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EXHIBIT 10.28
OPERATION AND MAINTENANCE AGREEMENT
THIS OPERATION AND MAINTENANCE AGREEMENT (this "Agreement") dated as of
June 25, 1999, is entered into by and between Xxxxxx Kill Power LLC, a Delaware
limited liability company (the "Owner"), and NRG Xxxxxx Kill Operations, Inc., a
Delaware corporation (the "Operator").
RECITALS
1. The Owner owns an electricity generation facility in Staten
Island, New York (the "Facility").
2. The Operator has expertise in the operation and maintenance of
electricity generating facilities of the type and character of the Facility and
desires to provide administrative, operating and maintenance services for the
Facility on the terms and conditions set out herein.
3. The Owner and the Operator desire to set forth the terms pursuant
to which the Operator shall provide the administrative, operating and
maintenance services for the Facility.
AGREEMENT
In consideration of the premises and the covenants, conditions, and agreements
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledge, the parties hereto agree as
follows:
ARTICLE 1
DEFINITIONS
Whenever used in this Agreement with initial capitalization, the
following terms shall have the meanings specified or referred to in this Article
1.
"Affiliate" means, with respect to any person or entity, (i) each
entity that such person or entity Controls, (ii) each person or entity that
Controls such person or entity, and (iii) each entity that is under common
Control with such person or entity.
"Agreement" shall have the meaning provided in the introductory paragraph
hereof.
"Approved Operating Budget" means the Operating Budget as approved by the
Owner, as such Operating Budget may be modified in writing in accordance with
the terms of this Agreement.
"Calendar Quarter" means the three-month periods commencing January 1,
April 1, July 1 and October 1.
"Calendar Year" means the twelve-month period from January 1 to December
31 inclusive.
"Consumables" means water treatment chemicals, reagents and other
chemicals, lubrication fluids and filters, hydraulic fluids and filters, air
filters, ordinary fasteners (nuts, bolts, nails, etc., which are customarily
readily available on normal commercial terms), light bulbs and flourescent
tubes, ordinary gasket materials, gloves, flashlights, batteries, disposable
safety equipment and first aid supplies, replacement hand tools, solder and
welding rods, all supplies for maintenance and plant cleaning materials and
supplies, and all other items commonly considered to be consumables within
operations of similar facilities.
"Dispatch Schedule" means the schedule that shows the required generation
and fuel for the relevant time period as published by the Owner.
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"Effective Date" means the date of this Agreement.
"Equipment" means all of the mechanical and electrical equipment, pumps,
piping, Rolling Stock and controls of the Facility owned or controlled by the
Owner and used or intended to be used or useable in the generation of electric
power.
"Facility" is defined in Recital 1.
"Five Year Forecast" means a rolling five year operation and maintenance
plan and Operating Budget forecast (including major maintenance and capital
repairs, and recommended improvements and additions) prepared by the Operator
based on the Owner's proposed schedule for dispatch of the Facility for the same
period, submitted to the Owner for approval each July 1.
"Force Majeure" means an event which (i) is not within the reasonable
control of the Party claiming Force Majeure (the "Claiming Party"), (ii) was not
caused by the acts, omissions or delays of the Claiming Party or any person over
whom the Claiming Party has control, (iii) is not an act event or condition the
risks or consequences of which the Claiming Party has expressly agreed to assume
pursuant to this Agreement, and (iv) by the prompt exercise of due diligence,
the Claiming Party is unable to overcome or avoid or cause to be avoided. Force
Majeure includes, but is not restricted to acts of God, fire, civil disturbance,
labor dispute, labor or material shortage, sabotage, or action or restraint by
court order of any public or governmental authority (so long as the Claiming
Party has not applied for or assisted in the application for, and has opposed
where and to the extent reasonable, such government action).
"Hazardous Waste" means waste with inherent properties which make such
waste dangerous to manage by ordinary means, including, but not limited to
chemicals and other wastes defined as hazardous at any time during the term of
this Agreement by the State of [name of state where Facility located] or by any
applicable federal, state or local laws, ordinances, regulations, orders or
other actions promulgated or taken with respect thereto..
"Independent Public Accountant" means the firm of independent public
accountants of nationally recognized standing selected by the Owner to perform
an annual financial audit pursuant to the terms of this Agreement.
"In Market Availability ("IMA ")" means a measure of plant performance
for meeting the annual Dispatch Schedule. IMA shall be calculated by dividing
the actual net generation delivered to the grid by the level of generation
prescribed in the Dispatch Schedule, with no value assigned when dispatch is
scheduled at zero. The IMA shall not exceed 100%. The IMA shall be 96% or higher
for June, July, August and September. The IMA shall be 95% or higher for the
remaining months. The IMA shall be subject to correction for significant
equipment failures that require an outage or result in unsafe conditions or
violations of Legal Requirements.
" ISO" means the independent system operator established to sell Power in
the market served by the Facility.
