SITE DEVELOPMENT AGREEMENT
THIS SITE DEVELOPMENT AGREEMENT ("Agreement") is dated as of November 30,
1999 ("Effective Date") and is made and entered into by and between Calpine
Corporation, a Delaware corporation ("Calpine"), with its principal offices at
50 West San Fernando Street, San Jose, CA 95113, and Adair International Oil and
Gas, Inc., a Texas corporation ("Adair") with its principal offices at 3000
Richmond Avenue, Houston, TX 77098. Calpine and Adair are sometimes referred to
herein individually as a "Party" and collectively as the "Parties"~
1. Recitals. This Agreement is made with reference to the following:
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1.1. Calpine and Adair are parties to a letter agreement dated May 5,
1999 ("Letter Agreement") wherein they agreed to jointly perform feasibility
studies to review and evaluate the potential development by Calpine or an
Affiliate of two 500 MW (nominal) combined cycle generation projects
(collectively, the "Projects", individually, a "Project") on sites in California
and New Mexico.
1.2. One of the Projects ("Mecca Power Project") would be located in
Mecca, California on land ("Mecca Project Site") owned by the Torres-Martinez
Desert Cahuilla Indians ("Owners"). Based upon their initial evaluation of the
Mecca Project Site, the Parties believe that it may be feasible for Calpine or
an Affiliate to construct and operate a merchant power plant thereon, and they
desire to further examine the eligibility of the proposed Mecca Project Site for
development.
1.3. Pursuant to the Letter Agreement, the Parties agreed to enter
into a development agreement for the purposes of further implementing a Project
site that they agree is feasible for development by Calpine or an Affiliate, and
they desire and intend hereby to enter into such an agreement regarding the
proposed Mecca Project Site.
1.4. In connection with their initial evaluation of the Mecca Project
Site, the Parties entered into an agreement ("Initial Owner Agreement") with the
Owners dated, July 8, 1999, which, among other things, grants to the Parties (i)
certain rights of entry on the Mecca Project Site to conduct due diligence and
feasibility investigations, (ii) a period of one (1) year of exclusive
negotiations with the Owners for an option to lease the Mecca Project Site, and
(iii) access to certain documents of the Owners pertaining to the Mecca Project
site, its prior use and operation, and its present physical condition.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements contained herein, the Parties, intending to be legally bound,
hereby agree as follows:
2. Definitions. Capitalized terms used in this Agreement shall have the
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following meanings unless the context clearly requires otherwise:
"Adair" means Adair International Oil and Gas, Inc., a Texas corporation.
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"ADAIR NOTICE OF TERMINATION: has the meaning given in Section 12.
"AFFILIATE" means, with respect to any Party, any other entity that
directly, or indirectly through one or more intermediaries, controls, is
controlled by or is under common control with such person. For purposes of the
foregoing "control," "controlled by" and "under common control with," with
respect to any Party shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of such
person, whether through the ownership of voting securities or partnership
interests, by contract or otherwise.
"AGREEMENT" means this Site Development Agreement, including all Exhibits
attached hereto.
"CALPINE" means Calpine Corporation, a Delaware corporation.
"CALPINE" Notice of Termination" has the meaning given in SECTION 11.
"COMMERCIAL OPERATION" means the Project has passed its performance testing
as described in the definitive construction agreements and the Project is able
to operate and produce electrical energy for commercial sale in accordance with
prudent utility practices as are commonly used for gas fired projects of the
type and size similar to the Project and applicable laws.
"COMMERCIAL OPERATION DATE" means the date in which the Project commences
Commercial Operation.
"COMMUNITY DEVELOPMENT AGREEMENT(S)" has the meaning given in SECTION 4.5.
"DEFINITIVE OWNER AGREEMENTS" means collectively the Lease Option, the Tero
Agreement, the Sales Tax Agreement, the Franchise Tax Agreement, and the
Community Development Agreement(s).
"DEVELOPMENT FEE" has the meaning given in SECTION 6.
"DEVELOPMENT PERIOD" is a two year period beginning at signing of this
agreement.
