Exhibit 99.6
EXECUTION COPY
FIRST AMENDMENT TO OPTION AND PURCHASE AND SALE AGREEMENT
This FIRST AMENDMENT TO OPTION AND PURCHASE AND SALE AGREEMENT (this
"Amendment") is made and entered into as of March 22, 2007, by and between
KEYSPAN GENERATION LLC, a limited liability company organized and existing under
the laws of the State of New York ("Seller", and also referred to herein as
"Genco"), and LONG ISLAND LIGHTING COMPANY d/b/a LIPA, a wholly-owned subsidiary
of Long Island Power Authority, a corporate municipal instrumentality and
political subdivision of the State of New York ("Buyer", and also referred to
herein as "LIPA").
RECITALS
WHEREAS, Seller and Buyer have previously entered into an Option and
Purchase and Sale Agreement, dated as of January 1, 2006 and as amended by
letter agreement, dated as of December 11, 2006 (the "Option Agreement"),
pursuant to which Seller has granted Buyer an option to purchase one or both of
the Far Rockaway Plant and the E.F. Barrett Plant (as such terms are defined in
the Option Agreement);
WHEREAS, concurrently with the execution of the Option Agreement, Seller
and Buyer and, as applicable, certain of their respective Affiliates have
entered into a Settlement Agreement and Release and an Amended and Restated
Management Services Agreement, each dated as of January 31, 2006 (collectively
with the Option Agreement, the "2006 Agreements");
WHEREAS, concurrently with the execution of this Amendment and as a
condition to the effectiveness hereof, Seller and Buyer and, as applicable,
certain of their respective Affiliates, are entering into an Amendment to the
Amended and Restated Management Services Agreement (the "MSA Amendment"), an
Agreement and Waiver (the "Waiver Agreement"), a Second Option and Purchase and
Sale Agreement (the "Second Option Agreement") and certain other related
agreements referred to therein (collectively, the "National Grid Agreements");
WHEREAS, on February 25, 2006 National Grid plc ("National Grid"), National
Grid US8 Inc. and KeySpan Corporation entered into a certain Agreement and Plan
of Merger (the "NG/KES Merger Agreement") pursuant to which National Grid US8
Inc., a wholly-owned subsidiary of National Grid, will merge with and into
KeySpan Corporation, with KeySpan Corporation as the surviving entity and
thereby becoming a wholly owned subsidiary of National Grid (the "Merger"),
subject to the terms and conditions of the NG/KES Merger Agreement; and
WHEREAS, as provided in the Waiver Agreement, in consideration for LIPA
entering into the Waiver Agreement, Seller, among other things, has agreed to
amend the Option Agreement to (a) extend the Expiration Date (as defined in the
Option Agreement) and (b) grant LIPA the option to purchase the ICUs and related
assets on the same terms and conditions as those applicable to the E.F. Barrett
Plant and the Far Rockaway Plant.
NOW, THEREFORE, in consideration of the premises and of such other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto intending to be legally bound agree as follows:
1. Defined Terms. Capitalized terms used and not otherwise defined herein
shall have the respective meanings ascribed to them in the Option
Agreement.
2. First Recital. The first recital to the Option Agreement is amended to read
in its entirety as follows:
"WHEREAS, Seller is the owner of the Far Rockaway Plant (as defined
herein), the E.F. Barrett Plant (as defined herein) and the ICUs (as
defined herein) (together, the "Generating Facilities");"
3. Second Recital. The second recital to the Option Agreement is amended to
read in its entirety as follows:
"WHEREAS, Seller is willing to grant LIPA an option to purchase one or
more of the Generating Facilities, on the terms and subject to the
conditions set forth herein; and"
4. Definitions.
a. The definition of "Business" contained in Section 1.1 of the Option
Agreement is amended to read in its entirety as follows:
"Business" means, with respect to one or more of the Generating
Facilities that are part of the Purchased Assets, the business of operating
such Generating Facilities as they are operated on the date hereof."
b. The definition of "Emission Credits" contained in Section 1.1 of the Option
Agreement is amended to read in its entirety as follows:
"Emission Credits" means the allowances and credits issued or
certified pursuant to the Federal Clean Air Act or analogous provisions of
the Laws of the State of New York or other regional or local laws
authorizing the emission of fixed quantities of SO2, NOx or CO2 and other
emission compounds, to the extent attributable to the Purchased Assets as
of the Closing Date."
c. The following new definition is added to Section 1.1 of the Option
Agreement:
"National Grid/KeySpan Closing Date" has the meaning assigned to it in
Section 2.3."
d. The definition of "Purchased Assets" contained in Section 1.1 of the Option
Agreement is amended to read in its entirety as follows:
"Purchased Assets" means one or more of the Generating Facilities, as
specified in the Option Notice delivered by Buyer hereunder, together with
the Additional Assets related to such specified Generating Facilities."
2
e. The definition of "Threshold" contained in Section 1.1 of the Option
Agreement is amended to read in its entirety as follows:
"Threshold" means (i) if all of the Generating Facilities are
purchased by Buyer, $600,000, (ii) if only the E.F. Barrett Plant and the
ICUs are purchased by Buyer, $500,000 (iii) if only the E.F. Barrett Plant
and the Far Rockaway Plant are purchased by Buyer, $500,000 or (iv) if only
E.F. Barrett Plant or the Far Rockaway Plant is purchased by Buyer,
$250,000."
5. Purchase Option. Section 2.1 of the Option Agreement is amended to read in
its entirety as follows:
"Section 2.1. Purchase Option. Subject to the terms and conditions of
this Amendment, Seller hereby grants to Buyer an irrevocable option to
purchase the Generating Facilities, or any of them, together with the
related Additional Assets and the Assumed Liabilities (the "Option")."
6. Exercisability. Section 2.3 of the Option Agreement is amended to read in
its entirety as follows:
"Section 2.3. Exercisability. Subject to the further terms of this
Agreement, the Option shall become exercisable at any time after January 1,
2006; provided, however, the Option with respect to the ICUs shall not
become exercisable unless Buyer has exercised the Option with respect to
the E.F. Barrett Plant. The Option shall expire and cease to be exercisable
at 3:00 p.m. on the date which (i) with respect to the E.F. Barrett Plant
and the ICUs, is May 31, 2008 and (ii) with respect to the Far Rockaway
Plant, is May 31, 2008 (each of (i) and (ii) being an "Expiration Date")."
7. Method of Exercise. Section 2.4 of the Option Agreement is amended to read
in its entirety as follows:
"Section 2.4. Method of Exercise. The Option may be exercised with
respect to one or more Generating Facilities only by the giving of a
written notice by Buyer (the "Option Notice") to the Seller in such form
and in such manner as is prescribed in Section 7.1 herein, setting forth
which of the Generating Facilities, or all of them, Buyer has elected to
purchase. If Buyer delivers an Option Notice with respect to less than all
of the Generating Facilities prior to the Expiration Date for such
Generating Facilities, it may subsequently deliver one or more Option
Notices with respect to one or both of the other Generating Facilities by
the delivery of an Option Notice to the Seller at any time prior to the
Expiration Date for such other Generating Facilities; provided, that, in
such event, the parties shall prior to the relevant Closing Date enter into
a new Energy Management Agreement Amendment (substantially in the form
3
attached hereto as Exhibit E) and a new Power Supply Agreement Amendment
(substantially in the form attached hereto as Exhibit D) to replace any
already signed, in order to reflect such additional Option Notice, and
enter into an Operation and Maintenance Agreement (substantially in the
form attached hereto as Exhibit C) with respect to each Generating Facility
that is the subject of such additional Option Notice. Each Option Notice
must be accompanied by a certification by an authorized officer of LIPA
that the exercise of the Option has been affirmatively approved by the vote
of the LIPA Board of Trustees."
8. Exercise Date. Section 2.5 of the Option Agreement is amended to read in
its entirety as follows:
"Section 2.5. Exercise Date. The date of each exercise of the Option
with respect to one or more Generating Facilities shall be the date on
which the Option Notice is delivered to Seller at its address as provided
in Section 7.1 of this Agreement (each an "Exercise Date")."
9. Effect of Option Notice. Section 2.6 of the Option Agreement is amended to
read in its entirety as follows:
Section 2.6. Effect of Option Notice. Upon receipt of an Option Notice
by Seller, Buyer and Seller shall be legally bound to consummate the
transactions contemplated with respect to the Generating Facilities which
are the subject of such Option Notice subject to (i) the satisfaction or
waiver of each of the conditions precedent set forth in Article VI hereof,
including, without limitation, receipt of all Buyer Required Governmental
Approvals, and (ii) all of the other terms and conditions hereof.
10. Closing Date. Section 2.7 of the Option Agreement is amended to read in its
entirety as follows:
Section 2.7. Closing Date. With respect to each Option Notice, the
closing date of the sale, conveyance, assignment and transfer by Seller,
and the purchase by Buyer, of the related Purchased Assets pursuant to this
Agreement and the other transactions contemplated hereby will be a date, as
mutually agreed by the parties, following satisfaction (or waiver) of all
conditions precedent to closing set forth in Article VI (each a "Closing
Date"), which date shall not be later than one-hundred twenty (120) days
following such satisfaction (or waiver), at a location to be agreed upon by
the parties hereto following the applicable Exercise Date. The Closing Date
may be extended by the written agreement of the parties hereto.
11. Assignment and Assumption. Subsection (b) of Section 2.9 of the Option
Agreement is amended to read in its entirety as follows:
"(b) Excluded Liabilities. Pursuant to the Assignment and Assumption
Agreement, Seller shall retain (i) all liabilities and obligations related
to the Purchased Assets which relate to periods prior to the Closing Date,
4
other than the Assumed Liabilities, (ii) all liabilities and obligations,
including environmental liabilities, relating to the Excluded Assets, and
(iii) all liabilities and obligations it has assumed under the Merger
Agreement and the Power Supply Agreement with respect to the Purchased
Assets, including, without limitation, liabilities regarding manufactured
gas plant sites (all such liabilities and obligations retained by Seller
being collectively, the "Excluded Liabilities")."
12. Exercise Date. Section 3.1 of the Option Agreement is amended to read in
its entirety as follows:
Section 3.1. Net Book Value; Preliminary Purchase Price.
(a) Not later than thirty (30) days following the Effective Date,
Seller shall provide Buyer with Seller's determination of the Net Book
Value of each Generating Facility and the Additional Assets as of the date
of the most recent audited financial statements based on Seller's audited
financial statements as of such date (the "Reference Net Book Value"),
together with the working papers of Seller and Seller's independent public
accountants relating to the Reference Net Book Value. Seller will also make
its representatives and independent public accountants reasonably available
from time to time during normal business hours to address questions with
respect thereto raised by Buyer and Buyer's representatives.
13. Additional Agreements.
a. Subsection (b) of Section 5.2 of the Option Agreement is amended to read in
its entirety as follows:
"(b) Easements. On the Closing Date, pursuant to one or more Easement
Agreements, as appropriate, Buyer shall grant to Seller and its Affiliates
irrevocable and perpetual easements on each of the sites and related
parcels of each Generating Facility within the Purchased Assets to the
extent necessary for the continued operation and maintenance of, and access
to, (i) if the ICUs are not part of the Purchased Assets, the ICUs and,
(ii) to the extent necessary, the other Excluded Assets."
b. Subsection (d) of Section 5.2 of the Option Agreement is amended to read in
its entirety as follows:
"(d) Emission Credits.
(i) To the extent Emission Credits are not required to satisfy the
compliance obligations of the Purchased Assets, such Emissions Credits
shall be pooled with those attributable to Seller's remaining generating
stations under the Power Supply Agreement (for the term of the Power Supply
Agreement) and such pooled credits shall be applied pro rata to all such
generating stations to meet their compliance obligations under applicable
Law, provided that if Buyer exercises the Option with respect to more than
5
one of the Generating Facilities, excess Emission Credits from one of the
Generating Facilities shall first be applied to the other Generating
Facility or Generating Facilities purchased by Buyer to the extent
necessary to meet its compliance obligations under applicable Law. If any
Emissions Credits attributable to the Purchased Assets are sold after the
Closing Date, Buyer shall be entitled to 100% of the net sale proceeds
therefrom.
(ii) In the event Buyer sells or transfers one or more of the
Generating Facilities that constitute Purchased Assets, the Emission
Credits related to such Generating Facilities shall remain subject to the
provisions of this Agreement with respect to the use of such Emission
Credits for Seller's remaining generating stations, and Buyer hereby
covenants to provide therefor in any agreement for any such sale or
transfer to the satisfaction of Seller."
14. Schedule I. Schedule I to the Option Agreement is deleted in its entirety
and replaced by a new Schedule I in the form attached hereto as Annex A.
15. Schedule II. Schedule II to the Option Agreement is deleted in its entirety
and replaced by a new Schedule II in the form attached hereto as Annex B.
16. Schedule V. Schedule V to the Option Agreement is deleted in its entirety
and replaced by a new Schedule V in the form attached hereto as Annex C.
17. Form of Operation and Maintenance Agreement. The form of Operation and
Maintenance Agreement attached as Exhibit C to the Option Agreement is
deleted in its entirety and replaced by the form thereof attached as Annex
D hereto.
18. Form of Power Supply Agreement Amendment. The form of Power Supply
Agreement Amendment attached as Exhibit D to the Option Agreement is
deleted in its entirety and replaced by the form thereof attached as Annex
E hereto.
19. Form of Energy Management Agreement Amendment. The form of Energy
Management Agreement attached as Exhibit E to the Option Agreement is
deleted in its entirety and replaced by the form thereof attached as Annex
F hereto.
20. Effective Time of Amendment. This Amendment shall become legally binding
and effective only upon satisfaction of each of the following conditions
precedent (the date upon which all such conditions are satisfied, being the
"Effective Date"):
a. Approvals reasonably satisfactory to National Grid and LIPA from
the New York State Comptroller and the New York State Attorney General (as
to form) of this Amendment and each of the other National Grid Agreements
shall have been obtained and be in full force and effect;
b. Each of the 2006 Agreements shall have become effective pursuant to
their respective terms and be in full force and effect; and
6
c. The Merger shall have been consummated.
21. Agreement Remains in Force. Except as expressly set forth in this
Amendment, the Option Agreement remains unmodified.
22. Headings. The headings contained in this Amendment are for reference
purposes only and shall not affect in any way the meaning or interpretation
of this Amendment.
23. Miscellaneous. This Amendment, together with the Annexes annexed hereto,
shall be binding upon and inure to the benefit of the parties hereto and
thereto and their respective successors and permitted assigns and are not
intended to confer upon any other Person, any rights or remedies hereunder
or thereunder and may be executed in two or more counterparts which
together shall constitute a single agreement.
24. Governing Law. This Amendment shall be governed by and construed in
accordance with the law of the State of New York (without giving effect to
conflict of law principles) as to all matters, including but not limited to
matters of validity, construction, effect, performance and remedies. THE
PARTIES HERETO AGREE THAT VENUE IN ANY AND ALL ACTIONS AND PROCEEDINGS
RELATED TO THE SUBJECT MATTER OF THIS AMENDMENT SHALL BE IN THE STATE
COURTS IN AND FOR NASSAU COUNTY, NEW YORK OR THE FEDERAL COURTS IN AND FOR
THE EASTERN DISTRICT OF NEW YORK, WHICH COURTS SHALL HAVE EXCLUSIVE
JURISDICTION FOR SUCH PURPOSE, AND THE PARTIES HERETO IRREVOCABLY SUBMIT TO
THE EXCLUSIVE JURISDICTION OF SUCH COURTS AND IRREVOCABLY WAIVE THE DEFENSE
OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF ANY SUCH ACTION OR
PROCEEDING. SERVICE OF PROCESS MAY BE MADE IN ANY MANNER RECOGNIZED BY SUCH
COURTS. EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES ITS RIGHT TO A JURY
TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN
CONNECTION WITH THIS AMENDMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
7
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of
the day and year first above written.
KEYSPAN GENERATION LLC,
as Seller
By: /s/John J. Bishar Jr.
---------------------
Name: John J. Bishar Jr.
Title: Executive Vice President
LONG ISLAND LIGHTING COMPANY d/b/a LIPA,
as Buyer
By: /s/Richard M. Kessel
--------------------
Name: Richard M. Kessel
Title: CEO & President
8
ANNEX A
Schedule I
Additional Assets
-----------------
1. All furniture, office supplies, tools and other equipment located at the
Generating Facilities, other than facilities, tools and equipment
identified as Excluded Assets.
2. All telecommunications facilities located at the Generating Facilities
relating primarily to the operation of the Generating Facilities.
3. All materials, inventory, and supplies, and all related agreements and
purchase orders, held by Seller as of the Closing Date, relating primarily
to the Generating Facilities.
4. All motor vehicles owned, purchased or leased by Seller that are used
primarily in connection with the Generating Facilities.
5. All franchises, permits and other governmental authorizations relating
primarily to the Generating Facilities.
6. If the E.F. Barrett Plant is part of the Purchased Assets, the following
contracts: (i) the lease arrangements related to the Flag Atlantic landing
station located at the E.F. Barrett Plant; (ii) the Plantation Motel
license agreement (small sign) with respect to the E.F. Barrett Plant; and
(iii) all leases with the Nassau County Police for telecommunications
equipment located at the E.F. Barrett Plant.
7. If the Far Rockaway Plant is part of the Purchased Assets, the following
Contracts: all leases with T-Mobile for telecommunication equipment located
at the Far Rockaway Plant.
8. If the ICUs are part of the Purchased Assets, all assets relating primarily
to the ICUs, including, without limitation:
(a) General Electric ("GE") Gas Turbines (Units 1-8);
(b) Pratt & Whitney Gas Turbines (Units 9-12);
(c) cranking motor breaker cubicles and generator breaker housings;
(d) GE Control Room;
(e) GE Warehouse;
(f) fuel forwarding skids;
(g) gas regulating station and associated piping;
(h) Pratt & Whitney engine/control room building;
(i) water wash skids;
(j) CO2 tanks and associated piping;
(k) Pratt & Whitney Warehouse;
I-1
(l) Tank 101 and the associated dike and piping;
(m) Tank 102 (D.I. Water Tank) and the associated dike and piping;
(n) Tank 103 and the associated dike and piping;
(o) Engine shop and engine parts storage trailers;
(p) power recovery tank;
(q) No. 2 fuel unloading stations;
(r) office management trailer;
(s) technician shop / lunch room / employee locker room building;
(t) security guard building at front gate; and
(u) fire hose cabinets around site.
Items (a)-(u) are located within the ICU easement area identified on Schedule
III.
I-2
ANNEX B
Schedule II
-----------
Excluded Assets
---------------
1. All KeySpan Energy Delivery Long Island ("KEDLI") natural gas transmission
and distribution assets located at the Generating Facilities (depicted on
the attached surveys (Schedules III and IV)).
2. All KeySpan Communications Corporation's ("KCC") telecommunications assets
located at the Generating Facilities, including:
Far Rockaway
------------
(a) One (1) 96 strand fiber optic cable installed overhead from the
property line to the telephone room (KCC Circuit No. F96204);
(b) Associated rack and fiber optic cable termination shelf/patch panel in
the Power Station telephone room;
(c) One (1) Canoga Perkins 2262 T1 Modem and power supply; and
(d) One (1) Versitron/Milan M7245 Media Converter.
E.F. Barrett
------------
(a) One (1) 96 strand fiber optic cable installed overhead from the
property line to the telephone room (KCC Circuit No. F96-306A);
(b) One (1) 96 strand fiber optic cable installed overhead from the
property line to the telephone room (KCC Circuit No. F96-306B);
(c) One (1) 96 strand fiber optic cable and associated manholes/conduits
installed underground from the property line to the FLAG Telecom
Landing Station (KCC Circuit No. F96-222);
(d) One (1) 96 strand fiber optic cable and associated manholes/conduits
installed underground from the property line to the FLAG Telecom
Landing Station (KCC Circuit No. F96-223);
(e) One (1) 96 strand fiber optic cable and associated manholes/conduits
installed underground from the property line to the FLAG Telecom
Landing Station (KCC Circuit No. F96-224);
(f) Five (5) 4" PVC underground duct system between the FLAG Telecom
Landing Station and the LIRR right-of-way (southeast corner of
property);
(g) One (1) Canoga Perkins 2262 T1 Modem and power supply; (h) Associated
rack and fiber optic cable termination shelf/patch panel in the Power
Station telephone room; and
(i) One (1) 12 strand submarine fiber optic cable and associated power
cable owned by FLAG Telecom installed in the KCC duct bank between the
FLAG Telecom Landing Station and the LIRR right-of-way described above
(KCC Circuit No. F12-214).
II-1
3. The following KeySpan IT/communications systems and equipment located at
the Generating Facilities:
Far Rockaway
------------
(a) Five (5) radio base stations/antennas (and related cabling) supporting
Electric and Gas Operations (roof of main control building);
(b) Four (4) radios/antennas (and related cabling) for Electric
Distribution Automation communications (roof of main control
building);
(c) One (1) CISCO 3640 Router and related equipment (main PBX room);
(d) One (1) CISCO 3524 Access Switch (main PBX room);
(e) One (1) CISCO 2950 Recorder Switch (main PBX room);
(f) One (1) CISCO 3524 Access Switch and related equipment (Admin Office);
(g) Avaya Definity G3i PBX Telephone system and related equipment; (h)
Avaya Intuity Voicemail System and related equipment; (i) One (1) Call
Detail Reporting Polecat Buffer Box; and (j) Avaya UPS System.
E.F. Barrett
------------
(a) Five (5) radio base stations/antennas (and related cabling) supporting
Electric and Gas Operations (roof of main control building);
(b) Four (4) radios/antennas (and related cabling) for Electric
Distribution Automation communications (roof of main control
building);
(c) One (1) CISCO 3640 Router (Main Data Closet);
(d) One (1) CISCO 6006 Access Switch and related equipment (Main Data
Closet);
(e) One (1) CISCO 3524 Access Switch and related equipment (Waste Water
Site);
(f) One (1) CISCO 3524 Access Switch and related equipment (I.C. Cabinet);
(g) One (1) CISCO 3524 Access Switch and related equipment (Control Room);
(h) One (1) CISCO 3524 Access Switch and related equipment (MSD Trailer);
(i) Avaya Definity G3i PBX Telephone system and related equipment;
(j) Avaya Intuity Voicemail System and related equipment;
(k) One (1) Call Detail Reporting Polecat Buffer Box; and
(l) Avaya UPS System.
4. If the ICUs are not part of the Purchased Assets, all assets relating
primarily to the ICUs, including, without limitation:
(a) General Electric ("GE") Gas Turbines (Units 1-8);
(b) Pratt & Whitney Gas Turbines (Units 9-12);
(c) cranking motor breaker cubicles and generator breaker housings;
(d) GE Control Room;
(e) GE Warehouse;
II-2
(f) fuel forwarding skids;
(g) gas regulating station and associated piping;
(h) Pratt & Whitney engine/control room building;
(i) water wash skids;
(j) CO2 tanks and associated piping;
(k) Pratt & Whitney Warehouse;
(l) Tank 101 and the associated dike and piping;
(m) Tank 102 (D.I. Water Tank) and the associated dike and piping;
(n) Tank 103 and the associated dike and piping;
(o) Engine shop and engine parts storage trailers;
(p) power recovery tank;
(q) No. 2 fuel unloading stations;
(r) office management trailer;
(s) technician shop / lunch room / employee locker room building;
(t) security guard building at front gate; and
(u) fire hose cabinets around site.
