Exhibit 10.1

 

PURCHASE AND SALE AGREEMENT

 

by and between

 

TM DELMARVA POWER, L.L.C.

 

as Seller

 

and

 

TPF CHESAPEAKE, LLC

 

as Purchaser

 

Dated as of January 13, 2005

 

Purchase and Sale Agreement

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TABLE OF CONTENTS

 

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ARTICLE 1

   DEFINITIONS    1      Section 1.1         Certain Defined Terms    1     
Section 1.2         Certain Interpretive Matters    11

ARTICLE 2

   PURCHASE AND SALE    12

ARTICLE 3

   CLOSING; PURCHASE PRICE    12      Section 3.1         Signing; Closing    12
     Section 3.2         Purchase Price    14      Section 3.3        
Adjustments to Purchase Price at Closing    14      Section 3.4        
Post-Closing Adjustments to Purchase Price    15      Section 3.5        
Procedures for Dispute Resolution of Purchase Price Adjustment    17     
Section 3.6         Allocation    17

ARTICLE 4

   REPRESENTATIONS AND WARRANTIES OF SELLER    18      Section 4.1        
Organization and Existence    18      Section 4.2         Execution, Delivery
and Enforceability    18      Section 4.3         Membership Interests    18  
   Section 4.4         Capitalization    18      Section 4.5         No
Violation    19      Section 4.6         Compliance with Laws    19     
Section 4.7         Permits, Licenses, Etc    19      Section 4.8        
Litigation    20      Section 4.9         Material Facility Contracts and
Expired Material Facility Contracts    20      Section 4.10         Personal
Property    21      Section 4.11         Real Property    21      Section 4.12
        No Undisclosed Liabilities    21      Section 4.13         Intellectual
Property    22      Section 4.14         Brokers    22      Section 4.15        
Environmental Matters    22      Section 4.16         Tax Matters    24     
Section 4.17         Employee Matters    25

 

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TABLE OF CONTENTS

(continued)

 

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Section 4.18

        No Subsidiaries    25     

Section 4.19

        Financial Statements    25     

Section 4.20

        Insurance    25     

Section 4.21

        EWG Status    25     

Section 4.22

        Market-Based Rate Authority    26     

Section 4.23

        Books and Records    26

ARTICLE 5

   REPRESENTATIONS AND WARRANTIES OF PURCHASER    26     

Section 5.1

        Organization and Existence    26     

Section 5.2

        Execution, Delivery and Enforceability    26     

Section 5.3

        No Violation    27     

Section 5.4

        Compliance with Laws    27     

Section 5.5

        Litigation    27     

Section 5.6

        Brokers    28     

Section 5.7

        Financial Capacity    28     

Section 5.8

        Purchaser’s Qualifications    28     

Section 5.9

        Purchaser’s Due Diligence    28     

Section 5.10

        Financial Statements    28     

Section 5.11

        Inspection    29     

Section 5.12

        Regulatory Status    29

ARTICLE 6

   COVENANTS OF EACH PARTY    29     

Section 6.1

        “As Is” Sale    29     

Section 6.2

        Efforts to Close; Updating    30     

Section 6.3

        Expenses    31     

Section 6.4

        Conduct Pending Closing    31     

Section 6.5

        Regulatory Approvals    34     

Section 6.6

        Tax Matters.    35

 

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TABLE OF CONTENTS

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     Section 6.7         Risk of Loss    38      Section 6.8         Insurance
   39      Section 6.9         Announcements; Confidentiality    40     
Section 6.10         Post Closing – Further Assurances    41      Section 6.11
        Post Closing – Information and Records    41      Section 6.12        
Use of TECO Marks    42      Section 6.13         Excluded Assets    43     
Section 6.14         Excluded Liabilities    44      Section 6.15        
Employee Matters    45      Section 6.16         Additional Covenants of
Purchaser    45      Section 6.17         Generator Rotor Repairs    46     
Section 6.18         Financing Efforts    46

ARTICLE 7

   INDEMNIFICATION    46      Section 7.1         Exclusive Remedy    46     
Section 7.2         Indemnification by Seller    47      Section 7.3        
Indemnification by Purchaser    48      Section 7.4         Notice of Claim   
49      Section 7.5         Defense of Third Party Claims    49      Section 7.6
        Cooperation    50      Section 7.7         Mitigation and Limitation of
Claims    50      Section 7.8         Manner of Payment    51

ARTICLE 8

   PURCHASER’S CONDITIONS TO CLOSING    51      Section 8.1         Compliance
with Provisions    51      Section 8.2         HSR Act    51      Section 8.3   
     FERC Approvals and Filings    51      Section 8.4         Required
Regulatory Approvals    51

 

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TABLE OF CONTENTS

(continued)

 

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     Section 8.5         Representations and Warranties    52      Section 8.6
        Pending Actions    52      Section 8.7         Officer’s Certificate   
52      Section 8.8         Company Material Adverse Effect    52     
Section 8.9         Legal Opinion    52      Section 8.10         No Termination
   52      Section 8.11         Receipt of Other Documents    53     
Section 8.12         Financing    53

ARTICLE 9

   SELLER’S CONDITIONS TO CLOSING    54      Section 9.1         Compliance with
Provisions    54      Section 9.2         FERC Approvals and Filings    54     
Section 9.3         HSR Act    54      Section 9.4         Required Regulatory
Approvals    54      Section 9.5         Representations and Warranties    54  
   Section 9.6         Pending Actions    54      Section 9.7         Officer’s
Certificate    55      Section 9.8         Legal Opinion    55      Section 9.9
        No Termination    55      Section 9.10         Termination of Existing
Affiliate Guaranty    55      Section 9.11         Receipt of Other Documents   
55

ARTICLE 10

   TERMINATION    56      Section 10.1         Rights to Terminate    56     
Section 10.2         Effect of Termination    56

ARTICLE 11

   GENERAL PROVISIONS    57      Section 11.1         Entire Document    57     
Section 11.2         Schedules    57

 

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Section 11.3

       Counterparts    57    

Section 11.4

       Severability    57    

Section 11.5

       Assignability    57    

Section 11.6

       Captions    58    

Section 11.7

       Governing Law    58    

Section 11.8

       Dispute Resolution    58    

Section 11.9

       Notices    59    

Section 11.10

       No Third Party Beneficiaries    59    

Section 11.11

       No Joint Venture    59    

Section 11.12

       Construction of Agreement    59    

Section 11.13

       Waiver of Compliance    60    

Section 11.14

       Consents Not Unreasonably Withheld    60    

Section 11.15

       Survival    60

 

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EXHIBITS AND SCHEDULES

 

Item

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Description

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Exhibit A    Form of Amendment, Assignment and Assumption Agreement Exhibit B   
Form of Assignment and Assumption Agreement (Excluded Assets and Liabilities)
Exhibit C    Form of Purchaser’s Guaranty Exhibit D    Form of Seller’s Guaranty
Exhibit E    Form of Seller Officer Certificate Exhibit F    Form of Seller’s
Legal Opinion Exhibit G    Form of Certificates of Incumbency of Seller and
Seller’s Guarantor Exhibit H    Form of Termination Agreement Exhibit I    Form
of Purchaser Officer Certificate Exhibit J    Form of Purchaser’s Legal Opinion
Exhibit K    Form of Certificates of Incumbency of Purchaser and Purchaser’s
Guarantors Schedule A    Membership Interests Schedule 1.1A    Persons With
Knowledge Schedule 1.1B    Permitted Encumbrances Schedule 1.1C    Purchaser’s
Required Consents Schedule 1.1D    Purchaser’s Required Regulatory Approvals
Schedule 1.1E    Seller’s Required Consents Schedule 1.1F    Seller’s Required
Regulatory Approvals

 

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Confidential Draft January 12, 2005

 

Schedule 3.3

   October 31 Adjusted Purchase Price Calculation

Schedule 3.3(a)

   October 31 Adjusted Net Working Capital Calculation

Schedule 3.6

   Purchase Price Allocation

Schedule 4.7

   Permits

Schedule 4.8

   Litigation

Schedule 4.9(a)

   Material Facility Contracts

Schedule 4.10

   Personal Property

Schedule 4.10(a)

   October 31 Inventory Schedule

Schedule 4.11

   Owned Real Property

Schedule 4.12

   Undisclosed Liabilities

Schedule 4.13

   Intellectual Property

Schedule 4.15

   Environmental Matters

Schedule 4.15(e)

   Emissions Allowances

Schedule 4.16

   Tax Matters

Schedule 4.19

   Commonwealth Chesapeake Company LLC Financial Statements

Schedule 4.20

   Facility Insurance Policies

Schedule 6.4

   Exceptions to Conduct Pending Closing

 

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PURCHASE AND SALE AGREEMENT

 

THIS PURCHASE AND SALE AGREEMENT (the “Agreement”), dated as of January 13,
2005, is made and entered into by and between TM DELMARVA POWER, L.L.C., a
Delaware limited liability company (the “Seller”) on the one hand, and TPF
Chesapeake, LLC, a Delaware limited liability company (the “Purchaser”), on the
other hand.

 

RECITALS

 

A. Commonwealth Chesapeake Company, LLC, a Virginia limited liability company
(the “Company”), owns the Facility (as defined in Section 1.1).

 

B. Seller owns 100% of the membership interests in the Company (the “Membership
Interests”).

 

C. Seller desires to sell to Purchaser, and Purchaser desires to purchase and
acquire from Seller, all of the Membership Interests, on the terms and subject
to the conditions hereinafter set forth.

 

D. Seller and Purchaser are entering into this Agreement to evidence their
respective duties, obligations, and responsibilities in respect of the purchase
and sale of the Membership Interests as contemplated herein (the
“Transactions”).

 

NOW, THEREFORE, in consideration of the foregoing recitals and the agreements
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, do hereby agree as follows:

 

ARTICLE 1

 

DEFINITIONS

 

Section 1.1 Certain Defined Terms. The following terms when used in this
Agreement (or in the Schedules and Exhibits to this Agreement) with initial
letters capitalized have the meanings set forth below:

 

“Adjusted Net Working Capital” means the difference between (x) the total
current assets of the Company, excluding Inventory, Fuel Oil, any account
receivables of the Company that have been outstanding and unpaid for a period of
ninety (90) days or more (“Late Accounts”) and any Excluded Assets, and (y) the
total current liabilities of the Company, excluding any Excluded Liabilities.

 

“Adjusted Purchase Price” has the meaning set forth in Section 3.3.

 

“Adjustment Sections” has the meaning set forth in Section 3.3.

 

Purchase and Sale Agreement

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“Affiliate” of a specified Person means any other Person that directly or
indirectly, through one or more intermediaries, controls, is controlled by or is
under common control with the specified Person. For the purposes of this
definition, “control,” when used with respect to any specified Person, means the
possession of the power to direct the management or policies of the specified
Person, directly or indirectly, whether through the ownership of voting
securities, partnership or limited liability company interests, by contract or
otherwise.

 

“Agents” has the meaning set forth in Section 5.12.

 

“Agreed Benchmark Price” has the meaning set forth in Section 3.1(b).

 

“Agreement” means this Purchase and Sale Agreement, together with the Schedules
and Exhibits hereto.

 

“Ancillary Agreements” means (i) Purchaser’s Guaranty; (ii) Seller’s Guaranty;
(iii) the Amendment, Assignment and Assumption Agreement; (iv) the Assignment
and Assumption Agreement (Excluded Assets and Liabilities); and (v) the
additional agreements and instruments of sale, transfer, conveyance, assignment
and assumption to be executed and delivered by any Party at the Closing, if any.

 

“Appurtenant Easements” has the meaning set forth in Section 4.11.

 

“Amendment, Assignment and Assumption Agreement” means that certain Amendment,
Assignment and Assumption Agreement, substantially in the form of Exhibit A, to
be executed and delivered by Seller and Purchaser at Closing.

 

“Assignment and Assumption Agreement (Excluded Assets and Liabilities) means
that certain Assignment and Assumption Agreement, substantially in the form of
Exhibit B, to be executed and delivered by Seller and the Company at Closing.

 

“Balance Sheet” has the meaning set forth in Section 4.19.

 

“Business Day” means a day other than Saturday, Sunday or a day on which banks
are authorized to be closed for business in the State of Virginia, and with
respect to the Closing Date, the State of Florida.

 

“Closing” has the meaning set forth in Section 3.1(c).

 

“Closing Balance Sheet” has the meaning set forth in Section 3.4(b).

 

“Closing Date” has the meaning set forth in Section 3.1(c).

 

“Closing Inventory and Fuel Oil Value” has the meaning set forth in Section
3.4(a).

 

“Code” means the Internal Revenue Code of 1986, as amended and interpreted as of
the Effective Date or as of the date of Closing, as the case may be, and all
references to Treasury Regulations shall mean such regulations as they exist and
are interpreted as of the Effective Date or as of the date of Closing, as the
case may be.

 

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“Communications Act” means the Communications Act of 1934, as amended, or its
regulatory successor, as applicable.

 

“Company” has the meaning set forth in the Recital A of this Agreement.

 

“Company Financial Statements” has the meaning set forth in Section 4.19.

 

“Company Intellectual Property” means all patents and industrial designs,
copyrights, trademarks, trade names, service marks, service names, technology,
know-how, processes, trade secrets, inventions, proprietary rights, proprietary
data, formulae, research and development data, databases, computer software
programs and any other intellectual property as provided by applicable Laws,
(and any registrations or applications for the same and all goodwill associated
therewith) necessary for the Company to conduct its business as currently
conducted.

 

“Company Material Adverse Effect” means any change (or changes taken together)
in, or effect on, the Facility or the Company that is materially adverse to the
operations or the physical or financial condition of the Facility or the
Company, taken as a whole, but excluding (1) any change (or changes taken
together) or effect generally affecting electric generating facilities located
in PJM wholesale or retail markets for electric power or transmission thereof
and not affecting the Facility in any materially different manner or degree
therefrom; (2) any change (or changes taken together) or effect resulting from
changes in or restructuring of the national or PJM wholesale or retail markets
for electric power or the transmission thereof, or for fuel used at the
Facility; or (3) any change which is cured (including by the payment of money
through insurance proceeds or otherwise) before the earlier of the Closing or
the termination of this Agreement under Section 10.1.

 

“Confidential Information” has the meaning set forth in Section 6.9.

 

“Confidentiality Agreement” means that certain Confidentiality Agreement dated
as of August 12, 2004 by and between TECO Energy, Inc., and Tenaska Power Fund,
L.P.

 

“Damaged Portion” has the meaning set forth in Section 6.7(c).

 

“Deposit Funds” has the meaning set forth in Section 3.2(a).

 

“Dispute” has the meaning set forth in Section 11.8.

 

“Dollar” or “$” means the lawful currency of the United States of America.

 

“Effective Date” means the date on which this Agreement has been executed and
delivered by Seller and Purchaser.

 

“Encumbrances” means any and all mortgages, pledges, claims, liens, security
interests, options, warrants, purchase rights, conditional and installment sales
agreements, easements, activity and use restrictions and limitations,
exceptions, rights-of-way, deed restrictions, defects or imperfections of title,
encumbrances and charges of any kind.

 

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“Environmental Condition” means the presence at the Facility or Release to the
environment at or from the Facility, of Hazardous Substances, including any
migration of Hazardous Substances through air, soil or groundwater at, to or
from the Facility, regardless of when such presence or Release occurred or is
discovered.

 

“Environmental Laws” means all applicable Federal, state, local and foreign
civil and criminal laws, regulations, rules, ordinances, codes, decrees,
judgments, directives, or judicial or administrative orders or common law
relating to pollution or protection of the environment, natural resources or
human health and safety, as in effect as of the Closing Date, including, without
limitation, laws relating to noise, Releases or threatened Releases of Hazardous
Substances (including, without limitation, Releases to ambient air, surface
water, groundwater, land, surface and subsurface strata) or otherwise relating
to the manufacture, processing, distribution, use, treatment, storage, Release,
transport, disposal or handling of Hazardous Substances, including, but not
limited to: the Comprehensive Environmental Response, Compensation and Liability
Act, 42 U.S.C. § 9601 et seq.; the Resource Conservation and Recovery Act, 42
U.S.C. § 6901 et seq.; the Federal Water Pollution Control Act, 33 U.S.C. § 1251
et seq.; the Clean Air Act, 42 U.S.C. § 7401 et seq.; the Hazardous Materials
Transportation Act, 49 U.S.C. § 1471 et seq.; the Toxic Substances Control Act,
15 U.S.C. §§ 2601 through 2629; the Oil Pollution Act, 33 U.S.C. § 2701 et seq.;
the Emergency Planning and Community Right-to-Know Act, 42 U.S.C. § 11001 et
seq.; the Safe Drinking Water Act, 42 U.S.C. §§ 300f through 300j; the
Occupational Safety and Health Act, 29 U.S.C. § 651 et seq.; the Surface Mining
Control and Reclamation Act of 1977, 30 U.S.C. § 1201 et seq.; any similar laws
of the State of Virginia or of any other Governmental Authority having
jurisdiction over any site at which the Facility is located or otherwise
applicable to the Facility or its owners or operators; and regulations
implementing the foregoing.

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

 

“ERISA Affiliate of Seller” means any Person that together with Seller or any
Affiliate of Seller would be deemed a single employer within the meaning of
Section 4001 of ERISA, or would otherwise have any liability for any benefit
plan of Seller or any Seller Affiliate.

 

“Estimated ANWC Statement” has the meaning set forth in Section 3.1(b)(i).

 

“Estimated Closing Inventory and Fuel Oil” has the meaning set forth in Section
3.1(b)(ii).

 

“Estimated Closing Inventory and Fuel Oil Adjustment” has the meaning set forth
in Section 3.1(b)(ii).

 

“Excluded Assets” has the meaning set forth in Section 6.13.

 

“Excluded Liabilities” has the meaning set forth in Section 6.14.

 

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“EWG” has the meaning set forth in Section 4.21.

 

“Expired Material Facility Contracts” means the written or oral contracts,
agreements, arrangements, licenses and leases to which the Company has been a
party, or to which the Company or the Facility has been bound or subject, that
have expired, lapsed or otherwise terminated up to four (4) years prior to the
Closing Date and which otherwise would constitute Material Facility Contracts
(or would be a Material Facility Contract but for the exclusion in clause (ii)
of the definition of Material Facility Contract) if in effect on the Effective
Date.

 

“Facility” means the approximately 315 MW simple-cycle, oil fired combustion
turbine electric generating facility known as the Commonwealth Chesapeake
Facility and located New Church, Virginia, and all related personal,
intellectual, and real property and interests therein (to the extent of the
Company’s interest).

 

“Facility Insurance Policies” means those insurance policies or binders
identified on Schedule 4.20.

 

“Facility Operations Agreement” means that certain Operations and Maintenance
Agreement, dated as of May 15, 2000, by and between the Company and the Facility
Operator, as amended.

 

“Facility Operator” means TPS Virginia Operations Company, a Virginia
corporation.

 

“FCC” means the Federal Communications Commission as established by the
Communications Act.

 

“FERC” means the Federal Energy Regulatory Commission as established by the
Department of Energy Organization Act of 1977, 42 U.S.C. § 7171, as amended, or
its regulatory successor, as applicable.

 

“Final Adjusted Purchase Price” has the meaning set forth in Section 3.4(c).

 

“Final Inventory and Fuel Oil Determination” has the meaning set forth in
Section 3.4(a).

 

“Fuel Oil” means the fuel oil used to power the Facility’s turbines, a supply of
which is maintained on site at the Facility.

 

“GAAP” means United States generally accepted accounting principles, as in
effect from time to time and applied on a consistent basis.

 

“Generator Rotor Contractors” means collectively Alstom Power Inc. and Electric
Motor & Contracting Co., Inc.

 

“Generator Rotor Repairs” means certain ongoing repairs with respect to the
generator rotors on the Facility’s turbines pursuant to a contract between the
Company and Alstom Power Inc. dated August 20, 2004 and certain associated
repair work being undertaken by Electric Motor & Contracting Co., Inc. pursuant
to its contract with the Company dated September 13, 2004.

 

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“Generator Rotor Repair Contracts” means the contracts between the Company and
the Generator Rotor Contractors pursuant to which the ongoing Generator Rotor
Repairs are being performed.

 

“Governmental Authority” means any federal, state, local, foreign or other
government; any governmental, regulatory or administrative agency, commission,
body or other authority exercising or entitled to exercise any administrative,
executive, judicial, legislative, police, regulatory or taxing authority or
power; any court or governmental tribunal; but does not include Purchaser,
Seller, any Affiliate of Purchaser or Seller, or any of their respective
successors in interest or any owner or operator of the Facility (if otherwise a
Governmental Authority).

 

“Hazardous Substances” means any chemical, material or substance in any form,
whether solid, liquid, gaseous, semisolid, or any combination thereof, whether
waste material, raw material, chemical, finished product, byproduct, or any
other material or article, that is listed or regulated under applicable
Environmental Laws as a “hazardous” or “toxic” substance or waste, or as a
“contaminant,” or is otherwise listed or regulated under applicable
Environmental Laws because it poses a hazard to human health or the environment;
including without limitation, petroleum products, asbestos, and urea
formaldehyde foam insulation.

 

“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended from time to time.

 

“Income Tax” means any Tax imposed by any Governmental Authority (i) based upon,
measured by or calculated with respect to gross or net income, profits or
receipts (including municipal gross receipt Taxes, capital gains Taxes and
minimum Taxes) or (ii) based upon, measured by or calculated with respect to
multiple bases (including corporate franchise Taxes) if one or more of such
bases is described in clause (i), in each case together with any interest,
penalties or additions attributable to such Tax.

 

“Indemnifiable Claim” has the meaning set forth in Section 7.7.

 

“Indemnitee” has the meaning set forth in Section 7.4.

 

“Indemnitor” has the meaning set forth in Section 7.4.

 

“Independent Accounting Firm” means a nationally recognized accounting firm
reasonably acceptable to the Parties.

 

“Intercompany Arrangements” means any intercompany transaction between the
Company, on the one hand, and Seller or any of their respective Affiliates, on
the other hand, whether or not such transaction relates to any contribution to
capital, loan, the provision of goods or services, tax sharing arrangements,
payment arrangements, intercompany advances, charges or balances or the like.

 

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“Inventory” means the following items used or consumed or intended to be used or
consumed at the Facility in the ordinary course of business: spare, replacement
or other parts; tools, special tools, equipment, lubricants, chemicals, fluids,
oils, supplies, filters, fittings, connectors, seals, gaskets, hardware, wire
and other similar materials; maintenance, shop and office supplies; and other
similar items of personal property, except the Fuel Oil.

 

“Laws” means all statutes, rules, regulations, ordinances, orders and codes of
federal, state, foreign and local Governmental Authorities.

 

“Losses” has the meaning set forth in Section 7.2(a).

 

“Material Facility Contracts” means the written or oral contracts, agreements,
arrangements, licenses and leases to which the Company is a party, or by or to
which the Company or the Facility is bound or subject, except for those: (i)
which will expire prior to the Closing Date without any further material
obligations of either the Company or Seller on behalf of the Company; (ii) which
may be terminated without material penalty or further obligation by the Company
or Seller on behalf of the Company upon ninety (90) days notice or less; or
(iii) which do not require expenditures or payments by the Company in excess of
One Hundred Thousand Dollars ($100,000) per year; provided that, notwithstanding
the foregoing exceptions, the “Material Facility Contracts” does include those
contracts: (A) which are between the Company and any of its or Seller’s
Affiliates; (B) which contain restrictions on competition or restrict future
development of the Facility; (C) which create indebtedness of the Company or
create a security interest in the Facility or other Company assets, in each case
other than Permitted Encumbrances; or (D) under which the transactions
contemplated by this Agreement would constitute a default or breach or be
materially delayed.

 

“Notice of Claim” has the meaning set forth in Section 7.4.

 

“Notice of Disagreement” has the meaning set forth in Section 3.4(c).

 

“October 31 Adjusted Net Working Capital Calculation” has the meaning set forth
in Section 3.3(a).

 

“October 31 Adjusted Purchase Price Calculation” has the meaning set forth in
Section 3.3.

 

“October 31 Inventory Schedule” has the meaning set forth in Section 3.1(b)(ii).

 

“Operating Agreement” means the Third Amended and Restated Operating Agreement
of Commonwealth Chesapeake Company, L.L.C. dated October 14, 2004.

 

“Owned Real Property” has the meaning set forth in Section 4.11.

 

“Party” means either a Seller or a Purchaser, as the context requires; “Parties”
means, collectively, Seller and Purchaser.

 

“Permits” has the meaning set forth in Section 4.7.

 

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“Permitted Encumbrances” means (i) statutory liens for Property Taxes and other
governmental charges and assessments (including without limitation Taxes) which
are not yet due and payable; (ii) statutory mechanics’, carriers’, workers’,
repairers’ and other similar liens arising or incurred in the ordinary course of
business for amounts which are not due and payable and which would not,
individually or in the aggregate, have a Material Adverse Effect; (iii)
easements, restrictions and other encumbrances clearly referenced as exceptions
on title insurance policies for the Facility issued pursuant to the title
commitments previously provided or made available by Seller to Purchaser; and
(iv) the specific liens, exceptions, restrictions, easements, charges,
rights-of-way, monetary and nonmonetary encumbrances, security interests,
regulations, and similar matters, which are listed on Schedule 1.1B.