"Labor Agreements" means the collective bargaining agreements between
Operator and local labor unions with respect to the operation of the Facility or
the maintenance thereof.
"Legal Requirements" means all laws, statutes, codes, ordinances,
Permits, orders, awards, judgments, decrees, injunctions, rules, regulations,
authorizations, consents, approvals, orders, franchises, licenses, directions
and requirements of all governments or governmental units, courts or
arbitrators, which now or at any time hereafter may be applicable to or affect
the Facility or any part thereof or any streets, alleys, passageways, sidewalks,
curbs, or gutters adjoining the Facility or any part thereof or any use or
condition of the Facility or any part thereof or the acquisition, construction,
ownership, use or operation of the Facility or any part thereof, except those
the non-compliance as to which will not have a material adverse effect on the
acquisition, construction, ownership or operation of the Facility.
"Margin" means, for the applicable period, the Owner's revenues less fuel and
direct operating and maintenance expenses.
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"Notice" is defined in Section 10.13.
"Notice of Termination" means that Notice issued by the Owner or Operator
pursuant to Article 5 of this Agreement which shall terminate this Agreement.
"Operating Account" means the account established by and in the name of
the Owner and funded from time to time with sufficient amounts to pay all
Operating Costs as the same accrue and are payable.
"Operating Budget" means the annual budget to be prepared by the Operator
pursuant to Section 2.2(b).
"Operating Costs" means the actual costs directly, properly and
reasonably incurred and paid for by the Operator from the Operating Account on
behalf of the Owner in the ordinary course of business solely for the
administration, operation and maintenance of the Facility, including, without
limitation or duplication: (a) wages and overhead costs for employees of the
Operator, including, without limitation, retirement plans, medical and life
insurance, disability and occupational hazard insurance, employee benefits,
employees savings plan, employee taxes and budgeted employee incentive fees; (b)
overtime; (c) employee training including tuition, travel, meals and lodging;
(d) all maintenance costs and expenses, including, without limitation,
scheduled, routine, preventative and unscheduled maintenance; (e) the cost of
Consumables, new and replacement spare parts, and all fuel expenses incurred
under any fuel agreements; (f) Plant Office Expenses; (g) capital expenditures
or replacement of Equipment and Rolling Stock approved in writing in advance by
the Owner; (h) care and handling of any Hazardous Waste; (i) Rolling Stock
Expenses; (j) cost of utility services for the Facility; (k) costs of legal,
accounting and consulting services including labor negotiations; (l) cost of
compliance with the Permits and Legal Requirements; (m) municipal, local and
franchise taxes on the Facility (but excluding any such taxes payable by
Operator as the Operator); (o) lease payments for property or easements and (p)
costs of insurance; provided, however, that no costs incurred or paid by the
Operator to any Affiliate of the Operator shall be treated as an Operating Cost
unless incurred in accordance with Section 4.12(c).
"Operator Fee" means the fee to be paid by the Owner Entity to Power
Marketing for the services provided pursuant to this Agreement as set forth in
Section 3.1.
"Performance Incentive" means the payment to the Operator under Article 9
for achieving certain performance levels of operation.
"Permits" means all of the consents, approvals, authorizations,
directions, licenses and permits issued by any federal, state or local agency or
authority to the Owner or the Operator with respect to the ownership,
construction, operation and maintenance of the Facility in a safe and
commercially sound manner.
"Person" means any individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, joint stock company,
government (or any agency or political subdivision thereof) or other entity of
any kind.
"Plant Office Expenses" means costs and expenses associated directly with
and incurred at the administrative offices of the Facility, including but not
limited to telephone and telecopy services, heat, electricity, postage and
overnight mail services, paper, envelopes, file folders, computer paper,
computer software, copy paper, copier and computer supplies, maintenance and
replacement of computer and office equipment, supplies, office cleaning and
maintenance (including light bulbs and fluorescent tubes), miscellaneous office
supplies, internet and cellular telephone services, and any other expenses
related to the Operator's use of the plant office, plant office equipment and
plant office operation.
"Power Pool" means the New York Power Pool or its successor.
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"Project Agreements" means agreements between the Owner and various third
parties as provided to the Operator by the Owner from time to time, including,
without limitation, those agreements listed on Exhibit A hereto:
"Prudent Operating Practices" means, at a particular time, those
practices, methods, equipment, and acts then engaged in or approved by a
significant portion of the electric utility industry and commonly used in
utility engineering and operations to operate and maintain equipment equivalent
to the Facility Equipment consistent with good business practices, economy,
reliability, safety, and expedition, having due regard for current editions of
the National Electric Code and other applicable electrical safety and
maintenance codes and standards, manufacturer's warranties and recommendations,
and all Legal Requirements governing the Facility.
"Rolling Stock" means locomotives, bulldozers, front-end loaders,
forklifts, mobile cranes, person lifts, pickup trucks, tractors, trailers,
automated sweeping equipment and the like, purchased or leased by the Owner for
use at the Facility.
