FRIENDLY ENERGY CORP
10SB12G, EX-6.3, 2000-08-31
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                                 EXHIBIT NO. 6.3


                 ESP SERVICE AGREEMENT PACIFIC GAS & ELECTRIC.





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            PACIFIC GAS AND ELECTRIC COMPANY
[LOGO]      ENERGY SERVICE PROVIDER (ESP) SERVICE
            AGREEMENT

This Energy Service Provider (ESP) Service Agreement (this "Agreement") is made
and entered into as of this 18 day of MAY, 2000, by and between" Friendly Energy
Corporation" ("ESP"), a corporation organized and existing under the laws of the
state of Nevada, and "Pacific Gas and Electric Company"("PG&E"), a corporation
organized and existing under the laws of the state of California. From time to
time, ESP and PG&E shall be individually referred to here in as a "Party" and
collectively as the "Parties."

SECTION 1:        GENERAL DESCRIPTION OF AGREEMENT

         1.1      This Agreement is a legally binding contract. The Parties
                  named in this Agreement are bound by the terms set forth
                  herein and otherwise incorporated herein by reference. This
                  Agreement shall govern the business relationship between the
                  Parties hereto by which ESP shall offer electrical energy
                  services, including, but not limited to, account maintenance
                  and billing services, electrical meter installation, meter
                  reading services and/or any other services that may be
                  approved by the California Public Utilities Commission
                  ("CPUC") in Direct Access transactions with customers in
                  PG&E's service territory ("Direct Access Services"). Each
                  Party, by agreeing to undertake specific activities and
                  responsibilities for or on behalf of customers, acknowledges
                  that each Party shall relieve and discharge the other Party
                  of the responsibility for said activities and
                  responsibilities with respect to those customers. Except
                  where explicitly defined herein (including Attachment A
                  hereto) the definitions controlling this Agreement are
                  contained in PG&E's applicable rules or in the relevant
                  direct access tariff.

         1.2      The form of this Agreement has been developed as part of the
                  CPUC regulatory process, was intended to conform to CPUC
                  directions, was filed and approved by the CPUC for use between
                  PG&E and ESPs and may not be waived, altered, amended or
                  modified, except as provided herein or in the relevant direct
                  access tariff, or as may other wise be authodzed by the CPUC.

SECTION 2:        REPRESENTATIONS

         2.1      Each Party represents that it is and shall remain in
                  compliance with all applicable laws and tariffs, including
                  applicable CPUC requirements.

         2.2      Each person executing this Agreement for the respective
                  Parties expressly represents and warrants that he or she has
                  authority to bind the entity on whose behalf this Agreement is
                  executed.

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         2.3      Each Party represents that (a) it has the full power and
                  authority to execute and deliver this Agreement and to perform
                  its terms and conditions; (b) the execution, delivery and
                  performance of this Agreement have been duly authorized by all
                  necessary corporate or other action by such Party; and (c)
                  this agreement constitutes such Party's legal, valid and
                  binding obligation, enforceable against such Party in
                  accordance with its terms.

         2.4      Each Party shall (a) exercise all reasonable care, diligence
                  and good faith in the performance of its duties pursuant to
                  this Agreement; and (b) carry out its duties in accordance
                  with applicable recognized professional standards in
                  accordance with the requirements of this Agreement.

SECTION 3:        TERM OF SERVICE

                  The term of this Agreement shall commence on the date of
                  execution by both Parties hereto (the "Effective Date")
                  and shall terminate on the earlier of (a) the date ESP informs
                  PG&E that it is no longer operating as an ESP in PG&E's
                  service territory; (b) the earlier termination pursuant to
                  Section 4 hereof; or (c) the effective date of a new ESP
                  Service Agreement between the Parties hereto. Notwithstanding
                  the Effective Date of this Agreement, the ESP acknowledges
                  that it may only offer Direct Access Services to customers
                  effective January 1, 1998, or such other date as may be
                  directed by the CPUC for commencement of such services by
                  ESPs, and only after it has complied with all provisions of
                  this Agreement and PG&E's applicable tariffs.

SECTION 4:        EVENTS OF DEFAULT AND REMEDY FOR DEFAULT

         4.1      An Event of Default under this Agreement shall include either
                  Party's material breach of any provision of this Agreement,
                  including those incorporated by reference herein, and failure
                  to cure such breach within thirty (30) calendar days of
                  receipt of written notice thereof from the non-defaulting
                  Party; or such other period as may be provided by this
                  Agreement or PG&E's direct access tariff.