Items (a)-(u) are located within the ICU easement area identified on Schedule
III.
5. All materials, inventory, tools, supplies, property rights, agreements and
purchase orders, held for use in connection with any Excluded Asset.
6. All motor vehicles owned, purchased or leased by Seller that are used
primarily in connection with any Excluded Asset.
7. All patents, copyrights, trade secrets, proprietary information, licensed
software, manuals and other intellectual property that relates primarily to
the Excluded Asset, excluding all intellectual property owned by Buyer as
of the Closing Date.
8. All franchises, permits and other governmental authorizations relating
primarily to any Excluded Asset.
II-3
ANNEX C
Schedule V
----------
Disclosure Schedule
-------------------
A. Consents and Approvals
----------------------
E.F. Barrett Plant
1. Filings with and consents, approvals and other actions by the Nassau County
Health Department ("NCHD") as may be required for the issuance by the NCHD
of an Article 11 permit in the name of Buyer.
2. Filings with and consents, approvals and other actions by the Nassau County
Fire Marshall (the "NCFM") as may be required for the issuance by the NCFM
of an Article 3 permit in the name of Buyer.
Far Rockaway Plant
1. Filings with and consents, approvals and other actions by the New York City
Fire Department (the "NYCFD") as may be required for the transfer of any
permits issued by the NYCFD and the designation thereunder of Buyer as the
owner of the Far Rockaway Plant.
2. Filings with and consents, approvals and other actions by the New York City
Department of Environmental Protection (the "NYCDEP") as may be required
for the transfer of the discharge permit issued by the NYCDEP and the
designation thereunder of Buyer as the owner of the Far Rockaway Plant.
3. Filings with and consents, approvals and other actions by the New York
State Department of Environmental Conservation ("NYSDEC") as may be
required for the transfer of the Long Island wells permit issued by the
NYSDEC and the designation thereunder of Buyer as the owner of the Far
Rockaway Plant.
ICUs
1. Filings with and consents, approvals and other actions by the Nassau County
Health Department ("NCHD") as may be required for the issuance by the NCHD
of an Article 11 permit in the name of Buyer.
2. Filings with and consents, approvals and other actions by the Nassau County
Fire Marshall (the "NCFM") as may be required for the issuance by the NCFM
of an Article 3 permit in the name of Buyer.
V-1
Each of E.F. Barrett Plant, Far Rockaway Plant and ICUs
1. Approval of the FERC pursuant to Section 203 of the Federal Power Act for
the transfer of the Purchased Assets.
2. Subdivision approvals as contemplated under Section 5.2(c).
3. Consents from third-parties as may be required for the transfer of leases,
easements and other Contracts that are part of the Purchased Assets.
4. Filings with and consents, approvals and other actions by the NYSDEC as may
be required for the transfer of the New York State Title IV Acid Rain and
Title V Air permits and the designation thereunder of Buyer as the owner of
the Generating Facilities.
5. Filings with and consents, approvals and other actions of NYSDEC as may be
required for the transfer of the Memorandum of Understanding Regarding
Voluntarily Restricting SO2 Allowance Sales to Certain Upwind States and
the designation thereunder of Buyer as the owner of the Generating
Facilities.
6. Filings with and consents, approvals and other actions by the NYSDEC as may
be required for the issuance by the NYSDEC of New York Chemical Bulk
Storage permits in the name of Buyer.
7. Filings with and consents, approvals and other actions by the NYSDEC as may
be required for the transfer of the State Pollutant Discharge Elimination
System ("SPDES") permits and the designation thereunder of Buyer as the
owner of the Generating Facilities.
8. Filings with and consents, approvals and other actions by the NYSDEC as may
be required for the issuance by the NYSDEC of Major Petroleum Facility
licenses in the name of Buyer.
B. Environmental
-------------
E.F. Barrett Plant
1. Leak in circulating line within concrete containment dike resulted in the
release of 5 gallons of No. 6 oil (NYSDEC Spill 06-09374).
2. Pump failed within pump house resulting in the release of 500 gallons of
No. 6 oil. All fuel oil contained within pump house (NYSDEC Spill
05-05253).
3. Spill of approximately 1 gallon of oily water due to equipment failure.
Currently awaiting final inspection and close out from the NYSDEC (spill
number 05-00135).
V-2
ICUs
1. Certain of the ICUs are not capable of meeting existing required daily NOx
Reasonably Achievable Control Technology ("RACT") emission limitations on
an individual unit basis. Compliance currently relies on a daily system
wide NOx averaging program in which compliance shortfall at such units is
compensated for by an excess margin of compliance at other Genco units as
provided for in the Seller's NYSDEC approved NOx RACT compliance plan.
Consequently, future compliant operation of the ICUs under ownership by
purchaser or subsequent acquirer under existing NOx RACT emissions limits
is subject to approval by NYSDEC (and possibly the U.S. Environmental
Protection Agency ("US EPA")) to continued inclusion of the Purchased
Assets within the Seller's NOx RACT system wide averaging compliance plan
or, alternatively, the implementation of other NOx reduction measures on
the Purchased Assets.
2. Broken fuel oil supply hose at Unit number 12A. Volume of fuel released is
approximately 150 gallons (NYSDEC Spill 99-02621).
3. Hole in fuel oil return line within trench under roadway resulted in the
release of 1,000 gallons of No. 2 oil (NYSDEC Spill 06-06424).
4. In 1984, piping associated with Tank 101 resulted in a significant release
of No. 2 fuel oil through the tank containment dike. The release impacted
surrounding soil and adjacent creek. A NYSDEC corrective action plan was
successfully implemented. Residual petroleum products remain in the ground.
Each of E.F. Barrett Plant, Far Rockaway Plant and ICUs
1. The E.F. Barrett Plant, Far Rockaway Plant and ICUs contain thermal system
components and other systems that utilize insulation or other materials
containing asbestos fibers (including, but not limited to, boiler
insulation, pipe insulation and coverings, duct insulation and coverings
and other thermal system insulations), and such circumstances could form
the basis of an Environmental Claim. The extent of this asbestos and the
components and other systems affected, and the amount of the remediation
costs, if required, with respect thereto, are unknown.
2. The E.F. Barrett Plant, Far Rockaway Plant and ICUs contain facility
components and other systems covered with paint or other coating that
contain lead, and such circumstances could form the basis of an
Environmental Claim. The extent of this lead and the components and other
systems affected, and the amount of the remediation costs, if required,
with respect thereto, are unknown.
3. The E.F. Barrett Plant, Far Rockaway Plant and ICUs contain former ash
deposition areas and coal stock pile areas, with resulting run-off areas,
V-3
and such circumstances could form the basis of an Environmental Claim. The
extent of deposited material and the amount of the remediation costs, if
required, are unknown.
4. Throughout the life of each of the E.F. Barrett Plant, the Far Rockaway
Plant and the ICUs, various routine and other repairs and maintenance tasks
have been performed, including various component replacements. The US EPA
and other parties have made claims against a number of operators and owners
of electric power plants that routine and other maintenance tasks cause a
plant to be "modified" for purposes of the Clean Air Act and subject to
"New Source Review" requirements, resulting in violations of the Clean Air
Act. While there have been no New Source Review claims made against the
E.F. Barrett Plant, the Far Rockaway Plant or the ICUs as of the date of
the Agreement, future claims could be made by the US EPA or other parties
alleging that previous repairs and maintenance tasks have resulted in Clean
Air Act violations. The effect of such a claim, if successfully made, is
not known, including, but not limited to, the type and cost of the
pollution control equipment that would to required to meet "New Source
Review" requirements.
5. From time to time, the Far Rockaway Plant, E.F. Barrett Plant and ICUs
exceed opacity limits specified in their New York State Title V air
permits. All exceedences are reported to the NYSDEC in accordance with the
applicable NY DEC consent order.
6. From time to time, the Far Rockaway Plant, E.F. Barrett Plant and ICUs
exceed limits specified in their SPDES permits. All exceedences are
reported to the NYSDEC in accordance with the applicable SPDES permits.
V-4
FINAL COPY
Annex D to First Amendment to Option and Purchase and Sale Agreement
OPERATION AND MAINTENANCE AGREEMENT
between
LONG ISLAND LIGHTING COMPANY (d/b/a LIPA)
and
[KEYSPAN CORPORATION SUBSIDIARY]
Dated as of [_____________]
TABLE OF CONTENTS
-----------------
Page
ARTICLE 1 DEFINITIONS.............................................................................................1
ARTICLE 2 OPERATOR'S SERVICES.....................................................................................7
2.1. Scope of Services...............................................................................7
2.1.1. Services to be Provided by Operator....................................................7
2.1.2. General Service Requirements...........................................................8
2.2. Minimum Loadings Ramp Rate, Start-Up Times and Minimum Scheduled Shut Down......................9
2.3. Plant Document Preparation......................................................................9
2.3.1. O&M Procedures.........................................................................9
2.3.2. Preventive Maintenance Program.........................................................9
2.3.3. Administrative Procedures Manual.......................................................9
2.4. Plant Staffing..................................................................................9
ARTICLE 3 OWNER RESPONSIBILITIES.................................................................................10
3.1. General........................................................................................10
3.2. Information....................................................................................10
3.3. Site Access and Facilities.....................................................................10
3.4. Permits........................................................................................10
3.5. Other Services.................................................................................10
ARTICLE 4 BUDGET PREPARATION, REVIEW AND ADOPTION................................................................10
4.1. Annual Capital Budget Preparation..............................................................10
4.2. Annual Capital Budget Review...................................................................10
ARTICLE 5 BILLING DATA AND OTHER OPERATING REPORTS...............................................................11
5.1. Reports........................................................................................11
5.1.1. Monthly Reports.......................................................................11
5.1.2. Quarterly Reports.....................................................................11
5.2. Notice from Judicial/Governmental Authorities..................................................11
5.3. Government Reports.............................................................................11
5.4. Other Information..............................................................................12
ARTICLE 6 DISPUTE RESOLUTION.....................................................................................12
6.1. General........................................................................................12
6.2. Negotiation....................................................................................12
6.3. Dispute Resolution Following Negotiation.......................................................12
6.4. Mediation......................................................................................12
6.5. Arbitration....................................................................................13
i
6.6. Provisional Relief.............................................................................13
6.7. Information Exchange...........................................................................13
6.8. Site of Arbitration............................................................................13
6.9. Awards.........................................................................................13
6.10. Grounds for Judicial Review....................................................................14
6.11. No Interruption................................................................................14
ARTICLE 7 COMPENSATION AND PAYMENT...............................................................................14
7.1. Monthly Invoices...............................................................................14
7.2. Fuel Management Fee............................................................................14
7.3. Audit..........................................................................................14
7.4. Maximum Variable Charge Payment................................................................15
ARTICLE 8 TERM AND TERMINATION...................................................................................15
8.1. Effective Date.................................................................................15
8.2. Term...........................................................................................15
8.3. Termination by Operator........................................................................15
8.3.1. Termination Rights....................................................................15
8.3.2. Payment...............................................................................16
8.4. Termination by Owner...........................................................................16
8.4.1. Termination for Cause.................................................................16
8.4.2. Termination for Convenience...........................................................17
8.5. Plant Condition at End of Term.................................................................17
ARTICLE 9 INSURANCE..............................................................................................18
9.1. Operator Insurance Coverage....................................................................18
9.1.1. Plant Liability Insurance.............................................................18
9.1.2. Workers Compensation and Employers Liability Insurance................................19
9.1.3. General Insurance Provisions..........................................................19
9.1.4. Operator Disclosure and Cooperation...................................................20
9.2. Owner Insurance Coverage.......................................................................20
9.3. Self-Insurance, etc............................................................................20
ARTICLE 10 INDEMNIFICATION.......................................................................................21
10.1. Indemnification of Owner.......................................................................21
10.2. Indemnification of Operator....................................................................22
10.3. Notice.........................................................................................23
10.4. Deferral of Dispute Resolution.................................................................23
ARTICLE 11 GENERAL LIMITATIONS OF LIABILITY......................................................................23
11.1. Total Liability................................................................................23
11.2. Consequential Damages..........................................................................24
11.3. Owner Actions..................................................................................24
ii
11.4. Survival and Application.......................................................................24
ARTICLE 12 ENVIRONMENTAL MATTERS.................................................................................24
12.1. Site Conditions................................................................................24
12.1.1. Disclosure............................................................................24
12.2. Insurance/Indemnification......................................................................24
12.3. Compliance.....................................................................................24
12.4. New Source Review Requirements.................................................................25
ARTICLE 13 NONDISCLOSURE.........................................................................................25
13.1. General........................................................................................25
13.2. Exceptions.....................................................................................25
13.3. Required Disclosure............................................................................25
ARTICLE 14 DOCUMENTS AND MATERIALS...............................................................................26
14.1. Documents and Materials........................................................................26
14.2. Review by Owner................................................................................26
ARTICLE 15 MISCELLANEOUS PROVISIONS..............................................................................26
15.1. Agreement......................................................................................26
15.2. Relationship of the Parties....................................................................26
15.3. KeySpan Guaranty...............................................................................26
15.4. Assignment.....................................................................................26
15.5. Access.........................................................................................27
15.5.1. Owner.................................................................................27
15.5.2. Cooperation...........................................................................27
15.6. Not for Benefit of Third Parties...............................................................27
15.7. Force Majeure..................................................................................27
15.7.1. Events Constituting Force Majeure.....................................................27
15.7.2. Event of Force Majeure................................................................28
15.7.3. Scope.................................................................................28
15.8. Strikes........................................................................................28
15.9. Amendments.....................................................................................28
15.10. Survival.......................................................................................29
15.11. No Waiver......................................................................................29
15.12. Notices........................................................................................29
15.13. Representations and Warranties.................................................................29
15.13.1. Owner Representations and Warranties..................................................29
15.13.2. Operator Representations and Warranties...............................................30
15.14. Counterparts...................................................................................31
15.15. Governing Law..................................................................................31
15.16. Captions; Appendices...........................................................................31
15.17. Non-Recourse...................................................................................31
15.18. Severability...................................................................................31
iii
15.19. Rules of Interpretation........................................................................31
15.20. Private Use Rules..............................................................................32
15.21. State Law Requirements.........................................................................32
APPENDICES
----------
Appendix A - Excluded Services
Appendix B - Allocated Fixed O&M Cost Payment
Appendix C - KeySpan Guaranty
Appendix D - Fuel Management Services
Appendix E - Provisions Required by State Law
iv
OPERATION AND MAINTENANCE AGREEMENT
-----------------------------------
This OPERATION AND MAINTENANCE AGREEMENT (the "Agreement") is entered into
as of [___________], by and between LONG ISLAND LIGHTING COMPANY d/b/a LIPA
("Owner", and also referred to herein as "LIPA"), a wholly-owned subsidiary of
the Long Island Power Authority, a corporate municipal instrumentality and
political subdivision of the State of New York, and [KEYSPAN CORPORATION
SUBSIDIARY] ("Operator"), a corporation organized and existing under the laws of
the State of New York.
RECITALS
--------
WHEREAS, LIPA and an affiliate of Operator, KeySpan Generation, LLC, are
parties to an Option and Purchase and Sale Agreement dated as of January 1,
2006, as amended pursuant to the First Amendment to Option and Purchase and Sale
Agreement dated as of March 22, 2007 (the "Option Agreement") pursuant to which,
subject to the terms and conditions thereof, LIPA has exercised an option to
purchase the Plant (as defined below); and
WHEREAS, Owner and Operator are entering into this Agreement pursuant to
Section 6.1 of the Option Agreement, in order for the Owner to retain Operator
to operate and maintain the Plant upon the terms and conditions set forth in
this Agreement.
NOW, THEREFORE, in consideration of the mutual promises set forth herein,
the parties agree as follows:
ARTICLE 1
DEFINITIONS
Unless otherwise required by the context in which any defined term appears,
the following capitalized terms have the meanings specified in this Article 1:
"Administrative Procedures Manual" has the meaning ascribed to that
term in Section 2.3.3.
"Affiliate" means, with respect to any Person, any other Person that
directly or indirectly controls, is controlled by, or is under common
control with such Person. For purposes of the foregoing definition,
"control" means (i) the direct or indirect ownership of fifty percent (50%)
or more of the outstanding capital stock or other securities or equity
interests having ordinary voting power to elect the board of directors,
managing general partner or similar managing authority or (ii) the power to
direct the management of such Person.
"Agreement" means this Operation and Maintenance Agreement, including
all Appendices annexed hereto and any terms specifically incorporated by
reference, and any amendments hereto agreed in writing by the parties
hereto.
"Allocated Fixed O&M Cost Payment" means a monthly payment made by
Owner to Operator determined in accordance with Appendix B.
"Annual Capital Budget" has the meaning set forth in Section 4.2.
"Applicable Law" means any Permit or any law, statute, act,
regulation, code, ordinance, rule, judgment, order, decree, directive,
requirement, guideline or any similar decision or determination, or any
Governmental Authority's official interpretation or administration of any
of the foregoing, which governs or affects the Plant, as now or hereinafter
in effect.
"Arbitrators" has the meaning set forth in Section 6.5.
"Availability" means the availability of the Plant as measured by the
North American Electric Reliability Council (NERC) - Generating
Availability Data System (GADS) Availability Factor Formula, as set forth
in Section II of Appendix F to the Power Supply Agreement.
"Bankrupt" means with respect to a party, such party (a) files a
petition or otherwise commences a proceeding under any bankruptcy,
insolvency, reorganization or similar law, or has any such petition filed
or commenced against it, (b) makes an assignment or any general arrangement
(other than an assignment undertaken in connection with a financing) for
the benefit of creditors, (c) otherwise becomes bankrupt or insolvent
(however evidenced), (d) has a liquidator, administrator, receiver,
bankruptcy trustee, conservator or similar official appointed with respect
to it or any substantial portion of its property or assets, provided that
if such action is taken without such party's consent, such party shall be
allowed 60 days to dismiss such appointment, or (e) is generally unable to
pay its debts as they come due.
"Business Day" means any day other than a Saturday, Sunday or legal
holiday. Legal holidays are those holidays set forth in Operator's
collective bargaining agreements.
"Calendar Year" means (i) initially, the period from the Effective
Date to the last day of next succeeding December and (ii) thereafter, each
12-month period beginning on the first day of each January.
"Chair" has the meaning set forth in Section 6.5.
"Computerized Maintenance Management System" means a computer system
to manage maintenance activities, such as work order creation and tracking,
maintenance scheduling, equipment history, parts information, inventory
tracking, manhours required for maintenance, and the Preventive Maintenance
Program.
"Confidential Information" has the meaning ascribed to that term in
Section 13.1.
"City Gate" means a receipt point of natural gas at any point located
at the New York Facilities at which KeySpan may now have rights to receive
natural gas.
"CPR" means the International Institute for Conflict Prevention &
Resolution.
2
"CPR Mediation Procedures" mean the procedures published from time to
time by the CPR for the conduct of mediations.
"CPR Rules" has the meaning set forth in Section 6.5.
"Default Interest Rate" means the rate established from time to time
as the "overpayment rate" pursuant to Subsection (e) of Section 1096 of the
New York State Tax Law by the New York State Commission of Taxation and
Finance, as applicable to Owner under Section 2880(7)(c) of the New York
State Public Authorities Law.
"Dispute" means any dispute arising out of or relating to the
Agreement.
"Effective Date" has the meaning ascribed to that term in Section 8.1.
"Emergency" means an event occurring at the Plant which poses actual
or imminent risk of serious personal injury, physical damage or
environmental contamination requiring immediate preventative or remedial
action by Operator.
"Energy Management Agreement" means the Energy Management Agreement,
by and between LIPA and KETS, dated as of June 26, 1997, as amended by the
first amendment thereto, dated March 29, 2002, the second amendment
thereto, dated December 30, 2005, and the third amendment thereto, dated
_______.
"Environmental Claim" means any and all administrative, regulatory or
judicial actions, suits, or proceedings alleging potential liability
arising out of (a) the Release into the environment of any Hazardous
Materials at the Plant; or (b) any violation of any Environmental Law with
respect to the Plant.
"Environmental Law" means all applicable federal, state, and local
statutes, ordinances, and regulations relating to pollution and the
protection of the environment.
"Excluded Services" means those services set forth in Appendix A
annexed hereto.
"FAA" has the meaning set forth in Section 6.9.
"Fees-And-Costs" means reasonable fees and expenses of employees,
attorneys, architects, engineers, accountants, expert witnesses,
contractors, consultants and other persons, and costs of transcripts,
printing of briefs and records on appeal, copying and other reimbursed
expenses, and expenses of any Legal Proceeding.
"FERC" means the Federal Energy Regulatory Commission.
"Firm Gas Supply" means a type of natural gas supply delivered or
transported to a City Gate that may not be interrupted except for Force
Majeure events. Such gas may be interrupted on the gas distribution system
serving KeySpan's existing gas service area whenever its continued delivery
would adversely affect the reliability of the gas distribution system
serving KeySpan's existing gas service area.
3
"Force Majeure" has the meaning ascribed to that term in Section
15.7.1.
"Fuel" means natural gas, oil, kerosene or other fossil fuel used for
operating the Plant.
"Fuel Management Fee" has the meaning ascribed to that term in Section
7.2.
"Gas Balancing" means the type of service currently provided by
KeySpan whenever the aggregate daily gas taken for use by the Plant varies
from the daily nominated quantity. When this occurs, Operator will cause
certain assets currently owned or contracted for by KeySpan to be used to
either provide additional quantities of gas required by the Plant or take
back any excess quantities not required by the Plant.
"Guarantor" means KeySpan.
"Governmental Authority" means any Federal, state, local or other
governmental, regulatory or administrative agency, commission, department,
board, or other governmental subdivision, court, tribunal, arbitral body of
other governmental authority, but excluding any owner of the Plant (if
otherwise a Governmental Authority under this definition) when acting in
its ownership capacity.
"Hazardous Materials" means (A) any petroleum, asbestos in any form
that is friable, and polychlorinated biphenyls; and (B) any chemicals,
materials or substances which are now defined as or included in the
definition of "hazardous substances," "hazardous wastes," "hazardous
materials," "extremely hazardous wastes," "restricted hazardous wastes,"
"toxic substances," or "toxic pollutants" under any Environmental Law.
"Indemnified Party" has the meaning ascribed to that term in Section
10.3.
"Indemnifying Party" has the meaning ascribed to that term in Section
10.3.
"Interruptible Gas Supplies" means natural gas supplies that will be
interrupted whenever the supplier recalls supplies pursuant to a negotiated
supply contract and/or the interstate pipeline interrupts the
transportation of such gas supply pursuant to its FERC approved tariff.
Such gas supplies may also be interrupted for force majeure events.
"KETS" means KeySpan Energy Trading Services LLC.
"KeySpan" means KeySpan Corporation, a New York corporation.