"Rolling Stock Expenses" means expenses, such as fuels, maintenance and
materials, licenses (if required), lease payments, insurance, and backup
equipment for the Rolling Stock.
"Scheduling Coordinator" means the Person, designated by the Owner, that
is responsible for (i) developing the Owner's Dispatch Schedule, and (ii)
providing instructions to the Operator regarding the level of generation
required and fuel to be used to meet the Owner's revenue requirements.
"Subcontractor" means any person, firm or corporation which performs work
for the Operator or the Owner at the request and direction of the Operator
pursuant to the terms of this Agreement and, subject to the provisions of
Section 4.2(c), may include Affiliates of the Owner or the Operator. Such
Subcontractors shall be qualified by the Operator's evaluation of credentials
and qualifications in accordance with a qualification program approved by the
Owner.
ARTICLE 2
OPERATOR WORK SCOPE
2.1 Operator Work Scope:
(a) Subject to the provisions of Section 3.1, the Operator
agrees to administer, operate and maintain the Facility in accordance
with the terms and conditions of this Agreement.
(b) Subject to the terms of this Agreement and so long as it
remains in effect, the Owner hereby grants the Operator the non-exclusive
right (which shall not constitute an easement or other restriction on the
Facility) to enter on the premises on which the Facility is located and
to occupy and have free access to use the same for solely the purposes
set forth in this Agreement. The Operator agrees that in its capacity as
the Operator it does not and shall not claim at any time any interest or
estate of any kind or extent whatsoever in the Facility by virtue of this
Agreement or the Operator's occupancy or use of the Facility hereunder.
(c) Operator covenants that it will not cause or permit any
waste or destruction of, or damage to, the Facility, ordinary wear and
tear excepted, and shall not use or permit the use of the Facility other
than as described in this Agreement, and that it will not suffer to be
maintained any nuisance or unlawful or improper use of occupation of the
Facility; provided, however, that noise from equipment shall be referred
to the Owner for correction as a maintenance or capital budget item.
(d) The Operator agrees that all programs, procedures and other
intellectual property developed by the Operator for use on or at the
Facility shall remain the property of the Owner.
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2.2 General Duties: The Operator shall, in consideration for the
Operator Fee and Performance Incentive, administer, operate and maintain of the
Facility in accordance with the Approved Operating Budget, the Dispatch
Schedule, Prudent Operating Practices and all Legal Requirements. It is
understood and agreed that the Operator shall incur Operating Costs in the
Owner's name and such Operating Costs shall be payable from funds on deposit in
the Operating Account. The Owner shall manage the Operating Account, writing
checks, drafts, and making wire transfers, in paying Operating Costs. Without
limiting the generality of the first sentence of this Section 2.2, of the
Operator shall perform the following tasks:
(a) Perform all administrative work of the Facility including:
(i) Plan, schedule and conduct all business related to
the operation and maintenance of the Facility.
(ii) Coordinate the fuel supply including delivery,
unloading and inventory as required by the Dispatch Schedule, on a
day to day basis.
(iii) Develop a spare parts and inventory program and
submit the same to the Owner for approval, such program being
intended to minimize carrying costs of the Owner and risks of
shortages of inventory.
(iv) Based on the approved spare parts and inventory
program, and as provided for in the Approved Operating Budget,
purchase and inventory spare parts, materials, and supplies
(including Consumables and items covered by Plant Office Expenses
and Rolling Stock Expenses), and review and approve invoices for
same.
(v) Based on the Dispatch Schedule, ISO and Power Pool
rules (A) maintain the required IMA and (B) advise the Owner of
risks associated with fuel and dispatch issues, including any
recommended curtailments.
(vi) Provide such operating and maintenance consulting
services to the Owner as it may deem necessary or desirable.
(vii) Respond in a timely manner to written requests for
Facility information from the Owner.
(viii) Develop a qualification program for evaluating the
qualifications and credentials of Subcontractors, and maintain the
existing R Stamp program for boiler and pressure vessel repair.
(ix) Cooperate with and assist the Owner in performing
the Owner's obligations, and the obligations of any party acting
for or as the assignee of the Owner, under the Project Agreements.
(x) Obtain and maintain such workers' compensation,
unemployment and other employee-related insurance as is required
under applicable state law.
(xi) Negotiate and administer the Labor Agreements to
achieve continuity of labor forces, labor harmony and efficient
use of labor forces in accordance with the Approved Operating
Budget.
(xii) Maintain necessary administrative office facilities.
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(xiii) Jointly with the Owner, provide for good community
relations.
(xiv) Prepare and provide periodic reports on behalf of
and at the request of the Owner.
(xv) Provide recommendations to the Owner to increase
reliability and reduce expenses.
(xvi) Obtain and maintain required and appropriate levels
of insurance with respect to its activities hereunder.
(xvii) Provide assistance to the Owner in tracking purchase
and sales of emissions credits.