         4.2      In the event of such an Event of Default, the non-defaulting
                  Party shall be entitled (a) to exercise any and all remedies
                  available under PG&E's direct access tariff; (b) to the extent
                  not inconsistent with PG&E's direct access tariff to exercise
                  any and all remedies provided for by law or in equity; and (c)
                  in the event of a material Event of Default, to terminate this
                  Agreement up on written notice to the other Party, which shall
                  be effective upon the receipt thereof.

         4.3      Breach by any Party hereto of any provision of PG&E's direct
                  access tariff shall be governed by applicable provisions
                  contained therein and each Party will retain all rights
                  granted thereunder.

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SECTION 5:        BILLING, METERING AND PAYMENT

         5.1      Billing options and metering services which are available to
                  ESP shall be as described in PG&E's direct access tariff, as
                  stated in PG&E's Electric Rule 22. Billing and metering
                  options applicable to aparticular customer shall be designated
                  in the Direct Access Service Request submitted by the ESP for
                  such customer.

         5.2      PG&E will bill and the ESP agrees to pay PG&E for all services
                  and products provided by PG&E in accordance with the terms and
                  conditions setforth in PG&E's direct access tariff, as
                  stated in PG&E's Electric Rule 22 and PG&E's rate schedules.
                  Any services provided by the ESP to PG&E shall be by separate
                  agreement between the Parties and are not a subject of this
                  Agreement.

SECTION 6:        LIMITATION OF LIABILITY

                   Each Party's liability to the other Party for any loss,
                   cost, claim, injury, liability, or expense, including
                   reasonable attorneys' fees, relating to or arising from
                   any act or omission in its performance of this Agreement,
                   shall be limited to the amount of direct damage actually
                   incurred, except as provided for in this Section. In no event
                   shall either Party be liable to the other Party for any
                   indirect, special, consequential, or punitive damages of
                   any kind whatsoever, whether in contract, tort or strict
                   liability, except in the event of an action covered by the
                   Indemnification provisions of Section 7 of this Agreement,
                   in which event this Section 6 shall not be applicable.

SECTION 7:        INDEMNIFICATION

         7.1      To the fullest extent permitted by law, and subject to the
                  limitations set forth in Section 6 of this Agreement, each
                  Party (the "Indemnifying Party") shall indemnify and hold
                  harmless the other Party, and its current and future direct
                  and indirect parent companies, affiliates and their
                  shareholders, officers, directors, employees, agents, servants
                  and assigns (collectively, the "Indemnified Party") and at the
                  Indemnified Party's option, the Indemnifying Party shall
                  defend the Indemnified Party from and against any and all
                  claims and/or liabilities for losses, expenses, damage to
                  property, injury to or death of any person, including, but not
                  imited to, the Indemnified Party's employees and its
                  affiliates' employees, sub contractors and subcontractors'
                  employees, or any other liability incurred by the
                  Indemnified Party, including reasonable expenses, legal and
                  otherwise, which shall include reasonable attorneys' fees,
                  caused wholly or in part by any negligent, grossly negligent
                  or willful act or omission by the Indemnifying Party, its
                  officers, directors, employees, agents or assigns arising
                  out of this Agreement, except to the extent caused wholly
                  or in part by any negligent, grossly negligent or willful act
                  or omission of the Indemnified Party.

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         7.2      If any claim covered by Section 7.1 is brought against the
                  Indemnified Party, then the Indemnifying Party shall be
                  entitled to participate in, and unless in the opinion of
                  counsel for the Indemnified Party a conflict of interest
                  between the Parties may exist with respect to such claim,
                  assume the defense of such claim, with counsel reasonably
                  acceptable to the Indemnified Party. If the Indemnifying
                  Party does not assume the defense of the Indemnified Party,
                  or if a conflict precludes the Indemnifying Party from
                  assuming the defense, then the Indemnifying Party shall
                  reimburse the Indemnified Party on amonthly basis for the
                  Indemnified Partys defense through separate counsel of the
                  Indemnified Party's choice. Even if the Indemnifying Party
                  assumes the defense of the Indemnified Party with acceptable
                  counsel, the Indemnified Party, at its sole option, may
                  participate inthe defense, at its own expense, with counsel
                  of its own choice without relieving the Indemnifying Party of
                  any of its obligations hereunder. In no event shall either
                  Party be liable to the other Party for any indirect, special,
                  consequential, or punitive damages of any kind whatsoever,
                  whether in contract, tort or strict liability.