"EFFECTIVE DATE" mean the effective date of this Agreement, as set forth in
the Preamble to this Agreement.
"FINANCIAL CLOSING" means, with respect to the Mecca Power Project, the
date when construction financing for the Mecca Power Project is fully committed
and first available for draw down pursuant to financing arrangements entered
into between Calpine or an Affiliate and one or more project lenders.
"FRANCHISE FEE AGREEMENT" has the meaning given in SECTION 4.4.
"INITIAL OWNER AGREEMENT" has the meaning given in SECTION 1.4.
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"LEASE" has the meaning given in SECTION 4.1.
"LEASE OPTION" has the meaning given in SECTION 4.1.
"LETTER AGREEMENT" has the meaning given in SECTION 1.1.
"MECCA POWER PROJECT" has the meaning given in SECTION 1.2.
"MECCA PROJECT SITE" has the meaning given in SECTION 1.2.
"Notice of Termination" has the meaning given in SECTION 11.
"Notice of Withdrawal" has the meaning given in SECTION 12.
"OWNERS" has the meaning given in SECTION 1.2.
"PARTY OR PARTIES" has the meaning given in the Preamble of this Agreement.
"POWER PURCHASE AGREEMENT" has the meaning given in SECTION 8 of this
Agreement.
"PROJECT OR PROJECTS" has the meaning given in SECTION 1.1.
"SALES TAX AGREEMENT" has the meaning given in SECTION 4.3.
"Site Development" has the meaning given in Section 4.
"TERM" has the meaning given in SECTION 3.
"TERMINATION DATE" has the meaning given in SECTION 3.
"TERO AGREEMENT" has the meaning given in SECTION 4.2.
3. Term. The term of this Agreement ("Term") shall commence on the
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Effective Date defined in the Preamble hereto and shall terminate ("Termination
Date") on the earlier of (i) ten (10) days after Calpine has given a Calpine
Notice of Termination pursuant to Section 11 of this Agreement, (ii) ten (10)
days after Adair has given an Adair Notice of Termination pursuant TO SECTION 12
of this Agreement, or (iii) the date on which all of the obligations of the
Parties pursuant to this Agreement have been performed, discharged or released.
4. Site Development. Commencing on the Effective Date and continuing
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throughout the Term of this Agreement, Calpine shall pursue the Site Development
for the Mecca Project Site. Throughout the Term of this Agreement, Adair shall
cooperate with and assist Calpine with Site Development for the Mecca Power
Project. "Site Development" shall mean and include, but is not limited to, the
following:
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4.1. Negotiations with the Owners for and documentation and execution
of an option to lease ("Lease Option") the Mecca Project Site which Lease Option
shall include, among other things, the definitive lease ("Lease") of the Mecca
Project Site to be executed by Owners and Calpine or an Affiliate if Calpine or
an Affiliate should exercise the Lease Option;
4.2. Negotiations with the Owners for and documentation and execution
of an agreement ("Tero Agreement") regarding the employment of labor in
connection with the construction of the Mecca Power Project;
4.3. Negotiations with the Owners for and documentation and execution
of an agreement ("Sales Tax Agreement") regarding the payment of sales, use or
other comparable taxes in connection with the purchase and placement of
equipment for the Mecca Power Project;
4.4. Negotiations with the Owners for and documentation and execution
of an agreement ("Franchise Fee Agreement") regarding the payment by the
owner/operator of the Mecca Power Project of an annual fee for the operation of
the Project;
4.5. Negotiations with the Owners for and documentation and execution
of an agreement or agreements ("Community Development Agreement(s)") regarding
payments for construction by the developer of the Mecca Power Project of
community services and facilities benefiting the Owners;
4.6. Negotiations with the Owners and/or such other interested parties
as may be deemed necessary or desirable by Calpine for the purpose of evaluating
the Mecca Project Site, completing a feasibility study, and otherwise
structuring, planning, and organizing implementation of the Mecca Power Project
throughout the development and construction period until the Commercial
Operation Date;
Adair's assistance and cooperation hereunder shall include, without limitation:
(i) introduction of Calpine representatives and agents to the Owners'
representatives and to the representatives of other interested parties with whom
discussions and/or negotiations are deemed by Calpine necessary or desirable for
purposes of Site Development; (ii) scheduling and, if requested by Calpine,
attending and participating in meetings related to Site Development; (iii) using
its best efforts to secure on terms favorable to and acceptable by Calpine or an
Affiliate the Definitive Owner Agreements and such other agreements as may be
necessary or deemed by Calpine desirable to implement the Mecca Power Project;
and (iv) otherwise taking such actions as may be reasonably requested by Calpine
or an Affiliate for the purpose of Site Development and for the purpose of
siting, permitting, financing and constructing a merchant power plant on the
Mecca Project Site.