(b) Perform all work associated with the Annual Operating
Budgets including:
(i) Provide accounting for any monthly, quarterly, year
end or other reports.
(ii) Provide monthly and quarterly detailed financial and
operating reports with Approved Operating Budget comparison.
(iii) Review and approve all invoices.
(iv) Maintain true, complete and accurate cost ledgers
and accounting records in accordance with generally accepted
accounting principles ("GAAP")utilized by the Owner regarding the
services provided and expenses paid or incurred by it pursuant to
this Agreement.
(v) Cooperate with the Independent Public Accountant
authorized by the Owner to perform annual financial audits.
(vi) Provide a proposed Operating Budget on or before
July 1 of each year for the next eighteen (18) month period for
approval in advance by the Owner, based on the Owner's inputs. The
Operator shall take into account the Dispatch Schedule, fuel and
other contracts, and other relevant matters, in the preparation of
the proposed Operating Budget. The Operator shall list all
assumptions, including emissions data, and provide adequate
information to identify risks. For any partial Calendar Year, the
Operator shall submit a proposed Operating Budget to the Owner for
the balance of the first partial Calendar Year plus the following
Calendar Year for the Owner's approval.
(vii) Provide a proposed Five Year Forecast on or before
July 1 each year for the next five years for approval by the
Owner, based on the Owner's inputs.
(viii) Provide Notice to the Owner promptly if Operating
Expenses exceed or are expected to exceed the Approved Operating
Budget by the lesser of $50,000 or 10% of any individual line item
in the Approved Operating Budget, including detailed information
impacting specific line items. Provide proposed revisions to the
Operating Budget based on changes in the Owner's expected Dispatch
Schedule for the relevant period, and fuel and/or other contracts.
(ix) Identify and determine the necessity and cost of
capital improvements and annually recommend a capital budget to
the Owner.
(c) Perform operation and maintenance services at the Facility
including:
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(i) Maintain an effective and sufficient operating work
force through appropriate on-going hiring, training,
administration and compensation and coordination with the Owner's
management personnel.
(ii) Develop and maintain safety procedures, a safety
manual, an employee job-site conduct handbook and an effective
safety program, including, without limitation, fire and explosion
safety measures.
(iii) Operate and maintain the Facility in a clean, safe
and efficient manner in accordance with the Approved Operating
Budget, Dispatch Schedule, Prudent Operating Practices, the
Project Agreements, equipment manufacturers specifications and
warranty terms, and all Legal Requirements, including developing
and maintaining an environmental program. Such operation shall
economically limit the use of emission allowances.
(iv) Maintain true, complete and accurate operating logs,
records and reports necessary or beneficial for proper operation
and maintenance of the Facility.
(v) Maintain drawings, instruction books and operating
and maintenance manuals and procedures and revise drawings and
manuals as modifications are made. All such material, including
all revisions and updates, regardless of medium used, shall remain
the Owner's property.
(vi) Maintain all tools and instruments necessary to
operate and maintain the Facility.
(vii) Develop, implement and regularly update a
maintenance program that is intended to minimize maintenance
costs, maximize intervals between major maintenance outages, and
does not invalidate equipment manufacturers' warranties,
specifications and recommendations or Prudent Operating Practices
and meets the requirements of the authorized insurance inspector.
(viii) Schedule and perform or cause to be performed the
work specified in the maintenance program in accordance with the
Dispatch Schedule, the Approved Operating Budget, Prudent
Operating Practice, and all Legal Requirements.
(ix) Schedule, perform and record periodic operational
checks and tests of equipment in accordance with the equipment
manufacturers' specifications and recommendations Prudent
Operating Practices and all Legal Requirements, and arrange for
required environmental or other required specialized equipment
tests to be performed.
(x) Evaluate the nature and impact of any equipment
failure and if the failure is major or material, promptly provide
Notice to the Owner and review the situation with the Owner and
mutually agree on a reasonable remedy of the matter.
(xi) Cooperate with and assist the Owner's personnel in
obtaining and maintaining required Legal Requirements.
(xii) Operate the Facility in accordance with the Approved
Operating Budget for such items, and if a new operating budget is
not timely approved by the Owner, operate in accordance with the
preceding Approved Operating Budget until a new Operating Budget
is approved by the Owner, and approval shall be subject to dispute
resolution in a timely manner.
(xiii) Provide for necessary and desirable security
services for the Facility.
(xiv) Provide for building, structural and yard
maintenance services.
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(xv) Order, receive and maintain adequate inventories and
supplies.
(xvi) Provide the Owner and the Owner's designees with
unrestricted access to the Facility and cooperate with the Owner
and its representatives and designees in all Owner inspections of
the Facility. Such inspections may occur without Notice at any
time and shall not unreasonably interfere with personnel safety or
the operation and maintenance of the Facility.