"KeySpan Guaranty" has the meaning ascribed to that term in Section
15.3.
"Loss-and-Expense" means any and all losses, liabilities, obligations,
damages, delays, fines, penalties, judgments, deposits, costs, claims,
demands, charges, assessments, taxes, or expenses, including all
Fees-And-Costs.
4
"New York Facilities" or "NYF" means the system of gas mains severally
owned and operated by KeySpan, The Brooklyn Union Gas Company and
Consolidated Edison Co. of New York, Inc. pursuant to the NYF Agreement.
"NYF Agreement" means the New York Facilities Agreement entered into
as of January 1, 1994, by an between The Brooklyn Union Gas Company,
Consolidated Edison Co. of New York, Inc., and KeySpan, as successor to
Long Island Lighting Company, as the same may be amended in accordance with
its terms.
"O&M Manual" means all equipment manuals, system descriptions, system
operating instructions, equipment maintenance instructions and pertinent
design documentation (including vendor and manufacturer manuals, as-built
drawings and all final specifications) for the Plant provided by Owner,
Operator, manufacturers, suppliers or vendors.
"O&M Procedures" means the procedures developed by Operator as defined
in Section 2.3.1.
"Operator Indemnified Parties" has the meaning ascribed to that term
in Section 10.2.
"Owner Indemnified Parties" has the meaning ascribed to that term in
Section 10.1.
"Party Appointed Arbitrators" has the meaning ascribed to that term in
Section 6.5.
"Permits" means collectively all authorizations, approvals, licenses,
rulings, permits, waivers, certifications, exemptions, variances, filings
or registrations by or with any Governmental Authority required for the
operation, maintenance, repair, subsequent improvement, modification,
replacement and ownership of the Plant.
"Person" means, unless otherwise specified, a natural person,
corporation, limited liability company, partnership, joint venture,
unincorporated association, society or other entity, including a
Governmental Authority.
"Plant" means the [insert definition(s) from Option Agreement of
either E.F. Barrett Plant and ICUs, or E.F. Barrett Plant, or Far
Rockaway].
"Plant Documents" means the O&M Manual, the O&M Procedures, the
Administrative Procedures Manual, the Annual Capital Budget, administrative
and general procedures, Emergency response procedures and other manuals and
procedures for the Plant developed by Operator from time to time.
"Plant Liability Insurance" has the meaning ascribed to that term in
Section 9.1.1.
5
"Power Supply Agreement" or "PSA" means the Power Supply Agreement, by
and between LIPA and GENCO, dated as of June 26, 1997, as amended by the
amendments thereto, dated [___________].
"Preventive Maintenance Program" has the meaning ascribed to that term
in Section 2.3.2.
"Prudent Electric Production Practices" means any of the practices,
methods and acts, as revised from time to time, that are then generally
accepted by the electric generation industry and commonly used in prudent
electric generation engineering and operations to operate and maintain
equipment lawfully, safely, dependably and economically, and as would have
been expected, in the exercise of reasonable judgment in light of the facts
and characteristics of the Plant known, or should have been known, at the
time the decision is made, to accomplish the desired result at the lowest
reasonable cost in a manner consistent with Applicable Laws, applicable
Permits, reliability, safety, environmental protection, economy and
expediency, including, without limitation, those established by the North
American Electric Reliability Council, as applicable to units of the size
and type of the Plant. Prudent Electric Production Practices are not
intended to be limited to the optimum practices, methods or acts to the
exclusion of others, but rather to the spectrum of possible practices,
methods and acts generally accepted by a significant portion of the
electric generation industry in the relevant region, during the relevant
time period, as described in the preceding sentence.
"Quarterly Report" means the report prepared on a monthly basis by
Operator as further described in Section 5.1.2.
"Release" means any release, spill, emission, leaking, pumping,
pouring, injection, escaping, deposit, disposal, discharge, dispersal,
leaching, or migration into the indoor or outdoor environment (including,
without limitation, the abandonment or disposal of any barrels, containers
or other closed receptacles containing any hazardous materials), as well as
the movement of any hazardous material through the air, soil, surface
water, groundwater or property:
"Services" has the meaning ascribed to that term in Section 2.1.
"System Interruptible Gas Supply" means a type of natural gas supply
that will be interrupted whenever its continued delivery would adversely
impact the delivery of gas to the gas customers served by the KeySpan's gas
transmission or distribution system; furthermore, if Operator is using non-
KeySpan assets to provide natural gas to the Plant, such gas will only be
interrupted on KeySpan's gas distribution system whenever its continued
delivery would adversely impact the reliability of such gas distribution
system. If the Plant is using gas provided from KeySpan assets, the Plant
will be interrupted before KeySpan's interruptible gas customers consistent
with current practices. Such gas supplies may also be interrupted for force
majeure events.
"Term" has the meaning ascribed to that term in Section 8.2.
6
"Termination for Convenience" has the meaning ascribed to that term in
Section 8.4.2.
"Transitional Labor Costs" mean the annualized labor costs, based upon
actual head count (and including, without limitation, all salaries,
pensions and welfare benefits and all other direct labor costs), of
personnel assigned full time to the Plant on the date of a Termination for
Convenience pursuant to Section 8.4.2, who are no longer required for the
operation and maintenance of the Plant due to a termination of this
Agreement, either with respect to the Plant or a discrete generating unit,
under Section 8.4.2.
"Transitional Labor Cost Payments" has the meaning ascribed to that
term in Section 8.4.2.
"Utility Services" means electric, telephone, potable water, municipal
water, sewage and other utility services required by Operator for the
provision of Services.
"Variable Charge" means (i) for the period from the Effective Date
through December 31, 2008, 90(cent) per net MWh produced by the Plant, and
(ii) for any period beginning after December 31, 2008, an amount per MWh to
be agreed by the parties based upon Operator's variable costs to provide
the Services. If the parties do not agree on a new Variable Charge for the
periods after December 31, 2008, then such dispute shall be resolved in
accordance with Article 6.
"Variable Charge Cap" has the meaning ascribed to that term in Section
7.4.
"Variable Charge Excess" has the meaning ascribed to that term in
Section 7.4.
"Variable Charge Payment " means an amount equal to the Variable
Charge multiplied by the net MWh produced by the Plant.
ARTICLE 2
OPERATOR'S SERVICES
2.1. Scope of Services. Except as provided in Article 3, Operator shall
provide, or cause to be provided, all services necessary to operate and maintain
the Plant in accordance with the services described in this Article 2 and the
other requirements set forth in this Agreement (the "Services"). Without
limiting the generality of the foregoing, and subject to the requirements set
forth in Section 2.1.2, Operator shall perform, or cause to be performed, the
following Services for the Owner:
2.1.1. Services to be Provided by Operator. During the Term, Operator
shall have the responsibility to:
(a) provide Fuel management services as set forth in Appendix D;
(b) develop, implement and update as necessary site specific
Operations and Maintenance Procedures and a Preventive
Maintenance Program;
7
(c) implement a Computerized Maintenance Management System;
(d) perform routine repairs on any failed or malfunctioning equipment
comprising part of the Plant;
(e) schedule, procure and manage major maintenance services for the
Plant;
(f) identify the need for goods and services providers (which may be
affiliates of the Operator) with respect to the operation and
maintenance of the Plant and schedule, arrange for, procure, and
coordinate the receipt of such goods and services;
(g) purchase, receive and expedite, as necessary, chemicals,
lubricants, consumables, operating and maintenance supplies,
vehicles, spare parts, safety supplies, tools and equipment
required to operate and maintain the Plant;
(h) maintain an inventory of spare parts, materials, supplies and
tools necessary to operate and maintain the Plant, and purchase
replacement inventory as required;
(i) provide periodic technical, administrative and financial reports
to Owner as required with respect to the Plant, including such
reports as required by regulatory agencies;
(j) maintain required technical and administrative records with
respect to the Plant;
(k) establish and maintain a technical library with respect to the
Plant;
(l) make recommendations to Owner for capital improvements and
changes to the Plant as part of the Annual Capital Budget as
provided in Article 4 (it being acknowledged and agreed, for the
avoidance of doubt, that the Services shall not include the
making of any capital improvements or changes to the Plant,
except as Owner and Operator may mutually agree from time to
time); and
(m) provide assistance to Owner in the preparation of insurance and
warranty claims, preparation of reports required to comply with
Environmental Laws, regulations or Permits, and such other
matters relating to the operation and maintenance of the Plant as
Owner may reasonably require.
2.1.2. General Service Requirements. In providing the Services,
Operator shall:
(a) comply with, to the extent applicable and necessary to provide
the Services, (i) all Applicable Laws, (ii) Prudent Electric
Production Practices, (iii) all insurance requirements applicable
to the Plant, (iv) any warranty obligations applicable to the
Plant, (v) vendor manuals and manufacturer's guidelines
8
applicable to the Plant or, in Operator's opinion and to the
extent they comply with Prudent Electric Production Practices,
Operator's current practice, (vi) O&M Manuals approved by Owner,
and (vii) NYISO dispatch directions; provided, however that
Operator shall be excused from such compliance with the previous
clauses (i) through (vii) if the reason for non-compliance arises
from (A) any act or omission by Operator to the extent necessary
to respond to any Emergency; or (B) any budgetary limitations
imposed by Owner pursuant to Article 4; or (C) as otherwise
expressly set forth in this Agreement.
(b) administer all matters pertaining to labor relations, salaries,
wages, working conditions, hours of work, termination of
employment, employee benefits, safety, and all other personnel
matters; and
(c) provide accounting, bookkeeping, and administrative services in
connection with costs under the Annual Capital Budget;
2.2. Minimum Loadings Ramp Rate, Start-Up Times and Minimum Scheduled Shut
Down. In providing the Services, the Operator shall not be required to operate
the Plant outside of the specifications for the Plant set forth in Appendix E of
the Power Supply Agreement (which Appendix is hereby incorporated by reference
herein) with respect to Minimum Loadings, Ramp Rate, Start-Up Times and Minimum
Scheduled Shut Down.
2.3. Plant Document Preparation.
2.3.1. O&M Procedures. Operator shall develop, implement and update as
necessary Plant-specific procedures as Operator deems to be necessary or
appropriate for the safe and efficient operation of the Plant during the
Term (the "O&M Procedures"), which O&M Procedures shall be subject to
Owner's review and approval, which approval shall not be unreasonably
withheld or delayed.
2.3.2. Preventive Maintenance Program. Operator shall develop,
implement and update as necessary a Plant-specific program for preventative
maintenance (the "Preventive Maintenance Program"), which program shall be
subject to Owner's review and approval, which approval shall not be
unreasonably withheld or delayed.
2.3.3. Administrative Procedures Manual. Operator shall develop,
implement and update as necessary a manual for administrative procedures
with respect to the Plant's operation (the "Administrative Procedures
Manual"), which Administrative Procedures Manual shall be subject to
Owner's review and approval, which approval shall not be unreasonably
withheld or delayed.
2.4. Plant Staffing. Operator shall provide adequate numbers of
properly qualified, trained and, where required, licensed personnel for the
performance of the Services.
9
ARTICLE 3
OWNER RESPONSIBILITIES
3.1. General. At Owner's sole cost and expense, Owner shall furnish to
Operator the information, data, reports, services, materials and other items as
provided in this Article 3. Owner shall make such items available at such times
and in such a manner as may be reasonably required by Operator.
3.2. Information. Owner shall provide to Operator copies of all agreements
related to the Plant and any amendments thereto or replacements thereof, as well
as technical, operational and other information, all as reasonably available to
Owner or in Owner's possession and necessary for the performance of the
Services. Subject to the standards of performance set forth in Section 2.1.2,
and unless Owner obtained such documents and information from Operator or an
Affiliate of Operator, Operator shall be entitled to rely upon such information
in its performance of the Services.
3.3. Site Access and Facilities. Owner shall arrange for Operator to have:
(i) continuous road access to the Plant, (ii) adequate parking facilities for
all Operator personnel, including its contractors and subcontractors; (iii)
access to the Plant and all systems, interconnections, equipment and
appurtenances of the Plant; and (iv) suitable office, warehouse and laboratory
space, and maintenance shop facilities. Operator hereby acknowledges that the
facilities at the Plant site as of the Effective Date satisfy the requirements
of the preceding sentence.
3.4. Permits. Except for Permits that must be obtained by Operator under
Applicable Law, Operator on behalf of Owner shall obtain or cause to be obtained
all Permits, including the renewal, revision or modification of such Permits, as
may be necessary to authorize Operator to engage in the business of operating
and maintaining electric generation facilities. Operator shall comply with all
terms and conditions of such Permits.
3.5. Other Services. Owner shall be responsible for the Excluded Services
as set forth in Appendix A.
ARTICLE 4
BUDGET PREPARATION, REVIEW AND ADOPTION
4.1. Annual Capital Budget Preparation. No later than September 1 of each
Calendar Year, Operator will submit for Owner's approval a written proposed
budget for capital expenditures with respect to the Plant for the next Calendar
Year and each of the four (4) succeeding Calendar Years.
4.2. Annual Capital Budget Review. Within 30 days of receipt of Operator's
proposed capital expenditure budget, Owner shall review the proposed budget and
return it to Operator with such changes, additions, deletions or revisions as
Owner shall require. The budget as returned to Operator by Owner shall be the
"Annual Capital Budget" for the applicable Calendar Years.
10
ARTICLE 5
BILLING DATA AND OTHER OPERATING REPORTS
5.1. Reports.
5.1.1. Monthly Reports. On the 15th Business Day of each calendar
month following the Effective Date, Operator shall submit to Owner a report
summarizing, for the prior calendar month, the electric generation,
availability, heat rate and Fuel consumption (each on a monthly and
year-to-date basis), major equipment trips or failures, procurement,
capital improvements, labor relations, training activities, safety issues,
significant interactions with governmental authorities, significant
environmental and permit issues including any notices of violation,
significant operating problems along with remedial actions planned, a brief
summary of major activities planned for the next two reporting periods and
other material data in connection with the Plant operation for the prior
calendar month. Such reports shall be in a format reasonably acceptable to
Owner.
5.1.2. Quarterly Reports. On the 20th Business Day following each
quarter following the Effective Date, Operator shall submit to Owner a
report summarizing for such prior quarter (i) Annual Capital Budget
performance, and various explanations thereof, and other material Annual
Capital Budget data in connection with the Plant and (ii) the progress with
respect to scheduled maintenance under the Preventive Maintenance Program
(the "Quarterly Report").
5.2. Notice from Judicial/Governmental Authorities. Promptly upon obtaining
knowledge thereof, each party shall submit to the other party written notice of
and copies of any relevant documents in the submitting party's possession
relating to: (i) any litigation, claims, disputes or actions actually filed, or
any material litigation, claims, disputes or actions which are threatened,
concerning in each case Owner, Operator, the Plant, or the Services; (ii) any
actual refusal to grant, renew or extend, or any action pending or any action
filed with respect to, the granting, renewal or extension of any Permit or any
material threatened action regarding the same; (iii) any dispute with any
Governmental Authority which may have a material adverse effect on the business
or affairs of Owner or Operator, or Plant operation or maintenance; and (iv)
without regard to their materiality, all penalties or notices of violation
issued by any Governmental Authority.
5.3. Government Reports. Any material reports relating to the Plant that
are prepared by Operator for submittal to any Governmental Authority shall first
be furnished to Owner for Owner's review and approval within a reasonable period
of time prior to such submission; provided, that if necessary to comply with a
prompt filing deadline, Operator shall give Owner only such notice and
opportunity to review as is reasonably practicable under the circumstances. Any
Owner approval shall not be unreasonably withheld or delayed. Operator shall
provide to Owner a copy of all reports relating to the Plant prepared by it for
submittal to any Governmental Authority concurrently with such submittal.
11
5.4. Other Information. Upon Owner's reasonable (as to time and format)
request, Operator shall submit to Owner any other material information
reasonably available to Operator concerning the Plant or the Services performed
by Operator.
ARTICLE 6
DISPUTE RESOLUTION
6.1. General. Any Dispute shall be resolved in accordance with the
procedures specified below, which shall constitute the sole and exclusive
procedures for the resolution of any Disputes.
6.2. Negotiation. The parties may attempt to resolve any Dispute promptly
by appointing a senior executive of each party to attempt to mutually agree upon
a resolution. Any party may give the other party written notice of any Dispute
not resolved in the normal course of business. Within 5 days after delivery of
the notice, the receiving party shall submit to the other a written response.
The notice and response shall include (a) a statement of that party's position
and a summary of arguments supporting that position, and (b) the name and title
of the executive who will represent that party and of any other person who will
accompany the executive. Within 10 days after delivery of the initial notice,
the persons representing the parties shall meet at a mutually acceptable time
and place, and thereafter as often as they reasonably deem necessary, to attempt
to resolve the Dispute. The parties shall endeavor to complete the negotiation
process within 20 days after the delivery of the negotiation notice. All
negotiations pursuant to this clause shall be confidential and shall be treated
as compromise settlement negotiations which shall not be used by either party as
evidence in any mediation, arbitration or court proceeding. The parties are not
required to undertake negotiation of any Dispute prior to commencing mediation
or arbitration pursuant to Section 6.4 or Section 6.5 respectively and may
commence mediation or arbitration at any time during the course of negotiation.
If a party commences mediation or arbitration pursuant to Section 6.4 or Section
6.5 respectively, any previously commenced negotiation shall be immediately
terminated, without any penalty or prejudice to the party commencing
negotiation.
6.3. Dispute Resolution Following Negotiation. If the Dispute has not been
resolved by negotiation as provided herein, either party may commence mediation
or arbitration pursuant to Sections 6.4 or Section 6.5 respectively. The parties
are not required to undertake mediation of any Dispute prior to commencing
arbitration pursuant to Section 6.5 and a party may commence arbitration at any
time during the course of mediation. If a party commences arbitration pursuant
to Section 6.5, any previously commenced mediation shall be immediately
terminated, without any penalty or prejudice to the party commencing
arbitration.
6.4. Mediation. Either party may refer for mediation, by written notice to
mediate, any Dispute not resolved by the negotiations provided for in Section
6.2. The mediation shall be conducted in accordance with the CPR Mediation
Procedures then currently in effect, to the extent such procedures are
consistent with the Agreement. The parties shall mutually agree on the selection
of a mediator, who may, but is not required to, be on a list of neutral
mediators published by the CPR. If the parties are unable to reach agreement on
the selection of a mediator within 5 days after delivery of the notice to
mediate, the parties shall follow the CPR procedures for selecting a mediator.
The parties shall endeavor to complete the mediation process within 20 days
after the delivery of the mediation notice.
12
6.5. Arbitration. Any Dispute which has not been resolved by negotiation as
provided in Section 6.2 or by mediation as provided in Section 6.4 shall be
settled by binding arbitration in accordance with the CPR Rules for
Non-Administered Arbitrations ("CPR Rules") then currently in effect, except to
the extent such rules are inconsistent with any provision of the Agreement, in
which case the provisions of the Agreement shall be followed. An arbitration
shall be commenced by written notice to the other party containing information
regarding the Dispute as set forth in Section 6.2. The arbitration shall be
conducted by three arbitrators (the "Arbitrators"). The Owner designates [name]
as its arbitrator or, in the event [name] is unavailable, [name] as its
alternate arbitrator. The Operator designates [name] as its arbitrator or, in
the event [name] is unavailable, [name] as its alternate arbitrator. In the
event that a party's designee is no longer able or is unwilling to serve as an
arbitrator for a Dispute, a party may appoint a substitute or replacement
arbitrator and shall promptly notify the other party thereof. The parties'
designated arbitrators are hereinafter referred to as the "Party Appointed
Arbitrators." The Party Appointed Arbitrators, within two business days of
receiving a notice of arbitration will select a third arbitrator (the "Chair"),
who will be one of the following individuals: [names]. The Chair shall be the
chairperson of the panel. In the event that any one of these individuals is no
longer able or is unwilling to continue to serve as the Chair, the Party
Appointed Arbitrators will confer and agree on a replacement arbitrator within
three Business Days. In the event no such agreement can be reached, the CPR
procedures shall govern the appointment of the Chair.
6.6. Provisional Relief. Either party may, without prejudice to any
negotiation, mediation, or arbitration procedures, proceed in the New York State
Supreme Court, Nassau County, to obtain provisional judicial relief if, in the
such party's sole discretion, such action is necessary to avoid imminent
irreparable harm, to provide uninterrupted electrical and other services, or to
preserve the status quo pending the conclusion of the Dispute procedures
specified herein. For purposes of the foregoing, Owner and Operator each hereby
agrees to submit to the jurisdiction of such court and, to the maximum extent
permitted by law, waives any right to object to the bringing of an action in
such court on ground of lack of venue or that such court is an inconvenient
forum.
6.7. Information Exchange. The Arbitrators shall have the discretion to
order a prehearing exchange of information by the parties, including, without
limitation, production of requested documents, the exchange of witness
statements of proposed witnesses, and the examination by deposition of parties.
The parties hereby agree timely to produce all such information as ordered by
the Arbitrators.
6.8. Site of Arbitration. The site of any Arbitration brought pursuant to
the Agreement shall be either Mineola, New York or Hauppauge, New York, or such
other site as the parties may agree.
6.9. Awards. The Arbitrators shall have no authority to award punitive
damages or any other damages aside from the prevailing party's direct damages
plus interest at the Default Interest Rate from the date such damages were
incurred. The Arbitrators may award reasonable attorneys' fees and costs of the
13
arbitration. The arbitration shall be governed by the Federal Arbitration Act, 9
U.S.C. ss.ss.1-16 (the "FAA"), and judgment upon the award rendered by the
Arbitrators may be entered by any court having jurisdiction thereof.
6.10. Grounds for Judicial Review. Any award made by the Arbitrators with
respect to any Dispute pursuant to these dispute resolution procedures may be
vacated, modified or corrected by a court only on the grounds permitted under
the provisions of Sections 10 and 11 of the FAA.
6.11. No Interruption. The pendency of these Dispute resolution procedures
shall not in and of itself relieve either party from its duty to perform under
this Agreement or serve to delay or suspend the operation of the Project or the
performance of the Services hereunder.
ARTICLE 7
COMPENSATION AND PAYMENT
Owner shall pay Operator for the Services in the manner and at the times
specified in this Article 7.
7.1. Monthly Invoices. Operator shall prepare and submit monthly invoices
to Owner no later than fifteen (15) days following the end of each calendar
month for payments due hereunder, which will include charges for (i) the monthly
Allocated Fixed O&M Cost Payment (ii) subject to Section 7.4, the monthly
Variable Charge Payment, and (iii) the monthly portion of the Fuel Management
Fee for such month as described in Section 7.2. Operator shall supply any
supporting documentation for the invoice as Owner may reasonably request.
Subject to Owner's right to conduct an audit pursuant to Section 7.3, Owner
shall pay such invoices within ten (10) days following the receipt of Operator's
invoice. Any amounts due but unpaid by Owner to Operator hereunder shall accrue
interest at the Default Interest Rate from the date due until paid. Payment
shall be made of all amounts owed by Owner to Operator hereunder by wire
transfer, or by other mutually agreeable method(s) to an account designated by
Operator.