         7.3      The Indemnifying Party's obligation to indemnify under this
                  Section 7 shall survive termination of this Agreement, and
                  shall not be limited in any way by any limitation on the
                  amount or type of damages, compensation or benefits payable
                  by or for the Indemnifying Party under any statutory scheme,
                  including, without limitation, under any Workers Compensation
                  Acts, Disability Benefit Acts or other Employee Benefit Acts.

SECTION 8:       ASSIGNMENT AND DEREGULATION

         8.1      Neither Party to this Agreement shall assign any of its
                  rights or obligations under this Agreement, except with
                  the prior written consent of the other Party, which
                  consent shall not be unreasonably with held or delayed. No
                  assignment of this Agreement shall relieve the assigning
                  Party of any of its obligations under this Agreement until
                  such obligations have been assumed by the assignee. When
                  duly assigned in accordance with the foregoing, this
                  Agreement shall be binding up on and shall inure to the
                  benefit of the assignee and the assignor shall be relieved
                  of its rights and obligations. Any assignment in violation
                  of this Section 8 shall be void.

         8.2      Notwithstanding the provisions of this Section 8, either
                  Party may subcontract its duties under this Agreement to a
                  subcontractor provided thatthe subcontracting Partyshall
                  remain fully responsible as a principal and not as a
                  guarantor for performance of any subcontracted duties,
                  shall serve as the point of contact between its subcontract
                  or and the other Party, and shall provide the other Party
                  with thirty (30) calendar days' prior written notice of any
                  such subcontracting, which notice shall include such
                  information about the subcontractor as the other Party
                  shall reasonably require, and provided further that each
                  Party may subcontract its obligation to provide Metering or
                  Meter Reading Services under this Agreement only to
                  subcontractors who have complied with all certification or
                  registration requirements described in applicable law, CPUC
                  rules and PG&E's

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                  direct access tariff. If either Party subcontracts any of
                  its duties hereunder, it shall cause it shall cause its
                  subcontractors to perform in a manner which is in conformity
                  with that Party's obligations under this Agreement.

SECTION 9:        INDEPENDENT CONTRACTORS

                  Each Party shall perform its obligations under this Agreement
                  (including any obligations performed by a Party's designees as
                  permitted under Section 8 of this Agreement) as an independent
                  contractor.

SECTION 10:       ENTIRE AGREEMENT

                  This Agreement consists of, in its entirety, this Energy
                  Service Provider Service Agreement and all attachments hereto,
                  all Direct Access Service Requests submitted pursuant to this
                  Agreement and PG&E's direct access tariff. This Agreement
                  supersedes all other agreements or understandings, written or
                  oral, between the Parties related to the subject matter
                  hereof. This Agreement may be modified from time to time only
                  by an instrument in writing, signed by both Parties.

  SECTION 11:     NONDISCLOSURE

         11.1     Neither Party may disclose any Confidential Information
                  obtained pursuant to this Agreement to any third party,
                  including affiliates of such Party, without the express prior
                  written consent of the other Party. As used herein, the term
                  "Confidential Information" shall include, but not be limited
                  to, all business, financial, and commercial information
                  pertaining to the Parties, customers of either or both
                  Parties, suppliers for either Party, personnel of either
                  Party, any trade secrets, and other information of a
                  similar nature, whether written or in intangible form that is
                  marked proprietary or confidential with the appropriate
                  owner's name. Confidential Information shall not include
                  information known to either Party prior to obtaining the same
                  from the other Party, information in the public domain,or
                  information obtained by a Party from a third party who did
                  not, directly or indirectly, receive the same from the other
                  Party to this Agreement or from a party who was under an
                  obligation of confidentiality to the other Party to this
                  Agreement or information developed by either Party
                  independent of any ConfidentiaI Information. The receiving
                  Party shall use the higher of the standard of care that the
                  receiving Party uses to preserve its own confidential
                  information or a reasonable standard of care to prevent
                  unauthorized use or disclosure of such Confidential
                  Information. Each receiving Party shall, upon termination of
                  this Agreement or at any time upon the request of the
                  disclosing Party, promptly return or destroy all
                  Confidential Information of the disclosing Party then in its
                  possession.