(xvii) Operate and maintain the Facility in such a way as
to satisfy all Legal Requirements, taking such samples and
performing and reporting such tests as are required by all Legal
Requirements, and promptly provide Notice to the Owner of any
areas of Legal Requirements conflicts or violations or
unsatisfactory conditions or test results, including performing
all necessary testing and reporting in accordance with Legal
Requirements.
(xviii) Dispose of all waste materials, including ash, in
accordance with Legal Requirements and the Owner's waste disposal
agreements, if any.
ARTICLE 3
RESPONSIBILITIES OF THE OWNER
3.1 Owner Responsibilities. The Owner shall have exclusive operational
control and decision making authority with respect to the overall operation of
the Facility. In addition, the Owner shall be responsible for the following:
(a) Operator Fee. The Owner shall pay to the Operator the base
Operator Fee of $400,000 per calendar year, in equal quarterly
installments in arrears (prorated for any partial quarterly period
between the Effective Date and the first day of the next full Calendar
Quarter), due and payable on the first day of the following Calendar
Quarter until such time as this Agreement is terminated as provided for
in Article 5 or 6. Such fee is not subject to escalation.
(b) Fund Operating Account. The Owner shall promptly fund and
replenish the Operating Account upon request of the Operator in the
amounts specified by the Operator as necessary to pay all current
Operating Costs and all other Operating Costs reasonably projected by the
Operator to become due and payable during the next thirty (30) days.
(c) Accounting Guidelines. The Owner shall provide the Operator
with accounting policies, directives and procedures so that the Operator
can perform its responsibilities in Article 2.
(d) Approval of Submittals. The Owner shall promptly review the
proposed maintenance program, the five year forecast, and the proposed
operating budget. The Owner shall meet with the Operator to discuss the
same and, if the Owner determines that any item proposed should be
changed and if the parties are unable to resolve a dispute in good faith
with respect to the submittals, the same shall be submitted to dispute
resolution.
(e) Remedy of Major Equipment Failures. The Owner shall
promptly meet with the Operator to determine the course of action to be
taken to remedy or repair major equipment failures; provided, however,
that the Operator shall take such action as it deems prudent to protect
life or property in the event of an emergency involving failure of
equipment.
(f) Preparation of Dispatch Schedules. The Owner shall be
responsible to provide to the Operator by June 1 each year a proposed
Dispatch Schedule for the next five (5) years. The Dispatch
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Schedule shall show all anticipated fuel requirements, as well as periods
of time and corresponding generation levels required for the Owner's
revenues.
(g) Approval of Capital Budget. The Owner shall promptly review
any capital additions or replacements recommended by the Operator, and
shall approve such capital additions or replacements as the Owner deems
necessary or desirable. The Owner shall separately contract for any major
maintenance replacements or capital improvements that are outside of the
capacity of the Operator's resources.
(h) Provide copies of Legal Requirements and Project
Agreements. The Owner shall provide to the Operator copies of all Legal
Requirements and Project Agreements.
(i) Safety: The Owner shall be responsible to ensure
that there is adequate funding available for safety related
capital expenditures, and to ensure that the Operator implements
an effective safety program.
3.2 Owner's Representative. The Owner's Commercial Asset Manager shall
be the Owner's site representative and shall be responsible for the following:
(a) Work with the Operator to ensure that the Owner's
obligations under the Project Agreements are performed.
(b) Work with the Operator to ensure that Legal Requirements
are maintained.
(c) Ensure that the Power Pool, bilateral and income statement
accounting (including but not limited to closing the books monthly,
quarterly and annually) is performed and required reports are issued,
including the Independent Public Accountant's annual report.
(d) Ensure that invoices are properly cost coded and timely
reviewed and approved.
(e) Represent the Owner's interests with respect to local
community relations, including property tax issues.
ARTICLE 4
REPRESENTATIONS, WARRANTIES AND COVENANTS
4.1 Representations and Warranties. The Owner and the Operator each
hereby represents and warrants to the other that the following statements are
true and correct as of the date hereof and shall be true and correct at all
times that it is a party hereto:
(a) It is duly formed, validly existing, and in good standing
under the laws of the jurisdiction of its incorporation or formation; to
the extent required by applicable law, it is duly qualified and in good
standing in the jurisdiction of its principal place of business, if
different from its jurisdiction of incorporation or formation; and that
it has full power and authority to execute and deliver this Agreement and
to perform its obligations hereunder, and all necessary actions by the
officers, managers, members or other applicable persons necessary for the
due authorization, execution, delivery, and performance of this Agreement
by it have been duly taken.
(b) It has duly executed and delivered this Agreement and the
other documents contemplated herein, and they constitute its legal, valid
and binding obligations enforceable against it in accordance with their
terms (except as may be limited by bankruptcy, insolvency or similar laws
of general application and by the effect of general principles of equity,
regardless of whether considered at law or in equity).