 

“Person” means an individual, partnership, joint venture, corporation, limited
liability company, trust, association or unincorporated organization, any
Governmental Authority, or any other entity.

 

“PJM” means PJM Interconnection, L.L.C., a Delaware limited liability company,
and the PJM electric control area.

 

“Post-Closing Statement” has the meaning set forth in Section 3.4(b)(ii).

 

“Property Tax” means any Tax resulting from and relating to the assessment of
real or personal property by any Governmental Authority.

 

“Purchase Price” has the meaning set forth in Section 3.2.

 

“Purchaser” has the meaning set forth in the preamble of this Agreement.

 

“Purchaser Claims” has the meaning set forth in Section 7.2(a).

 

“Purchaser Group” has the meaning set forth in Section 7.2(a).

 

“Purchaser’s Guarantors” means Tenaska Energy, Inc., a Delaware corporation and
Tenaska Energy Holdings, LLC, a Delaware limited liability company.

 

“Purchaser’s Guarantor’s Financial Statements” has the meaning set forth in
Section 5.10.

 

“Purchaser’s Guaranty” means that certain Continuing Guaranty, substantially in
the form of Exhibit C-1, which was executed by Purchaser’s Guarantors and
delivered by Purchaser to Seller on or before the Effective Date, pursuant to
which Purchaser’s Guarantors have guaranteed the equity portion of the Purchase
Price.

 

“Purchaser’s Knowledge” or “Knowledge”, when used in respect of a Purchaser,
means the actual and current knowledge, as of the Effective Date (or, with
respect to the certificate delivered pursuant to Section 9.6, the date of
delivery of the certificate) of any of the chief executive officer, the chief
financial officer, the chief operating officer, the chief accounting officer and
the chief legal officer or general counsel of Purchaser and of any other duly
elected

 

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officer of Purchaser or any Affiliate of Purchaser or any other employee of
Purchaser or any Affiliate of Purchaser who has actually participated in the
negotiation or review of this Agreement on Purchaser’s behalf and the Persons
listed in Schedule 1.1A.

 

“Purchaser Material Adverse Effect” means any change to, or effect on, the
Purchaser that is materially adverse to the operations or financial condition of
the Purchaser, taken as a whole, or which materially impedes the ability of the
Purchaser to consummate the transactions contemplated hereby or otherwise
fulfill its obligations hereunder; but excluding any effect (or effects taken
together) on Purchaser of any adverse change or shortfall with respect to the
syndication or capitalization of Tenaska Power Fund, L.P. (but not excluding any
effect to the extent caused by breaches by Seller of its representations,
warranties or obligations hereunder).

 

“Purchaser’s Required Consents” means the consent of any Person as specified in
Schedule 1.1C other than a Governmental Authority necessary for Purchaser to
consummate the Transactions contemplated by this Agreement and the Ancillary
Agreements.

 

“Purchaser’s Required Regulatory Approvals” means (i) the approval of the
Transactions contemplated hereby by any Governmental Authority of competent
jurisdiction over any of the Parties, the Facility, Seller, Purchaser, or the
Company that are required for Purchaser or any of its Affiliates to consummate
the Transactions as specified in Part I of Schedule 1.1D and (ii) the notice to,
filing with, or consent, approval or authorization of, any Governmental
Authority as specified in Part II of Schedule 1.1D.

 

“Release” means any release, spill, leak, discharge, abandonment, disposal,
pumping, pouring, emitting, emptying, injecting, leaching, dumping, depositing,
dispersing, allowing to escape or migrate into or through the environment
(including ambient air, surface water, ground water, land surface and subsurface
strata) of any Hazardous Substance, including the burial, storage, abandonment
or discarding of Hazardous Substances in barrels, drums, or other containers.

 

“Remediation” means any action of any kind to address an Environmental Condition
or Release or threatened Release or the presence of Hazardous Substances on or
in the air, soil or groundwater, including the following: (i) monitoring,
investigation, cleanup, containment, remediation, removal, mitigation, response
or restoration work; (ii) obtaining any permits, consents, approvals or
authorizations of any Governmental Authority necessary to conduct any such work;
(iii) preparing and implementing any plans or studies for such work; (iv)
obtaining a written notice from a Governmental Authority with jurisdiction under
applicable Environmental Laws that no material additional work is required by
such Governmental Authority; (v) any response to, or preparation for, any
inquiry, order, hearing or other proceeding by or before any Governmental
Authority with respect to any such Environmental Condition, Release or
threatened Release or presence of Hazardous Substances, and (vi) any other
activities reasonably determined by Seller or the Company to be necessary or
appropriate or required under Environmental Laws to address an Environmental
Condition, the presence of or Release of Hazardous Substances in the air, soil
or groundwater, at the Facility, or any other off-site location.

 

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“Securities Act” means the Securities Act of 1933, as amended.

 

“Seller” has the meaning set forth in the preamble of this Agreement.

 

“Seller Claims” has the meaning set forth in Section 7.3.

 

“Seller’s Existing Affiliate Guaranty” means the guarantee by TECO Energy, Inc.,
a Florida corporation and indirect parent of Seller, in favor of PJM and
Delmarva Power & Light Company (“DPL”), a Virginia corporation, of certain
obligations of the Company pursuant to (i) the Interconnection Agreement dated
July 1, 1999 between the Company and DPL, as amended and (ii) the
Interconnection Service Agreement dated June 1, 2000 between the Company and
PJM.

 

“Seller Group” has the meaning set forth in Section 7.3.

 

“Seller’s Guarantor” means TECO Energy, Inc., a Florida corporation.

 

“Seller’s Guaranty” means that certain Continuing Guaranty, substantially in the
form of Exhibit D, which was executed by Seller’s Guarantor and delivered by
Seller to Purchaser on or before the Effective Date.

 

“Seller’s Knowledge” or “Knowledge”, when used in respect of a Seller, means the
actual and current knowledge, as of the Effective Date (or, with respect to the
certificate delivered pursuant to Section 8.6, the date of delivery of the
certificate) of the Persons listed in Schedule 1.1A, which Schedule includes any
officer of Seller and any other employee of Seller or any Affiliate of Seller
who actually participated in the negotiation or review of this Agreement on
Seller’s behalf.

 

“Seller’s Required Consents” means the consent of any Person as specified in
Schedule 1.1E other than a Governmental Authority necessary for Seller to
consummate the Transactions contemplated by this Agreement and the Ancillary
Agreements.

 

“Seller’s Required Regulatory Approvals” means approval of the Transactions
contemplated hereby by any Governmental Authority of competent jurisdiction over
any of the Parties, the Facility, Seller, Purchaser or the Company, that are
required for Seller or any of its Affiliates to consummate the Transactions, as
specified in Schedule 1.1F.

 

“Tax” or “Taxes” means any federal, state, local or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code Section
59A), customs duties, capital stock, franchise, profits, withholding, social
security (or similar), unemployment, disability, real property (including
assessments, fees or other charges based on the use or ownership of real
property), personal property, transactional, use, transfer, registration, value
added, alternative or add-on minimum, estimated tax, or other tax of any kind
whatsoever, including any interest, penalty or addition thereto, whether
disputed or not, including, without limitation, any item for which liability
arises as a transferee or successor-in-interest.

 

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“Tax Proceeding” has the meaning set forth in Section 6.6(e).

 

“Tax Return” means any return, report, information return, declaration, claim
for refund, or other document, together with all amendments and supplements
thereto (including all related or supporting information), required to be
supplied to any Governmental Authority responsible for the administration of
Laws governing Taxes.

 

“TECO EnergySource Agreement” means the oral arrangement pursuant to which TECO
EnergySource, Inc., an affiliate of Seller and Seller’s Guarantor, is currently
providing services to the Company.

 

“TECO Marks” means the names and marks “TECO”, “TECO Power Services” and related
marks, and all other trade names, trademarks and service marks owned by Seller
or any of its Affiliates, excluding the name “Commonwealth Chesapeake Company”
and any rights of the Company in such name or related marks.

 

“Termination Date” means the date that this Agreement is terminated under
Section 10.1.

 

“Third Party Claim” means a claim by a Person that is not a member of Seller
Group or Purchaser Group, including any claim for the costs of conducting
Remediation, or seeking an order or demanding that a Person undertake
Remediation.

 

“Transactions” has the meaning set forth in the Recital D to this Agreement.

 

“Transfer Tax” means any sales Tax, transfer Tax, transaction Tax, conveyance
fee, use Tax, stamp Tax, stock transfer Tax or other similar Tax, including any
related penalties, interest and additions thereto.

 

“Transferred Employee” has the meaning set forth in Section 6.15.

 

Section 1.2 Certain Interpretive Matters. In this Agreement, unless the context
otherwise requires:

 

(a) the singular number includes the plural number and vice versa;

 

(b) reference to any Person includes such Person’s successors and assigns but,
if applicable, only if such successors and assigns are permitted by this
Agreement, and reference to a Person in a particular capacity excludes such
Person in any other capacity;

 

(c) reference to any gender includes each other gender;

 

(d) reference to any agreement (including this Agreement), document or
instrument means such agreement, document or instrument as amended or modified
and in effect from time to time in accordance with the terms thereof and, if
applicable, the terms hereof;

 

(e) reference to any Article, Section, Schedule or Exhibit means such Article,
Section, Schedule or Exhibit of or to this Agreement, and references in any
Article, Section, Schedule, Exhibit or definition to any clause means such
clause of such Article, Section, Schedule, Exhibit or definition;

 

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(f) any accounting term used and not otherwise defined in this Agreement or any
Ancillary Agreement has the meaning assigned to such term in accordance with
GAAP;

 

(g) “hereunder,” “hereof,” “hereto” and words of similar import are references
to this Agreement as a whole and not to any particular Section or other
provision hereof or thereof;

 

(h) “including” (and with correlative meaning “include”) means including without
limiting the generality of any description preceding such term;

 

(i) relative to the determination of any period of time, “from” means “from and
including,” “to” means “to but excluding” and “through” means “through and
including;”

 

(j) reference to any law (including statutes and ordinances) means such law as
amended, modified codified or reenacted, in whole or in part, and in effect from
time to time, including rules and regulations promulgated thereunder; and

 

(k) any agreement, instrument, insurance policy, statute, regulation, rule or
order defined or referred to herein or in any agreement or instrument that is
referred to herein means such agreement, instrument, insurance policy, statute,
regulation, rule or order as from time to time amended, modified or
supplemented, including (in the case of agreements or instruments) by waiver or
consent and (in the case of statutes, regulations, rules or orders) by
succession of comparable successor statutes, regulations, rules or orders and
references to all attachments thereto and instruments incorporated therein.

 

ARTICLE 2

 

PURCHASE AND SALE

 

Upon the terms and subject to the satisfaction of the conditions contained in
this Agreement, at the Closing, Seller shall sell and convey the Membership
Interests to Purchaser, and Purchaser shall purchase and receive the Membership
Interests from Seller.

 

ARTICLE 3

 

CLOSING; PURCHASE PRICE

 

Section 3.1 Signing; Closing.

 

(a) Deliverables at Signing. On or prior to the execution of this Agreement, (i)
Purchaser shall cause Purchaser’s Guarantors to execute and deliver Purchaser’s
Guaranty to Seller; and (ii) Seller shall cause Seller’s Guarantor to execute
and deliver Seller’s Guaranty to Purchaser.

 

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(b) Deliverables Prior to Closing. At least three (3) but no more than fifteen
(15) business days prior to the anticipated Closing Date, Seller shall prepare
and deliver to Purchaser the following:

 

(i) Seller’s written estimate of the Adjusted Net Working Capital as of Closing
(defined below) (expressed as a positive or negative number), calculated
consistently with the methodology set forth in Schedule 3.3(a) and in accordance
with GAAP and showing the calculation thereof in reasonable detail (the
“Estimated ANWC Statement”); and

 

(ii) Seller’s written estimate of the Inventory and Fuel Oil that will be on
hand at the Facility as of Closing (“Estimated Closing Inventory and Fuel Oil”),
together with a calculation of the amount (expressed as a positive or negative
number) equal to (A) the value of the Estimated Closing Inventory and Fuel Oil,
with the value of Inventory calculated utilizing the prices set forth on
Schedule 4.10(a) attached to this Agreement (the “October 31 Inventory
Schedule”) for the items listed therein and their equivalents and the actual
purchase price for any additional items included in Inventory and the value of
Fuel Oil in inventory in excess of 100,000 gallons determined using the trailing
20 day average price (calculated as of the date of such measurement) of New York
Harbor Fuel Oil as published in Platt’s Oilgram Plus $0.11 per gallon (the
“Agreed Benchmark Price”) minus (B) the value of the Company’s Inventory as of
October 31, 2004, as reflected on the October 31 Inventory Schedule (such
difference, the “Estimated Closing Inventory and Fuel Oil Adjustment”).

 

(c) Deliverables at Closing. Subject to the terms and conditions hereof,
proceedings for the consummation of the Transactions (the “Closing”) will take
place at the offices of TECO Energy, Inc., 702 North Franklin Street, Tampa, FL
33602 at 10:00 a.m. local time, on a mutually acceptable date within three (3)
Business Days following the date on which the conditions set forth in Article 8
and Article 9, other than those conditions that by their nature are to be
satisfied at the Closing, have been either satisfied or waived by the Party for
whose benefit such conditions exist, or at such other time and place as the
Parties may mutually agree, but in no event shall the Closing occur later than
May 31, 2005. The date on which such proceedings actually occur is referred to
herein as the “Closing Date.” The Closing shall be effective for all purposes at
11:59 p.m., Eastern time, on the Closing Date. At the Closing, and subject to
the terms and conditions hereof, the following will occur:

 

(i) Deliveries by Seller. At Closing, Seller shall execute and deliver, or cause
to be executed and delivered, to Purchaser, as applicable, those documents
required to be delivered to Purchaser by Seller pursuant to Article 8.

 

(ii) Deliveries by Purchaser. At Closing, Purchaser shall (A) deliver the
Purchase Price (as defined in Section 3.2 and adjusted pursuant to Section 3.3
below) (less the Deposit Funds (as defined below) and all accrued interest
thereon), and any amount(s) payable on the Closing Date to Seller pursuant to
the Ancillary Agreements, by wire transfer of immediately available funds to an
account or accounts designated by Seller in writing at least 2 Business Days
prior to the Closing Date; and (B) execute and deliver, or cause to be
delivered, to Seller, as applicable, those documents required to be delivered to
Seller by Purchaser pursuant to Article 9.

 

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Section 3.2 Purchase Price. The purchase price for the Membership Interests
being sold shall be Eighty Nine Million Dollars (U.S.$89,000,000) (the “Purchase
Price”), as adjusted only pursuant to Section 3.3 and Section 3.4 below. The
benchmark Purchase Price includes only the Inventory included on the October 31
Inventory Schedule and assumes zero Dollars ($0) Adjusted Net Working Capital at
Closing and shall be adjusted to account for Fuel Oil, Adjusted Net Working
Capital and any changes in Inventory from the October 31 Inventory Schedule at
Closing.

 

(a) Within five (5) Business Days after the Effective Date, Purchaser shall
deposit to an interest bearing escrow account the equivalent of five percent
(5%) of the Purchase Price (such sum, the “Deposit Funds”). Notwithstanding
anything to the contrary contained in this Agreement, the Deposit Funds shall be
released as follows:

 

(i) If Seller terminates this Agreement pursuant to Section 10.1(b), the Deposit
Funds and all accrued interest thereon shall be immediately released to Seller
or its designee in full satisfaction of all of Purchaser’s obligations under
this Agreement.

 

(ii) If Closing does not occur for reasons other than those set forth in Section
3.2(a)(i), on or prior to the Termination Date, the Deposit Funds and all
accrued interest thereon shall be immediately released to Purchaser or its
designee.

 

(iii) If Closing is achieved pursuant to the terms of this Agreement, the
Deposit Funds and all accrued interest thereon shall be released on the Closing
Date to Seller or its designee, and in such case the Deposit Funds and all
accrued interest thereon shall be applied towards Purchaser’s payment of the
Purchase Price.

 

(b) At the Closing, Purchaser shall pay to Seller in the manner described in
Section 3.1(c)(ii) above an amount equal to the Purchase Price as adjusted
pursuant to Section 3.3 below (less the Deposit Funds and accrued interest
thereon).

 

Section 3.3 Adjustments to Purchase Price at Closing. The Purchase Price shall
be subject only to those adjustments made at the Closing set forth below in
Sections 3.3(a) and 3.3(b), and those post-Closing adjustments (all of which
shall be made within ninety (90) days after the Closing Date) made pursuant to
the provisions of Section 3.4 (such Sections being referred to collectively as
the “Adjustment Sections,” and the Purchase Price as so adjusted is herein
referred to as the “Adjusted Purchase Price”). For purposes of illustrating the
methodology for calculating the adjustments to the Purchase Price only, Schedule
3.3 demonstrates how such adjustments would have been calculated from the
Balance Sheet if they had been calculated on October 31, 2004 (the calculation
in Schedule 3.3 shall be referred to as the “October 31 Adjusted Purchase Price
Calculation”).

 

(a) Adjusted Net Working Capital. At Closing, the Purchase Price shall be
increased or decreased, as the case may be to the extent that the amount of
Adjusted Net Working Capital demonstrated on the Estimated ANWC Statement is
greater than or less than zero Dollars ($0). For purposes of illustrating the
methodology for calculating Adjusted Net Working Capital only, Schedule 3.3(a)
demonstrates how the Adjusted Net Working Capital

 

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would have been calculated from the Balance Sheet if it had been calculated on
October 31, 2004 (the calculation in Schedule 3.3(a) shall be referred to as the
“October 31 Adjusted Net Working Capital Calculation”).

 

(b) Inventory and Fuel Oil. If the calculation of Estimated Closing Inventory
and Fuel Oil Adjustment described in Section 3.1(b) above results in a positive
number, then the Purchase Price paid at Closing shall be increased by such
amount. If such calculation results in a negative number, then the Purchase
Price paid at Closing shall be decreased by the absolute amount of such negative
number.

 

Section 3.4 Post-Closing Adjustments to Purchase Price.

 

(a) Within three (3) Business Days following the Closing, Purchaser shall audit
the actual Inventory and Fuel Oil at the Facility. Such audit shall include (i)
a measurement of the amount of actual Fuel Oil held at the Facility, (ii) a
physical audit of the Inventory at the Facility through reasonable audit testing
procedures, and (iii) a reconciliation for any changes in Inventory and
consumption or addition of Fuel Oil since the Closing Date. Within five (5)
Business Days after completion of such audit, Purchaser shall deliver written
notice to Seller of its calculation of the value of the Fuel Oil in inventory in
excess of 100,000 gallons and Inventory actually on hand at the Facility as of
the Closing, with such Fuel Oil in inventory in excess of 100,000 gallons to be
valued using the Agreed Benchmark Price and both such Fuel Oil and all Inventory
to be valued using the methodology set forth in Section 3.1(b)(ii) above (the
“Final Inventory and Fuel Oil Determination”). If Seller does not accept the
findings of Purchaser in the Final Inventory and Fuel Oil Determination it shall
so notify Purchaser in writing within fifteen (15) Business Days after receipt
of the Final Inventory and Fuel Oil Determination, in which case Seller and
Purchaser shall then use good faith efforts to promptly agree upon the actual
value of such Inventory and Fuel Oil as of Closing as quickly as practicable.
Such value of the Inventory and Fuel Oil as finally determined by the Parties or
pursuant to procedures in Section 3.5 shall be referred to as the “Closing
Inventory and Fuel Oil Value”. The final Purchase Price shall be increased or
decreased, as the case may be, to the extent that the amount of the Closing
Inventory and Fuel Oil Value is greater or lesser, respectively, than the value
of the Company’s Inventory and Fuel Oil used to calculate the Estimated Closing
Inventory and Fuel Oil Adjustment.

 

(b) Within ninety (90) days after the Closing Date, Purchaser shall deliver to
Seller:

 

(i) a balance sheet of the Company as of the Closing Date (the “Closing Balance
Sheet”), prepared in accordance with GAAP, and using the same GAAP accounting
principles, policies, and methods as Seller has historically used in connection
with the calculation of the items reflected on the Post-Closing Statement;

 

(ii) a final closing statement setting forth the resulting proposed Adjusted Net
Working Capital calculated with reference to the amounts shown on the Closing
Balance Sheet, the Final Inventory and Fuel Oil Determination and the proposed
final Adjusted Purchase Price (in its final and binding form, the “Post-Closing
Statement”). The Post-Closing

 

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Statement shall be prepared in accordance with the terms of this Agreement, and
shall be consistent with (A) the methodology set forth in the October 31
Adjusted Net Working Capital Calculation for the calculation of the Adjusted Net
Working Capital; and (B) the methodology set forth in the October 31 Adjusted
Purchase Price Calculation for the calculation of the Adjusted Purchase Price.

 

(c) Seller may object in good faith to the proposed Adjusted Purchase Price in
writing, stating in reasonable detail its objections thereto, within thirty (30)
days after the delivery of the Post-Closing Statement by Purchaser to Seller.
Purchaser and Seller agree to cooperate to exchange information used to prepare
the Post-Closing Statement and information relating thereto. The final Adjusted
Purchase Price as set forth in the Post-Closing Statement shall become final and
binding upon the Parties unless Seller gives written notice of its disagreement
(a “Notice of Disagreement”) to Purchaser within such thirty (30) day period
after Seller’s receipt of the same from Purchaser. Any Notice of Disagreement
shall specify in reasonable detail the nature and Dollar amount of any
disagreement so asserted. Following delivery of a Notice of Disagreement, each
Party and its respective agents and representatives shall be permitted to review
the other Party’s and its respective agents and representatives’ working papers
relating to the Notice of Disagreement. To the extent any items are not disputed
in a valid Notice of Disagreement, such items shall be deemed to have been
accepted by Seller. If Seller objects to the proposed Adjusted Purchase Price
with a timely Notice of Disagreement, the Parties shall attempt to resolve such
dispute by negotiation, and to the extent the Parties are unable to resolve any
such dispute within twenty (20) days following delivery of a Notice of
Disagreement or such later date as Seller and Purchaser may agree, then the
disputed portion of the Adjusted Purchase Price and Post-Closing Statement shall
be resolved in accordance with the provisions of Section 3.5. If a timely Notice
of Disagreement is received by Purchaser, then the disputed portion of the
Post-Closing Statement and the resulting Adjusted Purchase Price (as revised in
accordance with clause (x) or (y) below) shall become final and binding upon the
parties on the earliest of (x) the date the parties resolve in writing any
differences they have with respect to the matters specified in the Notice of
Disagreement, or (y) the date all matters in dispute are finally resolved in
writing by the Independent Accounting Firm as set forth in Section 3.5 below.
(The Adjusted Purchase Price which becomes final and binding on the Parties
pursuant to this Section 3.4(b) or 3.5, as applicable, shall be referred to as
the “Final Adjusted Purchase Price”).

 

(d) If the Purchase Price paid to Seller at Closing (less Deposit Funds) is
greater than the Final Adjusted Purchase Price (less Deposit Funds), Seller
shall, within three (3) Business Days after the Post-Closing Statement and the
Final Adjusted Purchase Price becomes binding on the Parties, make payment by
wire transfer to Purchaser in immediately available funds of the amount of such
difference, together with interest thereon at a rate per annum equal to five
percent (5%), calculated on the basis of the actual number of days elapsed over
360, from the Closing Date to the date of payment. If the Purchase Price paid to
Seller at Closing is less than the Final Adjusted Purchase Price, Purchaser
shall, within three (3) Business Days after the Post-Closing Statement and the
Adjusted Purchase Price becomes binding on the Parties, make payment by wire
transfer to Seller in immediately available funds of the amount of such
difference, together with interest thereon at a rate per annum equal to five
percent (5%), calculated on the basis of the actual number of days elapsed over
360, from the Closing Date to the date of payment.

 

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Section 3.5 Procedures for Dispute Resolution of Purchase Price Adjustment. If
the Parties are unable to resolve any differences they may have with respect to
the matters specified in the Notice of Disagreement as set forth in Section
3.4(b) above within the time periods set forth in such Section, such dispute may
be referred by any Party to the Independent Accounting Firm. The Parties shall
instruct the Independent Accounting Firm to make a final determination of the
Closing Balance Sheet, the Post-Closing Statement and the resulting Adjusted
Purchase Price calculated with reference to such amounts to the extent such
amounts are in dispute, in accordance with the guidelines and procedures set
forth in this Agreement. The Parties will cooperate with the Independent
Accounting Firm during the term of its engagement. The Parties shall instruct
the Independent Accounting Firm to not assign a value to any item in dispute
greater than the greatest value for such item assigned by Purchaser, on the one
hand, or Seller, on the other hand, or less than the smallest value for such
item assigned by Purchaser, on the one hand, or Seller, on the other hand. The
Parties shall also instruct the Independent Accounting Firm to make its
determination based solely on presentations by Purchaser and Seller which are in
accordance with the guidelines and procedures set forth in this Agreement (i.e.
not on the basis of an independent review). The Closing Balance Sheet and
Post-Closing Statement and the resulting Adjusted Purchase Price calculated with
reference thereto shall become final and binding on the Parties on the date the
Independent Accounting Firm delivers its final resolution in writing to the
Parties (which final resolution shall be requested by the Parties to be
delivered not more than forty-five (45) days following submission of such
disputed matters). Except as set forth above, the Parties do not intend to
impose any particular procedures upon the Independent Accounting Firm, it being
the desire of the Parties that any such disagreement shall be resolved as
expeditiously and inexpensively as reasonably practicable. The fees and expenses
of the Independent Accounting Firm shall be shared equally by Purchaser and
Seller. Each Party shall bear its own legal, accounting or consulting costs and
expenses in connection with any dispute hereunder.