5. Expenses. Each Party shall bear its own direct and internal expenses
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incurred in connection with the Site Development and in discharging its
obligations pursuant to this Agreement; provided, however, that Calpine shall
pay all third party expenses for consultants, testing of the Mecca Project Site,
and as required to prepare the Definitive Owner Agreements. Adair shall not
incur any third party expense for which Calpine is liable hereunder without
first obtaining Calpine's written approval of such expense. Each party shall
bear its own legal expenses incurred in connection with the preparation and
implementation of this Agreement.
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6. Development Fee and Consulting Contract. In consideration of the
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faithful and timely performance of its duties and obligations under this
Agreement, Adair shall be paid a fee ("Development Fee") in the amount of One
Million Dollars ($1,000,000). The Development Fee shall be due and payable in
two (2) equal installments of Five Hundred Thousand Dollars ($500,000) each.
The first installment shall be paid at Financial Closing of the Mecca Power
Project and the second installment shall be paid on the Commercial Operation
Date. Adair's right to receive the Development Fee is expressly conditioned
upon Financial Closing and Commercial Operation occurring for the Mecca Power
Project. For no longer than, the duration of the Project Development Period,
Adair shall, for a fee, consult with Calpine to assist with project development,
-tribal negotiations, and permitting. Adair shall be paid a monthly retainer of
$12,000 in exchange for 100 hours per month of support from John Adair, Jalal
Alghani and Dennis Lambert. All hours over 100 per month will be billed at a
rate of $100 per hour up to a maximum of $15,000 per month, including the
monthly retainer.
7. Contingent Royalty Interest Note. In further consideration of the
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faithful and timely performance of its duties and obligations under this
Agreement, Adair shall be issued a Contingent Royalty Interest Note which shall
pay Adair a royalty interest equal to 3% of the Project's earnings before
interest, taxes and depreciation (EBITDA) for years 1 through 7 of Commercial
Operations, 3.5% of the Project's EBITDA for years 8 through 15 of Commercial
Operations and 4.0% of the Project's EBITDA for years 16 through 20 of
Commercial Operations. Payments will commence following the first full calendar
quarter after the Commercial Operation Date of the Mecca Power Project and will
continue each successive quarter thereafter until the twentieth (20th)
anniversary of the Commercial Operation Date of the Mecca Power Project.
Adair's right to receive the royalty interest or power production fee is
expressly conditioned upon commencement of Commercial Operation of the Mecca
Power Project.
8. Power Purchase Agreement. At or before Financial Closing, Adair
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shall have the opportunity to purchase up to 20% of the output of the Mecca
Power Project under a long-term power sales agreement with Calpine ("Power
Purchase Agreement"). The terms of the Power Purchase Agreement and associated
power purchase prices will be negotiated during the project development period
and will be determined as project costs and operations become more defined.
Power purchase prices shall be at a discount to prevailing market prices and
shall approximate the fuel, operations and maintenance, financing and management
expenses for the Project. Adair's right to enter into a Power Purchase Agreement
is expressly conditioned upon commencement of Commercial Operation of the Mecca
Power Project. The Power Purchase Agreement will permit Adair to assign its
rights thereunder subject to Calpine's approval, which shall not be unreasonably
withheld, and subject to a right of first refusal in favor of Calpine.
9. Exclusivity. During the Term of this Agreement, the Parties agree to
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associate exclusively together for the purpose of furthering the potential
development of the Mecca Power Project on the Mecca Project Site.