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(c) Its authorization, execution, delivery, and performance of
this Agreement does not and will not (i) conflict with, or result in a
breach, default or violation of, (A) its organizational documents, (B)
any contract or agreement to which it is a party or is otherwise subject,
or (C) any law, order, judgment, decree, writ, injunction or arbitral
award to which it is subject; or (ii) require any consent, approval or
authorization from, filing or registration with, or notice to, any
governmental authority (including any approvals required by the Federal
Energy Regulatory Commission) or other person, unless such requirement
has already been satisfied.
(d) It is not a party to any litigation the outcome of which
could reasonably be expected to adversely affect its ability to perform
its obligations hereunder or to have a material adverse effect on its
properties, business or financial condition.
(e) The Owner does not warrant or represent that the Facility's
premises are safe, healthful, or suitable for the performance of the
Operator's obligations hereunder.
(f) The Owner is an exempt wholesale generator ("EWG") as
defined in the regulations of the Federal Energy Regulatory Commission.
4.2 Covenants. The Owner and the Operator hereby covenant and agree as
follows:
(a) Each will timely acquire and maintain all permits,
licenses, waivers and approvals (including, if required, approval to
operate as an EWG) required by any state or federal regulatory authority
in order for it to perform its obligations hereunder.
(b) Each will at all times abide by all laws, rules and
regulations of any state or federal governmental authority applicable to
the conduct of the Parties or the performance of their obligations
hereunder.
(c) The Operator will not acquire any assets or services from
or to any Affiliate except in the ordinary course of the Operator's
business upon terms no less favorable to the Operator than would be
obtained in a comparable arms length transaction with a Person not an
Affiliate and then only with the written consent of the Owner after
receiving a reasonable description in writing of each of the terms
thereof. Affiliate services shall also be subject to the Operator's
Subcontractor qualification program.
ARTICLE 5
TERM AND TERMINATION
5.1 Term. This Agreement shall be effective on the Effective Date and
remain in effect until the fifth anniversary of the Effective Date. This
Agreement shall automatically be renewed for successive five-year periods
subject to Notice of Termination of both Parties one hundred eighty (180) days
prior to the end of the Term. The Operator shall be reimbursed for usual and
customary demobilization costs and employee severance costs, if any, if the
Owner elects to not renew this Agreement.
5.2 Termination for Convenience. Notwithstanding the foregoing the
Owner may at any time and in its sole discretion terminate this Agreement upon
at least six (6) months prior Notice of Termination to the Operator. This
Agreement shall thereupon terminate on the date set forth in such Notice of
Termination. In the event of such termination, the Owner shall pay the present
value of the Operator Fees for the remaining period of the Term, discounted at
prime plus 6%, plus usual and customary demobilization costs and employee
severance costs, if any.
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5.3 Termination for Cause. The Owner may terminate the Operator for
failure to remedy an Event of Default, such termination to be effective on the
date specified in the Notice of Termination, and the Operator shall forfeit any
Operator Fee not yet paid or owing for the remainder of the Term.
5.4 Affiliate Termination. The Owner may terminate this Agreement with
at least six (6) months prior Notice if NRG Energy, Inc. or one of its
Affiliates ceases to maintain an ownership interest in the Owner of at least
25%. In the event of such termination, the Operator shall be reimbursed for
usual and customary demobilization costs and employee severance costs, if any,
but shall not be paid any amount in respect of the Operating Fee scheduled to
accrue during the period after the date of such termination.
ARTICLE 6
EVENTS OF DEFAULT AND DISPUTE RESOLUTION
6.1 Events of Default.
(a) The Owner shall be in default under this Agreement if the
Owner fails to pay when due any amount payable by the Owner hereunder not
being disputed by the Owner in good faith in writing, and fifteen (15)
days have elapsed after such due date.
(b) The Operator shall be in default if the Operator commits a
material breach of its obligations under this Agreement, or if its breach
under this Agreement causes a material default in any Project Agreement
or a material adverse variance in the Approved Operating Budget and the
Operator shall fail to promptly cure such failure within forty-five (45)
days after Notice thereof, or if the failure is capable of being cured
but is not resolved within forty-five (45) days after Notice thereof, and
the Operator has commenced and is diligently pursuing a cure to such
default, such default is not cured within one hundred eighty (180) days
after Notice thereof. Failure to meet the required IMA for two
consecutive Calendar Quarters is an Event of Default.
6.2 Rights Upon Default.
(a) Right of Operator. Upon the occurrence and continuance of a
default described in 6.01(a), the Operator may, at its option, terminate
this Agreement by delivering written Notice of termination to the Owner,
which Notice of termination shall be effective forty-five (45) days after
the date it is received by the Owner; provided, however, that if the
Owner has cured or undertaken to cure such default within thirty (30)
days of actual delivery of such Notice of termination to the Owner, such
Notice of termination shall be deemed to have been canceled and shall be
null and void. In the event of such termination, the Owner shall pay all
amounts due the Operator, including the Operator Fee, Incentive Fee (if
any, for the current period), and any unreimbursed costs advanced by the
Operator for Operating Costs then due. In such event, Operator shall take
all necessary steps to shut down and protect the Facility, leaving the
same in an orderly and safe condition, prior to leaving the premises. The
rights and remedies of the Operator (and of any Person acting on behalf
of or claiming through the Operator) under this Section 6.2(a) shall be
the Operator's (and any such Person's) sole right and remedy for any
breach of or default under the terms of this Agreement.