 

Section 3.6 Allocation. Seller and Purchaser have determined the allocation of
the Purchase Price in accordance with Section 1060 of the Code and such
allocation is set forth on Schedule 3.6 hereto. Purchaser and Seller agree to
timely file Internal Revenue Service Form 8594, if necessary, and all Tax
Returns, in accordance with Schedule 3.6 and to report the Transactions
contemplated by this Agreement for federal Income Tax and all other Tax purposes
in a manner consistent with such allocation. Each Party agrees to promptly
provide the other with any additional information and reasonable assistance
required to complete Form 8594, if necessary. In the event the Purchase Price is
adjusted pursuant to the Adjustment Sections, the Parties agree to allocate any
such adjustment in a matter consistent with Schedule 3.6, using the same
accounting principles, policies, and methods. If Purchaser and Seller are unable
to resolve any disputes in connection with the allocation of any adjustments to
the Purchase Price, such disputes shall be referred to the Independent
Accounting Firm for resolution, which resolution shall be final, conclusive and
binding on the Parties. Notwithstanding anything in this Agreement to the
contrary, the fees and expenses of the Independent Accounting Firm in resolving
the dispute shall be borne equally by Seller and Purchaser.

 

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ARTICLE 4

 

REPRESENTATIONS AND WARRANTIES OF SELLER

 

Seller represents and warrants to Purchaser, as of the date hereof and as of the
Closing Date, as to each of the matters set forth in this Article 4.

 

Section 4.1 Organization and Existence. Seller is a limited liability company,
duly organized, validly existing and in good standing under the laws of the
State of Delaware. The Company is a limited liability company, duly organized,
validly existing and in good standing under the laws of the State of Virginia
and has all requisite power and authority to own, lease and operate its
properties and to carry on its business as is now being conducted. Seller has
provided (or made available to Purchaser in its electronic data room) correct
and complete copies of the governing documents of the Company as amended to
date.

 

Section 4.2 Execution, Delivery and Enforceability. Seller has all requisite
power and authority to execute and deliver, and perform its obligations under,
this Agreement and the Ancillary Agreements which are executed by it, and to
consummate the transactions contemplated hereby and thereby. The execution,
delivery and performance by Seller of this Agreement and of the Ancillary
Agreements which are executed by it, and the consummation of the transactions
contemplated hereby and thereby, have been duly and validly authorized by all
necessary action required on the part of Seller and no other proceedings on the
part of Seller are necessary to authorize this Agreement and the Ancillary
Agreements to which it is a party or to consummate the transactions contemplated
hereby and thereby. Assuming the due authorization, execution and delivery by
Purchaser of this Agreement and the due authorization, execution and delivery by
Purchaser of the Ancillary Agreements which are to be executed by them, this
Agreement does and the Ancillary Agreements which are executed by Seller when
executed and delivered by Seller will constitute the valid and legally binding
obligations of Seller, enforceable against Seller in accordance with its and
their respective terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws of
general application relating to or affecting the enforcement of creditors’
rights and by general equitable principles.

 

Section 4.3 Membership Interests.

 

(a) Seller owns the Membership Interests shown as owned by Seller on Schedule A
free and clear of any Encumbrances, except such Encumbrances as may arise under
this Agreement and except for any restrictions on sales or transfers of
securities under applicable securities laws; and

 

(b) Seller has the full legal right, power and authority to transfer the
Membership Interests shown as owned by Seller on Schedule A as provided in this
Agreement.

 

Section 4.4 Capitalization. The Membership Interests constitute one hundred
percent (100%) of the issued and outstanding membership interests of the
Company. All of the Membership Interests have been duly authorized and are
validly issued (with no further payment

 

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required for valid issuance) and were not issued in violation of the preemptive
rights of any Person. There are no outstanding contractual obligations of the
Company or any other Person to issue, deliver, sell, repurchase, redeem,
convert, exchange or otherwise acquire any membership interest in, or other
equity security issuable by, the Company, except obligations under this
Agreement. The Company has not issued, and there are no outstanding contractual
obligations of the Company or any other Person to issue, any bonds or other debt
securities of the Company.

 

Section 4.5 No Violation. Subject to Seller obtaining Seller’s Required
Regulatory Approvals and Seller’s Required Consents, neither the execution nor
delivery by Seller of this Agreement or any of the Ancillary Agreements which
are executed by it, nor Seller’s compliance with any provision hereof or
thereof, nor consummation of the transactions contemplated hereby or thereby
will:

 

(a) violate or result in a breach of any provisions of the governing documents
or operating agreements of Seller, governing documents of the Company or the
Company’s Operating Agreement;

 

(b) result in a default (or give rise to any right of termination, cancellation
or acceleration) under, or violate any of the terms, conditions or provisions
of, any note, bond, mortgage, indenture, license or material agreement to which
Seller or the Company is a party or by which Seller, the Company, or the
Facility may be bound, except for such defaults (or rights of termination or
acceleration) as to which requisite waivers or consents have been, or prior to
the Closing will have been, obtained or which, individually or in the aggregate,
would not be reasonably likely to have a Company Material Adverse Effect;

 

(c) violate any law, rule, regulation, order, writ, injunction or decree,
applicable to Seller, the Company or the Facility, except where such violations,
individually or in the aggregate, would not be reasonably likely to have a
Company Material Adverse Effect and will not affect the validity or
enforceability of this Agreement or the Ancillary Agreements or the validity of
the transactions contemplated hereby or thereby; or

 

(d) require the consent or approval of, filing with, or notice to any Person
which, if not obtained, would prevent Seller from performing its obligations
hereunder.

 

Section 4.6 Compliance with Laws. There is no uncured violation, and to Seller’s
Knowledge, there have been no violations by Seller with respect to the Company
or the Facility or by the Company of any laws, orders, ordinances, rules,
regulations or judgments of any Governmental Authority, except for violations or
alleged violations that would not be reasonably likely to have a Company
Material Adverse Effect and will not affect the validity or enforceability of
this Agreement or the Ancillary Agreements or the validity of the transactions
contemplated hereby and thereby.

 

Section 4.7 Permits, Licenses, Etc. The Company holds all permits,
registrations, franchises, certificates, licenses and other authorizations,
consents and approvals of all Governmental Authorities that the Company and the
Facility require in order to construct, own, operate, and maintain the Facility
and generate and sell electric energy and capacity at wholesale

 

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in PJM as such business is currently conducted and at all levels at which it has
been conducted during the twelve (12) month period preceding the Closing Date
(collectively, “Permits”), except for such failures to hold such Permits that
would not, individually or in the aggregate, be reasonably likely to have a
Company Material Adverse Effect. The Company is in compliance with all such
Permits, except to the extent, individually or in the aggregate, as would not be
reasonably likely to have a Company Material Adverse Effect, and has not
received any written notice at any time of any violation of any Permit or that
(i) any such existing Permit will be revoked; or (ii) any pending application
for the renewal of any existing Permit will be denied. Schedule 4.7 includes a
list of all of the Permits, and Seller has made available to Purchaser a correct
and complete copy of each Permit set forth on Schedule 4.7.

 

Section 4.8 Litigation. Except as set forth in Schedule 4.8, there is no claim,
action, proceeding or investigation pending, or to Seller’s Knowledge,
threatened against or relating to the Company, or the Facility, before any
court, arbitrator or Governmental Authority, or any judgment, decree or order of
any court, arbitrator, or Governmental Authority, and to Seller’s Knowledge,
there are no facts or circumstances that are reasonably expected to give rise to
any such claim, action, proceeding or investigation. Except as set forth in
Schedule 4.8, there is no claim, action, proceeding or investigation pending, or
to Seller’s Knowledge, threatened against or relating to Seller, before any
court, arbitrator or Governmental Authority, or any judgment, decree or order of
any court, arbitrator, or Governmental Authority, which individually or in the
aggregate, (a) would reasonably be expected to result, or has resulted, in (i)
the institution or threat of legal proceedings to prohibit or restrain the
performance by Seller of this Agreement or any of the Ancillary Agreements to
which it is a party, or the consummation of the transactions contemplated hereby
or thereby, or (ii) a material impairment of the ability of Seller to perform
its obligations under this Agreement or any of the Ancillary Agreements to which
it is a party, or (iii) a material impairment of Company’s ability to own,
operate, and maintain the Facility; or (b) would be reasonably likely to have a
Company Material Adverse Effect.

 

Section 4.9 Material Facility Contracts and Expired Material Facility Contracts.

 

(a) The Company is not a party to, and neither the Company nor the Facility is
otherwise bound by or subject to, any Material Facility Contracts other than
those set forth in Schedule 4.9(a).

 

(b) Except as disclosed in Schedule 4.9(b), there is not, under any of the
Material Facility Contracts, any default or any event which, with notice or
lapse of time or both, would constitute a material default by the Company or, to
Seller’s Knowledge, a material default by another party to a Material Facility
Contract. Seller has made available to Purchaser a correct and complete copy of
each Material Facility Contract set forth on Schedule 4.9(a) and all amendments
thereto.

 

(c) No claim, action, proceeding or investigation is pending or, to Seller’s
Knowledge, threatened against the Company or Seller, challenging the
enforceability of any of the Material Facility Contracts, except for challenges
which, individually or in the aggregate, would not be reasonably likely to have
a Company Material Adverse Effect.

 

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(d) No claim, action, proceeding or investigation is pending or, to Seller’s
Knowledge, threatened against the Company or Seller with respect to any Expired
Material Facility Contract nor, to Seller’s Knowledge, are there any facts or
circumstances that are reasonably expected to give rise to any such claim,
action, proceeding or investigation. Except to the extent cured or waived by the
non-defaulting party, there is not, under any of the Expired Material Facility
Contracts, any default or any event which, with notice or lapse of time or both,
would constitute a material default by the Company or, to Seller’s Knowledge, a
material default by another party to an Expired Material Facility Contract.

 

Section 4.10 Personal Property. The Company has good and valid title to each
item of personal property listed on Schedule 4.10, free and clear of all
Encumbrances, except Permitted Encumbrances. To Seller’s Knowledge, neither
Seller nor the Company has any liabilities or obligations with respect to any
personal property previously owned by the Company that is not currently owned by
the Company, nor, to Seller’s Knowledge, are there any facts or circumstances
that are reasonably expected to give rise to any such liabilities or
obligations.

 

Section 4.11 Real Property. The Company has good and valid title to the real
property interests identified on Schedule 4.11 (the “Owned Real Property”),
which consists of the plant site, owned in fee, and appurtenant easements (the
“Appurtenant Easements”), free and clear of all Encumbrances, except Permitted
Encumbrances. The Company’s rights in the personal property listed on Schedule
4.10, together with the Company’s rights in the real property listed on Schedule
4.11 and the Company Intellectual Property, constitute all of the rights,
properties and other assets necessary to permit the Company to conduct its
business in the same manner as such business is currently conducted and at all
levels at which it has been conducted during the twelve (12) month period
preceding the Closing Date (subject to seasonal variances in required Fuel
Inventory), except where the absence of such rights, properties or assets, in
the aggregate, would not reasonably be expected to have a Company Material
Adverse Effect. The Company has never owned or held any interest in any real
property other than the Owned Real Property.

 

Section 4.12 No Undisclosed Liabilities. Except as set forth in Schedule 4.12,
assuming that the Facility Operations Agreement and the TECO EnergySource
Agreement have been terminated as required by Section 8.11(g), the Company does
not have any liabilities or obligations of any nature, whether fixed,
contingent, accrued or otherwise, liquidated or unliquidated, and whether due or
to become due, other than:

 

(i) the liabilities and obligations of the Company under Material Facility
Contracts;

 

(ii) liabilities and obligations contemplated by this Agreement;

 

(iii) liabilities and obligations under or in respect of the Permits (excluding
any violations thereof);

 

(iv) Permitted Encumbrances or the requirements of applicable Laws (excluding
any violations thereof);

 

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(v) Excluded Liabilities;

 

(vi) liabilities and obligations set forth or referred to in the Balance Sheet;
and

 

(vii) liabilities and obligations incurred since the date of the Balance Sheet
in the ordinary course of business, not in violation of any of the provisions of
this Agreement, and that do not and are not reasonably expected to have a
Company Material Adverse Effect; and

 

(viii) liabilities and obligations that would not, individually or in the
aggregate, reasonably be expected to have a Company Material Adverse Effect.

 

Section 4.13 Intellectual Property. To Seller’s Knowledge, the Company has
received no notice of any material infringement, impairment, dilution,
misappropriation, or other unauthorized use by the Company of patents,
copyrights, trademarks, or similar intellectual property rights of any third
parties. Schedule 4.13 lists all software programs, trademarks, patents, and
licensed intellectual property included within the Company Intellectual Property
used or useful in the conduct of the Company’s business consistent with past
practice, other than standard office and similar software programs generally
included on computers owned by the Company and readily available without
material expense (which programs are not separately listed). Except as set forth
in Schedule 4.13, the Company owns or has the valid right to use pursuant to
license, sublicense, agreement or permission, in each case free and clear of all
Encumbrances other than Permitted Encumbrances, all of the Company Intellectual
Property other than such Company Intellectual Property the absence of which
ownership or the right to use would not reasonably be expected to have a Company
Material Adverse Effect (individually or in the aggregate).

 

Section 4.14 Brokers. All negotiations relating to this Agreement and the
transactions contemplated hereby have been carried on by Seller in such a manner
as not to give rise to any valid claim against Purchaser (by reason of Seller’s
actions) for a brokerage commission, finder’s fee or other like payment to any
Person. Upon closing of the transactions contemplated by this Agreement, a
commission shall be payable to Morgan Stanley with respect to certain investment
banking services provided to Seller, for which Seller shall bear sole
responsibility.

 

Section 4.15 Environmental Matters. Except as set forth on Schedule 4.15:

 

(a) During the period of the Company’s ownership of the Owned Real Property and,
to Seller’s Knowledge, at all times prior thereto, there has not been a Release
of Hazardous Substances from or on the Owned Real Property or otherwise
affecting the Facility that: (A) constitutes violation of any Environmental Law;
(B) imposes any release-reporting obligations on the Company under any
Environmental Law; (C) imposes any clean-up or remediation obligations of the
Company under any Environmental Law (or obligation of the Company to reimburse
any other Person for similar obligations) or (D) is reasonably expected to
impose any liability of the Company for injury to any Person or any Person’s
property. For each Release disclosed in Schedule 4.15, a description of the
status of such release is provided, and that description is accurate and
complete in all material respects.

 

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(b) Since January 1, 2001, none of the Company, the Seller or the Facility has
violated in any material respect any Environmental Laws that govern the Company
or the Facility, and each of the Seller, the Company and the Facility is
currently in compliance with, in all material respects, all Environmental Laws
that govern the Company or the Facility.

 

(c) Each of the Company and the Facility has all Permits required under the
Environmental Laws for the operation of the Facility consistent with past
practice, is in compliance with all such Permits, and neither of them has
received any written notice that: (A) any such existing Permit will be revoked;
(B) any pending application for any new such Permit or renewal of any existing
Permit will be denied; or (C) alleges the violation of any Permit or any
Environmental Law. To the extent required by applicable Environmental Laws, the
Company has filed (or will have filed by the Closing Date) all applications
necessary to renew or obtain any necessary Permits required under Environmental
Laws in a timely fashion to allow the Company to continue to operate its
business and the Facility in compliance with applicable Environmental Laws, and
the Company does not have reason to know that such new or renewed Environmental
Permits will include any terms or conditions that will be more stringent than
the terms or conditions of such existing Permits, except for such applications,
terms and conditions that would not, individually or in the aggregate, have a
Company Material Adverse Effect. There are no separate agreements with any
Governmental Authority with respect to any obligation of the Company under any
Permit or any Environmental Laws nor are there any orders of any Governmental
Authority with respect thereto directed at the Company or the Facility
specifically as opposed to electric generators generally.

 

(d) Seller has made available to Purchaser true and complete copies of all
environmental studies, audits and assessment reports in its possession or
control, or prepared on its behalf, relating to the Owned Real Property or the
construction or operation of the Facility.

 

(e) Schedule 4.15(e) shows the amount of emission allowances held by the Company
as of November 30, 2004 in the EPA Clean Air Market Database. These amounts do
not reflect reductions for 2004 Facility emissions. Upon Closing, Company will
be entitled to all of these emissions allowances except those that are withdrawn
by the EPA to satisfy 2004 Facility emissions. The Company has no obligation to
sell any of the emission allowances identified in Schedule 4.15(e).

 

(f) To Seller’s Knowledge, there are no existing facts or circumstances that are
reasonably expected to give rise to a violation of any Permit or Environmental
Law or that would reasonably be expected to prevent the Company or the Facility
from operating consistent with past practice and complying with any Permit or
Environmental Law. To Seller’s Knowledge, the Company will not be required to
add, upgrade, or modify any equipment or facilities to operate consistent with
past practice in compliance with all Permits and Environmental Laws.

 

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(g) Except to the extent in compliance in all material respects with
Environmental Laws, neither Seller nor Company has ever transported or disposed
of any Hazardous Material generated at the Facility to any location other than
the Owned Real Property.

 

Section 4.16 Tax Matters. Except as set forth in Schedule 4.16:

 

(a) all Tax Returns required to be filed by or with respect to the Company have
been or will be timely filed (taking into account extensions of time to file)
with the appropriate taxing authorities in all jurisdictions in which such Tax
Returns are required to be filed;

 

(b) such Tax Returns (to the extent such Returns relate to the Company) are or
will be true and correct in all material respects, and all Taxes reported on
such Tax Returns have been or will be timely paid;

 

(c) the Company has not extended or waived, and has not requested a waiver or
extension of, the application of any statute of limitations regarding the
assessment or collection of any Tax and the Company has not requested any
extension of time within which to file any Tax Return;

 

(d) there are no audits, examinations, claims, assessments, levies,
administrative proceedings, or lawsuits pending, or to the Knowledge of Seller,
threatened against the Company by any taxing authority;

 

(e) None of the assets or properties of the Company is or will be required to be
treated as being (I) owned by another Person pursuant to the provisions of
section 168(f)(8) of the Internal Revenue Code of 1954, as amended and in effect
immediately before the enactment of the Tax Reform Act of 1986, or (II)
tax-exempt use property within the meaning of Section 168(h)(l) of the Code;

 

(f) No Governmental Authority in a jurisdiction where the Company does not file
Tax Returns has made a claim, assertion or, to Seller’s Knowledge, a threat that
the Company (or Seller by virtue of the Company’s operations or ownership of the
Facility) (A) is or may be subject to taxation by such jurisdiction, or (B) is
or may be required to file Tax Returns in such jurisdiction;

 

(g) The Company has made available to Purchaser correct and complete copies of
all federal, state, and local Tax Returns filed with respect to the Company (or
the portions thereof that relate solely to the Company) for all Tax years ended
on or after December 31, 2001;

 

(h) All Taxes for which the Company is liable, (whether or not requiring the
filing of returns or reports) relating to the business, operations or property
of Company have been timely and fully paid or have been adequately reserved;

 

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(i) All Taxes that the Company is required by law to withhold or collect have
been duly withheld or collected and have been paid over to the appropriate
governmental agency or authority are properly recorded as a liability on the
books of the Company;

 

(j) The Company (i) is not a party to any tax sharing or similar agreement; and
(ii) is not a member of any affiliated group nor does it have any liability for
Taxes payable by Seller or any of its Affiliates under Treas. Reg. § 1.1502-6
(or any similar provision of state, local or foreign Law).

 

(k) The Company is a disregarded entity for federal tax purposes pursuant to
Treas. Reg. § 301.7701-3 and it has not elected to be classified as a
corporation for federal Tax purposes.

 

Section 4.17 Employee Matters. The Company does not have, and on the Closing
Date will not have, any employees. Neither Seller or the Company is a party to
or is bound by any collective bargaining agreement with respect to any employees
assigned to the business of the Company and, to Seller’s Knowledge, no present
union organizing efforts are underway with respect to any such employees and no
claim has been made by any union as to the representation of such employees.

 

Section 4.18 No Subsidiaries. The Company does not own or hold, directly or
indirectly, any equity or other ownership interest in any other Person.

 

Section 4.19 Financial Statements. An unaudited balance sheet of the Company as
of October 31, 2004 and the audited financial statements of the Company for the
years ending on December 31, 2002 and December 31, 2003 are attached hereto as
Schedule 4.19 (together with the financial statements for 2004 once provided to
Purchaser pursuant to Section 6.2(d), the “Company Financial Statements”). The
information contained in such Company Financial Statements is, as of the date
thereof, correct in all material respects, and such Company Financial Statements
were prepared in accordance with GAAP (except for the absence of footnotes and
pending year-end adjustments) and fairly present the financial position of the
Company as of the date thereof; provided, however, notwithstanding any other
provision in this Agreement to the contrary, the representations made in this
Section 4.19 with respect to the Company’s 2004 financial statements will be
made by Seller only at Closing and not at the time of execution of this
Agreement.

 

Section 4.20 Insurance. The Company or an Affiliate of the Company carries those
Facility Insurance Policies listed or described in Schedule 4.20. Such coverages
are in full force and effect as of the execution of this Agreement by Seller,
and will be maintained in full force and effect until the consummation of the
Transactions contemplated hereby. Neither Seller nor the Company has made any
claims or instituted any proceedings under any Facility Insurance Policies which
are not fully and finally resolved.

 

Section 4.21 EWG Status. The Company was determined by FERC to be an exempt
wholesale generator within the meaning of Section 32 of the Public Utility
Holding Company Act of 1935, as amended, (an “EWG”) by orders dated December 21,
1998, and February 2,

 

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2000, in Docket Nos. EG99-15-000 and EG00-59-000, respectively. The Facility and
the Company have met, and through the Closing Date will continue to meet, all
applicable requirements, and has made all necessary filings, for the maintenance
of EWG status.

 

Section 4.22 Market-Based Rate Authority. The Company was granted market-based
rate authority by FERC by order dated December 21, 1998, in Docket No.
ER99-415-000. The Company has met, and through the Closing Date will continue to
meet, all applicable requirements and has made all necessary filings for the
maintenance of market-based rate authority, and has, and will continue to hold,
all necessary authorizations that permit the Company to sell electric power and
related services at market-based rates. Except for any facts or circumstances
that may arise as a result of or following the Transactions, to Seller’s
Knowledge, there is no reason to believe that Company’s triennial filing in
respect of its market-based rate authority filing that is pending with the FERC
on the Effective Date will not be accepted by the FERC in the ordinary course.

 

Section 4.23 Books and Records. The minute books and similar records of the
Company have been made available to Purchaser prior to the execution of this
Agreement and contain a true and complete record, in all material respects, of
all action taken at all meetings and by all written consents in lieu of meetings
of the members, boards of directors and similar governing bodies of the Company.

 

ARTICLE 5

 

REPRESENTATIONS AND WARRANTIES OF PURCHASER

 

Purchaser represents and warrants to Seller, as of the date hereof and as of the
Closing Date, as to each of the matters set forth in this Article 5.

 

Section 5.1 Organization and Existence. Purchaser is a limited liability
company, duly organized, validly existing and in good standing under the laws of
the State of Delaware, and has all requisite limited liability company power and
authority to own, lease and operate its properties and to carry on its business
as is now being conducted. Purchaser’s Guarantors are a corporation and a
limited liability company, each duly organized, validly existing and in good
standing under the laws of the State of Delaware, and each has all requisite
corporate or limited liability power and authority (as applicable) to transact
business in such jurisdiction.

 

Section 5.2 Execution, Delivery and Enforceability. Purchaser has all requisite
limited liability company power and authority to execute and deliver, and to
perform its obligations under, this Agreement and the Ancillary Agreements which
are executed by Purchaser, and to consummate the transactions contemplated
thereby. The execution, delivery and performance by Purchaser of this Agreement
and the Ancillary Agreements which are executed by it, and the consummation of
the transactions contemplated hereby and thereby, have been duly and validly
authorized by all necessary limited liability company action required on the
part of Purchaser, and no other limited liability company proceedings on the
part of Purchaser are necessary to authorize this Agreement and the Ancillary
Agreements to which it is a party or to consummate the transactions contemplated
hereby and thereby. Assuming the due

 

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authorization, execution and delivery by Seller of this Agreement and the due
authorization, execution and delivery by Seller and Seller’s Guarantor of the
Ancillary Agreements which are executed by it when executed by Seller (or
Seller’s Guarantor, in the case of Seller’s Guaranty), this Agreement does, and
the Ancillary Agreements when executed by Purchaser will, constitute the valid
and legally binding obligations of Purchaser, enforceable against Purchaser, as
applicable, in accordance with its and their terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws of general application relating to or affecting
the enforcement of creditors’ rights and by general equitable principles.