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10. Confidentiality. The Parties specifically agree that the terms of
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this Agreement, of the Definitive Owner Agreements, of any other agreements
entered into in connection with the Mecca Power Project, and all information
developed by or at the direction of either of the Parties in determining the
feasibility of the Mecca Power Project and the Mecca Project Site are
Confidential Information for purposes of this Agreement. All Confidential
Information received from a Party or its Affiliates shall be held in strict
confidence by the other Party and shall not be disclosed to any third party
except as may be reasonably required for the performance and fulfillment of this
Agreement. Confidential Information shall be used by the receiving Party and
its Affiliates only with regard to the Mecca Power Project and shall not be used
for any other purpose. Notwithstanding the foregoing, such obligations of
confidentiality shall not apply to any Confidential Information that: (i) is in
or enters the public domain through no fault of the receiving Party; ii) was in
the possession of the receiving Party prior to receipt under this Agreement;
(iii) corresponds in substance to information heretofore or hereafter furnished
by third parties to the receiving party without restriction on disclosure; or
(iv) must be disclosed pursuant to applicable law or an order of any court or
governmental body. Upon expiration or other termination of this Agreement, all
Confidential Information shall be returned to the Party from whom received, or
shall be destroyed with an appropriate assurance that any and all copies thereof
have been destroyed, or shall be retained by the receiving Party subject to the
confidentiality, non-disclosure and use restrictions of this Section.
Notwithstanding anything to the contrary in this Agreement, this Section shall
be of no further force or effect, however, with respect to Confidential
Information, from and after the date that is three (3) years following the date
of initial disclosure of such Confidential Information to the receiving Party.
11. Calpine Termination. If at any time Calpine, in its reasonable good
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faith discretion, shall determine that the Mecca Power Project is not feasible
and/or does not satisfy its criteria for the development and operation of a
merchant power plant, Calpine may, by written notice to Adair ("Calpine Notice
of Termination"), terminate this Agreement. If Calpine gives a Calpine Notice of
Termination, this Agreement shall terminate at midnight on the tenth (10th)
calendar day after such Notice is given and the Parties shall have no further
rights or obligations hereunder except for such obligations as by the terms of
this Agreement expressly survive termination. If Calpine gives a Calpine Notice
of Termination, Adair shall be free to pursue development of the Mecca Power
Project alone or with others, independently of Calpine, and Calpine shall have
no further rights hereunder.
12. Adair Termination. If at any time Adair, in its reasonable good
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faith discretion, shall determine that the Mecca Power Project is not feasible
and/or does not satisfy its criteria for the development and operation of a
merchant power plant, Adair may, by written notice to Calpine ("Adair Notice of
Termination "), terminate this Agreement. If Adair gives an Adair Notice of
Termination, this Agreement shall terminate at midnight on the tenth (10th)
calendar day after such Notice~ is given and the Parties shall have no further
rights or obligations hereunder except for such obligations as by the terms of
this Agreement expressly survive termination. If Adair gives an Adair Notice of
Termination, Calpine shall be free to pursue development of the Mecca Power
Project alone or with others, independently of Adair, and Adair shall have no
further rights hereunder, including, but not limited to, the right to the
Development Fee, the right to consulting fees, the right to the Contingent
Royalty Interest Note or the right to enter into the power sales agreement. If
Adair withdraws from the Mecca Power Project, within five (5) days after written
demand from Calpine, Adair shall execute and deliver to Calpine an assignment,
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in form reasonably satisfactory to Calpine, of all of its right, title and
interest in and to any and all agreements, studies, and other work product of
its Site Development activities hereunder (including, but not limited to, the
Initial Owner Agreement) together with all such original agreements, studies,
and work products. This obligation shall survive the termination of this
Agreement.