(b) Right of the Owner. Upon the occurrence and continuance of
an Event of Default described in Section 6.1, the Owner may, at its
option, terminate this Agreement, in accordance with Section 5.3, by
delivering written Notice of termination to the Operator, which Notice of
termination shall be effective immediately. In such event, Operator shall
take all necessary steps to protect the Facility, leaving the same in an
orderly and safe condition, prior to leaving the premises. The rights and
remedies of
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the Owner (and of any Person acting on behalf of or claiming through the
Owner) under this Section 6.2(b) shall be the Owner's (and any such
Person's) sole right and remedy for any breach of or default under the
terms of this Agreement.
6.3 Dispute Resolution. In the event the parties are unable to resolve
a dispute in good faith within thirty days, the aggrieved party shall Notice the
other party and the matter shall be referred to a senior officer of each party,
who shall have thirty (30) days to resolve the matter, after which either party
may pursue any and all other remedies available at law or in equity.
ARTICLE 7
INDEMNIFICATION; LIMITATIONS OF LIABILITY
7.1 Indemnifications. To the extent not otherwise covered by Facility
insurance, each party hereto will indemnify and hold harmless the other and each
director, officer, employee and Affiliate thereof, from and against all losses,
claims, damages, expenses or liabilities to which the such indemnified party or
such director, officer, employee or affiliated Person may become subject,
insofar as such losses, claims, damages, expenses or liabilities (or actions,
suits or proceedings including any inquiry or investigation or claims in respect
thereof) arise out of, in any way relate to, or result from a breach of this
Agreement by the indemnifying party; provided however, that such party shall not
have the right to be so indemnified for its own gross negligence or willful
misconduct as finally determined by a court of competent jurisdiction after all
appeals and time for appeals have expired. If any action, suit or proceeding
arising from any of the foregoing is brought against a party or any other Person
indemnified or intended to be indemnified pursuant to this Section 7.1, the
indemnifying party will, if required by the indemnified party or any such
indemnified Person, resist and defend such action, suit or proceeding or cause
the same to be resisted and defended by counsel reasonably satisfactory to the
Person or Persons indemnified or intended to be indemnified. Each indemnified
Person shall, unless the indemnified party or such indemnified Person has made
the request described in the preceding sentence and such request has been
complied with, have the right to employ its own counsel (including staff
counsel) to investigate and control the defense of any matter covered by such
indemnity and the reasonable fees and expenses of such counsel shall be at the
expense of the indemnifying party. Notwithstanding anything contained in this
Section 7.1 to the contrary, each of the Owner and the Operator shall be named
insured on the insurance covering the Facility's property and business, and no
party shall be required to indemnify the other for any loss for which such
insurance shall provide a recovery.
7.2 Limitation of Liability. The liability of either party to the
other on all claims of any kind (excluding death or bodily injury), whether
based on contract, indemnity, warranty, tort (including, as the case may be, a
party's own negligence), strict liability or otherwise, for all losses or
damages arising out of, connected with, or resulting from this Agreement or from
the performance or breach thereof, or from any services covered by or furnished
during the term of this Agreement, shall in no case exceed five times the annual
Operator Fee.
7.3 Waiver of Consequential Damages. In no event, whether based on
contract, indemnity, warranty, tort (including, as the case may be, a party's
own negligence) or otherwise, shall the Operator or its Subcontractors and
suppliers be liable to the Owner, or the Owner, its Subcontractors and suppliers
be liable to the Operator, for special, incidental, exemplary, indirect or
consequential damages including, but not limited to, loss of profits or revenue,
loss of use of the equipment or any associated equipment, cost of capital, cost
of purchased power, cost of substitute equipment, facilities or services,
downtime costs, or claims of customers of the Owner or the Operator for such
damages, and each party shall indemnify the other, its Subcontractors and
suppliers against any such claims from the other's suppliers or customers.
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ARTICLE 8
ASSIGNMENT
8.1 Assignment. Neither Party shall assign this Agreement or its
rights hereunder without the prior written consent of the other Party, provided,
however, either Party may, without the consent of the other Party (and without
relieving itself from liability hereunder), (i) transfer, sell, pledge, encumber
or assign this Agreement or the accounts, revenues or proceeds hereof in
connection with any financing or other financial arrangements by or for the
benefit of the Owner Entity or NRG Northeast Generating LLC, (ii) transfer or
assign this Agreement to an Affiliate of such Party if such Affiliate's
creditworthiness and technical ability to perform hereunder is not materially
different than that of such Party, (iii) transfer or assign this Agreement to
any person or entity succeeding to all or substantially all of the assets of
such Party, or (iv) in the case of the Owner Entity, transfer or assign this
Agreement to any person or entity acquiring the Station; provided, however, that
in each such case, any such assignee (other than an assignee in a transaction
referred to in clause (i) above) shall agree in writing to be bound by the terms
and conditions hereof and such assignee's creditworthiness and technical ability
to perform hereunder shall not be materially different than that of such Party.