 

Section 5.3 No Violation. Subject to Purchaser obtaining Purchaser’s Required
Regulatory Approvals and Purchaser’s Required Consents, neither the execution
and delivery by Purchaser of this Agreement, nor the execution and delivery by
Purchaser of the Ancillary Agreements which are executed by Purchaser,
compliance with any provision hereof or thereof, or Purchaser’s consummation of
the transactions contemplated hereby or thereby will:

 

(a) violate or result in a breach of any provisions of the governing documents
of Purchaser;

 

(b) result in a default (or give rise to any right of termination, cancellation
or acceleration) under or violate any of the terms, conditions or provisions of
any note, bond, mortgage, indenture, license or agreement or other instrument or
obligation to which Purchaser is a party or by which Purchaser may be bound,
except for such defaults (or rights of termination or acceleration) as to which
requisite waivers or consents have been, or prior to the Closing will have been,
obtained or which, individually or in the aggregate, would not be reasonably
likely to have a Purchaser Material Adverse Effect;

 

(c) violate any law, rule, regulation, order, writ, injunction or decree,
applicable to Purchaser or any of its assets, except where such violations,
individually or in the aggregate, would not be reasonably likely to have a
Purchaser Material Adverse Effect, and will not affect the validity or
enforceability of this Agreement or the Ancillary Agreements or the validity of
the transactions contemplated hereby or thereby; or

 

(d) require the consent or approval of, filing with, or notice to any Person
which, if not obtained, would prevent Purchaser from performing its obligations
hereunder.

 

Section 5.4 Compliance with Laws. There is no uncured violation by Purchaser of
any laws, orders, ordinances, rules, regulations or judgments of any
Governmental Authority in existence as of the execution of this Agreement,
except for violations or alleged violations that would not be reasonably likely
to have a Purchaser Material Adverse Effect and will not affect the validity or
enforceability of this Agreement or the Ancillary Agreements or the validity of
the transactions contemplated hereby and thereby.

 

Section 5.5 Litigation. There is no claim, action, proceeding or investigation
pending, or to Purchaser’s Knowledge threatened, against or relating to
Purchaser or its Affiliates before any court, arbitrator, or Governmental
Authority, or any judgment, decree or

 

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order of any court, arbitrator, or Governmental Authority, which, individually
or in the aggregate, (a) could reasonably be expected to result, or has
resulted, in (i) the institution of legal proceedings to prohibit or restrain
the performance by Purchaser of this Agreement or any of the Ancillary
Agreements to which it is a party, or the consummation of the transactions
contemplated hereby or thereby, or (ii) a material impairment of the ability of
Purchaser to perform its obligations under this Agreement or any of the
Ancillary Agreements to which it is a party; or (b) would be reasonably likely
to have a Purchaser Material Adverse Effect.

 

Section 5.6 Brokers. All negotiations relating to this Agreement and the
transactions contemplated hereby have been carried on by Purchaser in such a
manner as not to give rise to any valid claim against Seller (by reason of a
Purchaser’s actions) for a brokerage commission, finder’s fee or other like
payment to any Person.

 

Section 5.7 Financial Capacity. Purchaser is financially solvent, able to pay
its debts as they mature, and subject to the funding of the financing commitment
provided to Seller and identified in Section 8.12 hereof and Purchaser’s
Guarantors’ guaranty with respect to the equity portion of the Purchase Price,
Purchaser has committed sources of capital sufficient to permit Purchaser to pay
the Adjusted Purchase Price and otherwise timely perform its respective
obligations hereunder and under the Ancillary Agreements. To Purchaser’s
Knowledge, there are no facts or circumstances in existence as of the Effective
Date that could reasonably be expected to interfere with, delay or otherwise
impede such financing.

 

Section 5.8 Purchaser’s Qualifications. To Purchaser’s Knowledge, Purchaser is
qualified to obtain Purchaser’s Required Consents.

 

Section 5.9 Purchaser’s Due Diligence. Purchaser is an experienced and
knowledgeable investor in the U.S. power generation and development business.
Prior to entering into this Agreement, Purchaser was advised by its counsel,
accountants, financial advisors and such other Persons it has deemed appropriate
concerning this Agreement, and has relied solely on Seller’s obligations,
representations and warranties expressly contained in this Agreement and its
independent investigation and evaluation of, and appraisal and judgment with
respect to, the Company, the business, assets, including the Facility,
liabilities, results of operations, condition (financial or otherwise) and
prospects of the Company, and the revenue, price and expense assumptions
applicable thereto. Purchaser hereby acknowledges that the Membership Interests
are not registered under the Securities Act, or registered or qualified for sale
under any state securities laws and cannot be resold without registration
thereunder or exemption therefrom. Purchaser is an “accredited investor,” as
such term is defined in Regulation D of the Securities Act and will acquire the
Membership Interests for its own account and not with a view to a sale or
distribution thereof in violation of the Securities Act, and the rules and
regulations thereunder, any applicable state “blue sky” laws or any other
applicable securities laws. Purchaser has sufficient knowledge and experience in
financial and business matters to enable it to evaluate the risks of investment
in the Membership Interests and has the ability to bear the economic risk of
this investment for an indefinite period of time.

 

Section 5.10 Financial Statements. Purchaser has previously delivered (i) an
unaudited balance sheet of Purchaser’s Guarantors as of September 30, 2004 and
(ii) the audited

 

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financial statements of Purchaser’s Guarantors for the year ended December 31,
2003 (“Purchaser’s Guarantor’s Financial Statements”). The information contained
in Purchaser’s Guarantor’s Financial Statements is, as of the date thereof,
correct in all material respects, and such Purchaser’s Guarantor’s Financial
Statements were prepared in accordance with GAAP (except for the absence of
footnotes and pending year-end adjustments), and fairly presents the financial
position of Purchaser’s Guarantors as of the date thereof.

 

Section 5.11 Inspection. Purchaser acknowledges that, prior to its execution of
this Agreement, (i) it or its agents or representatives (collectively, “Agents”)
have been afforded access to and the opportunity to inspect, and have inspected,
the Facility, and have had the opportunity to conduct all such due diligence
investigation of the Facility, the Company, and the Material Facility Contracts,
as it deemed necessary or advisable in connection with entering into this
Agreement and the Transactions contemplated hereby; (ii) as of the Closing Date,
it or its Agents will have inspected the Facility, reviewed the Material
Facility Contracts, and conducted all such further due diligence investigations
of the Facility and the Company to the extent it or its Agents deem necessary or
advisable; and (iii) it is relying only upon Seller’s representations and
warranties expressly contained in this Agreement as to the matters covered
herein and Purchaser is otherwise relying on its own and its Agents’ inspections
and investigation in order to satisfy itself as to the condition, suitability,
and value of the business, assets (including the Facility), liabilities, results
of operations, condition (financial or otherwise) and prospects of the Company.

 

Section 5.12 Regulatory Status. The Purchaser is not, and, by reason of the
ownership, operation, or maintenance of the Company or the Facility (subject to
the Company obtaining exempt wholesale generation status under Section 32 of the
Public Utility Holding Company Act of 1935, as amended (“PUHCA”)), or any other
transaction contemplated by this Agreement, will not be deemed to be subject to
regulation as an “electric utility,” a “gas utility,” a “public utility
company,” a “holding company,” an “affiliate” of a “holding company,” a
“subsidiary” of a “holding company,” or an “affiliate” of a “subsidiary” of a
“holding company” within the meaning of PUHCA, or a “public utility” or
“electric utility” within the meaning of the Federal Power Act, other than
regulation as described in the orders granting Purchaser’s Required Regulatory
Approvals.

 

ARTICLE 6

 

COVENANTS OF EACH PARTY

 

Section 6.1 “As Is” Sale. EXCEPT FOR THE COVENANTS, REPRESENTATIONS AND
WARRANTIES OF SELLER SET FORTH IN OF THIS AGREEMENT, PURCHASER UNDERSTANDS AND
AGREES THAT THE MEMBERSHIP INTERESTS ARE BEING SOLD AND ACQUIRED, AND ALL OF THE
ASSETS OF THE COMPANY, INCLUDING THE FACILITY, SOLD AND ACQUIRED THEREBY ARE
LIKEWISE BEING SOLD AND ACQUIRED, “AS IS, WHERE IS” ON THE CLOSING DATE, AND IN
THEIR CONDITION ON THE CLOSING DATE “WITH ALL FAULTS”, AND THAT PURCHASER IS
RELYING ON ITS OWN EXAMINATION OF THE COMPANY AND SUCH ASSETS. PURCHASER
UNDERSTANDS AND AGREES THAT SELLER MAKES NO REPRESENTATIONS OR WARRANTIES WITH
RESPECT TO THE

 

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GENERATOR ROTOR REPAIRS AND THAT ANY AND ALL WARRANTY CLAIMS WITH RESPECT
THERETO SHALL BE MADE BY PURCHASER DIRECTLY AGAINST THE GENERATOR ROTOR
CONTRACTORS. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING AND EXCEPT FOR THE
REPRESENTATIONS AND WARRANTIES EXPRESSLY SET FORTH IN THIS AGREEMENT, PURCHASER
UNDERSTANDS AND AGREES THAT SELLER EXPRESSLY DISCLAIMS ALL REPRESENTATIONS AND
WARRANTIES AS TO LIABILITIES, OPERATION OF THE ASSETS OF THE COMPANY, INCLUDING
THE FACILITY, TITLE, CONDITION, VALUE OR QUALITY OF SUCH ASSETS OR THE BUSINESS,
CONDITION (FINANCIAL OR OTHERWISE), OR PROSPECTS OF THE COMPANY, RISKS AND OTHER
INCIDENTS OF OWNERSHIP OF THE MEMBERSHIP INTERESTS OR SUCH ASSETS AND ANY
REPRESENTATION OR WARRANTY OF MERCHANTABILITY, USAGE, SUITABILITY OR FITNESS FOR
ANY PARTICULAR PURPOSE WITH RESPECT TO SUCH ASSETS OR ANY PART THEREOF, OR AS TO
THE WORKMANSHIP THEREOF OR THE ABSENCE OF ANY DEFECTS THEREIN, WHETHER LATENT OR
PATENT. EXCEPT AS OTHERWISE PROVIDED FOR IN THIS AGREEMENT, PURCHASER FURTHER
AGREES THAT NO INFORMATION OR MATERIAL WHATSOEVER PROVIDED BY OR COMMUNICATION
MADE BY SELLER OR ANY REPRESENTATIVE OF SELLER WILL CONSTITUTE, CREATE OR
OTHERWISE CAUSE TO EXIST ANY REPRESENTATION OR WARRANTY.

 

Section 6.2 Efforts to Close; Updating.

 

(a) Subject to the terms and conditions herein, each of the Parties hereto shall
use commercially reasonable efforts to consummate and make effective the
Transactions contemplated hereby, as soon as reasonably practicable, and in any
event on or prior to May 31, 2005, including the satisfaction of all conditions
thereto set forth herein; provided, however, that this shall in no way affect or
modify the Parties’ respective termination rights under Section 10.1. Such
actions shall include, without limitation, exerting their commercially
reasonable efforts to obtain each of the consents, authorizations and approvals
of any Governmental Authority or other Person which is reasonably necessary to
effectuate the Transactions contemplated hereby, including, in the case of
Seller, Seller’s Required Regulatory Approvals and Seller’s Required Consents,
and in the case of Purchaser, Purchaser’s Required Regulatory Approvals and
Purchaser’s Required Consents, and effecting all other necessary registrations
and filings, including, without limitation, filings under applicable Laws,
including the HSR Act and the Communications Act, and all other necessary
filings with any Governmental Authority, including FERC. All appearances,
presentations, briefs, and proposals made or submitted by or on behalf of either
Party before any regulatory authority in connection with the approval of this
Agreement, the Transactions and the Ancillary Agreements shall be subject to the
joint approval or disapproval in advance and the joint control of Purchaser and
Seller, acting with the advice of their respective counsel, and each Party will
consult and fully cooperate with the other Party, and consider in good faith the
views of the other Party, in connection with any such appearance, presentation,
brief, or proposal; provided that nothing will prevent a Party from responding
to a subpoena or other legal process as required by law or submitting factual
information in response to a request therefor. Each Party will provide the

 

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other with copies of all written communications from Governmental Authorities
relating to the approval or disapproval of this Agreement, the Ancillary
Agreements and the transactions contemplated hereby and thereby.

 

(b) The Parties shall promptly notify each other of any changes or additions to
any of their respective Schedules to this Agreement, if any, as of a reasonably
current date prior to the Closing, but in any event at least once not later than
three (3) Business Days prior thereto. No such updates made pursuant to this
Section shall be deemed to cure any inaccuracy of any representation or warranty
made in this Agreement as of the date hereof, unless the Party being so notified
specifically agrees thereto in writing, nor shall any such notification be
considered to constitute or give rise to a waiver by any Party of any condition
set forth in this Agreement.

 

(c) Each Party shall, as promptly as practicable, notify the other in writing
upon its receipt of Knowledge of any breach of any representation or warranty
made by the other Party or of any other condition or circumstance that would
excuse its timely performance hereunder, or excuse Purchaser’s Guarantors or
Seller’s Guarantor, as the case may be, from their respective obligations under
Purchaser’s Guaranty or Seller’s Guaranty, as the case may be. Notwithstanding
the obligations in this paragraph, the failure of a Party to notify the other of
any breach of any representation or condition will not be a waiver of that
Party’s rights with respect to that breach or any similar breach. In the event
of such failure, however, the Party not receiving such notice is entitled to all
remedies available at law or equity (to the extent of its damage) resulting from
the failure to send notice.

 

(d) Seller (with each of Seller and Purchaser to bear one-half (1/2) of the
expense) will provide audited financial statements for the year ending December
31, 2004 (as audited by Ellin & Tucker) not less than 15 days before Closing.
Seller agrees to fully cooperate and use its reasonable efforts to facilitate
(and shall cause any of its Affiliates and its independent accountants to
cooperate and to undertake reasonable efforts to facilitate) Purchaser’s
financing, including allowing Purchaser’s use of such financial statements in
connection with Purchaser’s financing pursuant to the commitment previously
provided to Seller.

 

Section 6.3 Expenses. Whether or not the Transactions contemplated hereby are
consummated, except as otherwise provided in the Adjustment Sections or any
other provision of this Agreement, all costs and expenses incurred in connection
with this Agreement and the Transactions contemplated hereby shall be paid by
the Party incurring such expenses. Notwithstanding the foregoing, Purchaser
shall pay (i) all Transfer Taxes incurred in connection with this Agreement and
the Transactions contemplated hereby as provided in Section 6.6(a); and (ii) all
governmental filing fees incurred in connection with compliance with the HSR Act
and the Communications Act. All such charges and expenses shall be promptly
settled between the Parties at the Closing or upon termination or expiration of
further proceedings under this Agreement, or with respect to such charges and
expenses not determined as of such time, as soon thereafter as is reasonably
practicable.

 

Section 6.4 Conduct Pending Closing. Prior to consummation of the Transactions
contemplated hereby or the termination or expiration of this Agreement pursuant
to its terms,

 

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unless Purchaser shall otherwise consent in writing, which consent shall not be
unreasonably withheld or delayed, and except for actions (i) which are required
by Law; (ii) are reasonably taken in connection with any emergency or other
force majeure event; (iii) arise from or are related to any of the Excluded
Assets or the Excluded Liabilities or are necessary for the anticipated transfer
of the Membership Interests; or (iv) are otherwise contemplated by this
Agreement or disclosed in Schedule 6.4; Seller shall cause the Company to:

 

(a) Operate and maintain the Facility in all material respects in accordance
with the ordinary course of business consistent with past practices;

 

(b) Other than pursuant to the requirements of any existing Material Facility
Contract, not sell, lease, transfer, or dispose of, or make any contract for the
sale, lease, transfer or disposition of, any material assets or properties of
the Company or any spare parts or other inventory, except sales, leases,
transfers or dispositions in the ordinary course of business consistent with
past practices;

 

(c) Not make any distributions in respect of, or issue any of, its membership
interests or securities convertible into its membership interests, or
repurchase, redeem, or otherwise acquire any such membership interests or make
or propose to make any other change in its capitalization; provided, however,
that on or before the Closing Date, Seller shall have the right to cause the
Company to distribute to Seller and its Affiliates any or all of the cash and
Excluded Assets held by the Company;

 

(d) Not take any action or enter into any commitment with respect to or in
contemplation of any liquidation, dissolution, recapitalization, reorganization
or other winding up of the Company’s business or operations;

 

(e) Not change its accounting policies or practices (including, without
limitation, any change in depreciation or amortization policies), except as
required under GAAP and disclosed in writing to Purchaser;

 

(f) Not enter into any employment agreement not terminable by the Company at
will and without cost to the Company;

 

(g) Not create any employee benefit plan (within the meaning of Section 3(3) of
ERISA) or any other employee benefit plan or program not subject to ERISA,
except as required by Law;

 

(h) Not incur any debt (other than account payables arising in the ordinary
course of business) or grant any Encumbrance on any assets of the Company,
except (i) for Permitted Encumbrances; or (ii) to the extent required or
evidenced by any existing Material Facility Contract;

 

(i) Maintain in force and effect the property and liability insurance policies
related to the Facility;

 

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(j) Not take any action which would cause Seller’s representations and
warranties set forth in Article 4 to be incorrect in any material respect as of
the Closing;

 

(k) Not enter into any contract or agreement, or modify any contract or
agreement, with any Governmental Authority having responsibility for Taxes;

 

(l) Not commit or agree to enter into (or modify) any contract or agreement
specified in clause (k) of this Section;

 

(m) Not enter into, amend, terminate, waive any rights or defaults, or modify in
any respect, and except as incident to the operation of the business and assets
of the Company in the ordinary course, allow to lapse or expire, or fail to
timely apply for renewal of any Material Facility Contract or any Permit;

 

(n) Other than the Generator Rotor Repairs, not incur any obligation to make
capital expenditures in excess of $100,000, in the aggregate, except those that
are paid prior to the Closing;

 

(o) Not amend or otherwise change its charter, bylaws, member control agreement
or equivalent organizational documents; and

 

(p) Not acquire (including without limitation by merger, consolidation or
acquisition of stock or assets) any interest in any other Person; and not incur
any indebtedness for borrowed money or issue any debt securities or assume,
guarantee or endorse, or otherwise become responsible for the obligations of any
other Person, or make any loans or advances; or, except in the ordinary course
of business consistent with past practice, enter into any transaction relating
to the purchase of assets.

 

(q) (i) Exercise commercially reasonably efforts not to incur any obligation to
accept delivery or pay for any Fuel Oil after the Closing Date and (ii) not
incur any obligation to deliver, provide or make available any energy, capacity
or ancillary services after the Closing Date (in each case based upon Seller’s
good faith estimate as to the timing of the Closing Date).

 

(r) Exercise commercially reasonably efforts to have a total Fuel Inventory
(measured to the extent in excess of 200,000 gallons below the load line) of not
less than 1,500,000 and of not more than 4,500,000 gallons, as of the Closing
Date (based upon Seller’s good faith estimate as to the timing of the Closing
Date); provided that this clause (r) shall not require the Company to forego or
diminish any opportunities to deliver, provide or make available any energy,
capacity or ancillary services on or before the Closing Date.

 

provided, that nothing in this Section shall (i) obligate Seller to make or
cause the Company to make expenditures other than in the ordinary course of
business consistent with past practices or to otherwise suffer any material
economic detriment; or (ii) preclude Seller, or the Company from instituting,
participating in or completing any program designed to promote compliance or
comply with Laws or other good business practices with respect to the Facility.

 

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Section 6.5 Regulatory Approvals.

 

(a) Subject to Section 6.2, as promptly as practicable but in no event later
than fourteen (14) calendar days after the Effective Date, Seller and Purchaser
shall each prepare and file an application with FERC for approval of the
Transactions under Section 203 of the Federal Power Act. The Parties shall
consult with each other as to the appropriate time of filing such application
and shall agree in good faith upon the timing of such application, respond
promptly to any requests for additional information made by FERC, and use their
commercially reasonable efforts to cause any applicable waiting periods to
terminate or expire at the earliest possible date after the date of the
application.

 

(b) Subject to Section 6.2, as promptly as practicable but in no event later
than fourteen (14) calendar days after the Effective Date, Seller and Purchaser
shall file or cause to be filed with the Federal Trade Commission, the
Department of Justice, and the FCC all notifications required to be filed under
the HSR Act and the Communications Act, respectively, and the rules and
regulations promulgated thereunder with respect to the Transactions contemplated
hereby. The Parties shall consult with each other as to the appropriate time of
filing such notifications and shall agree in good faith upon the timing of such
filings, respond promptly to any requests for additional information made by
either of such agencies, and use their commercially reasonable efforts to cause
the waiting periods under the HSR Act to terminate or expire at the earliest
possible date after the date of filing.

 

(c) [Intentionally Omitted.]

 

(d) Without limiting the generality of the Parties’ undertakings pursuant to
Sections 6.5(a) and 6.5(b), the Parties shall:

 

(i) take promptly all commercially reasonable actions to resolve any concerns on
the part of any Governmental Authority having jurisdiction under any applicable
Law related to the Transactions, including without limitation entering into
negotiations, providing information, making proposals and entering into and
performing agreements; provided, however, that nothing in this Agreement shall
require either of the Parties, their Affiliates, or the Company to dispose of or
sell assets or properties, hold separate particular assets or categories of
assets, or businesses, or agree to dispose of or hold separate one or more
assets or properties or to take any other action (or refrain from taking any
other action) that could reasonably be expected to have a Purchaser Material
Adverse Effect or a Company Material Adverse Effect or a similar material
adverse effect with respect to Seller or any Affiliate of Purchaser or Seller;

 

(ii) use commercially reasonable efforts (including taking the steps
contemplated by Section 6.5(d)(i)) to prevent the entry in a judicial or
administrative proceeding brought under any Law by any Governmental Authority or
any other party for a permanent or preliminary injunction or other order that
would make consummation of the Transactions contemplated by this Agreement
unlawful or that would prevent or delay such consummation; and

 

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(iii) take promptly, in the event that an injunction or order of the type
identified in Section 6.5(d)(ii) has been issued in such a proceeding, any and
all commercially reasonable steps, including the appeal thereof, the posting of
a bond or the steps contemplated by Section 6.5(d)(i), necessary to vacate,
modify or suspend such injunction or order so as to permit such consummation on
a schedule as close as possible to that contemplated by this Agreement.

 

(e) Subject to Section 6.2, from and after the Closing Date, Purchaser shall
have the primary responsibility for securing the transfer, reissuance or
procurement of the Permits to the extent required by Law. Before Closing,
Purchaser will prepare (subject to Seller’s reasonable review and input) a
notice of change of material facts for filing in the Company’s FERC EWG docket,
and Seller will, and will cause Company to, cooperate with Purchaser in
preparing and making the filing before Closing as requested by Purchaser.
Promptly following the Closing, Purchaser shall make all required notice
filings, including without limitation: (i) notice of consummation of the
Transactions pursuant to Section 203 of the Federal Power Act, (ii) notice of
change of material facts in FERC’s EWG docket and (iii) notice of change of
upstream ownership in FERC’s Section 205 docket, each of which items (i) through
(iii) shall be subject to Seller’s reasonable review and input.

 

Section 6.6 Tax Matters.

 

(a) All Transfer Taxes (if any) incurred in connection with this Agreement and
the Transactions contemplated hereby (whether imposed on Seller, or Purchaser)
shall be paid by Purchaser if and when due. Seller will file, to the extent
required by applicable Law, all necessary Tax Returns and other documentation
with respect to all such Transfer Taxes, and Purchaser will be entitled to
review such returns in advance and such Tax Returns shall be subject to
Purchaser’s approval (which shall not be unreasonably withheld or delayed). To
the extent required by applicable Law, but subject to such review and approval
(which shall not be unreasonably withheld or delayed), Seller or any of their
Affiliates will join in the execution of any such Tax Returns or other
documentation.

 

(b) With respect to Property Taxes:

 

(i) Purchaser shall prepare and timely file all Tax Returns required to be filed
after the Closing with respect to the assets of the Company, if any, and shall
duly and timely pay all such Taxes arising from the filing of such Tax Returns.
Purchaser’s preparation of any such Tax Returns for the calendar year in which
the Closing occurs shall be subject to Seller’s approval, which approval shall
not be unreasonably withheld or delayed. Purchaser shall make such Tax Returns
available for Seller’s review and approval (which approval shall not be
unreasonably withheld or delayed) no later than fifteen (15) Business Days prior
to the due date for filing such Tax Returns, it being understood that Seller’s
failure to approve any such Tax Returns shall not limit Purchaser’s obligation
to timely file such Tax Returns and duly and timely pay all Taxes due as a
result of filing such Tax Returns.

 

(ii) Seller shall prepare and timely file all Tax Returns required to be filed
prior to the Closing with respect to the assets of the Company, if any, and
shall duly and timely pay (if prior to Closing) all such Taxes arising from the
filing of the Tax Returns. Seller’s

 

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preparation of any such Tax Return shall be subject to Purchaser’s approval,
which approval shall not be unreasonably withheld or delayed. Seller shall make
such Tax Returns available for Purchaser’s review and approval (which approval
shall not be unreasonably withheld or delayed) no later than fifteen (15)
Business Days prior to the due date for filing such Tax Returns, it being
understood that Purchaser’s failure to approve any such Tax Returns shall not
limit Seller’s obligation to timely file such Tax Returns and duly and timely
pay all Taxes due as a result of filing such returns.