13. Liability.
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13.1. Indemnification. To the fullest extent permitted by applicable
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law, each Party shall indemnify, defend and hold harmless the other Party, its
officers, directors, employees and representatives with respect to (i) any and
all claims made against any of them by any person or persons claiming, by or
through such indemnifying Party or as a result of any action by the indemnifying
Party, the identifying party's interest in this Agreement, and the identifying
party's interest in the Mecca Power Project, or an entitlement to payment of
fees, reimbursement of costs or other amounts in connection with the Site
Development to which interest or claim the other Party has not consented or
approved, or agreed to hereunder, and (ii) any liability, damage, cost or
expense, including court costs and reasonable attorneys' fees, in connection
with any third party claim arising from the negligence, willful misconduct or
breach of this Agreement by the indemnifying Party or its Affiliates; provided,
however, that neither Party shall have any indemnification obligations hereunder
to the extent any such claim, liability, damage, cost or expense is caused by or
arises from an indemnified Party's fault or negligence.
13.2. Limitation of Liability. In no event shall either Party or its
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Affiliates have any liability to the other Party or its Affiliates for any
monetary loss or damages arising out of or in connection with the activities
performed under this Agreement and each Party hereby expressly releases the
other Party and its Affiliates from any such liability. Without limiting the
generality of the foregoing, neither Party shall be liable for damages for
failure to accomplish the Site Development tasks assigned to it hereunder,
failure to obtain sufficient debt and equity financing for the Mecca Power
Project, or failure for any reason to achieve the Financial Closing of the Mecca
Power Project. In no event shall either Party or its Affiliates, or their
officers, directors, employees or representatives, be liable hereunder for
consequential, special or indirect loss or damage, including loss of profit,
loss of revenue or any other special or incidental damages, and each Party
hereby expressly releases the other Party, its Affiliates, and their officers,
directors, employees and representatives therefrom.
13.3. Intent of the Parties. The Parties intend that the releases from
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liability, disclaimers of liability and limitations on liability set forth in
this Section 13 shall apply whether in contract, tort or otherwise, even in the
event of the fault, negligence, strict liability, or breach of contract of the
Party release or whose liability is disclaimed or limited, shall extend to such
Party's Affiliates and to its and their officers, directors, employees and
representatives, and shall continue in full force and effect notwithstanding the
expiration or other termination of this Agreement. The Parties also intend and
agree that the indemnification provisions set forth in SECTION 13.1 and
SECTION 15.2 shall survive the expiration or other termination of this
Agreement, or the withdrawal of a Party from the Mecca Power Project hereunder,
with respect to events, occurrences and claims arising on or before such
expiration, other termination or withdrawal.
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14. Notices
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14.1. Writing. Any notice, invoice, demand, offer or other written
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instrument required or permitted to be given pursuant to this Agreement (unless
expressly permitted to be sent electronically) shall be in writing signed by the
Party giving such notice and shall, to the extent reasonably practicable, be
sent by telefax, and if not reasonably practicable to send by telefax, then by
hand delivery, overnight courier, or registered mail, to the other Party at the
address set forth below:
If delivered to Adair:
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Adair International Oil and Gas, Inc.
3000 Richmond Ave., Suite 100
Houston, Texas 77098
Telephone: (713) 621-8241
Fax: (713) 621-8240
Attention: John Adair
If delivered to Calpine:
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Calpine Corporation
6700 Koll Center Parkway
Pleasanton, CA 94566
Telephone: (925) 600-2000
Fax: (925) 600-8925
Attention: Business Development Department
with a copy to:
Calpine Corporation
50 West San Fernando Street
San Jose, CA 95113
Telephone: (408) 995-5115
Fax: (408) 975-4648
Attention: General Counsel
Each Party shall have the right to change the place to which notice shall be
sent or delivered or to specify one additional address to which copies of
notices may be sent, in either case by similar notice sent or delivered in like
manner to the other Party.
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14.2. Timing of Receipt. Without limiting any other means by
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which a Party may be able to prove that a notice has been received by the
other Party, a notice shall be deemed to be duly received:
(a) If delivered by hand or overnight courier, the date
when left at the address of the recipient;
(b) If sent by registered mail, the date of the return
receipt; or
(c) If sent by telefax, upon receipt by the sender of an
acknowledgment or transmission report generated by the machine
form which the telefax was sent indicating that the telefax was
sent in its entirety to the recipient's telefax number.
