guaranteed Party first assert, prosecute or exhaust any remedy or claim against the Company. 7. REPRESENTATIONS AND WARRANTIES. The Guarantor represents and warrants to Guaranteed Party as follows: 3 (a) ORGANIZATION AND GOOD STANDING. The Guarantor is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and each jurisdiction in which it currently conducts its business. The Guarantor has all requisite corporate power and authority to carry on its business at it is now conducted and as contemplated by this Guaranty, and to enter into and perform its obligations hereunder. (b) DUE AUTHORIZATION; NO CONFLICTS. The execution, delivery and performance by the Guarantor of the Guaranty has been duly and effectively authorized by all necessary corporate action of the Guarantor. No other corporate proceedings are necessary to authorize the execution and delivery by the Guarantor of this Guaranty; and this Guaranty is the valid and binding obligation of Guarantor, enforceable in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency or similar laws from time to time in effect that affect creditors' rights generally or by general principles of equity. Neither the execution and delivery of this Guaranty nor compliance by the Guarantor with any of the provisions hereof will (i) violate, or conflict with, or result in a breach of any provisions of, or constitute a default (or an event which, with notice or laps of time or both, would constitute a default) under, or result in the termination of, or accelerate the performance required by, or result in the creation of any lien upon any of the properties or assets of the Guarantor under any of the terms, conditions or provisions of, the Certificate of Incorporation or By-Laws of the Guarantor in effect on the date of this Guaranty (hereinafter, the "Effective Date") or any agreement or other instrument or obligation to which the Guarantor is a party at the Effective Date, or by which the Guarantor or any of its properties or assets or may be bound or affected as of the Effective Date, or (ii) violate any order, writ, injunction decree, arbitration award, statute, rule or regulation applicable at the Effective Date to the Guarantor or any of its properties or assets. (c) NO CONSENT REQUIRED. No permit, authorization, consent, approval, waiver, exception, variance, ruling, order decree, exemption, filing, recording, registration, notice or declaration (collectively, "GOVERNMENTAL APPROVAL"), is required or to be made on the Guarantor's behalf with any federal, state, county, municipal, regional, local, territorial or other governmental department, regulatory body, commission, board, bureau, agency, taxing authority or other instrumentality (collectively, "GOVERNMENTAL AUTHORITY") to authorize the execution and delivery of this Guaranty or the taking of any future action contemplated hereby, except for those Governmental Approvals (i) which have already been obtained or (ii) the failure of which to obtain would not have an adverse effect on the ability of the Guarantor to perform and satisfy its obligations hereunder. (d) NO DEFAULT UNDER OTHER AGREEMENTS. The Guarantor is not in default, and no condition exists that with notice or lapse of time or both would constitute a default, under any mortgage, deed of trust, indenture or other instrument or agreement to which it is a party or by which it or any of its properties or assets may be bound, that would have a material adverse effect on the Guarantor's ability to perform under this Guaranty; and the Guarantor is not in violation of any federal, state, or local rules, ordinances, judgments, decrees, injunctions, writs, interpretations, licenses and permits or orders of any court, arbitrator (collectively, "REQUIREMENTS OF LAW"), or Governmental Authority that could have a material adverse effect on the Guarantor's ability to perform under this Guaranty. 4 (e) LITIGATION. There is no litigation, proceeding, arbitration or government investigation pending or, so far as known to the Guarantor, threatened with respect to or otherwise relating to the Guarantor which if adversely determined could, in any one case or in the aggregate, have a material adverse effect on the ability of the Guarantor to comply with its obligations under this Guaranty. (f) COMPLIANCE WITH LAW. (i) The Guarantor has complied in all material respects with all Requirements of Law relating to this Guaranty, the Guarantor has received no written notice to the effect that, or otherwise been advised in writing that, it is not in compliance with any requirement of law or governmental approval relating to this Guaranty, and the Guarantor has no reason to believe that any currently existing circumstances are likely to result in violations by the Guarantor of any such requirement of law which could in any one case or in the aggregate, have a material adverse effect on the ability of the Guarantor to perform under this Guaranty; and (ii) to the best of the knowledge of the Guarantor, there is not now pending any proceeding, hearing or investigation with respect to the adoption of amendments or modifications to any existing requirement of law or governmental approval with respect to such matters which, if adopted, would have a material adverse effect on the ability of the Guarantor to comply with its obligations under the Guaranty. 8. COVENANTS. The Guarantor covenants and agrees that, so long as any part of the Obligations shall remain unpaid, the Guarantor shall: (a) PERFORMANCE AND COMPLIANCE WITH OTHER AGREEMENTS. Perform and comply with each of the material provisions of each material indenture, credit agreement, contract or other agreement by which the Guarantor is bound, non-performance or non-compliance with which would have a material adverse effect on its ability to perform its obligations hereunder, except material contracts or other agreements being contested in good faith. (b) PRESERVATION OF CORPORATE EXISTENCE, ETC. Preserve and maintain its corporate existence and preserve its material rights, franchises and privileges to conduct its business substantially as conducted on the date hereof. (c) COMPLIANCE WITH LAWS, ETC. Comply with all Requirements of Law and Governmental Approvals, non-compliance with which would have a material adverse effect on its ability to perform its obligations herein, except laws, rules, regulations and orders being contested in good faith. (d) NOTICE OF BREACH. Provide, as soon as possible and in any event within three (3) business days after the occurrence of any default or breach of the obligations applicable to the Guarantor hereunder, a statement of the Chief Financial Officer or Vice-President and Treasurer of the Guarantor setting forth details of the circumstances leading to such breach or default hereof and the action which the Guarantor proposes to take with respect thereto. (e) MERGERS, ETC. Not merge with any person, corporation, partnership, or other entity unless: (i) the surviving and resulting entity agrees in writing to be bound hereby to the same 5 extent as the Guarantor, and (ii) immediately after giving effect thereto, no event of default or breach of this Guaranty shall have occurred and be continuing. 