 

(iii) The Property Taxes assessed on the assets of the Company for the
applicable taxable year in which the Closing occurs shall be allocated to the
portion of such applicable taxable year ending on the Closing Date based upon
the ratio of the number of days in such applicable taxable year through the
Closing Date over the total number of days in such applicable taxable year times
the amount of Property Taxes paid by the Company for such applicable tax year.

 

(iv) Within 60 days following the date that Company or Purchaser pays the last
of the Property Taxes assessed on the assets of the Company for the taxable year
in which the Closing occurs, Purchaser will send a statement to Seller showing
(A) the total amount of such Property Taxes paid for the taxable year, (B) the
amount of such Property Taxes allocated to the portion of the taxable year
ending on the Closing Date as provided in Section 6.6(b)(iii) above (the “Actual
Pre-Closing Period Taxes”) and (C) the amount of Taxes payable included as
current liabilities of the Company in the Closing Balance Sheet, as adjusted by
the Post Closing Statement, taken into account in the adjustment of the Purchase
Price (the “Estimated Pre-Closing Period Taxes”). Seller will pay to Purchaser
the excess, if any, of the Actual Pre-Closing Period Taxes over the Estimated
Pre-Closing Period Taxes. Purchaser will pay to Seller the excess, if any, of
the Estimated Pre-Closing Period Taxes over the Actual Pre-Closing Period Taxes.

 

(c) Seller shall prepare and file or cause to be prepared and filed all Tax
Returns (other than Tax Returns to which Section 6.6(b) applies) for the Company
for any taxable period ending on or prior to the Closing Date. Any income,
deductions, losses, or credits with respect to the operations of the Company for
the taxable period (or portion thereof) ending on the Closing Date shall be
reported on the consolidated or combined income tax return that includes TECO
Wholesale Generation, Inc., for such period.

 

(d) Purchaser and Seller shall provide the other Party with such assistance as
may reasonably be requested by the other Party in connection with the
preparation of any Tax Return, any audit or other examination by any taxing
authority, or any judicial or administrative proceedings relating to liability
for Taxes, and each will retain and provide the requesting Party with any
records or information which may be relevant to such return, audit or
examination, proceedings or determination. Each Party will retain all of its Tax
Returns, schedules, work papers, and all other material records until the
expiration of the statute of limitations of the subject Tax period. Any
information obtained pursuant to this Section 6.6 or pursuant to any other
Section hereof providing for the sharing of information relating to or review of
any Tax Return or other schedule relating to Taxes shall be kept confidential by
the Parties hereto in accordance with Section 6.9.

 

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(e) After the Closing Date, in the case of any audit, examination, or other
proceeding with respect to Taxes (“Tax Proceeding”) relating to a Tax period
ending on or before the Closing Date, either Party receiving any notice related
to Taxes related to the Company shall inform the other Party within ten (10)
days of the receipt of such notice. If a proceeding ensues related to Taxes for
which Seller would be obligated under this Agreement, Seller, at Seller’s
expense, will have the opportunity to control the conduct of such Tax
Proceedings. Purchaser shall execute or cause to be executed powers of attorney
or other documents necessary to enable Seller to take all actions reasonably
desired by Seller with respect to such Tax Proceeding. Seller shall have the
right to control, in its sole discretion, any such Tax Proceedings, including
selection of counsel and selection of a forum for such contest, and to initiate
any claim for refund, file any amended return, or take any other action which it
deems appropriate with respect to such Taxes; provided however, that Seller may
not settle any Tax Proceeding without Purchaser’s written consent (which consent
shall not be unreasonably withheld or delayed) if such settlement is reasonably
expected to adversely affect the Company or Purchaser following the Closing
Date. Purchaser shall not enter into any agreement with the relevant
Governmental Authority pertaining to Taxes for which Seller would be obligated
under this Agreement without the written consent of Seller; provided, however,
that Purchaser may, without the written consent of Seller, enter into such an
agreement, provided that Purchaser shall have agreed in writing to accept
responsibility and liability for the payment of such Taxes and to forego any
indemnification under this Agreement with respect to such Taxes. In the event of
any conflict between the provisions of this Section 6.6(e) and any other
provision of this Agreement, the provisions of this Section 6.6(e) shall
control.

 

(f) Any refund of Taxes actually paid with respect to Taxes attributable to the
Company shall be promptly paid as follows (or to the extent payable but not paid
due to offset against other Taxes shall be promptly paid by the Party receiving
the benefit of the offset as follows): (i) to Seller if attributable to Taxes
with respect to any Tax year ending on or before the Closing Date (or for any
Tax year beginning before and ending after the Closing Date to the extent
allocable (determined in a manner consistent with Section 6.6(b) or (c), as
applicable) to the portion of such period beginning before and ending on the
Closing Date); provided, however, that, if any such refund, or the right to
receive such refund, of Taxes previously resulted in an increase to the Purchase
Price paid to Seller under this Agreement, such refund shall not, when such
refund is paid or utilized to offset other Taxes, result in a duplicate payment
to Seller pursuant to this Section 6.6(f)(i); and (ii) to Purchaser if
attributable to Taxes with respect to any Tax year beginning after the Closing
Date (or for any Tax year beginning before and ending after the Closing Date to
the extent allocable (determined in a manner consistent with Section 6.6(b) or
(c), as applicable), to the portion of such period beginning after the Closing
Date.

 

(g) Any Tax Return which includes or is based on the operations, ownership,
assets, or activities of the Company for the periods before Closing shall be
prepared in accordance with past Tax accounting practices used by the Company or
Seller with respect to the Tax Returns in question (unless such past practices
are no longer permissible under applicable Tax law), and to the extent any items
are not covered by past practices (or in the event such past practices are no
longer permissible under applicable Tax law), in accordance with reasonable Tax
accounting practices selected by the Party responsible for filing such Tax
Return hereunder with the consent, not to be unreasonably withheld or delayed,
of the other Party.

 

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(h) In the event that a dispute arises between Seller and Purchaser as to the
amount of any Taxes under this Section 6.6, the Parties shall attempt in good
faith to resolve such dispute, and any amount so agreed upon shall be paid to
the appropriate Party. If such dispute is not resolved within thirty (30) days
after initially arising, the Parties shall submit the dispute to the Independent
Accounting Firm for resolution which resolution shall be final, conclusive and
binding on the Parties. Notwithstanding anything in this Agreement to the
contrary, the fees and expenses of the Independent Accounting Firm in resolving
the dispute shall be borne equally by Seller and Purchaser. Any payment required
to be made as a result of the resolution of the dispute by the Independent
Accounting Firm shall be made within ten (10) days after such resolution,
together with any interest determined by the Independent Accounting Firm to be
appropriate.

 

Section 6.7 Risk of Loss.

 

(a) Between the date hereof and the Closing Date, all risk of loss or damage to
the assets and properties of the Company, including the Facility, shall be borne
by Seller. As of the Closing Date, all risk of loss or damage to the assets and
properties of the Company, including the Facility, shall be borne by Purchaser.

 

(b) If, before the Closing Date, all or any portion of the Facility becomes
subject to any condemnation or eminent domain proceeding, Seller shall notify
Purchaser promptly in writing of such fact. As soon as practicable following the
filing of such condemnation or eminent domain proceeding, Seller will provide to
Purchaser a detailed written estimate from an independent third party appraiser
mutually acceptable to Seller and Purchaser (the “Condemnation Estimate”)
setting forth the estimated amount of the reduction in the fair market value of
the Facility resulting from such condemnation. If the Condemnation Estimate is
equal to or less than fifteen percent (15%) of the Purchase Price, Purchaser
may, at its option: (i) require Seller to agree to assign to Purchaser at the
Closing the proceeds of any claim or settlement related to such proceeding to
which Seller or any Affiliate of Seller (other than the Company) may be entitled
(and Seller shall exercise commercially reasonable efforts in pursuit of such
settlement or claim and Purchaser and the Company will provide reasonable
cooperation with such efforts), or (ii) reduce the Purchase Price by an amount
equal to the Condemnation Estimate and require Company to affirmatively disclaim
any interest in any claim, settlement, or proceeds thereof related to the
proceeding that Company may have (provided that Purchaser and the Company shall
provide reasonable cooperation with Seller’s efforts to pursue such claim or
settlement), and in each such event the Parties shall proceed to Closing. Any
failure of a condition to Closing related to any such proceeding of which Seller
shall have so notified Purchaser shall be deemed not to exist, provided that
Purchaser exercises its election pursuant to the preceding sentence within a
reasonable period of time. If the Condemnation Estimate is greater than fifteen
percent (15%) of the Purchase Price, then Purchaser may elect, within fifteen
(15) days of written notice of such proceeding, either to (x) require Seller
upon the Closing to assign to Purchaser any claim, settlement, or proceeds
thereof related to such proceeding to which Seller or any Affiliate of Seller
(other than the Company) may be entitled and proceed with the Transactions
contemplated by this Agreement; or (y) terminate this Agreement.

 

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(c) If, before the Closing Date, all or any portion of the Facility is damaged
or destroyed (the “Damaged Portion”) (whether by fire, theft, vandalism or other
casualty, each a “Casualty”) in whole or in part, Seller shall notify Purchaser
promptly in writing of such fact. As soon as practicable following the Casualty,
Seller will provide to Purchaser a detailed written estimate from an independent
third party appraiser mutually acceptable to Seller and Purchaser setting forth
the estimate amount required to repair, replace or restore the Damaged Portion
together with the estimated loss of profits and all costs and expenses
associated with the Casualty (as mutually agreed by Purchaser and Seller, the
“Casualty Estimate”). If the Casualty Estimate is equal to or less than fifteen
percent (15%) of the Purchase Price, Purchaser may, at its option: (i) require
Seller to agree to assign to Purchaser at the Closing the proceeds of any
insurance claim or settlement related to such Casualty to which Seller or any
Affiliate of Seller (other than the Company) may be entitled (and Seller shall
exercise commercially reasonable efforts in pursuit of such settlement or claim
and Purchaser and the Company will provide reasonable cooperation with such
efforts), or (ii) reduce the Purchase Price by an amount equal to the Casualty
Estimate and require Company to affirmatively disclaim any interest in any
insurance claim or settlement, or proceeds thereof, related to the proceeding
that Company may have (provided that Purchaser and the Company shall provide
reasonable cooperation with Seller’s efforts to pursue such claim or
settlement), and in each such event, the Parties shall proceed to Closing. Any
failure of a condition to Closing related to any such proceeding of which Seller
shall have so notified Purchaser shall be deemed not to exist, provided that
Purchaser exercises its election pursuant to the preceding sentence within a
reasonable period of time. If the Casualty Estimate is greater than fifteen
percent (15%) of the Purchase Price, then Purchaser may elect, within fifteen
(15) days of written notice of such proceeding, either to (x) require Seller
upon the Closing to assign to Purchaser any claim, settlement, or proceeds
thereof related to such proceeding to which Seller or any Affiliate of Seller
(other than the Company) may be entitled and proceed with the Transactions
contemplated by this Agreement; or (y) terminate this Agreement.

 

Section 6.8 Insurance. Purchaser acknowledges and agrees that, effective upon
the Closing, the Facility Insurance Policies shall be terminated or modified to
exclude coverage of the Company and the Facility by Seller, and, as a result,
Purchaser shall be obligated at or before Closing to obtain at its sole cost and
expense replacement insurance, including insurance required by any third party
to be maintained by or for the benefit of the Company. Purchaser further
acknowledges and agrees that it may need to provide to certain Governmental
Authorities and third parties evidence of such replacement or substitute
insurance coverage for the continued operations of the business of the Company
following the Closing. Neither Seller nor Company will release (or take any
action that would release) any insurer for any liability or loss that is or
could reasonably likely be the subject of a claim under any such insurance on or
before the Closing Date. Except as otherwise provided in Section 6.7 hereof,
Seller shall assign, or shall cause its Affiliates to assign, to the Company all
proceeds from any unpaid claims made or entitled to be made under the Facility
Insurance Policies for damages or liabilities that have occurred before the
Closing Date, and will use its commercially reasonable efforts in the pursuit of
any such claims and collection of any proceeds related thereto.

 

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Section 6.9 Announcements; Confidentiality.

 

(a) Except as provided below, the Parties acknowledge that from and until the
date that is two (2) years after the Effective Date, no press release or other
public announcement, or public statement or comment in response to any inquiry,
relating to the Transactions contemplated by this Agreement shall be issued or
made by Purchaser or Seller, or their respective Affiliates, without the joint
written approval of both Purchaser and Seller. At least two (2) Business Days
before the Effective Date, each Party will submit to the other a draft of its
press release. If the Party receiving a press release does not object in writing
before the Closing, the press release will be deemed approved. Each Party will
cooperate with the other in drafting acceptable press releases, and neither
party will unreasonably withhold its consent to the other Party’s press release.
Notwithstanding the above, a press release or other public announcement,
regulatory filing, statement or comment made without such joint approval shall
not be in violation of this Section 6.9 if it is made in order for the
disclosing Party or any of its Affiliates to comply with applicable Laws or
stock exchange policies and regulations, as determined in the reasonable
judgment of the Party making such release or announcement and based upon advice
of counsel; and provided, further, that in all instances prompt written notice
from one Party to the other shall be given with respect to any such release,
announcement, statement or comment.

 

(b) Until Closing, and unless previously approved in writing by the other Party,
each Party shall keep confidential all information (whether in oral or written
form, electronically stored or otherwise) (i) obtained from or on behalf of the
other Party either before or after the date of this Agreement; (ii) related to
Purchaser’s proposed purchase of the Membership Interests, Seller’s proposed
sale of the Membership Interests, the contents of this Agreement and the
Ancillary Agreements, or the negotiation of this Agreement and the Ancillary
Agreements; or (iii) related in any way whatsoever to this Agreement or the
Ancillary Agreements.

 

(c) Until the date that is two (2) years after Closing, Seller will keep (and
will cause its Affiliates to keep) confidential all information (whether in oral
or written form, electronically stored or otherwise) related to Purchaser or
related to the Company or the business or the assets of the Company that is not
generally known to the public, specifically including any and all information
designated or treated as confidential by Seller in connection with the sales
process.

 

(d) The information described in paragraphs (b) and (c) is referred to as
“Confidential Information”. Notwithstanding the above, a Party may disclose the
Confidential Information to its management group, professional advisors
(including without limitation lenders and prospective financing sources),
employees, agents, or representatives who need to know such Confidential
Information to evaluate the Transactions contemplated hereby, are informed of
its confidential nature, and agree to abide by this Section 6.9. If a Party is
compelled to disclose Confidential Information by judicial or administrative
process or by any other requirements of Law, or disclosure is reasonably
necessary to obtain the approval of any Governmental Authority or third party
necessary to consummate the Transactions contemplated hereby, the Party will
provide the other Party with prompt written notice of any such request or
requirement and assist the other Party, at the other Party’s expense, in
obtaining a appropriate protective order or other appropriate remedy or waive
compliance with this Section 6.9; provided, however, whether or

 

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not such order or other remedy is obtained, the Party requested or required to
disclose Confidential Information shall disclose only that portion of the
Confidential Information that it is advised by counsel that it is legally
required to so disclose, and will exercise reasonable efforts to obtain reliable
assurance that confidential treatment will be accorded the Confidential
Information. Upon any termination of this Agreement pursuant to Article 10
hereof and upon the written request of a Party, the other Party shall return or
destroy promptly, at the request and option of the Party, all originals and
copies of written or recorded information provided to such Party by or on behalf
of the other Party and no such information shall be used by such Party, or its
employees, agents or representatives, in the business or operations of any
Person. Notwithstanding the foregoing, (i) each Party’s obligations under this
Section 6.9 shall not apply to any information or document insofar as it becomes
available to the public other than as a result of a disclosure by the other
Party in violation of this Agreement or other obligation of confidentiality
under which such information may be held or becomes available to the Party on a
non-confidential basis from a source other than the other Party or its officers,
directors, employees, representatives or agents, and (ii) except as may be
required by Law, the Parties shall seek appropriate protective orders or
confidential treatment for the Schedules to this Agreement in connection with
any filing with or disclosure to any Governmental Authority.

 

(e) The Confidentiality Agreement (to the extent that it relates to the
Facility) shall be superseded by this Agreement effective as of the Effective
Date and the Parties’ obligations under this Section 6.9 shall survive the
Closing, or termination of this Agreement, if Closing does not occur, for a
period of two (2) years. The Parties will cause their Affiliates that are party
to the Confidentiality Agreement to amend it to effect the provisions of the
first sentence of this paragraph (e). Effective as of Closing, Seller hereby
assigns to Purchaser (or will cause its Affiliates to assign to Purchaser at
Closing, if applicable) the benefit of all confidentiality agreements that it
has obtained in connection with the proposed sale of the Company.

 

Section 6.10 Post Closing – Further Assurances. At any time or from time to time
after the Closing, each Party shall, upon the reasonable request of the other
Party, execute and deliver any further instruments or documents, and exercise
commercially reasonable efforts to take such further actions as may reasonably
be required, to fulfill and implement the terms of this Agreement or realize the
benefits intended to be afforded hereby.

 

Section 6.11 Post Closing – Information and Records.

 

(a) For a period of seven (7) years after the Closing (or, if requested in
writing by a Party within seven (7) years after the Closing, until the closing
of the examination of Seller’s federal income Tax Returns for all periods prior
to and including the Closing or until conclusion of any ongoing inquiry by any
Governmental Authority) neither Party will dispose of any books, records,
documents or information reasonably relating to the Company before the Closing
Date without first giving notice to the other Party thereof and permitting that
Party to retain or copy such books and records as it may select. During such
period, each Party will (i) permit the other to examine and make copies, at the
requesting Party’s expense, during normal business hours and upon reasonable
notice, of such books, records, documents and information for any reasonable
purpose, including any litigation or other proceeding now

 

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pending or hereafter commenced against that Party, or the preparation of income
or other Tax Returns; provided, however, that all such examinations shall occur
and all such access shall be provided at times and places reasonably set by the
responding Party, and in no event shall Seller interfere with Purchaser’s
operation of the Facility or the conduct of its business.

 

(b) During such seven (7) year time period, Purchaser will provide to Seller, at
Seller’s expense, copies of such books, records, documents and information
reasonably relating to the Company delivered to it by Seller or any of its
Affiliates for any reasonable purpose, including any litigation or other
proceeding now pending or hereafter commenced against Seller or any of its
Affiliates by any person (including Purchaser). Seller will provide reasonable
notice to Purchaser of its need to access such books, records, documents or
other information.

 

(c) If privileged and/or attorney work product documents or information,
including communications between Seller and its counsel, are disclosed to
Purchaser in the books, records, documents or other information delivered by
Seller, Purchaser agrees (i) such disclosure is inadvertent; (ii) such
disclosure will not constitute a waiver, in whole or in part, of any privilege
or work product; (iii) such information will constitute confidential information
subject to the provisions of Section 6.9; and (iv) it will promptly return to
Seller all copies of such books, records, documents or other information in the
possession of Purchaser or its Affiliates, agents, employees or representatives
(including without limitation lenders and financial advisors).

 

(d) At Closing, Seller shall (A) deliver to Purchaser or cause to be present at
the Facility originals of all finance and accounting logs and records (other
than any finance and accounting books, logs and records that are not closed
prior to Closing), all material limited liability company record books, copies
of all Permits and all finance, accounting and operational logs and records
(including working policies and procedures, operating manuals, past reports,
environmental compliance policies, procedures, reporting templates and
historical data and health and safety policies and practices) of the Company and
of the Seller and its Affiliates, including the Facility Operator, to the extent
relating solely or primarily to the Facility or the Company and (B) transfer to
the Company or Purchaser all information, data and records associated with the
foregoing matters. Within a reasonable period (not to exceed fifteen (15)
business days) after the Closing Date, (A) Seller shall deliver to Purchaser all
originals of any other books, logs, records, documents and data (in written or
electronic form) of the Company, the Sellers, and the Facility Operator to the
extent relating solely or primarily to the Company or the Facility and not
delivered pursuant to the preceding sentence, as well as copies of all books,
logs, records, documents and data (in written or electronic form) of the Seller
and its Affiliates, including the Facility Operator, that relate to the Company
or the Facility and do not relate solely to the Seller or such Affiliate (such
information not relating to the Company or the Facility may be redacted), as
applicable, and (B) within a reasonable period of time after the Closing Date
(but not to exceed 30 days), Seller shall cause the transfer to the Company or
Purchaser of all information, data and records associated with the matters
described in the preceding sentence.

 

Section 6.12 Use of TECO Marks. TECO Marks will appear on some of the assets of
the Company, including on signage at the Facility, and on supplies, materials,
stationery,

 

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brochures, advertising materials, manuals and similar consumable items of the
Company. Purchaser acknowledges and agrees that it has and, upon consummation of
the Transactions contemplated hereby shall have, no right, title, interest,
license, or any other right whatsoever to use the TECO Marks; provided, however,
that Purchaser shall be authorized to continue to use for internal purposes only
and not for public use, materials bearing such TECO Marks (including manuals)
used by Seller prior to Closing for up to six (6) months following the Closing.
Notwithstanding the foregoing, use of the TECO Marks shall remain under the
control of Seller. Subject to the terms of the preceding sentence, Purchaser
shall, (i) within thirty (30) days after the Closing Date, remove, cover or
conceal the TECO Marks from the assets of the Company, including signage at the
Facility, and provide written verification thereof to Seller promptly after
completing such removal and (ii) within thirty (30) days after the Closing Date,
return or destroy (with proof of destruction) all other assets of the Company
that contain any TECO Marks that are not removed, covered or concealed.
Purchaser agrees never to challenge Seller’s (or its Affiliates’) ownership of
the TECO Marks or any application for registration thereof or any registration
thereof or any rights of Seller its Affiliates therein as a result, directly or
indirectly, of its ownership of the Company. Purchaser will not conduct any
business nor offer any goods or services under any TECO Marks. Purchaser will
not send, or cause to be sent, any correspondence or other materials to any
Person on any stationery that contains any TECO Marks or otherwise operate the
Company in any manner which would or might reasonably be expected to confuse any
Person into believing that Purchaser has any right, title, interest or license
to use any TECO Marks.

 

Section 6.13 Excluded Assets. Notwithstanding anything to the contrary contained
in this Agreement or any of the Ancillary Agreements, the Transactions
contemplated by this Agreement exclude, and prior to the Closing Date, Seller
shall cause the Company to transfer to Seller or any of their Affiliates (other
than the Company), unless otherwise agreed to in writing by Purchaser, the
following (the “Excluded Assets”):

 

(a) any and all of the Seller’s, Company’s, or their respective Affiliates’
rights arising under the Facility Operations Agreement or the TECO EnergySource
Agreement shall be Excluded Assets;

 

(b) except to the extent proceeds therefrom are assigned to Purchaser pursuant
to Section 6.7 hereof, and except for the Company’s rights with respect to
unpaid claims made or entitled to be made under the Facility Insurance Policies
for damages or liabilities that have occurred before the Closing Date, all
Facility Insurance Policies and all rights thereunder (and any current assets
related to prepaid insurance will be removed from working capital in adjusting
the Purchase Price under Sections 3.3 and 3.4); and

 

(c) the TECO Marks;

 

(d) any and all cash held by the Company (other than petty cash maintained at
the Facility, which petty cash shall be factored into the calculation of
Adjusted Net Working Capital);

 

(e) any Late Accounts; and

 

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(f) any rights of Seller or any Affiliate of Seller with respect to any
Intercompany Arrangements.

 

Seller’s representations and warranties in Article 4 shall not apply to any of
the Excluded Assets described in clauses (a) through (f) of the preceding
sentence except to the extent such representations regarding Excluded Assets
relate to liabilities of the Company (regardless of any indemnity by Seller), or
relate to assets that are not Excluded Assets. By way of illustration (and not
limitation), since after Closing the Company will retain certain rights to
receive payment for claims made or accrued prior to Closing under Facility
Insurance Policies, all representations and warranties in Article 4 (including
without limitation Section 4.20) shall apply to Facility Insurance Policies to
the extent relevant to the Purchaser’s or Company’s retained rights therein.
Notwithstanding the above and for the avoidance of doubt, the representations in
Sections 4.1 through 4.4 shall apply without exception. Seller shall cause the
Facility Operations Agreement and the TECO EnergySource Agreement to be
terminated prior to or concurrently with the Closing pursuant to Section 8.11(g)
below.