7.2. Fuel Management Fee. The Owner shall pay Operator a management fee
(the "Fuel Management Fee") commencing in the first month of the Effective Date.
The Fuel Management Fee will be $125,000 per year, payable in monthly
installments of $10,416.67. [The Fuel Management Fee shall be $125,000 per year
prorated based upon the fuel BTU's purchased in the year prior to the exercise
of the Option Agreement with respect to the Plant.] In addition, Owner shall pay
Operator for the cost of Fuel and fuel related taxes, as well as third party
fuel related fees and costs prudently incurred consistent with existing practice
under the Energy Management Agreement and Appendix D to this Agreement.
7.3. Audit. Notwithstanding the payment of any amount under this Agreement,
Owner shall remain entitled to conduct a subsequent audit and review of all
costs incurred and paid by Owner pursuant to this Agreement, together with any
supporting documentation requested by Owner, for a period of seven (7) years
from and after the date of such payment. If, pursuant to such audit and review,
it is determined that any amount previously paid by Owner did not constitute a
due and payable item pursuant to this Agreement, Owner may recover such amount
from Operator or deduct or cause to be deducted such amount from any payment
that may be due to Operator.
14
7.4. Maximum Variable Charge Payment. Notwithstanding anything to the
contrary, the maximum aggregate Variable Charge Payments payable to Operator for
any Calendar Year shall not exceed an amount (the "Variable Charge Cap") equal
to twenty percent (20%) of the sum of the Allocated Fixed O&M Cost Payments,
Variable Charge Payments, and Fuel Management Fee paid to Operator for such
Calendar Year. If the payment of the Variable Charge Payment for any month would
cause the sum of all Variable Charge Payments for the applicable Calendar Year
to exceed the Variable Charge Cap, then the amount (the "Variable Charge
Excess") by which such sum exceeds the Variable Charge Cap shall not be payable
to Operator. Thereafter, if the sum of all Variable Charge Payments for the
applicable Calendar Year actually paid to Operator is less than the Variable
Charge Cap, then there shall be paid to Operator with the next monthly payment
pursuant to Section 7.1, an amount equal to the lesser of (i) the difference
between the sum of all Variable Charge Payments for the applicable Calendar Year
actually paid to Operator (taking into consideration such month's payments) and
the Variable Charge Cap and (ii) the aggregate Variable Charge Excesses not paid
to Operator for such Calendar Year and any previous Calendar Years (plus a
carrying charge accruing at the Default Rate until such Variable Charge Excesses
are paid).
ARTICLE 8
TERM AND TERMINATION
8.1. Effective Date. This Agreement shall become legally binding and
effective only upon satisfaction of the following conditions precedent (the date
upon which all such conditions are satisfied, the "Effective Date"):
(a) Approvals of this Agreement (reasonably satisfactory to Owner and
Operator) from the Public Authorities Control Board, New York State
Comptroller, and the New York Attorney General (as to form) shall have been
obtained and be in full force and effect;
(b) The closing of the purchase of the Plant under the Option
Agreement shall have occurred; and
(c) Each of the Power Supply Agreement Amendment and the Energy
Management Agreement Amendment (each as defined in the Option Agreement)
shall have become effective in accordance with their respective terms.
8.2. Term. The term of this Agreement shall commence on the Effective Date
and expire May 28, 2013 unless earlier terminated.
8.3. Termination by Operator.
8.3.1. Termination Rights. Operator has the right to terminate this
Agreement without liability if:
15
(a) Owner fails to pay any undisputed sum due under this Agreement
within 30 days after Owner has received notice of such default
from Operator;
(b) Owner fails to perform any of its other obligations under this
Agreement in any material respect and such failure continues
after notice is provided by Operator to Owner, provided that
Owner shall have up to 60 Business Days to cure or make
substantial progress towards curing such default;
(c) any Governmental Authority suspends or revokes any approvals
issued by such Governmental Authority to permit Operator to
perform its obligations under this Agreement, or otherwise
prohibits Operator from performing its obligations under this
Agreement, provided that such suspension, revocation or
prohibition, as the case may be, was not the result of Operator's
negligence or failure to comply with the requirements of any
Applicable Law, Permit or approval; or
(d) Owner is Bankrupt;
8.3.2. Payment. In the event of a termination by Operator under this
Section 8.3, Owner shall pay Operator for all amounts due for the period
prior to such termination.
8.4. Termination by Owner.
8.4.1. Termination for Cause. Owner has the right to terminate this
Agreement for cause without liability if:
(a) Operator fails to perform any of its obligations under this
Agreement in any material respect and such failure continues
after notice is provided by Owner to Operator, provided that
Operator shall have up to 60 Business Days to cure or make
substantial progress towards curing such default;
(b) Operator is Bankrupt;
(c) Operator's total liability under this Agreement during two
consecutive Calendar Years shall have exceeded its maximum
liability hereunder for each such Calendar Year pursuant to
Section 11.1;
(d) the KeySpan Guaranty shall be held to be unenforceable or the
Guarantor shall disavow, or default in the performance of, its
obligations under the KeySpan Guaranty; or
(e) The Availability of the Plant in any two consecutive full
Calendar Years is less than ____ percent (___%) other than as a
result of (i) any one or more events of Force Majeure, (ii)
Owner's acting unreasonably with respect to the approval of any
Annual Capital Budget, (iii) the failure of Owner to pay for
expenses included in any Annual Capital Budget or otherwise to
cause or permit to be made any capital improvement or change to
16
the Plant included in any Annual Capital Budget on the schedule
provided therein or (iv) any negligent act or omission of Owner
or any of Owner's contractors, subcontractors, agents or invitees
(other than Operator and any of its contractors, subcontractors,
agents and invitees). [Specify 90% for only E.F. Barrett Plant;
85% for only Far Rockaway Plant; 85% for only the ICUs]
8.4.2. Termination for Convenience. Owner has the right, by not less
than 30 days prior written notice to Operator, to terminate this Agreement
with respect to the Plant (or with respect to a discrete generating unit
thereof) for convenience (a "Termination for Convenience") in the event of:
(a) The Plant's or such unit's, as the case may be, retirement; or
(b) The Plant's or such unit's, as the case may be, shutdown in
connection with a repowering.
In the event of a termination pursuant to this Section 8.4.2, Operator
shall be entitled, in addition to all other amounts due to it
hereunder as of the date of termination, monthly payments (the
"Transitional Labor Cost Payments") equal to the product of (i) one
twelfth (1/12) of the Transitional Labor Costs times (ii) the
applicable percentage set forth in table below. Beginning with the
next succeeding month following a termination under Section 8.4.2,
Owner shall make Transitional Labor Cost Payments to Operator on the
fifteenth (15th) of each month until the earlier to occur of (a)
Owner's having made forty eight (48) Transitional Labor Cost Payments
or (b) May 28, 2013.
Transitional Labor Cost Percentage
Payment
(Month)
1 to 12 100%
13 to 24 75%
25 to 36 50%
37 to 48 25%
8.5. Plant Condition at End of Term. Upon the expiration or earlier
termination of this Agreement, Operator shall remove its personnel and equipment
from the Plant in an orderly fashion. All special tools, improvements, inventory
of supplies, spare parts, safety equipment, O&M Manuals, documentation, whether
or not marked as confidential or proprietary in accordance with Article 13
hereof (in each case as provided to, obtained by or provided by, and as modified
by Operator pursuant to this Agreement during the Term) and any other items
furnished by or on behalf of Operator and paid for by Owner will remain at the
Plant and will remain or become the property of Owner without any additional
17
charge. Owner shall also have the right, in its sole discretion, to directly
assume any contracts entered into by or obligations of Operator solely in
connection with the Services, provided Owner also assumes sole liability under
such contracts. Operator shall execute all documents and take all other
reasonable steps requested by Owner that are required to assign to and vest in
Owner all rights, benefits, interests and title in connection with such
contracts or obligations and release Operator from same; provided, however, that
Owner shall indemnify and hold harmless Operator from and against any and all
liabilities arising thereunder after the date of any such assumption and
release. Prior to the effective date of such expiration or earlier termination,
Operator shall reasonably cooperate with Owner regarding the transition to a new
operator. If Owner requests Operator to continue to provide such transition
cooperation after the effective date of such expiration or earlier termination,
Operator shall provide such transition cooperation for a reasonable period of
time and Owner shall reimburse Operator for all costs incurred during such
transition period.
ARTICLE 9
INSURANCE
9.1. Operator Insurance Coverage. Throughout the Term, except as otherwise
required herein, Operator shall at its own cost, procure and maintain, with
insurers having an A.M. Best policyholders' rating of "A" or better, or
self-insure in accordance with the requirements made herein the following kinds
and amounts of insurance:
9.1.1. Plant Liability Insurance. (A) Such insurance as will protect
Operator from claims which may arise out of or result from services of
Operator as more fully described in this Agreement, whether such services
be by the Operator or by a contractor or by anyone directly or indirectly
employed by any of them, or by anyone for whose acts any of them may be
liable, claims for bodily injury and property damage of the kind usually
and customarily insured in a policy of: (i) commercial general liability
insurance, including at a minimum, coverage for contractual liability,
products and completed operations liability, and (ii) pollution or
environmental legal liability insurance as an extension of (i) above or in
a separate policy providing at the minimum sudden and accidental pollution
liability, and (iii) automobile liability insurance covering all vehicles
owned, operated, used, or the responsibility of Operator and (B) All Risk
Property Insurance for the full replacement value of the Plant, with Owner
named as the named insured. Operator shall cause Owner and its Affiliates
with the employees, agents, officers, directors, trustees, and
representatives of each to be named as additional insureds on the policies
described in (i), (ii) and (iii) of clause (A) above, with each policy
having a combined single limit of not less than $25,000,000.00 for each
occurrence (all insurance set forth in (i), (ii) and (iii) of clause (A)
above are collectively referred to as "Plant Liability Insurance").
Notwithstanding anything to the contrary in this Section 9.1 or any other
provision hereof, Owner shall pay or reimburse Operator for Owner's
proportionate share of all incremental costs incurred by Operator with
respect to the Plant Liability Insurance, or the All Risk Property
Insurance referred to above, as a result of the transfer to Owner of the
Plant and its ownership thereof.
18
9.1.2. Workers Compensation and Employers Liability Insurance. Such
insurance as will protect Operator from claims by employees for bodily
injury and occupational disease: (i) as required by the state of New York
and any other applicable state or governmental authority and (ii) employers
liability of not less than $25,000,000.00.
9.1.3. General Insurance Provisions. The insurance requirements set
forth herein are to fully protect Owner and its Affiliates from any and all
claims by third-parties, including employees of Operator or its agents,
subcontractors or employees and shall provide the following:
(a) Operator Insurance is Primary. The Plant Liability Insurance
shall apply as primary insurance with respect to any and all
other insurance or self-insurance programs carried by or
maintained by Owner or its Affiliates.
(b) Evidence of Coverage. Operator shall, prior to the Effective Date
of this Agreement, and within five (5) days after each request by
Owner, provide certificates of insurance to Owner's insurance
consultant evidencing all insurance policies, and if requested by
Owner or Owner's insurance consultant, a true, correct and
complete copy of all such insurance policies, required pursuant
to this Section 9.1. If the Plant Liability Insurance is
available only on a claims-made basis, then the dates of coverage
(including the retroactive date) will be so stated on the
certificate of insurance.
(c) Waiver of Subrogation. Owner and any other party reasonably
requested by Owner shall be granted waivers of subrogation by all
insurers providing coverage to Operator whether or not such
insurance policies are maintained pursuant to the requirements of
this Section 9.1 of the Agreement, including any amendments
thereto, or otherwise.
(d) Severability of Insureds. All policies required in this Section
9.1 shall provide that (i) inclusion of more that one person or
organization as insured hereunder shall not in any way affect the
rights of any such person or organization as respects any claim,
demand, suit or judgment made, brought or recovered, by or in
favor of any other insured, or by or in favor of any employee of
such other insured, and (ii) each person or organization is
protected thereby in the same manner as though a separate policy
had been issued to each, but nothing therein shall operate to
increase the insurance company's liability as set forth elsewhere
in the policy beyond the amount for which the insurance company
would have been liable if only one person or interest had been
named as insured.
(e) Notice of Cancellation. All policies required in this Section 9.1
may not be cancelled or materially altered without giving at
least thirty (30) days (or ten (10) days if such cancellation is
due to a failure to pay premiums) prior written notice of
cancellation to Owner.
19
(f) Deductibles. Any and all deductible or retention amounts under
policies provided by Operator pursuant to this Section 9.1 shall
be assumed by, for the account of, and at the sole risk of
Operator.
(g) Claims Made Policies. When the insurance policies required herein
are issued on a "claims made" or "claims first made" form, the
retroactive date shall be on or before the Effective Date of this
Agreement and such policies must be maintained for a period of at
least five (5) years after Termination of this Agreement or shall
be specifically endorsed to provide that claims made for at least
five (5) years after the event or occurrence giving rise to the
claim will be covered.
9.1.4. Operator Disclosure and Cooperation. Where Operator is
providing insurance coverage for benefit of Owner, procuring insurance at
request of Owner, and/or securing coverage at the expense of Owner,
Operator shall make complete and timely disclosure of all information as
may be requested from time to time by Owner and provide full cooperation in
securing such coverages as may be requested by Owner. Such disclosure and
cooperation shall include, without limit, an exact copy of the applicable
insurance policy wording, premium calculation, rating structure, disclosure
of No Claims Bonuses and/or profit sharing, information regarding cargo
shipments and related surveys, fees or commissions paid to brokers or
consultants, and/or other fees or expenses which may be incurred by Owner
in conjunction with the procurement of said insurance. In the event that
any Plant Liability Insurance policy or the coverage extended thereunder to
Owner or Owner's Affiliates is not renewed or is canceled and is not
replaced by Operator or its Affiliates with insurance policies providing
comparable coverage thereto, or if the Plant Liability Insurance policies,
in Owner's or Owner's Affiliates' reasonable judgment, undergo any material
change such that the coverage afforded thereunder is not commercially
reasonable, Owner and its Affiliates may secure separate general liability
insurance policies and/or pollution legal liability policies and/or
automobile liability policies to provide comparable commercially reasonable
insurance coverage and Operator shall reimburse Owner and its Affiliates,
as the case may be, for the Operator's proportionate share of the premiums
paid by Owner and its Affiliates, as the case may be, for such insurance.
9.2. Owner Insurance Coverage. Throughout the Term, Owner shall, at its
cost, maintain third party liability insurance similar to that required of
Operator and workers compensation insurance for its employees.
9.3. Self-Insurance, etc. Operator and Owner may carry such self insured
retentions, deductibles, or may self-insure any of the above Plant Liability
Insurance, All Risk Property Insurance, and Worker's Compensation insurance to
the extent that it is doing so on the Effective Date or to such greater extent
as may be approved in writing by Owner. Nothing in this Article 9 is intended to
nor shall it relieve Owner or Operator of any of their respective obligations
and liabilities under this Agreement including, but not limited to, the
indemnification obligations set forth in Article 10 below.
20
ARTICLE 10
INDEMNIFICATION
10.1. Indemnification of Owner. Operator agrees that to the extent
permitted by law it will protect, indemnify and hold harmless Owner and its
Affiliates and their respective representatives, trustees, directors, officers,
employees and subcontractors (as applicable in the circumstances), (the "Owner
Indemnified Parties") from and against (and pay the full amount of) any
Loss-and-Expense and will defend the Owner Indemnified Parties in any suit,
including appeals, for personal injury to, or death of, any person, or loss or
damage to property arising out of: (a) the gross negligence or willful
misconduct of Operator; (b) a violation of law by Operator which materially and
adversely affects (i) the condition or operations of the Plant, (ii) the
financial condition of Owner, (iii) the performance or ability of Operator to
perform its obligations under this Agreement or (iv) the cost of providing
electric service to the customers of the Plant (in each case other than for any
violation of environmental Law for which Owner or Operator may be strictly
liable provided Operator acted in a manner consistent with Prudent Electric
Production Practices), or (c) a criminal violation of Law by Operator. Operator
shall not, however, be required to reimburse or indemnify any Owner Indemnified
Party for any Loss-and-Expense to the extent any such Loss-and-Expense is due to
(a) any matter for which Owner is responsible under Article 3 hereof, (b) the
negligence or other wrongful conduct of any Owner Indemnified Party, (c) any
event of Force Majeure, (d) any act or omission of any Owner Indemnified Party
judicially determined to be responsible for or contributing to the
Loss-and-Expense, or (e) any matter for which the risk has been specifically
allocated to the Owner hereunder. An Owner Indemnified Party shall promptly
notify Operator of the assertion of any claim against it for which it is
entitled to be indemnified hereunder, shall give Operator the opportunity to
defend such claim, and shall not settle the claim without the approval of
Operator. Operator shall be entitled to control the handling of any such claim
and to defend or settle any such claim, in its sole discretion, with counsel of
its own choosing that is reasonably acceptable to the Owner Indemnified Parties;
provided, however, that, in the case of any such settlement, Operator shall
obtain written release of all liability of the Owner Indemnified Parties, in
form and substance reasonably acceptable to the Owner Indemnified Parties.
Notwithstanding the foregoing, each Owner Indemnified Party shall have the right
to employ its own separate counsel in connection with, and to participate in
(but, except as provided below, not control) the defense of, such claim, but the
fees and expenses of such counsel incurred after notice to Operator of its
assumption of the defense thereof shall be at the expense of such Owner
Indemnified Party unless:
(i) the employment of counsel by such Owner Indemnified Party has
been authorized by the Operator;
(ii) counsel to such Owner Indemnified Party shall have reasonably
concluded that there may be a conflict on any significant issue
between Operator and such Owner Indemnified Party in the conduct
of the defense of such claim; or
(iii) Operator shall not in fact have employed counsel reasonably
acceptable to the Owner Indemnified Party to assume the defense
of such claim within twenty (20) days following the receipt by
Operator of the notice from the Owner Indemnified Party regarding
the assertion of the applicable claim,
21
in each of which cases the fees and expenses of counsel for such Owner
Indemnified Party shall be at the expense of Operator; provided, however, that,
with respect to clauses (ii) and (iii) of this sentence, Operator shall not be
obligated to pay the fees and expenses of more than one law firm, plus local
counsel if necessary in each relevant jurisdiction, for all such Owner
Indemnified Parties with respect to any claims arising out of the same events or
facts or the same series of events or facts. The Operator shall not be entitled,
without the consent of such Owner Indemnified Party, to assume or control the
defense of any claim as to which counsel to such Owner Indemnified Party shall
have reasonably made the conclusion that there may be a conflict on any
significant issue between Operator and such Owner Indemnified Party in the
conduct of the defense of such claim as set forth in clause (ii) above, provided
that the foregoing limitation shall apply only with respect to those issues for
which there may be such a conflict. These indemnification provisions are for the
protection of the Owner Indemnified Parties only and shall not establish, of
themselves, any liability to third parties. The provisions of this Section 10.1
shall survive termination of this Agreement.
10.2. Indemnification of Operator. Owner agrees that to the extent
permitted by law, it will protect, indemnify and hold harmless Operator and its
Affiliates and their respective officers, directors, subcontractors (as
applicable in the circumstances) and employees (the "Operator Indemnified
Parties") from and against (and pay the full amount of) any Loss-and-Expense,
and will defend the Operator Indemnified Parties in any suit, including appeals,
for personal injury to, or death of, any person, or loss or damage to property
arising out of any matter for which Owner is responsible under Article 3 hereof.
Owner shall not, however, be required to reimburse or indemnify any Operator
Indemnified Party for any Loss-and-Expense to the extent any such
Loss-and-Expense is due to (a) any matter for which Operator is responsible
under Article 2 hereof or for which Operator is required to indemnify Owner
under Section 10.1, (b) the negligence or other wrongful conduct of any Operator
Indemnified Party, (c) any event of Force Majeure, (d) any act or omission of
any Operator Indemnified Party judicially determined to be responsible for or
contributing to the Loss-and-Expense, or (e) any matter for which the risk has
been specifically allocated to Operator hereunder. An Operator Indemnified Party
shall promptly notify Owner of the assertion of any claim against it for which
it is entitled to be indemnified hereunder, shall give Owner the opportunity to
defend such claim, and shall not settle the claim without the approval of Owner.
Owner shall be entitled to control the handling of any such claim and to defend
or settle any such claim, in its sole discretion, with counsel of its own
choosing that is reasonably acceptable to the Operator Indemnified Party;
provided, however, that, in the case of any such settlement, Owner shall obtain
written release of all liability of the Operator Indemnified Party, in form and
substance reasonably acceptable to the Operator Indemnified Party.
Notwithstanding the foregoing, each Operator Indemnified Party shall have the
right to employ its own separate counsel in connection with, and to participate
in (but, except as provided below, not control) the defense of, such claim, but
the fees and expenses of such counsel incurred after notice to Owner of its
assumption of the defense thereof shall be at the expense of such Operator
Indemnified Party unless:
(i) the employment of counsel by such Operator Indemnified Party has
been authorized by Owner;
22
(ii) counsel to such Operator Indemnified Party shall have reasonably
concluded that there may be a conflict on any significant issue
between Owner and such Operator Indemnified Party in the conduct
of the defense of such claim; or
(iii) Owner shall not in fact have employed counsel reasonably
acceptable to the Owner Indemnified Party to assume the defense
of such claim within twenty (20) days following the receipt by
Owner of the notice from the Operator Indemnified Party regarding
the assertion of the applicable claim,
in each of which cases the fees and expenses of counsel for such Operator
Indemnified Party shall be at the expense of Owner; provided, however, that,
with respect to clause (ii) and clause (iii) of this sentence, Owner shall not
be obligated to pay the fees and expenses of more than one law firm, plus local
counsel if necessary in each relevant jurisdiction, for all such Operator
Indemnified Parties with respect to any claims arising out of the same events or
facts or the same series of events or facts. Owner shall not be entitled,
without the consent of such Operator Indemnified Party, to assume or control the
defense of any claim as to which counsel to such Operator Indemnified Party
shall have reasonably made the conclusion that there may be a conflict on any
significant issue between Owner and such Operator Indemnified Party in the
conduct of the defense of such claim as set forth in clause (ii) above, provided
that the foregoing limitation shall apply only with respect to those issues for
which there may be such a conflict. These indemnification provisions are for the
protection of the Operator Indemnified Parties only and shall not establish, of
themselves, any liability to third parties. The provisions of this Section 10.2
shall survive termination of this Agreement.
10.3. Notice. In the event that a party (the "Indemnified Party") becomes
aware of any event or circumstance which might entitle it to indemnification
under this Article 10, it shall provide the other party (the "Indemnifying
Party") with written notification within the earlier of thirty (30) days after
discovery of such event or circumstance or ten (10) Business Days prior to the
time any response is required by law regarding such event or circumstance.
10.4. Deferral of Dispute Resolution. In the event that a party makes claim
for indemnification under this Article 10 and such claim is the subject of
Dispute Resolution under Article 6 of this Agreement, then, upon mutual
agreement of the parties, such Dispute Resolution may be suspended pending the
resolution of the indemnification claim.