In any case hereunder in which a Party is required or permitted to respond to a
notice from the other Party within a specified period, such period shall run
from the date on which the notice was deemed received as above provided, and the
response shall be considered to be timely given if given as above provided by
the last day of such, period.
15. Miscellaneous.
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15.1. Relationship of the Parties. It is agreed and understood by
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the Parties that this Agreement shall not constitute or create a joint venture,
partnership or legal entity of any kind or any other similar arrangement between
the Parties. Except where otherwise expressly approved by the other Party, each
Party shall act hereunder only on an individual and several basis and shall not
be authorized to act as agent or representative of the other Party nor have the
power or authority to bind the other Party for any purpose. No Party shall so
bind the other Party or represent to anyone that it has the authority to bind
such other Party or make any other representation about or on behalf of such
other Party.
15.2. Compliance with Laws. Each Party in its Site Development
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activities hereunder shall comply with all applicable laws, regulations, and
orders of any governmental or regulatory authority having jurisdiction with
respect to the Mecca Power Project, and each Party shall indemnify, defend and
hold harmless the other Party from any costs, claims, damages, penalties or
liability arising as a result of such Party's failure to comply therewith.
15.3. Entire Agreement; Amendment. This Agreement constitutes the
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entire agreement between the Parties as of the Effective Date with respect to
the subject matter hereof and supersedes any and all prior negotiations,
agreements, understandings and representations relating thereto, including the
Letter Agreement; provided, however, notwithstanding the foregoing, that certain
Confidentiality and Non-Disclosure Agreement dated as of February 11, 1999 by
and between the Parties shall not be superseded by this Agreement and shall
remain in full force and effect in accordance with the terms thereof. This
Agreement may not be amended, modified or changed except as mutually agreed in a
writing executed by both Parties and specifying that such writing is intended to
be an amendment to this Agreement.
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15.4. Joint Effort. Preparation of this Agreement has been a joint
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effort of the Parties and the resulting document shall not be construed more
severely against one of the Parties than against the other.
15.5. Captions. The captions contained in this Agreement are for
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convenience and reference only and in no way define, describe, extend or limit
the scope or intent of this Agreement or the intent of any provision contained
herein.
15.6. Severability. The invalidity of one or more phrases, sentences,.
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clauses, or Sections contained in this Agreement shall not affect the validity
of the remaining portions of the Agreement so long as the material purposes of
this Agreement can be determined and effectuated.
15.7. No Waiver. Any failure of either Party to enforce any of the
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provisions of this Agreement or to require compliance with any of its terms at
any time during the term of this Agreement shall in no way affect the validity
of this Agreement, or any part hereof, and shall not be deemed a waiver of the
right of such Party thereafter to enforce any and each of such provisions.
15.8. Applicable Law. This Agreement shall be governed by, construed
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and enforced in accordance with the Laws of the State of California, exclusive
of conflicts of laws provisions, and any action brought pursuant to or in
connection with this Agreement shall be venued in California.
15.9. Counterparts. This Agreement may be signed in any number of
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counterparts and each counterpart shall represent a fully executed original as
if signed by both patties.
15.10. Survival. The provisions of Sections 10, 13, and 15.12 of this
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Agreement shall survive the expiration or earlier termination of this Agreement
for the terms specified therein, if any, and otherwise indefinitely.
15.11. Further Assurances. Each Party agrees to execute and deliver
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all further instruments and documents, and take all further action not
inconsistent with the provisions of this Agreement that may be reasonably
necessary to complete performance of the Parties' obligations hereunder and to
effectuate the purposes and intent of this Agreement.
15.12. Third Parties. Except as otherwise expressly provided in this
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Agreement with respect to indemnified persons, nothing in this Agreement shall
be construed to create any duty to, standard of care with respect to, or any
liability to any person who is not a Party to this Agreement.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed
as of the Effective Date by their duly authorized representatives as follows:
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Calpine Corporation, a Delaware corporation Adair International Oil and Gas,
Inc., a Texas corporation
By: /s/ JACOB M. RUDISILL By: /s/ John W. Adair
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Its: VICE PRESIDENT Its: Chairman, C.E.O.
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