 

Section 6.14 Excluded Liabilities. Notwithstanding anything to the contrary
contained in this Agreement or any of the Ancillary Agreements, the Transactions
contemplated by this Agreement exclude, and prior to the Closing Date Seller
shall cause the Company to transfer to Seller or any of its Affiliates (other
than the Company) the following (the “Excluded Liabilities”):

 

(a) any liabilities or obligations of the Company in respect of any Excluded
Asset;

 

(b) any liabilities or obligations of the Company in respect of any Taxes
payable by Seller pursuant to Section 6.6 and any liability of the Company under
Treas. Reg. §1.1-502 (or any similar provision of state or local law) or
otherwise for Tax obligations of Seller or any of its Affiliates, except to the
extent of any amounts included as current liabilities of the Company and taken
into account in the adjustment of the Purchase Price;

 

(c) other than liabilities and obligations under this Agreement or the Ancillary
Agreements, any and all liabilities or obligations of the Company to Seller or
any of Seller’s Affiliates, or to any of Company’s, Seller’s or Seller’s
Affiliates’ officers, directors, or managers arising in connection with any
Intercompany Arrangements, including, without limitation, any and all
liabilities or obligations arising from any indemnity obligations in the
Company’s governing documents or indemnity agreements, whether or not known to
Seller or disclosed to Purchaser;

 

(d) any liabilities or obligations of the Company under ERISA arising as a
result of the Company being an ERISA Affiliate of Seller; and

 

(e) costs and expenses incurred by the Company pursuant to the Generator Rotor
Repair Contracts in connection with the Generator Rotor Repairs in accordance
with Section 6.17 below.

 

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Seller’s representations and warranties in Article 4 shall not apply to any of
the Excluded Liabilities described in clauses (a) through (e) of the preceding
sentence except to the extent such representations regarding Excluded
Liabilities relate to liabilities of the Company (regardless of any indemnity by
Seller) that are not Excluded Liabilities. Notwithstanding the above and for the
avoidance of doubt, the representations in Sections 4.1 through 4.4 shall apply
without exception.

 

Section 6.15 Employee Matters. Purchaser (or an Affiliate of Purchaser) may
interview and may offer employment that would commence not earlier than the date
of termination of the Facility Operating Agreement to any employee of the
Facility Operator, on such terms and conditions as Purchaser (or its Affiliate)
may reasonably determine, but except as provided below, Purchaser shall not be
obligated to do so pursuant to this Agreement (any employee of the Facility
Operator who accepts Purchaser’s or its Affiliate’s offer of employment is
referred to herein as a “Transferred Employee”). Offers of employment to the
Transferred Employees will include salary or wages at least equal to the salary
and wages currently paid to those employees by the Facility Operator. All offers
of employment will include benefits comparable to the benefits provided to
similarly situated employees of Affiliates of Purchaser. Purchaser (or its
Affiliate, if applicable) will waive or cause to be waived all pre-existing
coverage exclusions or limitations otherwise applicable under such plans to such
Transferred Employees (and their eligible dependents) effective as of such hire
date, to the extent allowed by such plans. Seller hereby agrees that effective
as of the Closing Date, Seller shall cause its applicable Affiliate(s) to
terminate the employment of each of the employees to whom Purchaser offers
employment under the terms of this Agreement, and that for a period of one year
from the Effective Date, neither Seller nor any of Seller’s Affiliates will
directly or indirectly recruit, solicit or otherwise induce or attempt to induce
any such employee to make themselves unavailable for employment by Purchaser or
its Affiliate or otherwise employ or seek to employ any such employee. If
Purchaser has not hired (or does not have agreements to hire as of Closing)
those employees that currently operate the Facility and that it deems necessary
to operate the Facility from and after the Closing, then Purchaser and Seller
will enter into a mutually acceptable transition agreement under which Seller
(or its Affiliates) will provide operating services at the actual cost to Seller
or its Affiliates (compensation of operating personnel plus the cost of
benefits, administrative costs and the like) for a period of not less than six
months.

 

Section 6.16 Additional Covenants of Purchaser. Purchaser hereby agrees with and
covenants to Seller that prior to consummation of the Transactions contemplated
hereby or the termination or expiration of this Agreement pursuant to its terms,
unless Seller otherwise consents in writing, Purchaser shall not take any action
which would cause any of Purchaser’s representations and warranties set forth in
Article 5 to be materially false as of the Closing.

 

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Section 6.17 Generator Rotor Repairs. Seller agrees to use commercially
reasonable efforts to complete the Generator Rotor Repairs prior to Closing. The
Generator Rotor Repairs shall continue to be made pursuant to the terms of the
Generator Rotor Repair Contracts with all approved payments to the Generator
Rotor Contractors required pursuant to the Generator Rotor Repair Contracts to
continue to be borne by Seller. To the extent that such Generator Rotor Repairs
are not completed prior to Closing, following Closing Purchaser shall continue
to work with the Generator Rotor Contractors to complete the Generator Rotor
Repairs and shall be authorized, subject to the prior written consent of Seller
(which consent shall not be unreasonably withheld or delayed), to take all
appropriate actions and make all decisions regarding the Generator Rotor Repairs
using reasonable commercial standards. Seller shall bear the cost of all charges
of the Generator Rotor Contractors under the Generator Rotor Repair Contracts
and as approved by Seller hereunder and shall indemnify Purchaser for any and
all of such amounts. Notwithstanding any of the foregoing, following the Closing
Purchaser shall have the right to make any decision or take any action with
respect to the Generator Rotor Repairs in its sole discretion; provided however,
Seller shall have no liability hereunder with respect to any costs or charges
incurred in connection with any actions or decisions by Purchaser or its
Affiliates not expressly consented to in writing (which consent may only be
withheld or delayed in good faith) by Seller hereunder.

 

Section 6.18 Financing Efforts. Purchaser hereby agrees to exercise its
commercially reasonable efforts to obtain and have available for Closing
acquisition financing on substantially the terms described in the financing
commitment identified in Section 8.12 hereof and in the fee letter provided to
Purchaser in connection with such financing commitment or on other commercially
reasonable terms not worse, taken as a whole, to Purchaser than those terms
contained in the financing commitment provided to Seller and identified in
Section 8.12 hereof (collectively, the “Financing Arrangement”); provided,
however, that to the extent any “market flex” provision applicable to such
Financing Arrangement results in an increase in interest rates and/or fees that
has the effect of increasing the net overall yield by greater than two percent
(2%) per annum, such financing shall not be deemed to be on substantially such
terms as the Financing Arrangement contemplated hereby; and provided further,
that this Section 6.18 shall in no way affect or modify the Parties’ respective
termination rights under Section 10.1.

 

ARTICLE 7

 

INDEMNIFICATION

 

Section 7.1 Exclusive Remedy. Except as provided in Sections 3.2(a), and 6.6(g),
and except for intentional fraud, Seller and Purchaser acknowledge that the
indemnification provisions set forth in this Article 7 shall be the exclusive
remedy of both Seller Group and Purchaser Group for any money damages arising
out of or in connection with this Agreement and the Transactions contemplated
hereby, and such indemnification provisions are exclusive and in lieu of any and
all other rights and remedies for money damages which Seller and Seller Group on
the one hand, and Purchaser and Purchaser Group on the other hand, may have
under this Agreement or under applicable Law, whether at common law or in
equity. Except as provided in Section 7.3(b), notwithstanding anything to the
contrary herein, nothing in this

 

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Agreement shall restrict any Party from seeking an injunction or other equitable
relief, including without limitation requiring payment of the Final Adjusted
Purchase Price or the transfer of the Membership Interests. No Party shall be
entitled to duplicative recovery to the extent that a purchase price adjustment
has been made previously with respect thereto.

 

Section 7.2 Indemnification by Seller.

 

(a) Purchaser Claims. Seller will indemnify, defend and hold harmless Purchaser
and its respective parents and Affiliates, and each of their officers and
directors, and successors and assigns (collectively, the “Purchaser Group”),
from and against any and all demands, suits, penalties, obligations, damages,
claims, losses, liabilities, payments, costs and expenses (“Losses”), that are
incurred by or awarded against any member of Purchaser Group, including
reasonable legal, accounting, and other expenses in connection therewith, which
arise out of, are in connection with, or relate to, the following (collectively,
“Purchaser Claims”):

 

(i) any breach or violation of any covenant, obligation, or agreement of Seller
set forth in this Agreement;

 

(ii) any breach or inaccuracy of the representations or warranties made by
Seller in Article 4 of this Agreement;

 

(iii) if the Closing occurs, the ownership, operation, or use of the Excluded
Assets (arising before or after the Closing Date), except to the extent retained
by Purchaser or the Company after the Closing Date in contravention of this
Agreement by Purchaser; or

 

(iv) if the Closing occurs, the failure of Seller or its Affiliates to pay,
discharge, or perform any of the Excluded Liabilities as and when due (arising
before or after the Closing Date).

 

(b) Limitations on Liability of Seller. Seller Group shall not be liable for any
punitive, incidental, indirect, special, or consequential damages resulting from
or arising out of any Purchaser Claims, including damages for lost revenues,
income, profits, or any other damage or loss resulting from the disruption to or
loss of operation of the Facility, except to the extent Purchaser Group suffers
such damages to a third party not affiliated with Purchaser or Purchaser’s
Guarantors in connection with a Third Party Claim. The aggregate cumulative
Losses for which Seller Group shall be liable under Section 7.2(a)(i) and
Section 7.2(a)(ii) for all claims thereunder shall be limited to twenty-five
percent (25%) of the Adjusted Purchase Price, except only for: (i) Indemnifiable
Claims arising under Sections 4.1, 4.2, 4.3, and 4.4, in which case the
aggregate cumulative Losses for which Seller Group shall be liable for such
Indemnifiable Claims shall be limited to one hundred percent (100%) of the
Adjusted Purchase Price, in each case taking into account cumulative amounts
paid on all other claims (provided that except as limited by the last sentence
of this Section 7.2(b) Losses arising under the Sections listed above will not
be taken into account in limiting liability resulting from breach of the
Sections not listed); and (ii) the aggregate cumulative Losses for which Seller
Group shall be liable for Indemnifiable Claims under Section 7.2(a)(i) and
7.2(a)(ii) if Closing does not occur

 

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shall be limited to fifteen percent (15%) of the Adjusted Purchase Price.
Seller’s obligation to indemnify Purchaser Group under Section 7.2(a)(i) shall
terminate on (i) with respect to breaches of covenants, obligations or
agreements that are to be performed on or before the Closing Date, the date that
is one (i) year from the Closing Date, (ii) with respect to breaches of Section
6.10, the date that is three (3) years from the Closing Date, and (iii) with
respect to breaches of any other covenants, obligations or agreements, the date
that is one year following the date of such breach. Seller’s obligation to
indemnify Purchaser under Section 7.2(a)(ii) with respect to any Seller
representation or warranty shall terminate upon expiration of such
representation warranty hereunder pursuant to Section 11.15 below. To the extent
that any Indemnifiable Claims arising under Sections 7.2(a)(iii) or 7.2(a)(iv)
are also Indemnifiable Claims under Sections 7.2(a)(i) or 7.2(a)(ii), Purchaser
Group shall be entitled to pursue either claim. In no event shall Seller Group’s
total aggregate liability arising under Section 7.2(a)(i) and Section 7.2(a)(ii)
exceed one hundred percent (100%) of the Adjusted Purchase Price.

 

Section 7.3 Indemnification by Purchaser.

 

(a) Seller Claims. Purchaser will indemnify, defend and hold harmless Seller,
its respective parents and Affiliates, and each of its officers and directors,
and successors and assigns (collectively, the “Seller Group”), from and against
any and all Losses, that are incurred by or awarded against any member of Seller
Group, including reasonable legal, accounting, and other expenses in connection
therewith, which arise out of, are in connection with, or relate to, the
following (collectively, “Seller Claims”):

 

(i) any breach or violation of any covenant, obligation, or agreement of
Purchaser set forth in this Agreement;

 

(ii) any breach or inaccuracy of any of the representations or warranties made
by Purchaser in Article 5 of this Agreement; or

 

(iii) if the Closing occurs and excluding matters for which Seller is obligated
to indemnify Purchaser under Section 7.2, the business of the Company, the
design, construction, ownership, operation or use of any of the assets of the
Company, including the Facility (but excluding the Excluded Assets, except to
the extent retained by the Company or Purchaser in contravention of this
Agreement by Purchaser), the failure to pay, perform or discharge any
liabilities or obligations of the Company (but excluding the Excluded
Liabilities) or any other matter relating to or arising out of the business of
the Company, the design, construction, ownership, operation or use of any of the
assets of the Company, including the Facility (but excluding the Excluded
Assets), in each case whether relating to periods of time prior to or after the
Closing Date.

 

Purchaser acknowledges that the Losses described in Section 7.3(a)(iii) shall be
retained by the Company and transferred with the transfer of the Membership
Interests, and shall continue to be the responsibility of the Company and
Purchaser.

 

(b) Limitations on Liability of Purchaser. Purchaser Group shall not be liable
for any punitive, incidental, indirect, special, or consequential damages
resulting from or

 

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arising out of any Seller Claims, including damages for lost revenues, income,
profits, or any other damage or loss resulting from the disruption to or loss of
operation of the Facility, except to the extent Seller Group suffers such
damages to a third party not affiliated with Seller or Seller’s Guarantor in
connection with a Third Party Claim. The aggregate cumulative Losses for which
Purchaser Group shall be liable under Section 7.3(a)(i) and Section 7.3(a)(ii)
for all claims thereunder shall be limited to twenty-five percent (25%) of the
Adjusted Purchase Price, except only for: (i) Indemnifiable Claims arising under
Sections 5.1 and 5.2, in which case such liability shall be limited to one
hundred percent (100%) of the Adjusted Purchase Price, in each case taking into
account cumulative amounts paid on all other claims (provided that except as
limited by the last sentence of this Section 7.3(b) Losses arising under the
Sections listed above will not be taken into account in limiting liability
resulting from breach of the sections not listed); and (ii) except for any
Seller Claims made in connection with Purchaser’s breach of its obligation to
close, in which case Seller’s sole remedy will be to terminate this Agreement
and retain the Deposit Funds pursuant to Section 3.2(a)(i). In no event shall
Purchaser Group’s total aggregate liability arising under Section 7.3(a)(i) and
Section 7.3(a)(ii) exceed one hundred percent (100%) of the Adjusted Purchase
Price.

 

Section 7.4 Notice of Claim. Subject to the terms of this Agreement and upon a
receipt of notice of the assertion of a claim or of the commencement of any
suit, action or proceeding that is a Third Party Claim against any member of
Purchaser Group or Seller Group entitled to indemnification under Section 7.2 or
Section 7.3, respectively, such Person entitled to indemnification hereunder
(the “Indemnitee”) will promptly notify the Party against whom indemnification
is sought (the “Indemnitor”) in writing of any damage, claim, loss, liability or
expense which the Indemnitee has determined has given or could give rise to a
claim under Section 7.2 or Section 7.3. Such written notice is herein referred
to as a “Notice of Claim.” A Notice of Claim will specify, in reasonable detail,
the facts known to the Indemnitee regarding the claim. Subject to the terms of
this Agreement, the failure to provide (or timely provide) a Notice of Claim
will not affect the Indemnitee’s rights to indemnification; provided, however,
the Indemnitor is not obligated to indemnify the Indemnitee for the increased
amount of any claim which would otherwise have been payable to the extent that
the increase resulted from the failure to deliver timely a Notice of Claim.

 

Section 7.5 Defense of Third Party Claims. The Indemnitor will defend, in good
faith and at its expense, any claim or demand set forth in a Notice of Claim
relating to a Third Party Claim and the Indemnitee, at its expense, may
participate in the defense. The Indemnitor will defend the Indemnitee against
the matter with counsel of its reasonable choice, and the Indemnitee may retain
separate co-counsel at its sole cost and expense (except that the Indemnitor
will be responsible for the reasonable fees and expenses of the separate
co-counsel in the event that the counsel selected by the Indemnitor cannot
independently represent both the Indemnitee and the Indemnitor due to a conflict
of interest). The Indemnitee will not consent to the entry of any judgment or
enter into any settlement with respect to the matter without the written consent
of the Indemnitor, which shall not be unreasonably withheld, and the Indemnitor
will not consent to the entry of any judgment with respect to the matter or
enter into any settlement, without the written consent of the Indemnitee, which
shall not be unreasonably withheld. If the Indemnitor does not assume the
defense of Indemnitee in a reasonably timely

 

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manner, the Indemnitee may retain counsel, as an indemnification expense, to
defend such claim, suit, judgment or matter, and Indemnitor may join the
Indemnitee in the defense of such claim and shall be responsible for its own
costs and expenses.

 

Section 7.6 Cooperation. The Party defending the Third Party Claim shall
deliver, or cause to be delivered, to the other Party copies of all
correspondence, pleadings, motions, briefs, appeals or other written statements
relating to or submitted in connection with the defense of the Third Party Claim
and timely notices of and the right to participate (as an observer) in any
hearing or court proceeding or any other proceeding relating to the Third Party
Claim. The Indemnitee will make available to the Indemnitor or its
representatives all records and other materials reasonably required by them for
use in contesting any Third Party Claim (subject to obtaining an agreement to
maintain the confidentiality of confidential or proprietary materials in a form
reasonably acceptable to Indemnitor and Indemnitee). If requested by the
Indemnitor, the Indemnitee will cooperate with the Indemnitor and its counsel in
contesting any Third Party Claim or, if appropriate, in making any counterclaim
against the Person asserting the claim or demand, or any cross-complaint against
any Person. The Indemnitor will reimburse the Indemnitee for any reasonable
expenses directly incurred by Indemnitee in cooperating with or acting at the
request of the Indemnitor.

 

Section 7.7 Mitigation and Limitation of Claims. As used in this Agreement, the
term “Indemnifiable Claim” means any Purchaser Claims or Seller Claims.
Notwithstanding anything to the contrary contained herein:

 

(a) Reasonable Steps to Mitigate. The Indemnitee shall take all reasonable steps
to mitigate all Losses relating to an Indemnifiable Claim, including availing
itself of any defenses, limitations, rights of contribution, claims against
third Persons and other rights at law or equity, and will provide such evidence
and documentation of the nature and extent of the Indemnifiable Claim as may be
reasonably requested by the Indemnitor. The Indemnitee’s reasonable steps
include the reasonable expenditure of money to mitigate or otherwise reduce or
eliminate any Loss for which indemnification would otherwise be due under this
Article 7, and the Indemnitor will reimburse the Indemnitee for the Indemnitee’s
reasonable expenditures in undertaking the mitigation, together with interest
thereon from the date of payment to the date of repayment at a variable rate of
interest equal to the “prime rate” as published in The Wall Street Journal from
time to time during the applicable period. However, the Indemnitee will not be
precluded from recovering any Losses due to a failure to mitigate to the extent
that it can demonstrate that it requested the Indemnitor to undertake or agree
to pay the expenses associated with such mitigation and the Indemnitor failed to
do so.

 

(b) Net of Benefits. Any Indemnifiable Claim shall be limited to the amount of
actual damages sustained by the Indemnitee by reason of such breach or
nonperformance, net of insurance recoveries or any tax benefit or other similar
recovery or offset realized, directly or indirectly, by the Indemnitee.

 

(c) Minimum Claim. If the Closing occurs, except as provided below, no Party
shall have any liability or obligation to indemnify under Sections 7.2(a)(ii) or
7.3(a)(ii), as the case may be, unless the aggregate amount for which such Party
would be liable thereunder,

 

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but for this provision, exceeds two percent (2%) of the Adjusted Purchase Price,
and recovery shall be limited only to such amounts that exceed such percentage
of the Adjusted Purchase Price. For purposes of the foregoing, individual
Indemnifiable Claims of Fifty Thousand Dollars ($50,000) or less shall not be
aggregated for purposes of calculating such deductible threshold amount or for
calculating amounts payable in excess of such threshold amount, unless they
arise from a single event that results in a series of related claims
collectively exceeding Fifty Thousand Dollars ($50,000), in which case they will
be aggregated. Once it is determined that a breach of a representation or
warranty has occurred (as written, with any qualifiers), then any condition or
qualifier on any representation or warranty relating to materiality or requiring
a Material Adverse Effect will be disregarded for the purposes of calculating
the amount of such damages resulting from such breach. Nothing in this Section
7.7(c) is intended to modify or limit a Party’s liability or obligation
hereunder for other Indemnifiable Claims. Notwithstanding the above, damages
arising from breaches of the following Sections shall not be subject to any of
the limitations in this Section 7.7(c): Sections 4.1, 4.2, 4.3, and 4.4
(applicable to claims against Seller); and Sections 5.1, and 5.2 (applicable to
claims against Purchaser).

 

Section 7.8 Manner of Payment. Except as otherwise provided herein, any
indemnification of Purchaser Group or Seller Group pursuant to this Article 7
shall be effected by wire transfer of immediately available funds from Seller,
or Purchaser, as the case may be, to an account(s) designated by the applicable
Purchaser or Seller, as the case may be, within ten (10) days after the
determination thereof.

 

ARTICLE 8

 

PURCHASER’S CONDITIONS TO CLOSING

 

The obligations of Purchaser to consummate the Transactions shall be subject to
fulfillment at or prior to the Closing of each of the following conditions,
except to the extent Purchaser waives such fulfillment in writing:

 

Section 8.1 Compliance with Provisions. Seller shall have performed or complied
in all material respects with all covenants and agreements contained in this
Agreement on its part required to be performed or complied with at or prior to
the Closing, and Seller’s Guarantor shall have performed or complied in all
material respects with all covenants and agreements contained in Seller’s
Guaranty on its part that are required to be performed or complied with at or
prior to the Closing.

 

Section 8.2 HSR Act. The waiting period under the HSR Act applicable to the
consummation of the sale of the Membership Interests contemplated hereby shall
have expired or been terminated.

 

Section 8.3 FERC Approvals and Filings. FERC shall have issued an order under
Section 203 of the Federal Power Act approving the Transactions.

 

Section 8.4 Required Regulatory Approvals. Without limiting the generality of
Sections 6.2 and 6.5, with respect to the purchase and sale of the Membership
Interests,

 

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Purchaser shall have received all of Purchaser’s Required Regulatory Approvals
described in clause (i) of the definition thereof. In the event that any
Purchaser Required Regulatory Approval requires any modification to this
Agreement, any Ancillary Agreement executed by Purchaser or the Transactions,
imposes any condition to the effectuation of the Transactions, or places any
restrictions upon Purchaser’s ownership of the Company, then Purchaser shall be
deemed to have approved such modifications, conditions and restrictions to the
extent that such modifications, conditions and restrictions, if any, are not
contemplated by this Agreement and the Ancillary Agreements and would not,
individually or in the aggregate, result in a material economic detriment to
Purchaser or the Company after the Closing, it being also agreed that Purchaser
shall be deemed to have approved of any modifications, conditions or
restrictions that are not disapproved by Purchaser in a written notice to Seller
given no later than ten (10) Business Days following the public announcement of
the decision of the Governmental Authority.

 

Section 8.5 Representations and Warranties. The representations and warranties
of Seller set forth in Article 4 of this Agreement that are qualified with
respect to materiality (whether by reference to Material Adverse Effect or
otherwise) shall be true and correct, and the representations and warranties of
Seller set forth in Article 4 of this Agreement that are not so qualified shall
be true and correct in all material respects, on and as of the Closing Date, in
each case as though made on and as of the Closing Date.

 

Section 8.6 Pending Actions. There must not be pending or threatened any
injunction, judgment, order, action, investigation or other proceeding by any
Governmental Authority or before any court against the Company, the Facility or
the Purchaser, and arising out of or related to the Transactions, if an
unfavorable result of any of the foregoing would prevent the consummation of any
of the transactions contemplated by this Agreement or would cause such
transactions to be rescinded following consummation, or would reasonably be
expected to have a Company Material Adverse Effect or a Purchaser Material
Adverse Effect.

 

Section 8.7 Officer’s Certificate. Purchaser shall have received a certificate
from Seller substantially in the form of Exhibit E, executed on its behalf by an
authorized officer, dated the Closing Date, to the effect that the conditions
set forth in Section 8.5 have been satisfied by Seller.

 

Section 8.8 Company Material Adverse Effect. Subject to Section 6.7, since the
Effective Date, no Company Material Adverse Effect shall have occurred and be
continuing.

 

Section 8.9 Legal Opinion. Purchaser shall have received an opinion from
Seller’s counsel, substantially in the form of Exhibit F, dated as of the
Closing Date, subject to the conditions and limitations therein and to other
customary conditions and limitations.

 

Section 8.10 No Termination. Neither Party shall have exercised any termination
right such Party is entitled to exercise pursuant to Section 10.1.

 

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Section 8.11 Receipt of Other Documents. Purchaser shall have received the
following:

 

(a) Certificates of good standing with respect to Seller and the Company, each
as of a recent date, issued by the pertinent government officials of their
respective jurisdictions of formation, as well as certified copies of the
certificates of formation of the Company and of Seller, each issued by the
pertinent government officials of their respective jurisdictions of formation;

 

(b) A certified copy of the Operating Agreement, together with a certificate of
the Secretary or an Assistant Secretary of Seller that such Operating Agreement
has not been amended;

 

(c) Copies, certified by the Secretary or an Assistant Secretary of Seller and
Seller’s Guarantor, of resolutions of the respective governing boards of Seller
and Seller’s Guarantor authorizing the execution and delivery by Seller of this
Agreement and the transactions contemplated herein, the execution and delivery
by Seller or Seller’s Guarantor of the Ancillary Agreements to which it is a
party, and the authorization or ratification of all of the other agreements and
instruments, in each case, to be executed and delivered by such Seller or
Seller’s Guarantor in connection herewith;

 

(d) A certificate of the Secretary or an Assistant Secretary of Seller and
Seller’s Guarantor, substantially in the form of Exhibit G, identifying the name
and title and bearing the signatures of the officers of Seller and Seller’s
Guarantor authorized to execute and deliver this Agreement, and the officers of
Seller or Seller’s Guarantor authorized to execute and deliver each Ancillary
Agreement to which Seller or Seller’s Guarantor, as applicable, is a party and
the other agreements and instruments contemplated hereby;

 

(e) Documents, instruments and certificates reasonably requested by Purchaser
that are necessary to consummate the transactions contemplated herein, executed
and delivered or caused to be executed and delivered by Seller;

 

(f) All Ancillary Agreements executed and delivered by Seller, or Affiliates
thereof, as the case may be; and

 

(g) An instrument terminating the Facility Operations Agreement and the TECO
EnergySource Agreement, executed and delivered by the Company and the Facility
Operator or other Affiliate as necessary, substantially in the form of Exhibit
H.