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         11.2     Notwithstanding the preceding, Confidential Information may be
                  disclosed to any governmental, judicial or regulatory
                  authority requiring such Confidential Information pursuant to
                  any applicable law, regulation, ruling, or order, provided
                  that: (a) such Confidential Information is submitted under any
                  applicable provision, if any, for confidential treatment by
                  such governmental, judicial or regulatory authority; and (b)
                  prior to such disclosure, the other Party is given prompt
                  notice of the disclosure requirement so that it may take
                  whatever action it deems appropriate, including intervention
                  in any proceeding and the seeking of any injunction to
                  prohibit such disclosure.

SECTION 12:       ENFORCEABILITY

                  If any provision of this Agreement or the application thereof,
                  is to any extent held invalid or unenforceable, the remainder
                  of this Agreement and the application thereof, other than
                  those provisions which have been held invalid or
                  unenforceable, shall not be affected and shall continue in
                  full force and  effect and shall been forceable to the
                  fullest extent permitted by law or in equity.

SECTION 13:       NOTICES

         13.1     Except as otherwise provided in this Agreement, any notices
                  under this Agreement shall be in writing and shall be
                  effective upon delivery if delivered by (a) hand; (b) U.S.
                  Mail, first class postage pre-paid, or (c) facsimile, with
                  confirmation of receipt to the Parties as follows:

                  IF THE NOTICE IS TO ESP:

                  Contact Name: Thomas Bowers

                  Business Address: Suite 250, 4275 Executive Square

                  La Jolla, CA 92037

                  Facsimile: 858-622-1200

                  IF THE NOTICE IS TO PG&E :

                  Contact Name: Director of ESP Relations

                  Business Address:
                  Account Services Department
                  Mail Code H28B
                  P.O. Box 770000
                  San Francisco, CA 94177

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         13.2     Each Party shall be entitled to specify as its proper address
                  any other address in the United States upon written notice to
                  the other Party.

         13.3     Each Party shall designate on Attachment A the person(s) to be
                  contacted with respect to specific operational matters
                  relating to Direct Access service. Each Party shall be
                  entitled to specify any change to such person(s) upon written
                  notice to the other Party.

SECTION 14:       TIME OF ESSENCE

                  The Parties expressly agree that time is of the essence for
                  all portions of this Agreement.

SECTION 15:       DISPUTE RESOLUTION

         15.1     The form of this Agreement has been filed with and approved by
                  the CPUC as part of PG&E's applicable tariffs. Except as
                  provided in Section 15.2 and 15.3, any d is pute a dsing
                  between the Parties relating to interpretation of the
                  provisions of this Agreement or to the performance of PG&E's
                  obligations hereunder (including the performance of Billing
                  Services, Metering Services and MDMA Services by PG&E) shall
                  be reduced to writing and referred to the Parties'
                  representatives identified on Attachment A for resolution.
                  Should such a dispute arise, the parties shall be required to
                  meet and confer in an effort to resolve their dispute. Pending
                  resolution, the Parties shall proceed diligently with the
                  performance of their respective obligations under this
                  Agreement, except if this Agreement has been terminated under
                  Section 4.2. If the Parties fail to reach an agreement within
                  a reasonable period of time, the matter shall, upon demand of
                  either Party, be submitted to resolution before the CPUC in
                  accordance with the CPUC's rules, regulations and procedures
                  applicable to resolution of such disputes.

         15.2     Any dispute arising between the Parties relating to
                  interpretation of the provisions of this Agreement or to the
                  performance of the ESP's obligations hereunder (including the
                  performance of Billing Services, Meteding Services and MIDMA
                  Services by the ESP) shall be reduced to editing and referred
                  to the Parties' representatives identified on Attachment A for
                  resolution. Should such a dispute arise, the parties shall be
                  required to meet and confer in an effort to resolve their
                  dispute. Pending resolution, the Parties shall proceed
                  diligently with the performance of their respective
                  obligations under this Agreement, except if this Agreement has
                  been terminated under Section 4.2. If the Parties fail to
                  reach an agreement within a reasonable period of time, the
                  parties may mutually agree to pursue mediation or arbitration
                  to resolve such issues.