ARTICLE 11
GENERAL LIMITATIONS OF LIABILITY
11.1. Total Liability. Operator's total liability to Owner during any
Calendar Year during the Term for all claims of any kind, whether based upon
contract obligation, tort liability (including negligence) or otherwise, for any
loss or damage arising out of, connected with or resulting from this Agreement
during such each Calendar Year, or from the performance or breach thereof, shall
in no case exceed the Fuel Management Fee for such Calendar Year; provided,
however, that the foregoing limitation of liability shall not apply to damages
resulting from Operator's gross negligence or willful misconduct or to
Operator's obligation to indemnify Owner against third party claims pursuant to
Article 10.
23
11.2. Consequential Damages. Notwithstanding any provision in this
Agreement to the contrary, neither party nor any of its respective Affiliates,
shareholders, principals, directors, trustees, officers, employees, agents,
subcontractors or vendors shall be liable for consequential or indirect losses
or damages, including loss of profit, cost of replacement for electricity, cost
of capital, loss of goodwill, increased operating costs or any other special or
incidental damages or losses, damages or liabilities under any agreements to
which Owner may be a party irrespective of whether such claims are based upon
warranty, negligence, strict liability, contract, operation of law or otherwise.
11.3. Owner Actions. Operator shall not be liable for any claims, losses,
damages, costs, expenses, fines, penalties and liabilities, including but not
limited to Environmental Claims, arising out of (i) Owner's inability or refusal
to allocate monies for capital expenditures with respect to the Plant after
Operator's specific, detailed, request for funds for specified projects pursuant
to Section 4.1; (ii) failure of Plant equipment that is not the result of
Operator's or its agent's gross negligence or willful misconduct in the
operation and maintenance of the Plant; or (iii) Operator's or its agent's
compliance with any instructions or directives provided by Owner.
11.4. Survival and Application. The waivers and disclaimers of liability,
indemnities, releases from liability, and limitations on liability expressed in
this Agreement shall survive the expiration or earlier termination of this
Agreement and shall apply at all times, whether in contract, equity, tort or
otherwise, regardless of the fault, negligence (in whole or in part), strict
liability, breach of contract or breach of warranty of the party indemnified,
released or whose liabilities are limited, and shall extend to the Affiliates,
shareholders, principals, directors, officers and employees, agents and related
or affiliated entities of such party, and their Affiliates, principals,
officers, directors and employees.
ARTICLE 12
ENVIRONMENTAL MATTERS
12.1. Site Conditions.
12.1.1. Disclosure. Owner agrees that it will fully disclose to
Operator all information, both written and oral, that becomes known to or
comes into the possession of Owner after the Effective Date from time to
time regarding the environmental conditions at the Plant, including any and
all reports, audits or other correspondence from environmental consultants
and/or Governmental Authorities.
12.2. Insurance/Indemnification. Owner shall cause Operator and its
Affiliates to be designated as a named insured on any insurance policy covering
Environmental Claims carried by Owner and its Affiliates.
12.3. Compliance. Without limiting the generality of Section 2.1.2 above,
Operator shall comply with all requirements of Environmental Laws, including the
terms and conditions of all Permits issued or obtained under Environmental Laws,
in connection with Operator's provision of the Services. Operator shall be
responsible for complying with all reporting obligations that arise under
24
Environmental Laws in connection with any Emergency or other event or condition
related to the Plant, including the reporting of any release of any Hazardous
Materials. Owner shall indemnify, defend and hold harmless Operator, its
shareholders, Affiliates, officers, directors, employees, agents and
representatives from and against any and all Environmental Claims directly or
indirectly related to or arising out of the actual or alleged existence,
generation, use, collection, treatment, storage, transportation, recovery,
removal, discharge or disposal of Hazardous Materials at the Plant and/or
adjacent areas to the Plant, except for Environmental Claims arising directly
out of the gross negligence or willful misconduct of the Operator or any
"Environmental Loss" for which Operator is liable under Section D5, Fuel
Indemnification Provisions, of Appendix D (as such term is defined in such
appendix).
12.4. New Source Review Requirements. Notwithstanding anything to the
contrary in this Agreement, Owner shall bear all responsibility and liability
for compliance with all requirements with respect to New Source Review under the
Clean Air Act and any similar provisions of any other Applicable Law, including,
without limitation (i) all responsibility and liability with respect to
decisions made by the Owner (and the consequences thereof) about potential
regulatory implications of routine repairs, upgrades, maintenance and
modifications of the Plant and (ii) all responsibility and liability for all
costs, penalties and other Losses and Expenses associated with New Source Review
relating to the Plant (whether from third-party claims or otherwise) as a
consequence of such decisions (or the consequences thereof).
ARTICLE 13
NONDISCLOSURE
13.1. General. Each party agrees, to the extent permitted by Applicable
Law, to hold in confidence any confidential information supplied to that party
and designated in writing as confidential by the supplier thereof ("Confidential
Information"). Each party further agrees, to the extent requested by the
supplier of such information, to require its subcontractors, vendors, suppliers
and employees to enter into appropriate nondisclosure agreements relative to
such Confidential Information, prior to the receipt thereof. The nondisclosure
obligations set forth in this Article 13 shall survive for a period of five (5)
years following the expiration or earlier termination of this Agreement.
13.2. Exceptions. The provisions of this Article 13 shall not apply to
information covered by any one of the following exceptions or any combination
thereof: (i) information that was in the public domain prior to the receiving
party's receipt or that subsequently becomes part of the public domain by
publication or otherwise, except by the receiving party's wrongful act; (ii)
information that the receiving party can demonstrate was in its possession prior
to receipt thereof from the disclosing party; (iii) information received by a
party from a third party having no obligation of confidentiality with respect
thereof; and (iv) information which was developed independently by the receiving
party without access to the disclosing party's Confidential Information.
13.3. Required Disclosure. Notwithstanding anything in this Article 13 to
the contrary, if any party is required by Applicable Laws, or in the course of
administrative or judicial proceedings, to disclose Confidential Information,
25
such party may make such disclosure of such Confidential Information; provided,
however, that the party making such disclosure shall immediately notify the
other party of the requirement prior to disclosing the Confidential Information
so that the disclosing party may attempt to cause such third-party to treat the
Confidential Information in a confidential manner and to prevent such
Confidential Information from becoming part of the public domain.
ARTICLE 14
DOCUMENTS AND MATERIALS
14.1. Documents and Materials. Operator shall maintain at the Plant current
as-built drawings, plans, specifications, descriptions, O&M Manuals, and related
materials regarding the Plant, in each case to the extent such documents and
materials were furnished to or prepared by Operator during the Term. All such
materials and documents, together with any materials and documents furnished to
Operator by Owner in connection with the Plant, shall be delivered to Owner upon
the expiration of the Term or earlier termination of this Agreement; provided,
however, that Operator may retain and use copies of all such documents and
materials in the course of its current and future business activities.
14.2. Review by Owner. All materials and documents referenced in Section
14.1 shall be available for review by Owner at all reasonable times and upon
reasonable notice during development and promptly upon completion thereof.
ARTICLE 15
MISCELLANEOUS PROVISIONS
15.1. Agreement. This Agreement consists of the terms and conditions set
forth in the body hereof and the Appendices and other attachments hereto. In the
event of a conflict, variation or inconsistency between or among the Appendices,
other attachments and the terms and conditions set forth in the body hereof, the
terms contained in the body hereof shall govern. This Agreement contains the
entire agreement between the parties with respect to the subject matter hereof.
15.2. Relationship of the Parties. Operator is deemed to be an independent
contractor hereunder and shall not be deemed to be (i) a partner, joint venturer
or affiliate of Owner, (ii) an owner, lessee, or sublessee of the Plant, or
(iii) an assignee or obligor under any agreements with respect to the Plant to
which it is not a party.
15.3. KeySpan Guaranty. Operator shall provide to Owner upon the execution
and delivery of this Agreement a guaranty from KeySpan Corporation, Operator's
parent, of Operator's obligations hereunder in the form of an amendment to the
Guaranty Agreement dated May 28, 1998, from KeySpan Corporation to the Long
Island Power Authority, which amendment shall be substantially in the form set
forth in Appendix C (the "KeySpan Guaranty").
15.4. Assignment. This Agreement shall not be assigned by either party
without the prior written consent of the other party hereto, which consent shall
not be unreasonably withheld, delayed or conditioned. This Agreement shall be
binding upon and shall inure to the benefit of the parties and their successors
and permitted assigns.
26
15.5. Access.
15.5.1. Owner. During the Term, Owner and its authorized agents and
representatives shall have continuous access at all times to the Plant.
Owner shall comply with all Operator access and safety requirements while
at the Plant. Upon the request of Owner, or its authorized agents and
representatives, Operator shall provide such Persons with access to any
Plant operating data and logs.
15.5.2. Cooperation. During any such inspection or review of the Plant
undertaken during the Term, Owner and its authorized agents and
representatives must strictly comply with all of Operator's safety and
security procedures, and Owner and its authorized agents and
representatives must conduct such inspection and reviews in such a manner
as to not unreasonably interfere with Operator's activities. Operator also
shall reasonably cooperate with Owner in allowing other visitors access to
the Plant under conditions mutually agreeable to the parties.
15.6. Not for Benefit of Third Parties. Except as otherwise expressly
provided herein, this Agreement and each and every provision hereof is for the
exclusive benefit of the parties hereto and is not for the benefit of any third
party.
15.7. Force Majeure.
15.7.1. Events Constituting Force Majeure. As used in this Agreement,
"Force Majeure" means any act, event, or condition that causes delay in or
failure of performance of obligations under this Agreement, or otherwise
materially and adversely affects a party's ability to perform, if such act,
event or condition (i) is beyond the reasonable control of the party
relying thereon, (ii) is not the result of the willful misconduct or
negligent act or omission of such party, and (iii) is not an act, event or
condition, the risk or consequence of which such party expressly assumed
under this Agreement, and then only to the extent that such Force Majeure
event cannot be cured, remedied, avoided, offset, or otherwise overcome by
the prompt exercise of reasonable due diligence of the party relying
thereon including, but not limited to:
(a) acts of God, accident, flood, sabotage, fire, explosion,
vehicular accident, epidemic, earthquake, lighting, drought, or
similar occurrence, acts of utilities, transmission outages or
sudden or disruptive electrical events or disturbance on the
transmission or distribution system, disruption of Fuel or
materials supply, acts of public or foreign enemy, war and other
hostilities, invasion, blockade, insurrection, rebellion, riot
and disorder, strikes or labor disturbances, general arrest or
restraint of government and people, civil disturbance or similar
occurrence;
(b) entry of an injunctive or restraining order or judgment of any
Governmental Authority, if such order or judgment is not the
result of the act, or failure to act, of a party or its
subcontractors or suppliers; or
27
(c) suspension, termination, interruption of, or failure to obtain
any Permit required or necessary for the construction, operation
or maintenance of the Plant, provided such suspension,
termination, interruption or failure is not the result of the
action or inaction of a party relying thereon or its
subcontractors or suppliers.
Notwithstanding the foregoing, events of Force Majeure excusing
Operator's obligations to operate and maintain the Plant shall not include
(i) a strike or labor action by Operator's employees at the Plant; (ii) the
failure of any subcontractor, supplier or vendor of Operator to perform its
obligations under any agreement or undertaking with Operator unless the
failure of such subcontractor, supplier or vendor to perform is caused by
an event or condition that would qualify as an event of Force Majeure for
Operator; or (iii) any change in general economic conditions or costs of
materials, supplies and labor.
15.7.2. Event of Force Majeure. Except for the obligations of either
party to make payments of amounts due to the other party, the party
claiming Force Majeure shall be excused from performance and shall not be
considered to be in default in respect of any obligation under this
Agreement to the extent that a failure of performance of such obligation
shall be due to Force Majeure. If either party's ability to perform its
obligations under this Agreement is affected by Force Majeure, the party
claiming such inability shall: (i) promptly notify the other party of such
Force Majeure and its cause and confirm the same in writing within five (5)
Business Days of discovery of the event or circumstances constituting such
Force Majeure; (ii) immediately supply such available information about the
event or circumstances constituting the Force Majeure and the cause thereof
as is reasonably requested by the other party; and (iii) immediately
initiate removal of the cause of the Force Majeure or, if immediate removal
is not possible, to mitigate the effect thereof.
15.7.3. Scope. The suspension of performance due to Force Majeure
shall be of no greater scope and no longer duration than that which is
necessary. The excused party shall use its reasonable best efforts to
remedy its inability to perform.
15.8. Strikes. In the event that the Plant is unable to supply capacity,
energy or ancillary services to Owner due to a strike or other form of labor
action by Operator's employees, or the employees of its contractors or
subcontractors, Owner shall have the right to operate the Plant and to retain
such other personnel or agents as Owner in its sole discretion and at its sole
cost and expense deems necessary or advisable for such purposes. For so long as
Owner operates the Plant and/or retains such other personnel, the Allocated
Fixed O&M Costs Payment, Variable Charge Payment and the Fuel Management Fee, as
applicable, payable under this Agreement shall be reduced (but not less than to
zero) by an amount equal to Owner's costs to operate and maintain the Plant;
provided, however that Operator shall resume operation of the Plant, upon
termination of such strike.
15.9. Amendments. No amendments or modifications of this Agreement shall be
valid unless evidenced in writing and signed by duly authorized representatives
of both parties.
28
15.10. Survival. Notwithstanding any provisions herein to the contrary, the
provisions set forth in Articles 6, 10, 11,12 and 13, and Sections 5.3, 7.3,
8.5, 15.1, 15.2, 15.6, 15.7, 15.10, 15.12, 15.15, 15.16, 15.17, 15.18, and 15.19
shall survive in full force the expiration or earlier termination of this
Agreement. In addition, any and all rights and obligations accruing under this
Agreement prior to the termination date or expiration date shall survive such
termination or expiration.
15.11. No Waiver. It is understood and agreed that any delay, waiver or
omission by Owner or Operator to exercise any right arising from any breach or
default by Owner or Operator with respect to any of the terms, provisions, or
covenants of this Agreement shall not be construed to be a waiver by Owner or
Operator, as the case may be, of any subsequent breach or default of the same or
other terms, provisions or covenants on the part of the other party.
15.12. Notices. Any written notice required or permitted under this
Agreement shall be deemed to have been duly given on the date of receipt, and
shall be either delivered personally to the party to whom notice is given, or
mailed to the party to whom notice is to be given, by facsimile or first class
registered or certified mail, return receipt requested, postage prepaid, and
addressed to the addressee at the most recent address specified by written
notice given to the other party in the manner provided in this Article 15.12.
The parties' addresses for such notices are as follows:
To Operator:
[KeySpan Corporation Subsidiary]
c/o KeySpan Corporation
175 E. Old Country Road
Hicksville, NY 11801
Attention: James Brennan
FAX No.: [____________]
To Owner:
Long Island Lighting Company (d/b/a LIPA)
333 Earle Ovington Blvd, Suite 403
Uniondale, New York 11553
Attention: Chief Operating Officer
w/copy to: General Counsel
FAX No.: [____________]
15.13. Representations and Warranties.
15.13.1. Owner Representations and Warranties. Owner, as of the date
of this Agreement, makes the following representations and warranties as
the basis for its undertakings contained herein:
(a) Owner has all requisite power and authority to execute and
deliver this Agreement and to perform each of its obligations
hereunder. Owner has duly authorized the execution, delivery and
performance of this Agreement. This Agreement is the legal, valid
29
and binding obligation of Owner and (assuming that this Agreement
has been duly authorized, executed and delivered by Operator) is
enforceable against Owner in accordance with its terms.
(b) The execution and delivery of this Agreement, the consummation of
the transactions contemplated herein and the fulfillment of and
compliance with the provisions of this Agreement do not
materially conflict with or constitute a material breach of or a
material default under any of the terms, conditions or provisions
of any law, any order of any court or other agency of government,
the organizational documents of Owner or any contractual
limitation, restriction or outstanding trust indenture, deed of
trust, mortgage, loan agreement, other evidence of indebtedness
or any other agreement or instrument to which Owner is a party or
by which it or any of its property is bound or result in a
material breach of or a material default under any of the
foregoing.
(c) All organizational consents and authorizations, and all other
actions required for Owner to execute and deliver this Agreement
have been obtained or completed.
(d) Owner has obtained, or will obtain as of the Effective Date, all
Permits required to be obtained by Owner for the ownership,
operation, maintenance, and repair of the Plant.
15.13.2. Operator Representations and Warranties. Operator, as of the
date of this Agreement, makes the following representations and warranties
as the basis for its undertakings contained herein:
(a) Operator has all requisite power and authority to execute and
deliver this Agreement and to perform each of its obligations
hereunder. Operator has duly authorized the execution, delivery
and performance of this Agreement. This Agreement is the legal,
valid and binding obligation of Operator and (assuming that this
Agreement has been duly authorized, executed and delivered by
Owner) is enforceable against Operator in accordance with its
terms.
(b) The execution and delivery of this Agreement, the consummation of
the transactions contemplated herein and the fulfillment of and
compliance with the provisions of this Agreement do not
materially conflict with or constitute a material breach of or a
material default under, any of the terms, conditions or
provisions of any law, any order of any court or other agency of
government, the Operator's organizational documents or any
contractual limitation, corporate or partnership restriction or
outstanding trust indenture, deed of trust, mortgage, loan
agreement, other evidence of indebtedness or any other agreement
or instrument to which Operator is a party or by which it or any
of its property is bound or result in a material breach of or a
material default under any of the foregoing.
30
(c) All organizational consents and authorizations, and all other
actions required for Operator to execute and deliver this
Agreement have been obtained or completed.
(d) Operator has either obtained or will obtain all licenses or
certificates that it or its employees are required to secure
under Applicable Law to perform the Services.
15.14. Counterparts. The parties may execute this Agreement in
counterparts, which shall, in the aggregate, when signed by both parties
constitute one and the same instrument; and, thereafter, each counterpart shall
be deemed an original instrument.
15.15. Governing Law. This Agreement shall be interpreted, governed and
construed in accordance with the laws of the State of New York. Any action
arising out of or relating to this Agreement shall be brought in New York
Supreme Court, Nassau County, or United States District Court for the Eastern
District of New York.
15.16. Captions; Appendices. Titles or captions of the articles contained
in this Agreement and the Appendices annexed hereto are inserted only as a
matter of convenience and for reference, and in no way define, limit, extend,
describe or otherwise affect the scope or meaning of this Agreement or the
intent of any provision hereof.
15.17. Non-Recourse. Except for Owner's rights under the KeySpan Guaranty,
neither party shall have any recourse against any of the other party's
Affiliates and each party expressly waives its rights of recourse against, and
releases from liability, the other party's Affiliates. Each party shall look
solely to the other party, and the assets thereof, to effect recovery of such
party's claims against the other party.
15.18. Severability. The invalidity or unenforceability of any provision of
this Agreement shall be determined only by a court of competent jurisdiction,
and the parties hereby agree to negotiate an equitable adjustment to the invalid
or unenforceable provisions with a view toward effecting the purposes of this
Agreement; the validity or enforceability of the remaining provisions or
portions or applications thereof, shall not be affected thereby.
15.19. Rules of Interpretation. The terms and provisions of this Agreement
shall be interpreted and construed as follows: (a) words of the masculine gender
shall include corresponding words of the feminine or neuter genders and vice
versa; (b) the plural shall include the singular and vice versa; (c) unless the
context indicates otherwise, all references herein to Articles, Sections,
paragraphs, appendices, schedules, and Appendices shall refer, respectively, to
the Articles, Sections, paragraphs, appendices, schedules and Appendices of this
Agreement; (d) the words "includes" or "including" mean "including, but not
limited to" and are not limiting; (e) any reference to an agreement, a contract
or any other document means the same as it may be amended, modified,
supplemented or replaced from time to time, unless otherwise noted; (f) any
reference to a Person includes such Person's successors and assigns; and (g)
"ensure", shall not be construed as a guarantee, but shall imply only a duty to
use reasonable effort and care, consistent with Prudent Electric Production
Practices.
31
15.20. Private Use Rules. In the event that it is determined that the
compensation provisions contained in this Agreement do not comply with the
applicable Internal Revenue Service "private use" rules, the parties shall
cooperate with each other and negotiate in good faith to amend or modify such
compensation provisions so that they do so comply while retaining the relative
economic benefits of the parties under this Agreement.
15.21. State Law Requirements. All contracts entered into by Owner are
required under New York State law to contain certain terms and conditions, as
set forth in Appendix E hereto and the provisions of such Appendix E are hereby
deemed incorporated in this Agreement at this place. To the extent of any
conflict between any other provision of this Agreement and Appendix E, Appendix
E shall control. The Operator shall comply with such terms and conditions during
the Term of this Agreement.
32
IN WITNESS WHEREOF, the parties have executed this Agreement through their
duly authorized officers as of the date set forth in the preamble to this
Agreement.
LONG ISLAND LIGHTING COMPANY [KEYSPAN CORPORATION
(d/b/a LIPA) SUBSIDIARY]
By: ________________________ By: __________________________
Name: _______________________ Name: ________________________
Title: _______________________ Title: _______________________
33
APPENDIX "A"
------------
EXCLUDED SERVICES
-----------------
The following costs and other obligations are Owner's responsibility:
1. Property Taxes
2. Inventory Taxes
3. Emission credits and allowances
4. Costs imposed by the New York Independent System Operator (or other
regional transmission or electrical pool operator) rules or
procedures, including any costs associated with the sale or other
marketing of any energy produced by the Plant.
5. Costs relating to unforeseen, sudden major equipment or component
failures not covered under equipment warranty, including major
component failures.
6. Initial inventory of spare parts, consumables and tools, and storage
of spare parts.
7. Costs to replace Plant equipment to the extent that such costs are
capital expenditures and all other capital improvements.
8. Cost of any capital expenditures for alterations, modifications,
improvements or additions to the Plant which are required by any
Governmental Authority or otherwise required to comply with Applicable
Laws.
9. Costs subject to Owner's indemnification obligations under this
Agreement.
10. Costs to remedy any notice of violation or non-compliance issued by
any Governmental Authority with regard to air emissions, water
discharges, noise emissions, hazardous discharges or any other
environmental, health or safety problems affecting the Plant.
A-1
APPENDIX "B"
------------
ALLOCATED FIXED O&M COST PAYMENT
--------------------------------
On the Effective Date and for the first Calendar Year, the Allocated Fixed
O&M Cost Payment shall be an amount determined as follows:
AFOMCP = (CC + $7,120,000 - PT - DEP- RORB - TAXES - CARC - ASC)*(PE/TE)/12
Where:
AFOMCP = Allocated Fixed O&M Charge Payment
CC = The Capacity Charge in effect under the PSA.
PT = The component for property taxes included in the Capacity Charge.
DEP = The component for depreciation included in the Capacity Charge.
RORB = The component for return on rate base included in the Capacity
Charge.
TAXES = The component for state and federal income taxes included in the
Capacity Charge.
CARC = The component for common assets recovery charge included in the
Capacity Charge.
ASC = The component for the amortization of security costs included in the
Capacity Charge.