 

Section 8.12 Financing. The conditions to funding in Purchaser’s financing
commitment, which has been previously provided to Seller, shall be satisfied or
waived, all in a manner reasonably satisfactory to Purchaser, at or prior to
Closing, and funding pursuant to Purchaser’s financing commitment must be
available at Closing.

 

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ARTICLE 9

 

SELLER’S CONDITIONS TO CLOSING

 

The obligations of Seller to consummate the Transactions shall be subject to
fulfillment at or prior to the Closing of each of the following conditions,
except to the extent Seller waives such fulfillment in writing:

 

Section 9.1 Compliance with Provisions. Purchaser shall have performed or
complied in all material respects with all covenants and agreements contained in
this Agreement on its part required to be performed or complied with at or prior
to the Closing, and Purchaser’s Guarantors shall have performed or complied in
all material respects with all covenants and agreements contained in Purchaser’s
Guaranty on its part that are required to be performed or complied with at or
prior to the Closing.

 

Section 9.2 FERC Approvals and Filings. FERC shall have issued an order under
Section 203 of the Federal Power Act approving the Transactions.

 

Section 9.3 HSR Act. The waiting period under the HSR Act applicable to the
consummation of the sale of the Membership Interests contemplated hereby shall
have expired or been terminated.

 

Section 9.4 Required Regulatory Approvals. Without limiting the generality of
Sections 6.2 and 6.5, with respect to the purchase and sale of the Membership
Interests, Seller shall have received all of Seller’s Required Regulatory
Approvals. In the event that any Seller Required Regulatory Approval requires
any modification to this Agreement, any Ancillary Agreement executed by any
Seller, or the Transactions, or imposes any condition to the effectuation of the
Transactions, then Seller shall be deemed to have approved such modifications,
conditions and restrictions to the extent that such modifications, conditions
and restrictions, if any, are not contemplated by this Agreement and the
Ancillary Agreements and would not, individually or in the aggregate, result in
a material economic detriment to Seller, it being also agreed that Seller shall
be deemed to have approved of any such modifications, conditions or restrictions
that are not disapproved by Seller in a written notice to Purchaser given no
later than ten (10) Business Days following the public announcement of the
decision of the Governmental Authority.

 

Section 9.5 Representations and Warranties. The representations and warranties
of Purchaser set forth in Article 5 of this Agreement that are qualified with
respect to materiality (whether by reference to Material Adverse Effect or
otherwise) shall be true and correct, and the representations and warranties of
Purchaser set forth in Article 5 that are not so qualified shall be true and
correct in all material respects, on and as of the Closing Date, in each case as
though made on and as of the Closing Date.

 

Section 9.6 Pending Actions. There must not be pending or threatened any
injunction, judgment, order, action, investigation or other proceeding by any
Governmental Authority or before any court relating to the Company, the Facility
or the Seller, and arising out

 

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of or related to the Transactions, if an unfavorable result of any of the
foregoing would prevent the consummation of any of the transactions contemplated
by this Agreement or would cause such transactions to be rescinded following
consummation, or would reasonably be expected to have a Seller Material Adverse
Effect.

 

Section 9.7 Officer’s Certificate. Seller shall have received a certificate from
Purchaser, substantially in the form of Exhibit I, executed on its behalf by an
authorized officer, dated the Closing Date, to the effect that the conditions
set forth in Section 9.5 have been satisfied by Purchaser.

 

Section 9.8 Legal Opinion. Seller shall have received an opinion or opinions
from Purchaser’s counsel, substantially in the form of Exhibit J, dated as of
the Closing Date, subject to the conditions and limitations therein and to other
customary conditions and limitations.

 

Section 9.9 No Termination. Neither Party shall have exercised any termination
right such Party is entitled to exercise pursuant to Section 10.1.

 

Section 9.10 Termination of Existing Affiliate Guaranty. Seller’s Existing
Affiliate Guaranty shall have been terminated and PJM and all other
beneficiaries thereof shall have effectively and irrevocably released Seller and
all of its Affiliates from any and all liability thereunder. However, if PJM and
the other beneficiaries of Seller’s Existing Affiliate Guaranty will not accept
a letter of credit from Purchaser in lieu of Seller’s Existing Affiliate
Guaranty and release Seller and all of its Affiliates therefrom, then Seller’s
Existing Affiliate Guaranty may instead remain in place for the benefit of the
Company, and Purchaser shall instead provide a letter of credit for the benefit
of Seller and Seller’s Guarantor (in form and substance reasonably satisfactory
to Seller) in an amount equal to Seller’s continuing obligations under Seller’s
Existing Affiliate Guaranty.

 

Section 9.11 Receipt of Other Documents. Seller shall have received the
following:

 

(a) Certificates of good standing with respect to Purchaser and Purchaser’s
Guarantors, each as of a recent date, issued by the pertinent government
officials of their respective jurisdictions of formation;

 

(b) Certified copies of the certificate of incorporation and by-laws of
Purchaser’s Guarantors and of the articles of organization and operating
agreement of Purchaser, together with a certificate of a duly authorized officer
of Purchaser and Purchaser’s Guarantors that none of such documents have been
amended;

 

(c) Copies, certified by the Secretary or an Assistant Secretary of Purchaser
and Purchaser’s Guarantors, of resolutions of the respective governing boards of
Purchaser and Purchaser’s Guarantors authorizing the execution and delivery by
Purchaser of this Agreement, the execution and delivery by Purchaser or
Purchaser’s Guarantors of the Ancillary Agreements to which it is a party, and
the authorization or ratification of all of the other agreements and
instruments, in each case, to be executed and delivered by Purchaser or
Purchaser’s Guarantors in connection herewith;

 

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(d) A certificate of the Secretary or an Assistant Secretary of Purchaser and
Purchaser’s Guarantors, substantially in the form of Exhibit K, identifying the
name and title and bearing the signatures of the officers of Purchaser and
Purchaser’s Guarantors authorized to execute and deliver this Agreement, and the
officers of Purchaser or Purchaser’s Guarantors authorized to execute and
deliver each Ancillary Agreement to which Purchaser or Purchaser’s Guarantors,
as applicable, is a party and the other agreements and instruments contemplated
hereby;

 

(e) Documents, instruments and certificates reasonably requested by Seller that
are necessary to consummate the transactions contemplated herein, executed and
delivered or caused to be executed and delivered by Purchaser; and

 

(f) All Ancillary Agreements executed and delivered by Purchaser and Purchaser’s
Guarantors.

 

ARTICLE 10

 

TERMINATION

 

Section 10.1 Rights to Terminate. To the extent set forth in Section 10.2 of
this Agreement, this Agreement may be terminated as follows:

 

(a) By mutual written consent of Seller and Purchaser, this Agreement may be
terminated at any time prior to Closing.

 

(b) Either Seller or Purchaser may terminate this Agreement if a material
default or breach of any provision of this Agreement has been committed by the
other Party and such material default or breach has not been cured or waived by
the earlier of the Closing Date or the date thirty (30) days after receipt by
the other Party of written notice from the terminating Party specifying with
particularity such breach or default. Such cure period may extend the Closing
Date to such date when the cure period expires or, if earlier, when the material
default or breach is cured. In the event of a termination by Seller pursuant to
this Section 10.1(b), the provisions of Section 3.2(a)(i) shall apply with
respect to the release of Deposit Funds.

 

(c) Purchaser may terminate this Agreement in accordance with Sections 6.7(b)
and 6.7(c).

 

(d) This Agreement shall terminate automatically if the Closing has not occurred
by 5:00 p.m. Eastern Time on May 31, 2005.

 

(e) Seller may terminate this Agreement if Purchaser has not paid the Deposit
Funds in accordance with Section 3.2(a) within five (5) Business Days of the
Effective Date.

 

Section 10.2 Effect of Termination. If there has been a termination pursuant to
Section 10.1, then this Agreement shall be deemed terminated, and all further
obligations of the Parties hereunder shall terminate, except that the
obligations set forth in Sections 3.2(a), 6.3, 6.9,

 

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and 10.1(a), and in Articles 7 and 11 shall survive. In the event of such
termination of this Agreement, there shall be no liability for damages on the
part of a Party to another under and by reason of this Agreement or the
transactions contemplated hereby except as set forth in Article 7, and except
for intentionally fraudulent acts by a Party, the remedies for which shall not
be limited by the provisions of this Agreement. The foregoing provisions shall
not, however, limit or restrict the availability of injunctive or other
equitable relief to the extent that the same would otherwise be available to a
Party hereunder.

 

ARTICLE 11

 

GENERAL PROVISIONS

 

Section 11.1 Entire Document. This Agreement (including the Exhibits and
Schedules to this Agreement), and the Ancillary Agreements (including without
limitation Purchaser’s Guaranty and Seller’s Guaranty) contain the entire
agreement between the Parties with respect to the transactions contemplated
hereby, and supersede all negotiations, representations, warranties,
commitments, offers, contracts and writings prior to the execution date of this
Agreement, written or oral. No modification or amendment of any provision of
this Agreement shall be effective unless made in writing and duly signed by the
Parties referring specifically to this Agreement.

 

Section 11.2 Schedules. The Parties agree and acknowledge that the Schedules in
this Agreement may be incomplete or subject to revision prior to the Closing.
The Parties will cooperate and work in good faith to complete and update such
Schedules in a manner consistent with the provisions of Section 6.2(b) and the
other requirements of this Agreement. For purposes of determining whether
Purchaser’s conditions set forth in Section 8.5 or the Seller’s conditions set
forth in Section 9.5 have been fulfilled or whether any breach of any
representation or warranty has occurred, unless otherwise agreed in writing, the
Schedules shall be deemed to include only the information contained therein on
the date of this Agreement and shall be deemed to exclude all information
contained in any update, supplement or amendment thereto.

 

Section 11.3 Counterparts. This Agreement may be executed in one or more
counterparts, each of which is an original, but all of which together constitute
one and the same instrument.

 

Section 11.4 Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be valid, binding, and enforceable
under applicable Law, but if any provision of this Agreement is held to be
invalid, void (or voidable) or unenforceable under applicable Law, such
provision shall be ineffective only to the extent held to be invalid, void (or
voidable) or unenforceable, without affecting the remainder of such provision or
the remaining provisions of this Agreement.

 

Section 11.5 Assignability. The rights under this Agreement shall not be
assignable or transferable nor the duties delegable by either Party without the
prior written consent of the other Party, which consent may be granted or
withheld in such other Party’s sole discretion; and

 

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nothing contained in this Agreement, express or implied, is intended to confer
upon any Person, other than the Parties hereto, their permitted
successors-in-interest and permitted assignees and any Person benefiting from
the indemnities provided herein, any rights or remedies under or by reason of
this Agreement unless so stated to the contrary. Notwithstanding the foregoing,
Purchaser may assign this Agreement to any Affiliate of Purchaser and may grant
to any of its or Company’s lenders a security interest in their rights under
this Agreement or assign (after Closing) any rights hereunder to any Person or
Persons acquiring the Membership Interests or the assets of the Company;
provided that neither the grant of any such interest, nor the foreclosure of any
such interest, shall in any way release, reduce or diminish the obligations of
Purchaser to Seller hereunder. In addition to and also notwithstanding the
foregoing, Seller shall be entitled to assign its rights and obligations
hereunder to any Affiliate and to any Person or Persons acquiring Seller’s
Guarantor or all or substantially all of the assets of Seller’s Guarantor. Any
such assignment shall be conditioned on the assignee’s agreement in writing to
assume the assigning Party’s duties and obligations under this Agreement and the
Ancillary Agreements, subject to any and all restrictions, terms and conditions
of the Material Facility Contracts. Any assignment effected in accordance with
this Section 11.5 will not relieve the assigning Party of its obligations and
liabilities under this Agreement and the Ancillary Agreements.

 

Section 11.6 Captions. The captions of the various Articles, Sections, Exhibits
and Schedules of this Agreement have been inserted only for convenience of
reference and do not modify, explain, enlarge or restrict any of the provisions
of this Agreement.

 

Section 11.7 Governing Law. The validity, interpretation and effect of this
Agreement are governed by and will be construed in accordance with the laws of
the State of New York without regard to conflicts of law doctrines except to the
extent that certain matters are preempted by Federal law or are governed by the
law of the jurisdiction of organization of the respective Parties.

 

Section 11.8 Dispute Resolution. Except for matters that are expressly to be
resolved by the Independent Accounting Firm pursuant to Article 3 of this
Agreement, any claim, counterclaim, demand, cause of action, dispute, and
controversy arising out of or relating to this Agreement, any Ancillary
Agreement (or any agreement delivered in connection with this Agreement) or in
any way relating to the subject matter of this Agreement involving the Parties
or their representatives (each a “Dispute”), that is not resolved by mutual
agreement of the Parties or their representatives, as applicable, may be
resolved by litigation consistent with the following. EACH PARTY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN
RESPECT OF ANY SUIT, ACTION, CLAIM, OR PROCEEDING RELATING TO THIS AGREEMENT.
With respect to any Dispute, each Party irrevocably (i) submits to the exclusive
jurisdiction of the courts located in the State of New York, including without
limitation the Federal courts located therein; and (ii) waives any objection
which it may have at any time to the laying of venue of any Dispute brought in
any such court, waives any claim that such Dispute has been brought in an
inconvenient forum and further waives the right to object, with respect to such
Dispute, that such court does not have any jurisdiction over such Party.

 

58

Purchase and Sale Agreement

--------------------------------------------------------------------------------

Section 11.9 Notices. All notices, requests, demands, and other communications
under this Agreement must be in writing and must be delivered in person or sent
by certified mail, postage prepaid, facsimile, or by overnight delivery, and
properly addressed as follows:

 

If to Seller:

 

TM DELMARVA POWER, L.L.C.

702 N. Franklin Street

Tampa, Florida 33602

Attention: General Counsel

Tel: 813-228-1804

Fax: 813-228-1328

 

If to Purchaser:

 

TPF CHESAPEAKE, LLC

1044 N. 115 Street, Suite 400

Omaha, Nebraska 68154-4446

Attention: David Dickey, Legal Department

Tel: 402-691-9500

Fax: 402-691-9723

 

Any Party may from time to time change its address for the purpose of notices to
that Party by a similar notice specifying a new address, but no such change is
effective until it is actually received by the Party sought to be charged with
its contents. All notices and other communications required or permitted under
this Agreement which are addressed as provided in this Section 11.9 shall be
effective upon receipt at the location set forth in this Section 11.9, if
delivered personally or by overnight delivery, on the third day after mailing if
sent by United States mail, postage prepaid, and, upon completion of the
facsimile transmission, if delivered by facsimile.

 

Section 11.10 No Third Party Beneficiaries. Except as may be specifically set
forth in this Agreement, nothing in this Agreement, whether express or implied,
is intended to confer any rights or remedies under or by reason of this
Agreement on any Persons other than the Parties and their respective permitted
successors and assigns, nor is anything in this Agreement intended to relieve or
discharge the obligation or liability of any third Persons to any Party, nor
give any third Persons any right of subrogation or action against any Party.

 

Section 11.11 No Joint Venture. Nothing contained in this Agreement creates or
is intended to create an association, trust, partnership, or joint venture or
impose a trust or partnership duty, obligation, or liability on or with regard
to any Party.

 

Section 11.12 Construction of Agreement. This Agreement and any documents or
instruments delivered pursuant hereto shall be construed without regard to the
identity of the Person who drafted the various provisions of the same. Each and
every provision of this Agreement and such other documents and instruments shall
be construed as though the Parties participated equally in the drafting of the
same. Consequently, the Parties acknowledge and agree that any rule of
construction that a document is to be construed against the drafting party shall
not be applicable either to this Agreement or such other documents and
instruments.

 

59

Purchase and Sale Agreement

--------------------------------------------------------------------------------

Section 11.13 Waiver of Compliance. To the extent permitted by applicable Law,
any failure of any of the Parties to comply with any obligation, covenant,
agreement or condition set forth herein may be waived by the Party entitled to
the benefit thereof only by a written instrument signed by such Party, but any
such waiver shall not operate as a waiver of, or estoppel with respect to, any
prior or subsequent failure to comply therewith. The failure of a Party to this
Agreement to assert any of its rights under this Agreement or otherwise shall
not constitute a waiver of such rights.

 

Section 11.14 Consents Not Unreasonably Withheld. Wherever the consent or
approval of any Party is required under this Agreement, such consent or approval
shall not be unreasonably withheld, unless such consent or approval is to be
given by such Party at the sole or absolute discretion of such Party or is
otherwise similarly qualified.

 

Section 11.15 Survival. The representations and warranties given or made by any
Party in Articles 4 or 5 hereof or in any certificate or other writing furnished
in connection herewith shall survive the Closing for a period of twelve (12)
months after the Closing Date and shall thereafter terminate and be of no
further force or effect, except that (i) the representations and warranties set
forth in Sections 4.1, 4.2, 4.3, 4.4, 5.1 and 5.2 shall survive the Closing for
the period of thirty (30) days past the applicable statutes of limitation plus
any extensions or waivers thereof, (ii) the representations and warranties in
Sections 4.9(d), the last sentence of 4.11, 4.15(g) and 4.17 shall survive the
Closing for a period of two (2) years past the Closing Date, and (iii) any
representation or warranty as to which a claim (including a contingent claim)
shall have been asserted during the survival period shall continue in effect
with respect to such claim until such claim shall have been finally resolved or
settled. Each Party shall be entitled to rely upon the representations and
warranties of the other Party set forth herein, notwithstanding any
investigation or audit conducted before or after the Closing Date or the
decision of any Party to complete the Closing.

 

IN WITNESS WHEREOF, the Seller and Purchaser have executed this Agreement as of
the date first above written.

 

[SIGNATURE PAGE FOLLOWS]

 

60

Purchase and Sale Agreement

--------------------------------------------------------------------------------

SELLER

  PURCHASER:

TM DELMARVA POWER, L.L.C.

  TPF CHESAPEAKE, LLC         By:   Tenaska PF, Inc.,             Its Manager

By:

 

 

--------------------------------------------------------------------------------

  By:  

--------------------------------------------------------------------------------

Name:

 

 

--------------------------------------------------------------------------------

  Name:  

 

--------------------------------------------------------------------------------

Title:

 

 

--------------------------------------------------------------------------------

  Title:  

--------------------------------------------------------------------------------

 

Purchase and Sale Agreement

--------------------------------------------------------------------------------

EXHIBIT A

 

FORM OF AMENDMENT, ASSIGNMENT AND ASSUMPTION AGREEMENT

 

AMENDMENT, ASSIGNMENT AND ASSUMPTION AGREEMENT

 

THIS AMENDMENT, ASSIGNMENT AND ASSUMPTION AGREEMENT (this “Agreement”), dated as
of [                     , 2005] is made and entered into by and among TM
DELMARVA POWER, L.L.C., a Delaware limited liability company (the “Seller”), on
the one hand, and TPF Chesapeake, LLC, a Delaware limited liability company (the
“Purchaser”), on the other hand.

 

RECITALS

 

A. Seller owns 100% of the membership interests (the “Membership Interests”) in
Commonwealth Chesapeake Company, LLC, a Virginia limited liability company (the
“Company”), and is the sole Member of the Company under that certain Third
Amended and Restated Operating Agreement of the Company (the “Operating
Agreement”) dated as of October 14, 2004.

 

B. Purchaser desires to purchase and acquire the Membership Interests and agrees
to assume certain obligations and liabilities of the Seller as more fully
provided herein.

 

C. Seller and Purchaser have made and entered into a Purchase and Sale Agreement
(the “Purchase and Sale Agreement”) dated as of [January     , 2005], which
provides for Seller at the Closing to sell and convey to Purchaser, and for
Purchaser to purchase and acquire from Seller, the Membership Interests, all as
more fully provided therein. Capitalized terms used herein and not otherwise
defined shall have the respective meanings set forth in the Purchase and Sale
Agreement.

 

D. Seller and Purchaser desire to amend the Operating Agreement as provided
herein.

 

Now therefore, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, Seller and Purchaser agree as follows:

 

AMENDMENT, ASSIGNMENT AND AGREEMENT

 

1.1. Amendment to Operating Agreement. The Operating Agreement is hereby amended
pursuant to Section 7.2 thereof to admit Purchaser as the sole Member of the
Company and to remove Seller as the sole Member of the Company. All references
to “TM Delmarva Power, L.L.C.” and “TMDP” in the Operating Agreement are hereby
removed and replaced with the name of Purchaser. Except as otherwise expressly
set forth in this Agreement, nothing herein

 

A-1

Exhibit A

Form of Amendment, Assignment and Assumption Agreement

--------------------------------------------------------------------------------

shall be deemed to constitute an amendment, modification or waiver of any of the
terms and conditions of the Operating Agreement, all of which terms and
conditions shall remain in full force and effect as originally constituted.
Notwithstanding the foregoing, Purchaser hereby agrees to further amend the
Operating Agreement as necessary to reflect the changes contemplated hereby (the
amendments made pursuant to and by this Section 1.1 are referred to collectively
as the “Amendments”).

 

1.2. Assignment of Interests. Pursuant to the Purchase and Sale Agreement (i)
Seller hereby sells, assigns, transfers, and delivers (“Assigns”) to Purchaser
the Membership Interests and (ii) Purchaser hereby accepts such assignment and
fully assumes and agrees to perform and discharge when due all of the
obligations and liabilities of Seller under the Operating Agreement, with
respect to the Membership Interests or otherwise as a Member of the Company,
except the Excluded Liabilities (as defined in the Purchase and Sale Agreement)
or as otherwise contemplated by the Purchase and Sale Agreement, whether
relating to periods of time before or after the date hereof (the assignments and
assumptions made pursuant to and by this Section 1.2 are referred to
collectively as the “Assignments”).

 

1.3. Purchase and Sale Agreement. This Agreement is subject to, in all respects,
the terms and conditions of the Purchase and Sale Agreement, and nothing
contained herein is meant to enlarge, diminish or otherwise alter the terms and
conditions of the Purchase and Sale Agreement or the Parties’ duties and
obligations contained therein. To the extent there is a conflict between this
Agreement and the Purchase and Sale Agreement, the terms of the Purchase and
Sale Agreement shall control.

 

1.4. Operating Agreement Provisions.

 

(a) On the date hereof, Purchaser will file, or cause to be filed, with the
Secretary of State of the Commonwealth of Virginia an amendment to the Company’s
Certificate of Organization to reflect the substitution of Purchaser for Seller
as the sole Member of the Company as a result of the Amendment of the Operating
Agreement and the Assignment of the Membership Interests effected by this
Agreement.

 

(b) Seller hereby (i) acknowledges that neither the execution and delivery of
this Agreement or the Purchase and Sale Agreement, nor the consummation of any
transaction contemplated herein or therein, nor the Amendment of the Operating
Agreement, is intended to cause a dissolution of the Company under Virginia law
or the Operating Agreement; and (ii) agrees that the Company will not be
dissolved as a result of the execution and delivery of this Agreement or the
Purchase and Sale Agreement, the consummation of any transaction contemplated
herein or therein, or the Amendment of the Operating Agreement.

 

1.5. Governing Law. This Agreement will be governed by, and construed in
accordance with, the Laws of the State of New York without regard to the
conflict of laws rules of such state.

 

A-2

Exhibit A

Form of Amendment, Assignment and Assumption Agreement

--------------------------------------------------------------------------------

1.6. Counterparts. This Agreement may be signed in any number of counterparts,
each of which will be an original, with the same effect as if the signatures
thereto and hereto were upon the same instrument.

 

[SIGNATURE PAGE FOLLOWS]

 

A-3

Exhibit A

Form of Amendment, Assignment and Assumption Agreement

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.

 

TM DELMARVA POWER, L.L.C.

By:

 

 

--------------------------------------------------------------------------------

Name:

   

Title:

   

TPF CHESAPEAKE, LLC

By:

 

 

--------------------------------------------------------------------------------

Name:

   

Title:

   

 

A-4

Exhibit A

Form of Amendment, Assignment and Assumption Agreement

--------------------------------------------------------------------------------

EXHIBIT B

 

FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT (EXCLUDED ASSETS

AND LIABILITIES)

 

ASSIGNMENT AND ASSUMPTION AGREEMENT

 

THIS ASSIGNMENT AND ASSUMPTION AGREEMENT (this “Assignment and Assumption
Agreement”), dated as of [                     ], 2005, is made and entered into
by and between COMMONWEALTH CHESAPEAKE COMPANY, LLC, a Virginia limited
liability company (the “Company”), and TM DELMARVA POWER, L.L.C., a Delaware
limited liability company (the “Seller”).