         15.3     Notwithstanding the provisions of Paragraph 15.1 and 15.2
                  above: (a) all disputes between the Parties relating to the
                  payment by the ESP of any PG&E fees or

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                  charges shall be subject to the provisions of PG&E's
                  applicable tariffs governing disputes over customer bills;
                  (b) all disputes between the Parties regarding Competition
                  Transition Charges payable by direct access customers or
                  the ESP on behalf of such customers shall be subject to the
                  provisions of PG&E's applicable tariffs; and (c) PG&E may
                  pursue available remedies for unauthorized electrical use
                  by the ESP in a court of competent judsdiction.

         15.4     If the dispute involves a request for damages, parties are
                  notified that the Commission has no authority to award
                  damages. To resolve such issues, the parties may mutually
                  agree to pursue mediation or arbitration to resolve such
                  issues, or if no agreement is reached, to pursue other legal
                  remedies that are available to the parties.

SECTION 16:       APPLICABLE LAW AND VENUE

                  This Agreement shall be interpreted, governed by and
                  constructed in accordance with the laws of the State of
                  California, and shall exclude any choice of law rules that
                  direct the application of the laws of another jurisdiction,
                  irrespective of the place of execution or of the order in
                  which the signatures of the parties are affixed or of the
                  place or places of performance. Except for matters and
                  disputes with respect to which the CPUC is the sole proper
                  venue for dispute resolution pursuant to applicable law
                  or this Agreement, the federal and state courts located in
                  San Francisco County, California shall constitute the sole
                  proper venue for resolution of any matter or dispute
                  hereunder, and the Parties submit to the exclusive
                  jurisdiction of such courts with respect to such matters
                  and disputes.

SECTION 17:       FORCE MAJEURE

                  Neither Party shall be liable for any delay or failure in
                  the performance of any part of this Agreement (other than
                  obligations to pay money) due to any event of force majeure
                  or other cause beyond its reasonable control, including but
                  not limited to, unusually severe weather, flood, fire,
                  lightning, epidemic, quarant inerestriction, war, sabotage,
                  act of a public enemy, earthquake, insurrection, dot, civil
                  disturbance, strike, work stoppage caused by jurisdictional
                  and similar disputes, restraint by court order or public
                  authority, or action omon-action by or inability to obtain
                  authorization or approval from any governmental authority,
                  or any combination of these causes, which by the exercise
                  of due diligence and foresight such Party could not
                  reasonably have been expected to avoid and which by the
                  exercise of due diligence is unable to overcome. It is
                  agreed that upon the Party so affected giving written
                  notice and reasonably full particulars of such force
                  majeure to the other Party within a reasonable time after
                  the cause relied on, then the obligations of the Party, so
                  far as they are affected by the event of force majeure,
                  shall be suspended during the continuation of such
                  inability and circumstance and shall, so far as possible,
                  be remedied with all reasonable dispatch. In the event of
                  force majeure, as described herein, both Parties shall take
                  all reasonable steps to comply with this Agreement

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                  and PG&E's applicable tariffs despite occurrence of a force
                  majeure event.

SECTION 18:       UNAUTHORIZED USE OF ENERGY (ENERGY THEFT)

         18.1     The ESP represents and warrants that for each of its
                  Customers, and at all times during which it provides Direct
                  Access services as an Energy Service Provider, the ESP shall
                  completely, accurately, and in a timely manner account
                  for each of its Customers loads with a duly authorized
                  Scheduling Coordinator. Load data not accounted for in this
                  manner may provide grounds for termination of this Agreement.
                  For verification purposes only, PG&E shall have complete
                  access to the identity of the Scheduling Coordinator and the
                  load data provided to it by the ESP. Such information is to
                  remain confidential, and shall not be disclosed to any
                  unauthorized person.

         18.2     PG&E shall notify the ESP immediately and the ESP shall notify
                  PG&E immediately of any suspected unauthorized energy use. The
                  Parties agree to preserve any evidence of unauthorized
                  energy use. Once unauthorized energy use is suspected, PG&E,
                  in its sole discretion, may take any or all of the actions
                  permitted under PG&E's applicable tariffs.

SECTION 19:       NOT A JOINT VENTURE

                  Unless specifically stated in this Agreement to be
                  otherwise, the duties, obligations, and liabilities ofthe
                  Parties are intended to be several and not joint or
                  collective. Nothing contained in this Agreement shall ever
                  be construed to create an association, trust, partnership
                  orjoint venture or to impose a trust or partnership duty,
                  obligation, or liability on or with regard to either Party.
                  Each Party shall be liable individually and severally for
                  its own obligations under this Agreement.

