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EXHIBIT 10.35
OPERATION AND MAINTENANCE AGREEMENT
THIS OPERATION AND MAINTENANCE AGREEMENT (this "Agreement") dated as
of December 15, 1999, is entered into by and between Montville Power LLC, a
Delaware limited liability company (the "Owner"), and NRG Montville Operations,
Inc., a Delaware corporation (the "Operator").
RECITALS
1. The Owner owns an electricity generation facility and
related assets in Montville, Connecticut (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
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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.
"Control" means the possession, directly or indirectly, through one
or more intermediaries, of (i) in the case of a corporation, a majority of the
outstanding voting securities thereof; (ii) in the case of a limited liability
company, partnership, limited partnership or venture, the right to more than 50%
of the distributions therefrom (including liquidating distributions); (iii) in
the case of a trust or estate, including a business trust, a majority of the
beneficial interest therein; and (iv) in the case of any other entity, a
majority of the economic or beneficial interest therein.
"Dispatch Schedule" means the schedule that shows the required
generation and fuel for the relevant time period as published by the Owner.
"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.
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" 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.
"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
Operator 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.
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"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 England Power Pool or its successor.
"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
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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.
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.
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(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.
(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
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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:
(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.
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(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.
(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 $400,000.00 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.
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(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 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:
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(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).
(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
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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.
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
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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 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
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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.
10.5 Waiver. Failure or forbearance by a party to exercise
any of its rights or remedies under this
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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
Montville Power LLC NRG Montville 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.
MONTVILLE POWER LLC NRG MONTVILLE OPERATIONS INC.
By: /s/ Xxxxx X. Xxxxxxxxxxx By: /s/ Xxxxx X. Xxxxx
---------------------------- -------------------------
Name: Xxxxx X. Xxxxxxxxxxx Name: Xxxxx X. Xxxxx
---------------------------- -------------------------
Title: President Title: President
---------------------------- -------------------------