PE = The total number of operator's full time equivalent employees
working at the Plant as of the date immediately preceding the
Effective Date, excluding, however, any MSD workers. In no event shall
PE exceed the average number of such employees for the two (2)
Calendar Years immediately preceding the Effective Date.
TE = The total number of full time equivalent employees working as of the
day immediately preceding the Effective Date for Operator or its
affiliates at all generating facilities covered under the PSA as of
such date.
On January 1 of each Calendar Year during the Term through December 31,
2008, the Allocated Fixed O&M Charge shall be equal to the Allocated Fixed O&M
Charge for the previous year plus the Labor Cost Index Adjustment plus the
Benefit Cost Index Adjustment, where:
"Labor Cost Index Adjustment (Production)" means the sum of (1) the
average monthly labor costs for the Plant contained in the Allocated
Fixed O&M Charge Payments for the prior Calendar Year and (2) the
product of (a) the Defined Labor Index times (b) average monthly base
labor costs contained in the Allocated Fixed O&M Charge Payments for
the prior Calendar Year.
"Defined Labor Index" means the percentage change for the twelve month
period ending on the preceding September 30 for the Employment Cost
Index for Wages and Salaries Only, Private Industry Workers,
Northeast, Not Seasonally Adjusted, as published by the United States
Bureau of Labor Statistics.
B-1
"Benefit Cost Index Adjustment" means the sum of (1) the average
monthly benefit costs contained in the Allocated Fixed O&M Charge
Payments for the Plant in the prior Calendar Year and (2) the product
of (a) the Defined Labor index times (b) average monthly base benefit
costs contained in the Allocated Fixed O&M Charge Payments for the
prior Calendar Year.
For each Calendar Year during the term after December 31, 2008, the
Allocated Fixed O&M Charge shall be an amount to be agreed upon by the parties
based upon a cost of service analysis. If the parties do not agree on a new
Allocated Fixed O&M Charge for the Calendar Years after December 31, 2008, then
such dispute shall be resolved in accordance with Article 6.
B-2
APPENDIX "C"
------------
FORM OF KEYSPAN GUARANTY AMENDMENT
AMENDMENT TO GUARANTY AGREEMENT
THIS AMENDMENT TO THE GUARANTY AGREEMENT is made and dated as of
[_________________] (this "Amendment") to the Guaranty Agreement, dated as of
May 28, 1998 (the "Guaranty"), from KEYSPAN CORPORATION (f/k/a Marketspan
Corporation), a corporation organized and existing under the laws of the State
of New York (together with any permitted successors and assigns hereunder, the
"Guarantor"), to LONG ISLAND POWER AUTHORITY (together with its subsidiaries and
other permitted assignees of the Agreements, the "Authority").
RECITALS
WHEREAS, Long Island Lighting Company d/b/a LIPA (the "Owner"), a
wholly-owned subsidiary of the Authority, and [KeySpan Corporation Subsidiary]
(the "Operator"), a subsidiary of the Guarantor are parties to an Operation and
Maintenance Agreement, dated as of the date hereof (the "O&M Agreement"),
whereby the Operator has agreed to operate and maintain the Plant (as defined in
the O&M Agreement) upon the terms and conditions set forth in the O&M Agreement;
and
WHEREAS, pursuant to Section 15.3 of the O&M Agreement, the Guarantor is
entering into this Amendment to guarantee the obligations of the Operator under
the O&M Agreement on the terms and subject to the conditions of the Guaranty.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements hereinafter set forth and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
Section 1. Definitions. All capitalized terms used in this Amendment and
not otherwise defined shall have the meanings assigned to them in the Guaranty.
Section 2. Amendment to the Guaranty Agreement. The parties hereby agree
that (i) the term "Agreements" as used in the Guaranty shall be deemed to
include the O&M Agreement for all purposes of the Guaranty and (ii) the term
"Subsidiaries" as used in the Guaranty shall be deemed to include the Operator
for all purposes of the Guaranty.
Section 3. Miscellaneous
(a) Incorporation by Reference. Sections 1.2(A), (B), (C) and (D) of
the Guaranty shall be incorporated by reference herein as if fully set
forth herein.
(b) Entire Agreement; Authority. The Guaranty, as amended by this
Amendment, together with the Agreement and the Transaction Agreements,
constitute the entire agreement between the parties hereto with respect to
C-1
the transactions contemplated by the Guaranty. Nothing in this Amendment is
intended to confer on any person other than the Guarantor, the Authority
and their successors and assigns as permitted hereunder any rights or
remedies under or by reason of this Amendment.
(c) Counterparts. This Amendment may be executed in any number of
original counterparts. All such counterparts shall constitute but one and
the same Amendment.
(d) Applicable Law. This Amendment shall be governed by and construed
in accordance with the applicable laws of the State of New York.
(e) Full Force and Effect of Guaranty. Notwithstanding the amendment
and extension of the Management Services Agreement, or the amendments to
the Power Supply Agreement and the Energy Management Agreement, the
Guaranty, as modified by this Amendment, and as this Amendment is made a
part thereof, shall remain in full force and effect.
C-2
IN WITNESS WHEREOF, the parties have caused this Amendment to be
executed and delivered by their duly authorized officers or representatives
as of the date first above written.
LONG ISLAND POWER AUTHORITY
By ___________________________
Name:
Title:
KEYSPAN CORPORATION
By ___________________________
Name:
Title:
C-3
APPENDIX "D"
------------
FUEL MANAGEMENT SERVICES
------------------------
D1. General. Operator shall manage all aspects of the fuel supply for the
Plant including determinations regarding the type of fuel used for operating the
Plant and the source of such fuel supply taking into account the purchase of
alternate sources of electricity in lieu of electricity from the Plant when
economic. Owner will compensate Operator for such fuel management services in
accordance with the terms of this Agreement. In this respect, Operator shall,
among other things:
(a) Acquire required gas supplies which includes a mix of
Interruptible and Firm Gas Supplies as deemed appropriate;
(b) Acquire required fuel oil supplies in accordance with generating
unit specific requirements as determined by Operator;
(c) Negotiate, execute and administer fuel supply contracts with one
or more entities;
(d) Obtain and schedule transportation for all fuel deliveries,
including daily nomination and dispatch;
(e) Arrange for the displacement of gas across KeySpan's gas
distribution system and the New York Facilities to facilitate deliveries to
the Plant; and
(f) Arrange-for the delivery, receipt, fuel analysis, handling,
storage, local and on site transportation and use of Fuel.
Unless otherwise arranged and agreed to between Owner and Operator, all gas
supplies to be used at the Plant will be Interruptible Gas Supplies or short
term Firm Gas Supplies with contracts extending no longer than one month from
the date entered into, all of which are System Interruptible Gas Supplies.
Operator will arrange for the most cost-effective fuel for use at the Plant,
subject to the existing obligations of KeySpan Energy Delivery-Long Island with
respect to the delivery of gas to its customers. Operator will arrange for Gas
Balancing services to be provided associated with use of gas at the Plant.
Operator will provide these services from existing assets of Operator or its
affiliates. Operator will not contract for additional firm assets (including
storage, pipeline capacity or swing gas supply) specifically for use in the
Plant unless Owner and Operator agree to the contract. Such Interruptible Gas
Supplies will be provided only as long as it is available for use, in the Plant.
D2. Fuel Measurement. To the extent not already in place, installation,
maintenance and operation of all fuel metering and telemetering equipment shall
be undertaken by Operator in accordance with applicable requirements. Operator
shall cooperate with Owner in Owner's verification of the accuracy of all
measurements of fuel made by Operator and Owner shall have access to all records
of Operator necessary for such purpose.
D-1
D3. General Fuel Service Requirements.
D3.1 Minimization of Costs. In providing the fuel, Operator shall use best
efforts to minimize fuel costs for the Plant, such efforts being consistent with
(i) all applicable insurance policies, (ii) all applicable prudent industry
practices and standards, including Prudent Electric Production Practices, (iii)
all applicable operating and contract constraints for fuel delivery, (iv)
Operator's collective bargaining agreements and (v) applicable Laws.
D3.2 Accounting Controls. Operator, on a monthly basis, shall provide, or
cause to be provided, all accounting, bookkeeping, and administrative services
in connection with the fuel costs, such accounting to be consistent with the
FERC Uniform System of Accounts and generally accepted accounting principles
consistently applied. In areas of conflict, FERC accounting principles shall
control. All records relating to such services shall be subject to review and
audit in accordance with Section 7.3.
D4. Ownership of Fuel.
D4.1 Ownership of the Fuel. In order to eliminate any ambiguity in this
Agreement with respect to the ownership of the Fuel purchased by Operator or any
Affiliate of Operator on behalf of Owner pursuant to this Agreement, Owner and
Operator agree as follows: (i) Owner acknowledges that it is the owner of the
Fuel; and (ii) Operator acknowledges and confirms that it is obligated to, and
agrees that it will, indemnify the Owner Indemnified Parties in the manner set
forth in this Appendix D for any Loss, as defined in this Appendix D.
D4.2 Owner's Agreements. Owner hereby acknowledges ownership of the Fuel
throughout the effective term of this Agreement and agrees that from the date of
this Agreement it will:
(i) take no position inconsistent with its ownership of the Fuel in
any filing with a governmental agency or department (including any tax
return) or in any judicial or administrative proceeding (other than a
judicial proceeding in which the provisions of this Agreement may be at
issue);
(ii) account for the Fuel as an asset of Owner and cause the Fuel to
be reflected as such in its financial statements; and
(iii) provide from time to time such further assurances and written
confirmation of its ownership of the Fuel as shall reasonably be requested
by Operator.
D5. Fuel Indemnification Provisions
D5.1 General Indemnity. Operator acknowledges and confirms that during the
Term it is obligated to, and agrees that it will, indemnify, defend and hold
harmless the Owner Indemnified Parties against any and all Losses (as defined in
Section D5.2, below), other than any Losses caused by the negligence, willful
misconduct or breach of statutory or regulatory duty of one or more Owner
Indemnified Parties; provided, however that no Loss shall be deemed to have been
caused by the negligence, willful misconduct or breach of statutory or
regulatory duty of any Owner Indemnified Party if any action or failure to act
giving rise to such Loss is that of Operator or any Affiliate of Operator acting
D-2
on behalf of any Owner Indemnified Party pursuant to one of this Agreement, the
Energy Management Agreement or the Power Supply Agreement. In no event shall the
term "Loss" and "Losses" mean Economic Loss, as that term is defined in Section
D5.2 below.
D5.2 Certain Definitions. As used in this Appendix D, the term "Loss" and
"Losses" mean any loss, claim, damage, liability, demand, action, suit,
judgment, assessment, penalty, award, cost and/or expense suffered by or
asserted against any Owner Indemnified Party or to which any Owner Indemnified
Party may become subject insofar as any such loss, claim, damage, liability,
demand, action, suit, judgment, assessment, penalty, award, cost and/or expense
arises out of, or is based upon, Owner's ownership of the Fuel, including,
without limitation, any Environmental Loss, Fuel Loss, General Claim and/or
Collection Expense, each as defined below. For the purpose of defining "Loss"
and exclusions thereto and as otherwise used in this Appendix D, in addition to
the definitions set forth in Article 1 of this Agreement, the following terms
are used with the meanings set forth below:
"Attorneys' Fees" means and includes all reasonable costs, fees and charges
(including, without limitation, charges for disbursements) of any attorney,
legal assistant and paralegal, and shall include both outside counsel retained
by any Owner Indemnified Party and in-house counsel for any Owner Indemnified
Party and shall also include, without limitation, expert witness payments
(whether consulting or testifying) and other court costs whether or not incurred
in a judicial or administrative proceeding.
"Collection Expense" means any expense (including, without limitation,
Attorneys' Fees) incurred by an Owner Indemnified Party in order to obtain
payment from Operator or an insurer in respect of a Loss or otherwise to enforce
the terms of this Appendix D.
"Economic Loss" shall mean any loss in economic value of the Fuel resulting
from, but not limited to, such factors as: changes in the unit price of the Fuel
in the open market, changes in the cost of transporting the Fuel to the point of
consumption, changes in the cost of storing the Fuel prior to consumption, and
changes in the cost of injecting or withdrawing the Fuel. "Economic Loss" shall
also mean any loss resulting from trading in financial derivatives in the
commodities markets that are designed to hedge price risk associated with the
Fuel, but in no event will any loss that falls within the definition of "Fuel
Loss" (as that term is defined in this Appendix D) also be considered to be
"Economic Loss."
"Fuel Environmental Law" means and includes any present and/or future
federal, state or local law, ordinance, code, rule, regulation or order
regulating, relating to, or imposing liability or standards of conduct
concerning environmental matters, permits, pollution, waste disposal, industrial
hygiene, land use or the protection of human or animal health or welfare,
including, without limitation, those related to any Release or threatened
Release of hazardous materials and to the ownership, transportation, storage,
use or disposition of hazardous materials, in any manner applicable to the Fuel
and other requirements of governmental authorities relating to the environment
or to any hazardous material or Fuel-Related Activity (including, without
limitation, the U. S. Comprehensive Environmental Response, Compensation and
Liability Act, the U. S. Superfund Amendment and Reauthorization Act, the U. S.
Toxic Substances Control Act, the U. S. Resources Conservation and Recovery Act,
D-3
the U. S. Hazardous Material Transportation Act, the U. S. Clean Air Act, the U.
S. Water Pollution Control Act, the U. S. River and Harbors Act of 1899, the Oil
Pollution Act of 1990, the New York Environmental Conservation Law and all rules
arid regulations of the United States Environmental Protection Agency, the New
York Department of Environmental Conservation, or any other agency or
governmental board or entity having jurisdiction over the Fuel or the ownership,
transportation, storage, use or disposition thereof, as any of the foregoing
have been or are hereafter amended).
"Environmental Loss" means a Loss suffered or incurred by an Owner
Indemnified Party arising out of or as a result of: (i) any violation of any
applicable Fuel Environmental Law relating to the Fuel or to the ownership,
transportation, storage, use or disposition thereof; (ii) any investigation,
inquiry, order, hearing, action, or other proceeding by or before any
governmental agency addressing the violation of any applicable Fuel
Environmental Law in connection with any Fuel-Related Activity; (iii) any claim,
demand or cause of action, or any action or other proceeding, whether
meritorious or not, brought or asserted against any Owner Indemnified Party
which directly or indirectly relates to, arises from or is based on any of the
matters described in clauses (i) or (ii), or any allegation of any such matters;
or (iv) any cost of reclamation or remediation with respect to any property,
whether then owned by such Owner Indemnified Party or by another person and
whether legally imposed under a Fuel Environmental Law or as a result of a Legal
Proceeding or necessary to restore an Owner Indemnified Party's property to the
condition it was in and/or the value it held prior to any damage suffered as a
result of any Fuel-Related Activity.
"Fuel Loss" means any actual loss or deprivation of Fuel to Owner so that
such Fuel is not available for its intended use under this Agreement through
either a loss, damage, theft, seizure or destruction of such Fuel or a
diminution of the value of Fuel through the attachment of liens or other
encumbrances or claims to title for which Owner is not responsible; provided,
however, that, at the sole option of Owner, the amount of any Fuel Loss for
purposes of this Appendix D may be measured by the expense, as reasonably
determined by Owner, of acquiring power in substitution for that which would
have been generated with the Fuel to which such Fuel Loss relates; provided,
further that under no circumstances shall Operator be liable hereunder for any
amount in excess of the amount of the replacement value of the Fuel which is the
subject of the Fuel Loss at the time it is replaced.
"Fuel-Related Activity" means any storage, holding, release, emission,
discharge, processing, abatement, removal, disposition, handling or
transportation of Fuel.
"General Claim" means a claim for damages; other than a claim brought under
a Fuel Environmental Law, asserted against an Owner Indemnified Party because of
Owner's ownership of the Fuel, including and expressly limited to, a claim
asserted by: (i) a party claiming bodily injury or property damage caused by the
Fuel or by the transportation, storage, use or disposition thereof; (ii) an
employee or former employee of Operator or KeySpan Corporation or its various
subsidiaries seeking worker's compensation, pension or other benefits of
employment or alleging violations of the Occupational Safety and Health Act, or
other statutes or governmental regulations governing safety in the workplace,
labor relations or other aspects of the employer/employee relationship as a
result of a Fuel-Related Activity.; (iii) a government or agency or department
thereof seeking the assessment of fines or penalties in connection with the
transportation of the Fuel or any other aspect of the ownership, storage, use or
D-4
disposition of the Fuel; or (iv) any other party seeking to hold such Owner
Indemnified Party legally responsible for damage caused by the Fuel or for the
acts or omissions of Operator or KeySpan Corporation or its various subsidiaries
managing the Fuel.
"Legal Proceeding" means an action, suit, investigation, administrative
proceeding or formal proceeding of an adversarial nature before a court or other
governmental tribunal with jurisdiction over the parties and authority to assess
fines or penalties and/or to award damages or issue an order binding on a party
thereto.
D5.3 Fuel Indemnification Procedure.
(a) Losses Not Asserted or Incurred in a Legal Proceeding. If, other
than in the course of a Legal Proceeding, an Owner Indemnified Party shall
incur a Loss or receive a demand or claim for payment by it which, if paid,
would constitute a Loss, such Owner Indemnified Party shall deliver to
Operator (in the case of any such demand or claim, promptly, but in any
case .within twenty days after receipt thereof), a written request for
indemnification (a "Request"), setting forth in reasonable detail the
nature of such Loss, demand or claim, the amount thereof (or if the precise
amount of such Loss, demand or claim is not yet known or determinable, the
estimated amount or magnitude thereof or a statement to the effect that
such. amount is not yet known or determinable) and the basis on which such
Owner Indemnified Party believes that it is entitled to be indemnified
pursuant to this Appendix D, accompanied by any appropriate supporting
documentation. If
(i) the amount of the Loss, demand or claim is set forth in the
Request, the Operator shall pay the requested amount within
thirty (30) Business Days (as used in this Appendix D, the term
"Business Day" means any day on which commercial banks are not
authorized or required to be closed in Nassau County, New York);
provided, however, that, if Operator believes that the
information provided in such Request is incomplete or
insufficient to support a claim for indemnification in the amount
stated or that the Request does not state a valid claim for
indemnification pursuant to this Appendix D, it shall, not more
than ten (10) Business Days after receipt of the Request, deliver
written notice to such Owner Indemnified Party that it (i)
requires further information in order to evaluate the claim for
indemnification, stating the nature of the required information,
or (ii) acknowledges that such Owner Indemnified Party is
entitled to indemnification but disagrees with the amount
requested, stating the basis for its disagreement and. the amount
it believes to be appropriate, or (iii) disclaims liability under
this Appendix D with respect to the Loss, demand or claim
described in the Request, stating the basis for its denial of
liability; or
(ii) the precise amount of the Loss, demand or claim is not set forth
in the Request, Operator shall, within ten (10) Business Days,
deliver written notice to such Owner Indemnified Party either (a)
acknowledging the Loss as covered by this Appendix D, subject to
the ultimate determination of the amount thereof; or (b) if
Operator believes that the information provided in such Request
is incomplete or insufficient to support a claim for
indemnification or that the Request does not state a valid claim
for indemnification pursuant to this Appendix D, notifying such
D-5
Owner Indemnified Party that Operator (x) requires further
information in order to evaluate the claim for indemnification,
stating the nature of the required information, or (y) disclaims
liability under this Appendix D with respect to the Loss, demand
or claim described in the Request, stating the basis for its
denial of liability.
If Operator has made a request for further information, such Owner Indemnified
Party shall, within ten (10) Business Days, either provide the requested
information or notify Operator in writing that it does not believe any further
information is necessary. If the Owner Indemnified Party fails to respond within
ten (10) Business Days or fails to satisfy Operator's request for further
information, Operator shall deliver written notice to such Owner Indemnified
Party that it disclaims liability under this Appendix D with respect to the
Loss, demand or claim described in the Request, stating the basis for its denial
of liability. If the Owner Indemnified Party provides further information
satisfying Operator's request, Operator shall, within ten (10) Business Days,
either (a) if the Request stated a specific amount of the Loss, pay the
requested amount; (b) if the Request did not state a specific amount of Loss,
deliver written notice to such Owner Indemnified Party that it acknowledges the
Loss, demand or claim as covered by this Appendix D, subject to the ultimate
determination of the amount thereof; or (c) deliver written notice to such Owner
Indemnified Party that it disclaims liability under this Appendix D with respect
to the Loss, demand or claim described in the Request, stating the basis for its
denial of liability. If the Request does not state a precise amount of Loss,
demand or claim, within five (5) Business Days after it becomes aware of or is
able to determine the amount of the Loss, demand or claim, such Owner
Indemnified Party shall deliver to Operator, a written supplement to the
Request, setting forth in reasonable detail the amount of such Loss, demand or
claim and the manner in which it was determined, accompanied by any appropriate
supporting documentation. Operator shall respond to any such supplement to a
Request in the manner contemplated by clause (i), above. Any dispute as to the
amount or appropriateness of any indemnification requested hereunder shall be
resolved in the manner provided in Article 6 of this Agreement.
(b) Indemnification in Connection with Losses Incurred or Asserted in Legal
Proceedings. Promptly after receipt by an Owner Indemnified Party of notice of
the commencement of any Legal Proceeding which may result in a Loss to such
Owner Indemnified Party, but in any case within ten (10) Business Days thereof,
such Owner Indemnified Party will, if a claim in respect thereof is to be made
against Operator under this Appendix D, notify Operator in writing of the
commencement thereof. In case any such action is brought against any Owner
Indemnified Party, and it notifies Operator of the commencement thereof,
Operator will be entitled to participate therein, and, to the extent that it may
wish to assume the defense thereof, with counsel reasonably satisfactory to such
Owner Indemnified Party, it may elect by written notice delivered to the Owner
Indemnified Party promptly after receiving the aforesaid notice from such Owner
Indemnified Party, to assume the defense thereof, with counsel reasonably
satisfactory. to such Owner Indemnified Party; provided, however, that if the
defendants (including impleaded parties) in any such action include both such
Owner Indemnified Party and Operator and such Owner Indemnified Party shall have
reasonably concluded that- there may be legal defenses available to it and/or
other Owner Indemnified Parties which are different from or additional to' those
available to Operator, such Owner Indemnified Party or Owner Indemnified Parties
shall have the right to select separate counsel to assert such legal defenses
and to otherwise participate in the defense of such action on behalf of such
D-6
Owner Indemnified Party or Owner Indemnified Parties. Upon receipt of notice
from Operator to such Owner Indemnified Party of its election so to assume the
defense of such action and approval by the Owner Indemnified Party of counsel,
Operator will not be liable to such Owner Indemnified Party under this Appendix
D for any legal or other expenses subsequently incurred by such Owner
Indemnified Party in connection with the defense thereof unless (i) such Owner
Indemnified Party shall have employed separate counsel in connection with the
assertion of legal defenses in accordance with the proviso to the next preceding
sentence (it being understood, however, that Operator shall not be liable for
the expenses of more than one separate counsel representing the Owner
Indemnified Parties who are parties to such action); (ii) Operator shall not
have employed counsel satisfactory to such Owner Indemnified Party to represent
such Owner Indemnified Party within a reasonable time after notice of
commencement of the action; or (iii) Operator has authorized the employment of
counsel for such Owner Indemnified Party at the expense of Operator; and except
that if clause (i) or (iii) is applicable, such liability shall be only in
respect of the counsel referred to in such clause (i) or (iii).