SECTION 20:       CONFLICTS BETWEEN THIS AGREEMENT AND PG&E'S DIRECT ACCESS
                  TARIFF

                  Should a conflict exist or develop between the provisions of
                  this Agreement and PG&E's direct access tariff, as approved by
                  the CPUC, the provisions of PG&E's direct access tariff shall
                  prevail.

SECTION 21:       AMENDMENTS OR MODIFICATIONS

         21.1     Except as provided in Section 21.2, no amendment or
                  modification shall be made to this Agreement, in whole or in
                  part, except by an instrument in writing executed by
                  authorized representatives of the Parties, and no amendment or
                  modification shall be made by course of performance, course of
                  dealing or usage of trade.

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         21.2     This Agreement may be subject to such changes or modifications
                  as the CPUC may from time to time direct or necessitate in the
                  exercise of its jurisdiction, and the Parties may amend the
                  Agreement to conform to changes directed or necessitated by
                  the CPUC. In the event the Parties are unable to agree on the
                  required changes or modifications to this Agreement, their
                  dispute shall be resolved in accordance with the provisions of
                  Section 15 hereof or, in the alternative, ESP may elect to
                  terminate this Agreement upon written notice to PG&E, which
                  shall be effective upon the receipt thereof. PG&E retains the
                  right to unilaterally file with the CPUC, pursuant to the
                  CPUC's rule sand regulations, an application for a change in
                  PG&E's rates, charges, classification, serviceor rules, or any
                  agreement relating thereto.

SECTION 22:       BILLING OPTIONS OFFERED TO END-USE CUSTOMERS BY ESP

                  Check which billing options (as described in PG&E's direct
                  access tariff ESP intends to provide its Customers under this
                  Agreement.

                     X     Consolidated Billing by PG&E.
                  -------
                           Consolidated Billinq by the ESP
 .                 -------
                           Separate PG&E and ESP Bills.
                  -------

                  ESP may change these elections from time to time in compliance
                  with the relevant direct access tariff upon prior written
                  notice to PG&E. The Direct Access Service Request (DASR)
                  for each Direct Access customer will specify which billing
                  option will apply to that customer. If ESP specifies in any
                  DASR any billing option that has not been checked above, the
                  DASR will be rejected.

SECTION 23:       METER OPTIONS OFFERED TO END-USE CUSTOMERS BY ESP

                  Check which meter options (as described in PG&E's direct
                  access tariff) ESP will offer for some or all of its Customers
                  served under this Agreement.

                        ESP will provide Hourly Meters.
                  -----
                        ESP will offer Hourly Meter Installation Services.
                  -----
                        ESP will offer Hourly Meter Reading Services.
                  -----

                 ESP may change these elections from time to time in
                 compliance with PG&E's direct access tariff upon prior written
                 notice to PG&E. The Direct Access Service Request (DASR) for
                 each Direct Access customer will specify which metering option
                 will apply to that Customer. If ESP specifies in any Direct

<PAGE>


                 Access Service Request any metering option that has not been
                 checked above, The DASR will be rejected.

SECTION 24:      AUDITS

         24.1    PG&E and the ESP shall each retain such specific records as
                 may be required to support the accuracy of meter data provided
                 in their respective consolidated billings. When either Party
                 reasonably believes that errors related to metering or
                 billing activity may have occurred, a Party may request the
                 production of such documents as may be required to verify the
                 accuracy of such metering and consolidated billing. Such
                 documents shall be provided within ten (10) business days of
                 such request. In the event the requesting Party, upon review
                 of such documents, continues to believe that the other Party's
                 duty to accurately meter and provide consolidated billing for
                 usage has been breached, the requesting Party may direct that
                 an audit be conducted. PG&E and the ESP shall designate their
                 own employee representative or their contracted representative
                 to audit the other party's records.

         24.2    Any such audit shall be undertaken by PG&E, the ESP, or their
                 contracted representative at reasonable times without
                 interference with the audited Party's business operations, and
                 in compliance with the audited Party's security procedures.
                 PG&E and the ESP agree to cooperate fully with any such audit

         24.3    Specific records to support the accuracy of meter data
                 provided in the consolidated billings may require examination
                 of billing and metering support documentation
                 maintained by subcontractors. PG&E and the ESP shall include a
                 similar clause in their agreements with their subcontractors
                 reserving the right to designate their own employee
                 representative, or their contracted representative to audit
                 records related to consolidated billing to Direct Access
                 Customers.