ARTICLE 9
PERFORMANCE INCENTIVES
9.1 Performance Incentives.
(a) The Operator may be entitled to receive an Incentive Fee or
obligated to pay a Penalty, as specified in Appendix A.
(b) The Incentive Fee or Penalty will be due each August 1, and
will be based on the preceding twelve month period ending July 1.
Penalties, if any, may be recouped or set-off against the next due and
payable Operator Fee or Incentive Fee and adjusted for any partial
operating year following the date of this Agreement.
ARTICLE 10
MISCELLANEOUS
10.1 Independent Contractor. Except as otherwise expressly stated in
this Agreement, the Operator shall at all times be deemed an independent
contractor and not by reason of this Agreement a joint venturer, agent or
principal of the Owner and none of the Operator's officers, directors, partners,
employees, agents or representatives or the officers, directors, partners,
employees, agents or representatives of its Subcontractors shall be considered
officers, directors, partners, employees, agents or representatives of the
Owner.
10.2 Severability. The invalidity, in whole or in part, of any of the
provisions of this Agreement will not affect the validity of the remaining
provisions hereof.
10.3 Entire Agreement. This Agreement and all amendments thereto
contain the complete agreement between the Owner and the Operator with respect
to the matters contained herein and supersede all other agreements, whether
written or oral, with respect to the matters contained herein between the Owner
and the Operator.
10.4 Amendment. No modification amendment, or other change to this
Agreement will be effective unless consented to in writing by each of the
parties hereto.
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10.5 Waiver. Failure or forbearance by a party to exercise any of its
rights or remedies under this Agreement shall not constitute a waiver of such
rights or remedies. No party shall be deemed to have waived or forborne any
right or remedy resulting from such failure to perform unless it has made such
wavier specifically in writing.
10.7 Counterparts. This Agreement may be executed in one or more
counterparts each of which shall be deemed an original and all of which shall be
deemed one and the same Agreement.
10.8 Choice of law. This Agreement shall be governed by the laws of the
State of New York.
10.9 Title Passage. Title to all materials and services provided under
this Agreement shall pass to the Owner upon performance of the work or upon the
Owner becoming obligated to make payment therefor. It is expressly understood
and agreed, however, that the passage of title shall not release the Operator
from its responsibility to fully carry out its obligations under this Agreement.
The Operator shall issue purchase orders in the name of the Owner as the Owner's
agent.
10.10 Effect of Force Majeure. If either party is rendered unable by an
event of Force Majeure to carry out, in whole or part, its obligations under
this Agreement, then, for only the pendency of such Force Majeure, the party
affected by the event (other than the obligation to make payments then due or
becoming due with respect to performance which occurred prior to the event)
shall be temporarily relieved of its obligations hereunder insofar as they are
affected by Force Majeure but for no longer period. The party affected by an
event of Force Majeure shall provide the other party with written notice setting
forth the full details thereof within two (2) Business Days after the occurrence
of such event and shall take all reasonable measures to mitigate or minimize the
effects of such event of Force Majeure.
10.11 Interest on Amounts due. Any amounts owing fifteen (15) days after
the due date thereof shall bear interest at the prime rate of interest as
reported from time to time in the Wall Street Journal plus 2%.
10.12 Continuous Operation. During the pendency of any dispute arising
under this Agreement, unless otherwise agreed between the parties the Operator
shall continue to operate the Facility without default or interruption in
service.
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10.13 Notice: A Notice, consent, approval, or other communication (each
a "Notice") shall be delivered in writing via mail or facsimile, and if meant
for
Owner delivered to: Operator delivered to:
Commercial Asset Manager President
Xxxxxx Kill Power LLC NRG Xxxxxx Kill Operations, Inc.
0000 Xxxxxxxx Xxxx, Xxxxx 000 0000 Xxxxxxxx Xxxx, Xxxxx 000
Xxxxxxxxxxx, XX 00000 Xxxxxxxxxxx, XX 00000
000-000-0000 (phone) 000-000-0000 (phone)
000-000-0000 (fax) 000-000-0000 (fax)
IN WITNESS WHEREOF the parties have executed this Agreement as of the
date first set forth above.
XXXXXX KILL POWER LLC
By: /s/ Xxxxx X. Xxxxxxxxxxx
---------------------------
Title: President
-----------------------
NRG XXXXXX KILL OPERATIONS INC.
By: /s/ Xxxxx X. Xxxxx
---------------------------
Title: President
------------------------
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