(c) Contribution. In order to provide for just and equitable contribution
in connection with any Legal Proceeding under circumstances in which the
indemnification provided for in this Appendix D is due in accordance with the
terms hereof but is for any reason held by a court to be unavailable from
Operator, on the grounds of policy or otherwise, Operator and the affected Owner
Indemnified Parties shall contribute to the aggregate Losses (including any
legal and other expenses reasonably incurred in connection with investigating or
defending any portions of the complaint to which Operator and one or more Owner
Indemnified Parties may be subject) in such proportion as the court or other
tribunal shall find equitable in light of the relative fault or responsibility
of Operator and the Owner Indemnified Parties. Any Owner Indemnified Party
entitled to contribution shall, promptly after receipt of notice of commencement
of a Legal Proceeding against such Owner Indemnified Party in respect of which a
claim for contribution may be made against Operator under this paragraph (c),
but in any case within ten (10) Business Days thereof, whether or not a request
for indemnification is to be made in respect of such Legal Proceeding, notify
Operator in writing of the commencement thereof. Each Owner Indemnified Party's
obligation to contribute pursuant to this paragraph (c) shall be several and not
joint.
(d) Progress Payments. Notwithstanding any other provision of this Section
D5.3, if an Owner Indemnified Party has delivered a Request with respect to a
Loss, claim or demand pursuant to Section D5.3(a) hereof or a notice with
respect to a Legal Proceeding pursuant to Section D5.3(b) hereof, Operator shall
pay promptly, but in any case within thirty (30) Business Days of the receipt of
a written request therefor, such amounts disbursed by such Owner Indemnified
Party in connection with such Loss, claim or demand or such Legal Proceeding as
are set forth in such written request; provided, however, that all amounts paid
by Operator pursuant to this Section D5.3(d) shall be credited against the full
amount of the Loss suffered by such Owner Indemnified Party as finally
determined pursuant hereto; provided, further, that if the aggregate amount paid
to any Owner Indemnified Party pursuant to this Section D5.3(d) shall ultimately
be determined to have been paid in respect of a claim for which such Owner
Indemnified Party was not legally entitled to be indemnified pursuant to this
Appendix D or in an amount which exceeded the full amount of the Loss ultimately
determined to be subject to this Appendix D, such Owner Indemnified Party shall,
promptly after receipt of a written request therefor from Operator, but in any
case within five (5) Business Days thereafter, repay to Operator such aggregate
amount or the portion thereof which exceeded the amount of the Loss, as the case
may be.
D-7
(e) Effect of Insurance Coverage, Claims and Payments. Notwithstanding any
other provision of this Appendix D, no payment required to be made to an Owner
Indemnified Party in respect of a Loss pursuant to this Section D5.3 shall be
delayed, reduced, offset or affected in any way by (i) the existence of any
insurance policy or policies which may cover or result in the payment of
insurance proceeds with respect to such Loss; (ii) the pendency of any claim
filed under any such insurance policy or asserted against any third party which
may result in the payment of insurance proceeds or other amounts in respect of
such Loss; or (iii) any other possibility or potential for payment in respect of
such Loss by any person other than Operator; provided, however; that (x) if any
amount is received by an Owner Indemnified Party in the form of payment of a
type contemplated by clause (i), (ii) or (iii) of this Section D5.3(e) prior to
the time that Operator is required to pay such amount pursuant to this Section
D5.3, the amount required to be paid pursuant to this Section D5.3 shall be
reduced to the extent of such amount theretofore actually received by such Owner
Indemnified Party and (y) if any amount is received by an Owner Indemnified
Party in the form of payment of -a type contemplated by clause (i), (ii) or
(iii) of this Section D5.3(e) subsequent to the time that a portion or the full
amount of a Loss has been paid to such Owner Indemnified Party by Operator with
the result that such Owner Indemnified Party has actually received an aggregate
amount in excess of the full amount of such Loss, such Owner Indemnified Party
shall, promptly after receipt of a written request therefor from Operator, but
in any case within five (5) Business Days thereafter, repay to Operator such
amount or the portion thereof which resulted in such Owner Indemnified Party
receiving an amount in excess of the full amount of such Loss, as the case may
he.
(f) Failure of an Owner Indemnified Party to Comply with the
Indemnification Procedures. Notwithstanding any other provision of this Appendix
D, failure of an Owner Indemnified Party to comply with the foregoing
indemnification procedures, including but not limited to the time periods set
forth for compliance herein, shall relieve Operator of its obligations to make
any payment until such failure to comply by an Owner Indemnified Party has been
remedied to the reasonable satisfaction of Operator; provided, however, that the
failure by an Owner Indemnified Party to take an action within a specified time
period shall only toll Operator's obligation to make payments hereunder during
such failure to comply and shall not prevent such Owner Indemnified Party from
perfecting a valid and enforceable claim to indemnification once such action has
been taken.
D6. Insurance in Respect of Fuel
D6.1 Operator to Maintain Insurance Coverage.
(a) Operator will, for the mutual benefit of Operator and the Owner
Indemnified Parties, obtain and maintain during the entire Term:
(i) Policies of insurance, with respect to the Fuel, insuring the
Fuel against loss or damage by fire, lightning and such other
perils as are included in a standard "all-risk" policy,
including, without limitation, flood and earth movement, extra
expense, riot and civil commotion, vandalism, malicious mischief,
D-8
burglary and theft. Such insurance shall be in an amount equal to
the full replacement cost of the Fuel. The Owner Indemnified
Parties shall be included as additional insureds and shall, where
applicable, be included as loss payees;
(ii) Comprehensive or Commercial General Liability insurance,
including broad form property damage, blanket contractual, acts
of contractors/subcontractors, sudden and accidental pollution
and personal injury coverages and containing minimum limits per
occurrence of $100,000,000 and $200,000,000 in the aggregate for
any policy year;
(iii) Insurance covering the replacement cost of any Fuel which may be
the subject of a Fuel Loss or the cost of purchasing power in
substitution for the power which would have been generated
through the use of such Fuel, whichever is greater;
(iv) Worker's compensation insurance with respect to any employees of
Operator, as required by any governmental authority or legal
requirement and employer's liability coverage with limits of
$100,000,000;
(v) To the extent that such coverage is not otherwise provided by
insurance maintained by Operator, during any period of repair or
restoration of the Plant or any other location at which the Fuel
is regularly stored or used, builder's "all risk" insurance in an
amount equal to not less than the full insurable value of the
Fuel insuring against such risks (including, without limitation,
fire and extended coverage) as Owner may request, in form and
substance acceptable to Owner, and, in addition, provision shall
be made by Operator to require any contractor performing such
repair or restoration to maintain comparable coverage;
(vi) If it is determined by an environmental state and/or federal
agency that a site must be cleaned up Operator and/or any Owner
Indemnified Party with an estimated aggregate cost in excess of
$10,000,000, Clean-up Cost Cap (CCC) coverage providing
catastrophic protection for cost overruns on clean-up cost
estimates associated with any Fuel-Related Activity and resulting
known liabilities in any determined Area of Concern as well as
new found conditions within the Areas of Concern with a
deductible not in excess of 10% of such cost estimates;
(vii) Pollution Legal Liability (PLL), if available from companies
with a claims paying ability rating of "A" or better by Best's
Rating Guide, covering bodily injury, property damage and
clean-up costs arising from new conditions arising from future
spills/releases from any Fuel-Related Activity; and
(viii) Such other insurance as may from time to time be reasonably
required by Owner in order to protect the interests of the Owner
Indemnified Parties.
(b) Self-Insurance, Etc. -Notwithstanding the requirements of Section
D6.1(a) hereof, it is agreed that (i) Operator may self-insure any of
the above coverages to the extent that it is doing so on the Effective
Date or to such greater extent as may be approved in writing by Owner
and, with such terms and in such amounts, as a prudent company with
the same debt rating as KeySpan Corporation would maintain with
respect to similar properties and a similar business, and, in any
D-9
event, will maintain insurance on all its property of a character
usually insured by a company engaged in the same or a similar business
similarly situated against loss or damage of the kinds and in the
amounts customarily insured against by such companies, and carry or
cause to be carried, with such insurers in customary amounts, such
other insurance, including public liability insurance as is usually
carried by companies engaged in the same or a similar business
similarly situated; provided, however, that if at any time KeySpan
Corporation's debt ratings fall below minimum investment grade as
rated by both Standard and Poors and by Moody's, Operator shall not be
permitted to self-insure pursuant to this Section D6.1(b) and shall
fully comply with the requirements of Section D6.1(a) hereof within
ninety (90) days, except to the extent that Owner has otherwise agreed
in writing.
D6.2 Requirements for All Policies. All policies of insurance (the
"Policies") required pursuant to this Section D6: (i) if they cover property
damage to any Fuel, shall contain a "Replacement Cost Endorsement" and shall
have a deductible no greater than $3,000,000 or twenty percent (20%) of such
replacement cost, whichever is less unless otherwise agreed by Owner; (ii) shall
be issued by companies with a claims paying ability rating of "A" or better by
Best's Rating Guide; (iii) to the extent that it covers loss of, or damage to,
Fuel, shall name Owner, as its interest may appear, as a loss payee or the
equivalent, naming Owner as the person to which (or at the direction of which)
all payments made by such insurance company shall be paid; (iv) shall contain a
waiver of subrogation against Owner; (vi) shall be maintained throughout the
Term without additional cost to Owner; (vii) shall contain such provisions as
Owner deems reasonably necessary to protect the interests of the Owner
Indemnified Parties, including, without limitation, endorsements providing that
neither Operator, any Owner Indemnified Party nor any other party shall be a
co-insurer under said Policies, and that the Owner Indemnified Parties shall
receive at least thirty (30) days prior written notice of any modification,
reduction or cancellation; and (viii) shall he reasonably satisfactory in form
and substance to Owner and shall be approved by Owner as to, amounts, form, risk
coverage, deductibles, loss payees and insureds.
D6.3 Payment of Insurance Premiums. To the extent that Operator does not
self-insure pursuant to Section D6.1(b) hereof, Operator shall pay the premiums
for such Policies (the "Insurance Premiums") as the same become due and payable
and shall furnish to Owner evidence of the renewal of each of the Policies with
receipts for the payment of the Insurance Premiums or other evidence of such
payment reasonably satisfactory to Owner. If Operator does not furnish such
evidence and receipts at least thirty (30) days subsequent to the expiration of
any expiring Policy, then Owner may procure, but shall not be obligated to
procure, such insurance and pay the Insurance Premiums therefor, and Operator
agrees to reimburse Owner for the cost of such Insurance Premiums promptly on
demand. Within thirty (30) days after request by Owner, Operator shall obtain
such increases in the amounts of coverage required hereunder as may be
reasonably requested by Owner, taking into consideration changes in the value of
money over time, changes in liability laws, changes in prudent customs and
practices. The payment by Operator of Insurance Premiums pursuant to this
Section D6.3 shall not in any way reduce or offset the amount of any payment
which Operator is required to make in respect of any Loss pursuant to Section D5
hereof.
D-10
APPENDIX "E"
------------
PROVISIONS REQUIRED BY STATE LAW
--------------------------------
NON-ASSIGNMENT CLAUSE. In accordance with Section 138 of the State Finance Law,
this Agreement may not be assigned by the Operator or its right, title or
interest therein assigned, transferred, conveyed, sublet or otherwise disposed
of without the previous consent, in writing, of Owner and any attempts to assign
this Agreement without the Owner's written consent are null and void. The
Operator may, however, assign its right to receive payment without Owner's prior
written consent unless this Agreement concerns Certificates of Participation
pursuant to Article 5-A of the State Finance Law.
COMPTROLLER'S APPROVAL. In accordance with Section 112 of the New York State
Finance Law (the "State Finance Law"), this Agreement shall not be valid,
effective or binding upon Owner until it has been approved by the State
Comptroller and filed in his office.
WORKER'S COMPENSATION BENEFITS. In accordance with Section 142 of the State
Finance Law, this Agreement shall be void and of no force and effect unless the
Operator provides and maintains coverage during the life of this Agreement for
the benefit of such employees as are required to be covered by the provisions of
the Workers' Compensation Law.
NON-DISCRIMINATION REQUIREMENTS. In accordance with Article 15 of the Executive
Law (also known as the Human Rights Law) and all other New York State and
Federal statutory and constitutional non-discrimination provisions, the Operator
shall not discriminate against any employee or applicant for employment because
of race, creed, color, sex, national origin, age, disability, marital status,
sexual orientation, genetic predisposition or carrier status. Furthermore, in
accordance with Article 220-e of the New York Labor Law, and to the extent that
this Agreement shall be performed within the State of New York, the Operator
agrees that neither it nor its subcontractors shall, by reason of race, creed,
color, disability, sex, national origin, sexual orientation, genetic
predisposition or carrier status; (a) discriminate in hiring against any New
York State citizen who is qualified and available to perform the work; or (b)
discriminate against or intimidate any employee for the performance of work
under this Agreement.
WAGE AND HOURS PROVISIONS. If this Agreement is a public work contract covered
by Article 8 of the Labor Law or a building service contract covered by Article
9 thereof, neither the Operator's employees nor the employees of its
subcontractors may be required or permitted to work more than the number of
hours or days stated in said statutes, except as otherwise provided in the Labor
Law and as set forth in prevailing wage and supplement schedules issued by the
State Labor Department. Furthermore, the Operator and its subcontractors must
pay at least the prevailing wage rate and pay or provide the prevailing
supplements, including the premium rates for overtime pay, as determined by the
State Labor Department in accordance with the Labor Law.
E-1
NON-COLLUSIVE BIDDING CERTIFICATION. In accordance with Section 2878 of the
Public Authorities Law, if this Agreement was awarded based upon the submission
of bids, the Operator warrants, under penalty of perjury, that its bid was
arrived at independently and without collusion aimed at restricting competition.
The Operator further warrants that, at the time the Operator submitted its bid,
an authorized and responsible person executed and delivered to the Owner a
non-collusive bidding certification on the the Manager's behalf.
INTERNATIONAL BOYCOTT PROHIBITION. In accordance with Section 220-f of the Labor
Law and Section 139-h of the State Finance Law, if this Agreement exceeds
$5,000, the Operator agrees, as a material condition of this Agreement, that
neither the Operator nor any substantially owned or affiliated person, firm,
partnership or corporation has participated, is participating, or shall
participate in an international boycott in violation of the federal Export
Administration Act of 1979 (50 USC app. Sections 2401 et seq.) or regulations
thereunder. If the Manager, or any of the aforesaid affiliates of the Manager,
is convicted or is otherwise found to have violated said laws or regulations
upon the final determination of the United States Commerce Department or any
other appropriate agency of the United States subsequent to this Agreement's
execution, such contract, amendment or modification thereto shall be rendered
forfeit and void. The Operator shall so notify the State Comptroller within five
(5) business days of such conviction, determination or disposition of appeal
(2NYCRR 105.4).
SET-OFF RIGHTS. Owner shall have all of its common law, equitable and statutory
rights of set-off. These rights shall include, but not be limited to, Owner's
option to withhold for the purposes of set-off any moneys due to the Operator
under this Agreement up to any amounts due and owing to Owner with regard to
this Agreement, any other contract with Owner, including any contract for a term
commencing prior to the term of this Agreement, plus any amounts due and owing
to Owner for any other reason including, without limitation, tax delinquencies,
fee delinquencies or monetary penalties relative thereto. Owner shall exercise
its set-off rights in accordance with normal State practices including, in cases
of set-off pursuant to an audit, the finalization of such audit by Owner, its
representatives, or the State Comptroller.
RECORDS. The Operator shall establish and maintain complete and accurate books,
records, documents, accounts and other evidence directly pertinent to
performance under this Agreement (hereinafter, collectively, "the Records"). The
Records must be kept for the balance of the calendar year in which they were
made and for six (6) additional years thereafter. The State Comptroller, the
Attorney General and any other person or entity authorized to conduct an
examination, as well as the agency or agencies involved in this Agreement, shall
have access to the Records during normal business hours at an office of the
Operator within the State of New York or, if no such office is available, at a
mutually agreeable and reasonable venue within the State, for the term specified
above for the purposes of inspection, auditing and copying. Owner shall take
reasonable steps to protect from public disclosure any of the Records which are
exempt from disclosure under Section 87 of the Public Officers Law (the
"Statute") provided that: (i) the Operator shall timely inform the Owner in
writing, that said records should not be disclosed; and (ii) said records shall
be sufficiently identified; and (iii) designation of said records as exempt
under the Statute is reasonable. Nothing contained herein shall diminish, or in
any way adversely affect, the State's right to discovery in any pending or
future litigation.
E-2
EQUAL EMPLOYMENT FOR MINORITIES AND WOMEN. In accordance with Section 312 of the
New York Executive Law: (i) the Operator shall not discriminate against
employees or applicants for employment because of race, creed, color, national
origin, sex, age, disability, marital status, sexual orientation, genetic
predisposition or carrier status and shall undertake or continue existing
programs of affirmative action to ensure that minority group members and women
are afforded equal employment opportunities without discrimination ("affirmative
action" shall mean recruitment, employment, job assignment, promotion,
upgradings, demotion, transfer, layoff, or termination and rates of pay or other
forms of compensation); (ii) at the request of the Owner, the Operator shall
request each employment agency, labor union, or authorized representative of
workers with which it has a collective bargaining or other agreement or
understanding, to furnish a written statement that such employment agency, labor
union or representative will not discriminate on the basis of race, creed,
color, national origin, sex, age, disability, marital status, sexual
orientation, genetic predisposition or carrier status and that such union or
representative will affirmatively cooperate in the implementation of the
Manager's obligations herein; and (iii) the Operator shall state, in all
solicitations or advertisements for employees, that, in the performance of this
Agreement, all qualified applicants will be afforded equal employment
opportunities without discrimination because of race, creed, color, national
origin, sex, age, disability, marital status, sexual orientation, genetic
predisposition or carrier status. The Operator shall include the provisions of
(i), (ii) and (iii) above, in every subcontract over twenty-five thousand
dollars ($25,000.00) for the construction, demolition, replacement, major
repair, renovation, planning or design of real property and improvements thereon
(the "Work") except where the Work is for the beneficial use of the Manager.
CONFLICTING TERMS. In the event of a conflict between the terms of this
Agreement (including any and all attachments thereto and amendments thereof) and
the terms of this Appendix E, the terms of this Appendix E shall control.
GOVERNING LAW. This Agreement shall be governed by the laws of the State of New
York except where the Federal supremacy clause requires otherwise.
LATE PAYMENT. Timeliness of payment and any interest to be paid to the Operator
for late payment shall be governed by Section 2880 of the Public Authorities Law
and the guidelines adopted by Owner thereto.
PROHIBITION ON PURCHASE OF TROPICAL HARDWOODS. The Operator certifies and
warrants that all wood products to be used under this contract award will be in
accordance with, but not limited to, the specifications and provisions of State
Finance Law ss.165 (Use of Tropical Hardwoods) which prohibits purchase and use
of tropical hardwoods, unless specifically exempted, by the State or any
governmental agency or political subdivision or public benefit corporation.
Qualification for an exemption under this law will be the responsibility of the
Operator to establish to meet with the approval of the State.
In addition, when any portion of this Agreement involving the use of woods,
whether supply or installation, is to be performed by any subcontractor, the
Operator will indicate and certify in the submitted bid proposal that the
subcontractor has been informed and is in compliance with specifications and
provisions regarding use of tropical hardwoods as detailed in ss.165 State
Finance Law. Any such use must meet with the approval of the State; otherwise,
the bid may not be considered responsive. Under bidder certifications, proof of
qualification for exemption will be the responsibility of the Operator to meet
with the approval of the State.
E-3
MACBRIDE FAIR EMPLOYMENT PRINCIPLES. In accordance with the MacBride Fair
Employment Principles (Chapter 807 of the New York Laws of 1992), the Operator
hereby stipulates that the Operator either (i) has no business operations in
Northern Ireland, or (ii) shall take lawful steps in good faith to conduct any
business operations in Northern Ireland in accordance with the MacBride Fair
Employment Principles (as described in Article 165 of, the New York State
Finance Law), and shall permit independent monitoring of compliance with such
principles.
OMNIBUS PROCUREMENT ACT OF 1992. It is the policy of New York State to maximize
opportunities for the participation of New York State business enterprises,
including minority and women-owned business enterprises as bidders,
subcontractors and suppliers on its procurement contracts. Information on the
availability of New York State subcontractors and suppliers is available from:
NYS Department of Economic Development
Division for Small Business
One Commerce Plaza
Albany, New York 12245.
A directory of certified minority and women-owned business enterprises
is available from:
NYS Department of Economic Development
Minority and Women's Business Development Division
One Commerce Plaza
Albany, New York 12245
The Omnibus Procurement Act of 1992 requires that by signing this Agreement, the
Operator certifies that:
(a) The Operator has made commercially reasonable efforts to encourage the
participation of New York State Business Enterprises as suppliers and
subcontractors, including certified minority and woman-owned business
enterprises, on this project, and has retained the documentation of these
efforts to be provided upon request to the State;
(b) The Operator has complied with the Federal Equal Opportunity Act of
1972 (P.L. 92-261), as amended; and
(c) The Operator agrees to make commercially reasonable efforts to provide
notification to New York State residents of employment opportunities on this
Project through listing any such positions with the Job Service Division of the
New York State Department of Labor, or providing such notification in such
manner as is consistent with existing collective bargaining contracts or
agreements. The Operator agrees to document these efforts and to provide said
documentation to the State upon request.
E-4
(d) The Operator acknowledges that the State may seek to obtain offset
credits from foreign countries as a result of this Agreement and agrees to
cooperate with the State in these efforts.
RECIPROCITY AND SANCTIONS PROVISIONS. The Operator is hereby notified that if
its principal place of business is located in a state that penalizes New York
State vendors, and if the goods or services it offers are substantially produced
or performed outside New York State, the Omnibus Procurement Act 1994 amendments
(Chapter 684, Laws of 1994) require that the Operator be denied contracts which
it would otherwise obtain.
PURCHASES OF APPAREL. In accordance with State Finance Law 162 (4-a), Owner
shall not purchase any apparel from any contractor unable or unwilling to
certify that: (i) such apparel was manufactured in compliance with all
applicable labor and occupational safety laws, including, but not limited to,
child labor laws, wage and hours laws and workplace safety laws, and (ii) the
Operator will supply, prior to or on the Contract Date, the names and addresses
of each subcontractor and a list of all manufacturing plants to be utilized by
the Manager.
CERTIFICATION OF COMPLIANCE WITH EXECUTIVE ORDER 127. The Operator certifies
that all information provided to Owner with respect to Executive Order Number
127 is complete, true, and accurate.
OPTIONAL TERMINATION BY THE AUTHORITY. Owner reserves the right to
terminate this Agreement in the event it is found that the certification filed
by the Operator in accordance with New York State Executive Order Number 127,
signed by Governor Pataki on June 16, 2003, was intentionally false or
intentionally incomplete. Upon such finding, Owner may exercise its termination
right by providing written notification to the Operator in accordance with the
written notification terms of this Agreement.