         24.4    The auditing Party will notify the audited Party in writing of
                 any exception taken as a result of an audit. The audited Party
                 shall refund the amount of any undisputed exception to the
                 auditing Party within ten (10) days. If the audited Party fails
                 to make such payment, the audited Party agrees to pay
                 interest, accruing monthly, at a rate equal to the prime rate
                 plus two percent (2%) of Bank of America NT&SA, San Francisco,
                 or any successor institution, in effect from time to time, but
                 not to exceed the maximum contract rate permitted by the
                 applicable usury laws of the State of California. Interest will
                 be computed from the date of written notification of
                 exceptions to the date the audited Party reimburses the
                 auditing Party for any exception. The cost of such audits
                 shall be paid by the auditing Party; provided, however, that in
                 the event an audit verifies over charges of five percent (5%)
                 or more, then the audited Party shall

<PAGE>


                 reimburse the auditing Party for the cost of the audit.

         24.5    This right to audit shall extend for a period of three
                 (3) years following the date of final payment under this
                 Agreement. Each party and each subcontractor shall retain all
                 necessary records and documentation for the entire length of
                 this audit period.

SECTION 25:      MISCELLANEOUS

         25.1    Unless otherwise stated in this Agreement: (a) any reference
                 in this Agreement to a section, subsection, attachment or
                 similar term refers to the provisions of this Agreement; (b) a
                 reference to a section includes that section and all its
                 subsections; and (c) the words "include," "includes," and
                 "including" when used in this Agreement shall be deemed in
                 each case to be followed by the words Without Limitation."The
                 Parties agree that the normal rule of construction to the
                 effect that any ambiguities are to be resolved against the
                 drafting Party shall not be employed in the interpretation of
                 this Agreement

         25.2    The provisions of this Agreement are for the benefit of the
                 Parties and not for any other person or third party
                 beneficiary. The provisions of this Agreement shall not
                 impart rights enforceable by any person, firm or organization
                 other than a Party or a successor or assignee of a Party to
                 this Agreement.

         25.3    The descriptive headings of the various sections of this
                 Agreement have been inserted for convenience of reference only
                 and shall in no way define, modify or restrict any of the
                 tenns and provisions thereof.

         25.4    Any waiver at any time by either Party of its rights with
                 respect to a default under this Agreement, or with respect to
                 any other matter arising in connection with this Agreement,
                 shall not be deemed a waiver with respect to any other or
                 subsequent default or matter and no waiver shall be considered
                 effective unless in writing.

         25.5    Each Party shall be responsible for paying its own attorneys'
                 fees and other costs associated with this Agreement,
                 except as provided in Sections 6 and 7 hereof. If a dispute
                 exists hereunder, the prevailing Party, as determined by the
                 CPUC, or as may otherwise be determined by the dispute
                 resolution procedure contained in Section 15 hereof, if used,
                 or by a court of law, shall be entitled to reasonable
                 attorneys' fees and costs.

<PAGE>


         25.6    To the extent that the CPUC has a right under then-current law
                 to audit either Party's compliance with this Agreement or
                 other legal or regulatory requirements pertaining to Direct
                 Access transactions, that Party shall cooperate with such
                 audits. Nothing in this Section shall be construed as an
                 admission by either Party with respect to the right of the
                 CPUC to conduct such audits or the scope thereof.

         25.7    Except as otherwise provided in this Agreement, all rights of
                 termination, cancellation or other remedies in this Agreement
                 are cumulative. Use of any remedy shall not preclude any other
                 remedy in this Agreement.

         The Parties have executed this Agreement on the dates indicated below,
             to be effective upon the later date.

ON BEHALF OF ESP                       ON BEHALF OF PG&E

By:  /s/ Thomas Bowers                    By:  /s/ Del Evans
   -------------------------------           -------------------------------
Name: Thomas Bowers                       Name:          Del Evans
     -----------------------------             -----------------------------
Title: Chief Operating Officer            Title:         Director
      ----------------------------              ----------------------------
Date: April 11, 2000                      Date:           5/18/00
     -----------------------------             -----------------------------



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