9. NO WAIVER. No failure on the part of Guaranteed Party to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. 10. CONTINUING GUARANTY. This Guaranty is a continuing guaranty and shall (i) remain in full force and effect until the payment in full of all amounts payable under this Guaranty, (ii) be binding upon the Guarantor, its successors and assigns, and (iii) inure to the benefit of, and be enforceable by, Guaranteed Party and its successors, transferees and assigns. 11. WAIVER OF NOTICES. The Guarantor hereby unconditionally and irrevocably waives all notices to and demands upon the Company or the Guarantor and all other formalities, the omission of any of which or delay in performance of which, might, but for the provisions of this paragraph, by rule of law, under equitable principles or otherwise, constitute grounds for relieving or discharging the Guarantor in whole or in part from its obligations hereunder. 12. NO CONSEQUENTIAL DAMAGES. Neither Party shall be liable to the other under this Guaranty or otherwise for any exemplary, consequential, special, or punitive losses or damages that may be incurred by either Party as a result of their execution of and performance under this Guaranty. 13. FURTHER ASSURANCES. The Guarantor, at its sole cost and expense, shall cause to be promptly and duly taken, executed, acknowledged and delivered, such further documents and instruments as Guaranteed Party may from time to time reasonably request in order to carry-out more effectively the intent and purposes of this Guaranty. 14. SEVERABILITY. If any provision of this Guaranty shall be held or deemed to be or shall, in fact, be illegal, inoperative or unenforceable, the same shall not affect any other provision or provisions herein contained or render the same invalid, inoperative or unenforceable to any extent whatsoever. 15. COUNTERPARTS; EFFECTIVENESS. This Guaranty may be executed in any number of counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument. The effective date of this Guaranty for all purposes shall be the date specified on page one (1) above. 16. AMENDMENT; WAIVER; REQUIREMENT OF WRITING. This Guaranty cannot be amended, changed, modified, released or discharged except by a writing signed by the party against whom enforcement of the amendment, change, modification or waiver is sought. 17. ADDRESS FOR NOTICES. Any notice, request, consent, waiver or other communication required or permitted hereunder shall be effective only if it is in writing and personally delivered or sent by certified or registered mail, postage prepaid, or by nationally recognized overnight courier, addressed as set forth below: 6 If to Guaranteed Party: AES Red Oak, L.L.C. c/o The AES Corporation 1001 North 19th Street Arlington, VA 22209 Attention: General Counsel Telephone: (703) 522-1315 Facsimile: (703) 528-4510 If to Guarantor: The Williams Companies, Inc. One Williams Center Tulsa, OK 74172 Attention: Treasurer Telephone: (918) 573-5551 Facsimile: (918) 573-2065 or to such other person or address as the addressee may have specified in a notice duly given to the sender as provided herein. Such notice or communication shall be deemed to have been given as of the date received by the recipient thereof. 18. GOVERNING LAW. This Guaranty shall be construed in accordance with and governed by the laws of the State of New York without regard to the conflict of laws provisions of such laws. 19. SUBMISSION TO JURISDICTION. Each of Guaranteed Party and the Guarantor hereby irrevocably and unconditionally: (a) submits for itself and its property in any legal action or proceeding relating to this Guaranty, or for recognition and enforcement of any judgment in respect thereof, to the exclusive general jurisdiction of the courts of the State of New York, the courts of the United States of the Southern District of New York, and appellate courts with jurisdiction over any appeals therefrom; (b) consents and agrees that any such action or proceeding may be brought in and only in such courts and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same; (c) agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to its address set forth in Section 17 of this Guaranty, or at such other address of which the other party shall have been notified pursuant thereto; and 7 (d) agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law. 20. ASSIGNMENT. This Guaranty may be assigned by the Guarantor only with prior written consent of Guaranteed Party, which consent shall not be unreasonably withheld. Guaranteed Party may assign this Guaranty only as permitted under the PPA with respect to assignments by Guaranteed Party of its rights thereunder. This Guaranty shall be binding upon, and inure to the benefit of, the parties hereto and their respective successors and permitted assigns. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 8 IN WITNESS WHEREOF, the Guarantor and Guaranteed Party have each caused this Guaranty to be executed on its behalf by its duly authorized office as of the date shown above. THE WILLIAMS COMPANIES, INC. as Guarantor By: /s/ James G. Ivey ------------------------------------------- Name: James G. Ivey Title: Treasurer ACCEPTED AND ACKNOWLEDGED: AES RED OAK, L.L.C. By: /s/ Charles Falter ------------------------------------------- Name: Charles B. Falter Title: Vice President [GUARANTY BY THE WILLIAMS COMPANIES, INC.] EXHIBIT A AES RED OAK PROJECT THE WILLIAMS COMPANIES, INC. GUARANTY CAP REDUCTION SCHEDULE
MAY 30 NOVEMBER 30 ------ ---------- YEAR REDUCTION REDUCTION ---- --------- ---------- [*]
[EXHIBIT A] -----END PRIVACY-ENHANCED MESSAGE-----