CONTINGENT FEES. The Operator hereby certifies and agrees that (a) the
Operator has not employed or retained and will not employ or retain any
individual or entity for the purpose of soliciting or securing any Owner
contract or any amendment or modification thereto pursuant to any agreement or
understanding for receipt of any form of compensation which in whole or in part
is contingent or dependent upon the award of any such contract or any amendment
or modification thereto; and (b) the Operator will not seek or be paid an
additional fee that is contingent or dependent upon the completion of a
transaction by Owner.
E-5
Annex E to First Amendment to Option and Purchase and Sale Agreement
FINAL COPY
[SECOND]
AMENDMENT
Dated as of [_________]
to
POWER SUPPLY AGREEMENT
between
LONG ISLAND LIGHTING COMPANY
and
KEYSPAN GENERATION LLC
Dated as of
June 26, 1997
This AMENDMENT (the "Amendment") is made and entered into as of
[___________], by and between LONG ISLAND LIGHTING COMPANY d/b/a LIPA, a New
York corporation ("LIPA"), and KEYSPAN GENERATION LLC, a New York limited
liability company ("GENCO"), to the Power Supply Agreement, by and between LIPA
and GENCO, dated as of June 26, 1997 (as amended, supplemented or otherwise
modified from time to time, the "PSA").
RECITALS
WHEREAS, LIPA and GENCO are parties to an Option and Purchase and Sale
Agreement, dated as of January 1, 2006, as amended by a First Amendment to
Option and Purchase and Sale Agreement, dated as of March 22, 2007 (the "Option
Agreement"), pursuant to which LIPA was granted an option to purchase the Far
Rockaway generating facility and certain related assets (the "Far Rockaway
Plant") and/or the E.F. Barrett generating facility and certain related assets
(the "E.F. Barrett Plant") or the E.F. Barrett Plant and the E.F. Barrett
internal combustion units 1-8 and 9-12 (the "ICUs") and certain related assets
on the terms and subject to the conditions set forth therein;
WHEREAS, LIPA exercised its option under the Option Agreement to purchase
[the Far Rockaway Plant, the E.F. Barrett Plant and the ICUs] [the Far Rockaway
Plant and the E.F. Barrett Plant] [the E.F. Barrett Plant and the ICUs] [the
E.F. Barrett Plant] [the Far Rockaway Plant]; and
WHEREAS, as a condition to the purchase of the Purchased Assets under the
Option Agreement, LIPA and GENCO are entering into this Amendment to the PSA to
reflect the purchase of the Purchased Assets.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements hereinafter set forth and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
Section 1.1. Definitions. All capitalized terms used in this Amendment and
not otherwise defined shall have the meanings assigned to them in the PSA.
ARTICLE 2
AMENDMENTS TO PSA
Section 2.1. Amendment to Article 1 of the PSA. (a) Article 1.1 of the PSA
is hereby amended by inserting the following new definitions in the appropriate
alphabetical order:
"E.F. Barrett Plant" means the 350 MW E.F. Barrett generating station, Unit
Nos. 1 and 2 (but excluding the ICUs), as more fully described in the
Option Agreement.
1
"Far Rockaway Plant" means the 100 MW Far Rockaway generating station, as
more fully described in the Option Agreement.
"ICUs" means the E.F. Barrett internal combustion units 1-8 and 9-12.
"LIPA Generating Facilities" means the electric generating facilities and
appurtenant facilities purchased by LIPA from GENCO, which as of the
effective date of the [Second] Amendment [is/are] [the E.F. Barrett Plant]
[,] [the Far Rockaway Plant] [,] [the ICUs] [,] [the Shoreham Plant] [,
and] [the Wading River Plant].
"Option Agreement" means the Option and Purchase and Sale Agreement, dated
as of January 1, 2006, between LIPA and GENCO, as amended, supplemented or
otherwise modified from time to time.
"[Second] Amendment" means this Amendment to the PSA, dated as of
[________].
"Step-Up Percentage" means the step-up in the tax basis of each Generating
Facility's tax basis expressed as a percentage of the total step-up in the
tax bases of Generating Facilities that were recorded as a result of the
sale of the Genco assets to KeySpan. For the E.F. Barrett Plant, the
percentage shall be 10.87%, for the Far Rockaway Plant, the percentage
shall be 4.05% and for the ICUs the percentage shall be 2.43%.
(b) The definitions of "Generating Facilities" and "Generating Facility
Sites" in Article 1 of the PSA are hereby amended by deleting such definitions
in their entirety and inserting in lieu thereof the following new definitions:
"Generating Facilities" means the electric generating facilities owned by
GENCO as of March 19, 1997 (but excluding the LIPA Generating Facilities),
including, but not limited to: (a) all systems, structures, equipment and
appurtenances associated with each Generating Facility's operation and
forming a part thereof; (b) permanent administrative offices and building
structures housing Generating Facility equipment, and site improvements
such as roads, drainage, fencing and landscaping; and (c) structures,
pipelines and equipment for (i) the delivery of Fuel, and (ii) the
transport of water, waste water and other waste disposal, and (iii) other
materials, supplies and commodities required for the Services. A list of
GENCO's generating units is contained in Appendix C.
"Generating Facility Sites" means each parcel of land upon which each
existing Generating Facility is situated, as well as the land contiguous
thereto, owned by Genco as of March 19, 1997 (but excluding the LIPA
Generating Facilities).
2
Section 2.2. Amendment to Section 2.6 of the PSA. Section 2.6 of the PSA is
hereby amended by deleting the first sentence thereof and substituting in lieu
thereof the following:
"GENCO will use reasonable efforts, in accordance with Prudent Utility
Practice to maintain a DMNC level for the Generating Facilities of [3973 MW
minus the following amounts for each generating facility which is a LIPA
Generating Facility as of the Closing Date specified in the Option
Agreement: Far Rockaway Plant--110 MW; E.F. Barrett Plant--386 MW; ICUs--
281 MW; Shoreham Plant--67 MW; and Wading River Plant--242 MW].
Section 2.3 Amendment to Section 3.1.1 of the PSA. Unless previously
amended to reflect a transfer of Generating Facilities to LIPA, Section 3.1.1 of
the PSA is hereby amended as follows:
(a) by deleting the second sentence thereof and substituting in lieu
thereof the following:
"This analysis would evaluate all available resource options,
including the LIPA Generating Facilities, to meet the electric energy
requirements of LIPA's Electricity Customers."
(b) by deleting the fourth sentence thereof and substituting in lieu
thereof the following:
"The IERP analysis is intended to be performed to determine the
optimum mix of the LIPA Generating Facilities, the Generating
Facilities, and purchased power from other sources in an effort to
provide the least cost mix of electricity resources including demand
side management (DSM) options for LIPA's Electricity Customers while
observing established reliability criteria."
Section 2.4. Amendment to Section 9.1.1 of the PSA. Unless previously
amended to reflect a transfer of Generating Facilities to LIPA, Section 9.1.1 of
the PSA is hereby amended by adding the following new sentence at the end
thereof. If such sentence has previously been added to the PSA, it shall be
amended to read as follows:
"In addition to the foregoing, on or before [_________], GENCO shall
prepare and submit to LIPA for review and approval a revised Five Year
Budget Plan, which shall contain fixed and variable costs developed by
GENCO in calendar year 2008 to account for the fact that the LIPA
Generating Facilities are no longer Generating Facilities."
Section 2.5. Amendment to Section 9.1.2 of the PSA. Unless previously
amended to reflect a transfer of Generating Facilities to LIPA, Section 9.1.2 of
the PSA is hereby amended by adding the following new sentence after the first
sentence thereof. If such sentence has previously been added to the PSA, it
shall be amended to read as follows:
3
"On or before [________________], GENCO shall prepare and submit to
LIPA a revised rolling Five Year Capital Improvement Budget showing
incremental capital expenditures and associated rate adjustments for
the Generating Facilities excluding the LIPA Generating Facilities for
LIPA's review and approval."
Section 2.6. Amendment to Section 9.2 of the PSA. Unless previously amended
to reflect a transfer of Generating Facilities to LIPA, Section 9.2 of the PSA
is hereby amended by adding the following new sentence at the end thereof. If
such sentence has previously been added to the PSA, it shall be amended to read
as follows:
"The parties shall establish mutually agreed upon timelines following
LIPA's receipt of the revised rolling Five Year Capital Improvement
Budget for review and revision of the revised Five Year Capital
Improvement Budget pursuant to the procedures set forth above."
Section 2.7. Amendment to Article 11.1 of the PSA. Section 11.1 of the PSA
is hereby amended by deleting the LIPA Generating Facilities and associated
capacity values from the Capacity Ramp Down schedule and by amending the first
sentence of the second paragraph thereof to read as follows:
"The Ramp Down will be an aggregate potential reduction amount of no
greater than 1500 MW, less the amount of generating capacity in the
LIPA Generating Facilities."
Section 2.8. Amendment to Appendix A of the PSA.
(a) Unless previously amended to reflect a transfer of Generating
Facilities to LIPA, Appendix A to the PSA is hereby amended by inserting
the following new paragraph (H) in Section I thereof.
"Notwithstanding the foregoing Section I, on and after the effective
date of the [Second] Amendment, the Capacity Charge for the Generating
Facilities (excluding the LIPA Generating Facilities) shall be
determined by removing the costs being recovered through the Capacity
Charge in effect for that Contract Year for the LIPA Generating
Facilities. The costs to be removed will include the: return on rate
base calculated at the rate of 7.17% for each of the LIPA Generating
Facilities individually less its share of the $7.120 million revenue
credit; depreciation charges; property taxes specifically identified
as attributable to the appropriate LIPA Generating Facilities; state
and federal income taxes (including the effect of the costs of
removal); and an allocable share of operations and maintenance
expenses (net of contractual synergy savings). The allocable share of
operations and maintenance expenses to be attributable to each of the
LIPA Generating Facility shall be determined by multiplying the Total
Fixed O&M Cost Component by the total number of full time equivalent
employees dedicated to the LIPA Generating Facility divided by the
total number of full time equivalent employees working at each of the
GENCO Generating Facilities covered under the PSA ("Allocated Fixed
O&M Cost"). The Total Fixed O&M Cost Component shall be determined by
4
subtracting from the sum of the Capacity Charge and the $7.120 million
revenue credit, the following components: property taxes,
depreciation, return on rate base, state and federal income taxes
(including the effects of cost of removal), common assets recovery
charge and the amortization of security costs.
The share of the revenue credit assignable to each of the LIPA
Generating Facilities shall be determined by multiplying $7.120
million by the amount of the Step-Up Percentage for the Generating
Facility."
(b) Unless previously amended to reflect a transfer of Generating
Facilities to LIPA, Appendix A to the PSA is hereby amended by inserting
the following new paragraph in Section III(B) thereof relating to the Tax
True-Up. If such sentence has previously been added to the PSA, it shall be
amended to read as follows:
"Notwithstanding the foregoing, on and after the effective date of the
[Second] Amendment, the base amount of property taxes shall be revised
by removing the base amount of property taxes attributed to the LIPA
Generating Facilities that is included in the base amount of property
taxes at the time of Closing (as defined in the Option Agreement)."
(c) Unless previously amended to reflect a transfer of Generating
Facilities to LIPA, Appendix A to the PSA is hereby amended by inserting
the following new paragraph in Section III(C) thereof relating to the Plant
Additions True up. If such sentence has previously been added to the PSA,
it shall be amended to read as follows:
"(4) On and after the effective date of the [Second] Amendment, the
Budgeted Incremental Depreciation Expense and the Budgeted Incremental
Net Utility Plant shall be revised by removing the Budgeted
Incremental Depreciation Expense and Budgeted Incremental Net Utility
Plant attributed to the LIPA Generating Facilities."
(d) Unless previously amended to reflect a transfer of Generating
Facilities to LIPA, Appendix A to the PSA is hereby amended by deleting
Section IV thereof relating to Reopeners.
(e) Section V of Appendix A to the PSA is hereby amended by
restatement of (i) the amount of the Incremental Synergy Savings as set
forth in Section V.J.; (ii) the base year labor costs (production) and base
year benefit costs (production) as set forth in the Labor Cost Index
Adjustment (Production) and Benefit Cost Index Adjustment (Production) as
set forth in Section V.K., and (iii) base year labor costs (support) and
base year benefit costs (support) as set forth in the Labor Cost Index
Adjustment (Support) and Benefit Cost Index Adjustment (Support) in Section
V.L., to reflect removal of the LIPA Generating Facilities.
5
Section 2.9. Amendment to Appendix B of the PSA. Appendix B of the PSA is
hereby amended by deleting each of the LIPA Generating Facilities and the
amounts associated with each of the LIPA Generating Facilities from the Tables.
Section 2.10. Amendment to Appendix C of the PSA. Appendix C of the PSA is
hereby amended by deleting the LIPA Generating Facilities and their associated
name plate ratings from the list of Generating Units.
Section 2.11. Amendment to Appendix E of the PSA. Appendix E of the PSA is
hereby amended by deleting the LIPA Generating Facilities from the tables.
Section 2.12. Amendment to Appendix F of the PSA. Schedule F to the PSA is
hereby amended by inserting the following new paragraph (V) as follows:
"Upon the effective date of the [Second] Amendment, the original
targets for (i) the DMNC Incentive/Disincentive; (ii) the Availability
Incentive/Disincentive; and (iii) the Heat Rate Incentive, shall be
adjusted to reflect the targets for Genco Generating Facilities as
shown in the graph below. The incentive maximums shall be reduced by
__%." [insert: 2.77% if only Far Rockaway Plant is purchased; 9.72% if
only E.F. Barrett Plant is purchased; 12.48% if only Far Rockaway
Plant and E.F. Barrett Plant are purchased; 16.79% if only E.F.
Barrett and the ICUs are purchased; 19.55% if the Far Rockaway Plant,
the E.F. Barrett Plant and the ICUs are purchased]
---------------------- ------------------ ------------------ ------------------- ------------------ ---------------------------
[If only Far [If only E.F. [If only Far [If only E.F. [If Far Rockaway Plant,
Rockaway Plant Barrett Plant Rockaway Plant Barrett Plant E.F. Barrett Plant and
is purchased] is purchased] and E.F. Barrett and the ICUs are the ICUs are purchased]
Plant are purchased]
purchased]
---------------------- ------------------ ------------------ ------------------- ------------------ ---------------------------
Availability 94.2% 94.0% 94.0% 94.1% 94.2%
---------------------- ------------------ ------------------ ------------------- ------------------ ---------------------------
DMNC 3863 MW 3587 MW 3477 MW 3306 MW 3196 MW
---------------------- ------------------ ------------------ ------------------- ------------------ ---------------------------
Heat Rate MMBTU = MMBTU = MMBTU = MMBTU = MMBTU =
10.6676* 10.6992* 10.6332* 10.6992* 10.6332* MWhN
MWhN + MWhN + MWhN + MWhN + + 166,014
181,492 151,140 166,014 151,140
---------------------- ------------------ ------------------ ------------------- ------------------ ---------------------------
6
ARTICLE 3
MISCELLANEOUS
Section 3.1. Effective Date. This Amendment shall be effective upon
satisfaction of each of the following conditions (the date upon which all such
conditions are satisfied, the "Effective Date"): (i) the consummation of the
sale and purchase of the Purchased Assets pursuant to the Option Agreement; (ii)
approval of this Amendment from the New York State Attorney General (as to
form); (iii) approval (satisfactory to LIPA and Genco) of this Amendment from
the New York State Comptroller; and (iv) the Federal Energy Regulatory
Commission shall have permitted this Amendment to become effective. The
conditions set forth in items (ii), (iii) and (iv) above are hereinafter
referred to as the "Approvals". Upon receipt of all the Approvals, LIPA shall
provide Genco with a copy of each such Approval.
Section 3.2. Affirmation of Representations. The representations and
warranties of GENCO set forth in Section 21.9.1 of the PSA shall be true and
correct in all material respects as of the Effective Date. The representations
and warranties of LIPA set forth in Section 21.9.2 of the PSA shall be true and
correct in all material respects as of the Effective Date.
Section 3.4. Miscellaneous.
(a) This Amendment provides for certain values used to calculate the
rates and charges payable by LIPA to be determined by removing from the
values in the PSA in effect prior to the Effective Date of this Amendment
certain amounts associated with the LIPA Generating Facilities. The exact
value to be used is subject to (i) a final determination of whether the
E.F. Barrett Plant, the Far Rockaway Plant and the ICUs, or only the Far
Rockaway Plant and the E.F. Barrett Plant, or only the Far Rockaway Plant,
or only the E.F. Barrett Plant, or only the E.F. Barrett Plant and the ICUs
have become LIPA Generating Facilities, and (ii) identification of values
properly attributable to the LIPA Generating Facilities. The final values
to be used in calculating such rates and charges after the Effective Date
shall be determined by mutual agreement of the parties no later than 30
days after the Effective Date.
(b) Except as amended hereby, the PSA shall remain in full force and
effect. The parties shall cooperate in preparation of an amended and
restated PSA which incorporates the provisions of the original PSA and all
amendments thereto, including this Amendment to be effective as of the
Effective Date.
(c) This Amendment shall be governed, including, without limitation,
as to validity, interpretation and effect, by the Laws of the State of New
York.
(d) This Amendment may be executed in two or more counterparts which
together shall constitute a single agreement.
7
IN WITNESS WHEREOF, the parties have caused this Amendment to be executed
and delivered by their duly authorized officers or representatives as of the
date first above written.
LONG ISLAND LIGHTING COMPANY
d/b/a LIPA
By /s/ ___________________
Name: [_________________]
Title: [_________________]
KEYSPAN GENERATION LLC
By /s/ __________________
Name: [_________________]
Title: [_________________]
8
FINAL COPY
Annex F to First Amendment to Option and Purchase and Sale Agreement
THIRD AMENDMENT
Dated as of [_______________________]
to
ENERGY MANAGEMENT AGREEMENT
between
LONG ISLAND LIGHTING COMPANY
and
KEYSPAN ENERGY TRADING SERVICES LLC
Dated as of
June 26, 1997
This THIRD AMENDMENT (the "Amendment") is made and entered into as of
[___________], by and between LONG ISLAND LIGHTING COMPANY d/b/a LIPA, a New
York corporation ("LIPA"), and KEYSPAN ENERGY TRADING SERVICES LLC, a New York
limited liability company formerly known as MarketSpan Trading Services LLC (the
"Energy Manager"), to the Energy Management Agreement, by and between LIPA and
the Energy Manager, dated as of June 26, 1997, as previously amended as of March
29, 2002 and as of December [__], 2005 (the "EMA").
RECITALS
WHEREAS, Energy Manager is responsible under the EMA, inter alia, for fuel
procurement, delivery, storage, and management ("Fuel Management Services") for
the GENCO Generating Facilities to meet the energy generation requirements of
the Electricity Customers;
WHEREAS, LIPA and KeySpan Generation LLC are parties to an Option and
Purchase and Sale Agreement, dated as of January 1, 2006, as amended by a First
Amendment to Option and Purchase and Sale Agreement, dated as of March 22, 2007
(the "Option Agreement"), pursuant to which LIPA was granted an option to
purchase the Far Rockaway Plant (as defined in the Option Agreement) and/or the
E.F. Barrett Plant (as defined in the Option Agreement) or the Far Rockaway
Plant, the E.F. Barrett Plant and the ICUs, or the E.F. Barrett Plant and the
ICUs (as defined in the Option Agreement) and certain related assets on the
terms and subject to the conditions set forth therein;
WHEREAS, on [_____] LIPA exercised its option under the Option Agreement to
purchase [the Far Rockaway Plant, the E.F. Barrett Plant and the ICUs] [the Far
Rockaway Plant and the E.F. Barrett Plant] [the E.F. Barrett Plant and the ICUs]
[the E.F. Barrett Plant] [the Far Rockaway Plant] as specified in the Option
Notice (as defined in the Option Agreement) delivered by LIPA under the Option
Agreement (the "Purchased Assets");
WHEREAS, LIPA and [KEYSPAN CORPORATION SUBSIDIARY] ("Operator") are
contemporaneously entering into an Operation and Maintenance Agreement (the "O&M
Agreement") pursuant to which LIPA will retain Operator to, among other things,
perform Fuel Management Services for the Purchased Assets upon the terms and
conditions set forth therein; and
WHEREAS, as a condition to the consummation of the purchase and sale of the
Purchased Assets under the Option Agreement, LIPA and the Energy Manager are
entering into this Amendment.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements hereinafter set forth and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
2
ARTICLE 1
DEFINITIONS
Section 1.1. Definitions. All capitalized terms used in this Amendment and
not otherwise defined shall have the meanings assigned to them in the EMA.
ARTICLE 2
AMENDMENTS TO EMA
Section 2.1. Amendment to Section 3.2.1 of the EMA. Section 3.2.1 of the
EMA is hereby amended by deleting "$750,000"[or such other amount, if the EMA
has been amended prior to this Amendment] in the 4th line thereof and inserting
in lieu thereof "$625,000"[or an amount that is $125,000 less than the other
amount referred to above]. [If LIPA purchases less than all of the Plants, then
the $125,000 fee reduction will be pro rated based upon the fuel BTU's purchased
in the year prior to the exercise of the Option Agreement.]
ARTICLE 3
MISCELLANEOUS
Section 3.1. Effective Date. This Amendment shall be effective upon
satisfaction of the following conditions (the date upon which all such
conditions are satisfied, the "Effective Date"): (i) the consummation of the
sale and purchase of the Purchased Assets pursuant to the Option Agreement, (ii)
approval of this Amendment (satisfactory to Energy Manager and LIPA) from the
New York State Comptroller, (iii) approval (as to form) of this Amendment from
the New York Attorney General, and (iv) if required in LIPA's sole judgment,
receipt of a private letter ruling from the Internal Revenue Service that this
Amendment constitutes a "qualified management services agreement" under the
Internal Revenue Code of 1986, as amended, and the regulations thereunder. The
conditions set forth in items (ii), (iii) and (iv) above are hereinafter
referred to as the "Approvals".
Section 3.2. Affirmation of Representations. The representations and
warranties of the Energy Manager set forth in Section 13.11.1 of the EMA shall
be true and correct in all material respects as of the Effective Date. The
representations and warranties of LIPA set forth in Section 13.11.2 of the EMA
shall be true and correct in all material respects as of the Effective Date.
Section 3.4. Miscellaneous. Except as amended hereby, the EMA shall remain
in full force and effect. This Amendment shall be governed, including, without
limitation, as to validity, interpretation and effect, by the Laws of the State
of New York. This Amendment may be executed in two or more counterparts which
together shall constitute a single agreement.
3
IN WITNESS WHEREOF, the parties have caused this Amendment to be executed
and delivered by their duly authorized officers or representatives as of the
date first above written.
LONG ISLAND LIGHTING COMPANY
d/b/a LIPA
By /s/ ______________________________
Name:
Title:
KEYSPAN ENERGY TRADING SERVICES LLC
By /s/ ______________________________
Name:
Title:
4