 

RECITALS

 

A. Seller owns 100% of the membership interests (the “Membership Interests”) in
the Company.

 

B. Seller and TB Venture Holdings, LLC, a Delaware limited liability company
(the “Purchaser”), have made and entered into a Purchase and Sale Agreement (the
“Purchase and Sale Agreement”) dated as of [January     , 2005], which provides
for (i) Seller at the Closing to sell and convey to the Purchaser, and for
Purchaser to purchase and acquire from Seller, the Membership Interests, all as
more fully provided therein; and (ii) Seller, prior to the Closing Date, to
cause the Company to assign to Seller or any of its Affiliates (other than the
Company) the Excluded Assets and the Excluded Liabilities. The terms “Excluded
Assets,” “Excluded Liabilities” and any other capitalized terms used herein and
not otherwise defined shall have the respective meanings ascribed to such terms
in the Purchase and Sale Agreement.

 

Now therefore, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the Seller and the Company agree as follows:

 

ASSIGNMENT AND AGREEMENTS

 

1.1 Assignments. Pursuant to the Purchase and Sale Agreement (i) the Company
hereby sells, assigns, transfers, and delivers to Seller all right, title and
interest in the Company in, to and under the Excluded Assets and (ii) Seller
hereby accepts such assignment and fully and unconditionally assumes and agrees
to perform and discharge as and when due all of the obligations and liabilities
constituting Excluded Liabilities whether relating to periods of time before or
after the date hereof.

 

1.2 Purchase and Sale Agreement. This Assignment and Assumption Agreement is
subject to, in all respects, the terms and conditions of the Purchase and Sale
Agreement, and

 

B-1

Exhibit B

Form of Assignment and Assumption Agreement (Excluded Assets and Liabilities)

--------------------------------------------------------------------------------

nothing contained herein is meant to enlarge, diminish or otherwise alter the
terms and conditions of the Purchase and Sale Agreement or the Parties’ duties
and obligations contained therein. To the extent there is a conflict between
this Assignment and Assumption Agreement and the Purchase and Sale Agreement,
the terms of the Purchase and Sale Agreement shall control.

 

1.3 Governing Law. This Assignment and Assumption Agreement will be governed by,
and construed in accordance with, the Laws of the State of New York, without
regard to the conflict of laws rules of such state.

 

1.4 Counterparts. This Assignment and Assumption Agreement may be signed in any
number of counterparts, each of which will be an original, with the same effect
as if the signatures thereto and hereto were upon the same instrument.

 

IN WITNESS WHEREOF, the parties have executed this Assignment and Assumption
Agreement as of the date first written above.

 

COMMONWEALTH CHESAPEAKE

COMPANY, LLC

By:  

TM DELMARVA POWER, L.L.C.

its Sole Member

By:  

 

--------------------------------------------------------------------------------

Name:  

 

--------------------------------------------------------------------------------

Title:  

 

--------------------------------------------------------------------------------

TM DELMARVA POWER, L.L.C. By:  

 

--------------------------------------------------------------------------------

Name:  

 

--------------------------------------------------------------------------------

Title:  

 

--------------------------------------------------------------------------------

 

B-2

Exhibit B

Form of Assignment and Assumption Agreement (Excluded Assets and Liabilities)

--------------------------------------------------------------------------------

EXHIBIT C

 

FORM OF PURCHASER’S GUARANTY

 

CONTINUING GUARANTY

 

THIS CONTINUING GUARANTY (the “Guaranty”), dated as of [                     ],
2005, is made by Tenaska Energy, Inc., a Delaware corporation and Tenaska Energy
Holdings, LLC, a Delaware limited liability company (“Purchaser’s Guarantors”),
in favor of TM Delmarva Power, LLC, a Delaware limited liability company (the
“Seller”), and is executed and delivered in connection with the Purchase and
Sale Agreement, dated as of the date hereof (hereinafter referred to as the
“Purchase and Sale Agreement”), by and among the Seller on the one hand, and TPF
Chesapeake, LLC, a Delaware limited liability company (the “Purchaser”) on the
other hand. All capitalized terms used herein and not otherwise defined shall
have the meanings assigned to such terms in the Purchase and Sale Agreement.

 

WITNESSETH:

 

WHEREAS, pursuant to the Purchase and Sale Agreement, Seller shall sell and
convey to Purchaser, and Purchaser shall purchase and receive from Seller, all
of the Membership Interests in Commonwealth Chesapeake Company, LLC (the
“Company”).

 

WHEREAS, Purchaser is an affiliate of Purchaser’s Guarantors, and Purchaser’s
Guarantors have agreed to provide this guaranty of certain of Purchaser’s
obligations under the Purchase and Sale Agreement as a material inducement to
Seller to execute and deliver the Purchase and Sale Agreement, and to consummate
the transactions contemplated thereby.

 

NOW, THEREFORE, in consideration of the mutual covenants set forth in the
Purchase and Sale Agreement, Purchaser’s Guarantors hereby agree as follows:

 

1. Guaranty. Purchaser’s Guarantors hereby, jointly and severally, irrevocably,
absolutely, and unconditionally guarantee to Seller the full, prompt, and
faithful payment of Purchaser’s obligation under Section 3.2(b) of the Purchase
and Sale Agreement to pay the Adjusted Purchase Price, less the Deposit Funds
and interest thereon, at the Closing upon satisfaction in full of Purchaser’s
Conditions to Closing set forth in Article 8 of the Purchase and Sale Agreement;
provided, however, the maximum amount of Purchaser’s Guarantors’ obligations
under this Guaranty shall be limited to the payment of the “Equity Portion of
the Purchase Price,” as defined below; and provided, further, Purchaser’s
Guarantors shall have no obligations under this Guaranty if the Closing does not
occur, it being agreed that Seller’s sole remedy for any Seller Claims made in
connection with Purchaser’s breach of its obligation to close shall be as
provided in and limited by Section 7.3(b) of the Purchase and Sale Agreement
(the payment obligations,

 

C(1)-1

Exhibit C

Form of Purchaser’s Guaranty

--------------------------------------------------------------------------------

as limited herein, are the “Guaranteed Obligations”). Purchaser’s Guarantors
hereby irrevocably and unconditionally covenant and agree that each is liable
for payment of the Guaranteed Obligations as primary obligor, and that this
Guaranty is a guaranty of payment when due and not of collectibility.
Purchaser’s Guarantors agree that a separate action or actions may be brought
and prosecuted against Purchaser’s Guarantors for any of the Guaranteed
Obligations not otherwise satisfied by Purchaser, whether action is brought
against Purchaser or whether Purchaser is joined in any such action or actions
(Purchaser’s Guarantors hereby waiving any right to require Seller or Company to
first proceed against Purchaser). In no event shall Purchaser’s Guarantors’
obligations or liabilities hereunder exceed the Equity Portion of the Purchase
Price. The “Equity Portion of the Purchase Price” shall mean the amount of the
Adjusted Purchase Price minus $55,000,000.

 

2. Nature of Guaranty; Unconditional Obligations.

 

  (a) The obligations of the Purchaser’s Guarantors under this Guaranty are
independent of the Guaranteed Obligations. The Purchaser’s Guarantors’
obligations hereunder with respect to the Guaranteed Obligations shall not be
affected by the existence, validity, enforceability, perfection, or extent of
any collateral for such Guaranteed Obligations. Notwithstanding any termination,
this Guaranty shall continue to be effective or be reinstated, as the case may
be, if at any time any payment of any of the Guaranteed Obligations is rescinded
or must otherwise be returned by the Seller upon the insolvency, bankruptcy or
reorganization of Purchaser or otherwise, all as though such payment had not
been made.

 

  (b) The Seller may, at any time and from time to time without the consent of
or notice to the Purchaser’s Guarantors, except such notice as may be required
by applicable law which cannot be waived, without impairing or releasing the
obligations of the Purchaser’s Guarantors hereunder:

 

  (i) change the manner, place and terms of payment or change or extend the time
of such payment of, renew, or alter any Guaranteed Obligation, or in any manner
modify, amend or supplement the terms of the Purchase and Sale Agreement, any
Ancillary Agreements, any documents, instruments or agreements executed in
connection therewith, and the Guaranty herein made shall apply to the Guaranteed
Obligations, as changed, extended, renewed, modified, amended, supplemented or
altered in any manner;

 

  (ii) exercise or refrain from exercising any rights against Purchaser or
others (including the Purchaser’s Guarantors) or otherwise act or refrain from
acting;

 

C(1)-2

Exhibit C

Form of Purchaser’s Guaranty

--------------------------------------------------------------------------------

  (iii) add or release any other guarantor from its obligations, or amend, waive
or consent to any departure from the same, without affecting or impairing the
obligations of Purchaser’s Guarantors hereunder;

 

  (iv) settle or compromise any Guaranteed Obligations and/or any obligations
and liabilities (including any of those hereunder) incurred directly or
indirectly in respect thereof; and/or

 

  (v) consent to or waive any breach of, or any act, omission or default under,
the Purchase and Sale Agreement or any Ancillary Agreements.

 

3. Additional Waivers. To the extent permitted by applicable law, Purchaser’s
Guarantors hereby unconditionally and irrevocably waive and relinquish all
rights and remedies accorded by applicable law to sureties or guarantors and
agree not to assert or take advantage of any rights or remedies, including:

 

  (a) Any defense that may arise by reason of the incapacity or lack of
authority of Purchaser, or which results from any disability of Purchaser or the
cessation or stay of enforcement from any cause related to such defenses of the
liability of Purchaser;

 

  (b) Any right to require Seller, as a condition of payment by Purchaser’s
Guarantors, to pursue any other remedy in the power of Seller whatsoever;

 

  (c) Except to the extent Purchaser’s Guarantors have subordinated such rights
to Seller, any right to subrogation, reimbursement, exoneration, or contribution
or any other rights that would result in Purchaser’s Guarantors being deemed a
creditor of Purchaser under the federal Bankruptcy Code or any other law, in
each case arising from the existence or performance of obligations of Purchaser
under the Purchase and Sale Agreement or under any Ancillary Agreements;

 

  (d) Any circumstance that constitutes a legal or equitable discharge of a
guarantor or surety, other than indefeasible and complete performance of the
Guaranteed Obligations;

 

  (e) Notices, demands, presentments, promptness, diligence, protests, notices
of protest, notices of dishonor and notices of any action or inaction, including
acceptance of this Guaranty, notices of default under the Purchase and Sale
Agreement or any Ancillary Agreements, notices of any renewal, extension or
modification of the Guaranteed Obligations or any agreement related thereto;

 

C(1)-3

Exhibit C

Form of Purchaser’s Guaranty

--------------------------------------------------------------------------------

  (f) Any principles or provisions of law, statutory or otherwise, that are or
might be in conflict with the terms of this Guaranty, and any legal or equitable
discharge of the Purchaser’s Guarantors’ obligations hereunder;

 

  (g) Any right to require the Seller to proceed against Purchaser or any other
person or to proceed against or exhaust any security held by the Seller at any
time or to pursue any other remedy in the Seller’s power before proceeding
against Purchaser’s Guarantors;

 

  (h) Any defense based on any offset against any amounts which may be owed by
any person to Purchaser’s Guarantors for any reason whatsoever;

 

  (i) Any defense, setoff, deduction, abatement, suspension, deferment,
diminution, recoupment, limitation, termination or counterclaim which may at any
time be available to or asserted by Purchaser against the Seller or any other
person under the Purchase and Sale Agreement or any Ancillary Agreement (other
than defense of payment of the applicable amounts);

 

  (j) Any defense based upon the lack of validity or enforceability of the
Purchase and Sale Agreement or any Ancillary Agreement or any agreement or
instrument relating thereto;

 

  (k) Any defense based upon any exchange, release or non-perfection of any lien
on any collateral for, or any release or amendment or waiver of any term of any
other guaranty of, or any consent to departure from any requirement of any other
guaranty of, all or any of the Guaranteed Obligations; and

 

  (l) Any defense based on a bankruptcy, insolvency, winding up, dissolution,
liquidation, receivership, or reorganization of, or similar procedure affecting,
Purchaser or its assets or any resulting release or discharge of any of the
Guaranteed Obligations (except to the extent resulting from performance
thereof).

 

4. Financial Statements and Other Information. Until such time as this Guaranty
terminates pursuant to Section 9 hereof, Purchaser’s Guarantors covenant and
agree with Seller that, upon written request of Seller, they will provide on a
confidential basis copies of Purchaser’s Guarantors’ financial statements that
are regularly prepared after the date hereof.

 

5. Representations and Warranties. Purchaser’s Guarantors represent and warrant
to Seller as follows:

 

  (a) Purchaser’s Guarantors are a corporation and a limited liability company,

 

C(1)-4

Exhibit C

Form of Purchaser’s Guaranty

--------------------------------------------------------------------------------

respectively, each is duly organized, validly existing and in good standing
under the laws of the State of Delaware, and has all requisite corporate or
limited liability company (as applicable) power and authority to own, lease, and
operate its properties and to carry on its business as is being conducted.

 

  (b) Purchaser’s Guarantors have all corporate or limited liability company (as
applicable) power to enter into, and carry out its obligations under, this
Guaranty. The execution, delivery and performance of this Guaranty, and the
consummation of the transactions contemplated hereby, have been duly and validly
authorized by all necessary corporate or limited liability company (as
applicable) action required on the part of Purchaser’s Guarantors, and no other
corporate or limited liability company (as applicable) proceedings on the part
of Purchaser’s Guarantors are necessary to authorize this Guaranty or to
consummate the transactions contemplated hereby. This Guaranty constitutes the
valid and legally binding obligation of Purchaser’s Guarantors, enforceable
against Purchaser’s Guarantors in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws of general application relating to or affecting
the enforcement of creditors’ rights and by general equitable principles.

 

  (c) Neither the execution and delivery of this Guaranty, nor compliance with
any provision hereof, nor the consummation of the transactions contemplated
hereby will:

 

  (i) violate or result in a breach of any provisions of the certificate of
incorporation or by-laws of Purchaser’s Guarantors;

 

  (ii) result in a default (or give rise to any right of termination,
cancellation or acceleration) under or violate any of the terms, conditions, or
provisions of any note, bond, mortgage, indenture, license or material agreement
to which Purchaser’s Guarantors is a party or by which Purchaser’s Guarantors
are bound, except for such defaults (or rights of termination or acceleration)
as to which requisite waivers or consents have been obtained or which would not,
individually or in the aggregate, materially impair Purchaser’s Guarantors’
authority, right, or ability to perform the obligations contemplated by this
Guaranty;

 

  (iii) violate any law, rule, regulation, order, writ, injunction, or decree,
applicable to Purchaser’s Guarantors, except where such violations, individually
or in the aggregate, would not materially impair Purchaser’s Guarantors’
authority, right or ability to perform the obligations contemplated by this
Guaranty; or

 

C(1)-5

Exhibit C

Form of Purchaser’s Guaranty

--------------------------------------------------------------------------------

  (iv) require consent or approval of, filing with, or notice to any Person
which, if not obtained, would prevent Purchaser’s Guarantors from performing its
obligations hereunder.

 

6. Subrogation. Purchaser’s Guarantors waive any rights that it may now or
hereafter acquire against Purchaser that arise from the existence, payment,
performance or enforcement of Purchaser’s Guarantors’ obligations under this
Guaranty, the Purchase and Sale Agreement or any Ancillary Agreement, including
any right of subrogation, reimbursement, exoneration, contribution or
indemnification until the time that all Guaranteed Obligations owing to the
Seller are fully and indefeasibly paid or discharged. If any amount shall be
paid to Purchaser’s Guarantors in violation of the preceding sentence at any
time prior to the payment in full in cash of the Guaranteed Obligations and all
other amounts payable under this Guaranty, such amount shall be held in trust
for the benefit of the Seller and shall forthwith be paid to the Seller to be
credited and applied to any unsatisfied Guaranteed Obligations and all other
amounts payable under this Guaranty, whether matured or unmatured, in accordance
with the terms of the Purchase and Sale Agreement and any Ancillary Agreement,
or to be held as collateral for any unsatisfied Guaranteed Obligations or other
amounts payable under this Guaranty thereafter arising. Upon such full and
indefeasible payment of all the Guaranteed Obligations, Purchaser’s Guarantors
shall have all applicable rights of subrogation, reimbursement, exoneration,
contribution and indemnification.

 

7. No Impairment. Purchaser’s Guarantors agree and covenant that neither it nor
any Affiliates that it controls will take any action that will impair
Purchaser’s ability to meet its obligations under the Purchase and Sale
Agreement and the Ancillary Agreements when due.

 

8. Assignability. This Guaranty is binding upon and inures to the benefit of the
successors and assigns of Purchaser’s Guarantors and Seller, and is not
assignable or transferable by Purchaser’s Guarantors without the prior written
consent of Seller, which consent may be granted or withheld in Seller’s sole
discretion; provided, however that Purchaser’s Guarantors may assign or transfer
its obligations under this Guaranty to a third party in connection with
Purchaser’s Guarantors’ sale of its direct or indirect ownership interest in the
Purchaser or in connection with any merger, consolidation, sale of all or
substantially all the capital stock or assets of Purchaser’s Guarantors, or
other extraordinary transaction of a similar nature, provided, further, that
Purchaser’s Guarantors shall not be released from its obligations under this
Guaranty unless and until such assignee shall: (i) assume, by writing reasonably
satisfactory to Seller, Purchaser’s Guarantors’ obligations under this Guaranty
and acknowledge that it is the ultimate parent entity of the Purchaser; (ii)
have had, since the last day of the third full fiscal year preceding the date of
such assignment, a Net Worth (as defined below), as evidenced by financial
statements prepared in form and substance reasonably acceptable to Seller, of no
less than

 

C(1)-6

Exhibit C

Form of Purchaser’s Guaranty

--------------------------------------------------------------------------------

Purchaser’s Guarantors’ Net Worth for such period; and (iii) have a comparable
credit rating to Purchaser’s Guarantors. For purposes of this Guaranty, a
Person’s Net Worth means, as of the date of determination thereof, the aggregate
sum of the Person’s common stock, preferred stock, capital surplus and retained
earnings accounts, or similar accounts, as determined in accordance with
generally accepted accounting principles consistently applied (“Equity Value”).

 

9. Termination. Purchaser’s Guarantors’ obligations under Section 1 of this
Guaranty constitute a continuing guaranty and all obligations of Purchaser’s
Guarantors under this Guaranty shall continue in full force and effect until the
Guaranteed Obligations shall have been fully performed or otherwise extinguished
at which time this Guaranty and all obligations of Purchaser’s Guarantors under
this Guaranty shall terminate and expire. For the avoidance of doubt, this
Guaranty will terminate upon payment in full of the Adjusted Purchase Price at
the Closing or upon termination of the Purchase and Sale Agreement.

 

10. Notices. All notices, requests, demands, and other communications under this
Guaranty must be in writing and must be delivered in person or sent by certified
mail, postage prepaid, facsimile, or by overnight delivery, and properly
addressed as follows:

 

If to Seller:

 

TM Delmarva Power, L.L.C.

702 N. Franklin Street

Tampa, FL 33602

Attention: General Counsel

Tel: 813-228-1804

Fax: 813-228-1328

 

If to Purchaser’s Guarantors:

 

Tenaska Energy, Inc.

1044 N. 115 Street, Suite 400

Omaha, Nebraska 68154-4446

Attention: David Dickey, Legal Department

Tel: 402-691-9500

Fax: 402-691-9723

 

and

 

Tenaska Energy Holding, LLC

1044 N. 115 Street, Suite 400

Omaha, Nebraska 68154-4446

Attention: David Dickey, Legal Department

Tel: 402-691-9500

Fax: 402-691-9723

 

C(1)-7

Exhibit C

Form of Purchaser’s Guaranty

--------------------------------------------------------------------------------

Any Person may from time to time change its address for the purpose of notices
by a similar notice specifying a new address, but no such change shall be
effective until it is actually received by the Person sought to be charged with
its contents. All notices and other communications required or permitted under
this Guaranty which are addressed as provided in this Section 8 shall be
effective upon receipt at the location set forth in this Section 8, if delivered
personally, by overnight delivery, or by United States mail, postage prepaid,
and if delivered by facsimile, upon completion of the transaction if a
confirmation copy is sent the same day by overnight courier or messenger.

 

11. Other Provisions. This Guaranty is subject to the provisions of Sections
11.3, 11.5, 11.7, and 11.9 through 11.14 of the Purchase and Sale Agreement,
which shall apply to this Guaranty mutatis mutandis.

 

12. Expenses. Purchaser’s Guarantors agrees to pay, or cause to be paid, and to
save Seller harmless against liability for, any and all actual and direct costs
and expenses (including the reasonable fees and disbursements of counsel),
incurred or expended by Seller in connection with any action or proceeding for
the enforcement of or preservation of any rights under this Guaranty if Seller
is the prevailing party in such action or proceeding.

 

13. Rights Cumulative. The rights, powers, and remedies given to Seller by this
Guaranty are cumulative and shall be in addition to and independent of all
rights, powers, and remedies given to Seller by virtue of any statute or rule of
law or in the Purchase and Sale Agreement or the Ancillary Agreements, or any
agreement between Purchaser’s Guarantors and Seller. A waiver by the Seller of
any right or remedy hereunder on any one occasion shall not be construed as a
bar to any right or remedy which the Seller would otherwise have had on any
future occasion with regard to any subsequent breach. Any forbearance or failure
to exercise, and any delay by Seller in exercising, any right, power, or remedy
hereunder shall not impair any such right, power, or remedy or be construed to
be a waiver thereof, nor shall it preclude the further exercise of any such
right, power, or remedy.

 

14. Governing Law.

 

  (a) The validity, interpretation and effect of this Guaranty are governed by
and will be construed in accordance with the laws of the State of New York
without regard to conflicts of law doctrines.

 

C(1)-8

Exhibit C

Form of Purchaser’s Guaranty

--------------------------------------------------------------------------------

  (b) Purchaser’s Guarantors hereby irrevocably and unconditionally submit, for
itself and its property, to the nonexclusive jurisdiction of any New York State
court or federal court of the United States of America sitting in New York City,
and any appellate court from any thereof, in any action or proceeding arising
out of or relating to this Guaranty. Purchaser’s Guarantors agree that a final
judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. Nothing in this Guaranty shall affect any right that any party
may otherwise have to bring any action or proceeding relating to this Guaranty,
the Purchase and Sale Agreement or any of the Ancillary Agreements to which it
is or is to be a party in the courts of any jurisdiction.

 

  (c) Purchaser’s Guarantors irrevocably and unconditionally waive, to the
fullest extent it may legally do so, any objection that it may now or hereafter
have to the laying of venue of any suit, action or proceeding arising out of or
relating to this Guaranty in any New York State or federal court. Purchaser’s
Guarantors hereby irrevocably waive, to the fullest extent permitted by law, the
defense of an inconvenient forum to the maintenance of such action or proceeding
in any such court.

 

  (d) Purchaser’s Guarantors hereby irrevocably waive all right to trial by jury
in any action, proceeding or counterclaim (whether based on contract, tort or
otherwise) arising out of or relating to this Guaranty.

 

[Signature Page Follows.]

 

C(1)-9

Exhibit C

Form of Purchaser’s Guaranty

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, Purchaser’s Guarantors have executed this Continuing
Guaranty as of the date first set forth above.

 

Purchaser’s Guarantors: TENASKA ENERGY, INC., a Delaware corporation By:  

 

--------------------------------------------------------------------------------

Name:     Title:     TENASKA ENERGY HOLDINGS, LLC, a Delaware limited liability
company By:   Tenaska Energy, Inc., its Manager By:  

 

--------------------------------------------------------------------------------

Name:     Title:    

 

C(1)-10

Exhibit C

Form of Purchaser’s Guaranty

--------------------------------------------------------------------------------

EXHIBIT D

 

FORM OF SELLER’S GUARANTY

 

CONTINUING GUARANTY

 

THIS CONTINUING GUARANTY (the “Guaranty”), dated as of [                    
    ], 2005, is made by TECO Energy, Inc., a Florida corporation (“Seller’s
Guarantor”), in favor of TPF CHESAPEAKE, LLC, a Delaware limited liability
company (the “Purchaser”) and Commonwealth Chesapeake Company, LLC (the
“Company”), and is executed and delivered in connection with the Purchase and
Sale Agreement, dated as of the date hereof (hereinafter referred to as the
“Purchase and Sale Agreement”), by and among TM DELMARVA POWER, L.L.C., a
Delaware limited liability company (the “Seller”), on the one hand, and the
Purchaser on the other hand. All capitalized terms used herein and not otherwise
defined shall have the meanings assigned to such terms in the Purchase and Sale
Agreement.

 

WITNESSETH:

 

WHEREAS, pursuant to the Purchase and Sale Agreement, Seller shall sell and
convey to Purchaser, and Purchaser shall purchase and receive from Seller, all
of the Membership Interests in the Company.

 

WHEREAS, Seller is an indirect wholly-owned subsidiary of Seller’s Guarantor,
and Seller’s Guarantor has agreed to provide this guaranty of Seller’s
obligations under the Purchase and Sale Agreement as a material inducement to
Purchaser to execute and deliver the Purchase and Sale Agreement, and to
consummate the transactions contemplated thereby.

 

NOW, THEREFORE, in consideration of the mutual covenants set forth in the
Purchase and Sale Agreement, Seller’s Guarantor hereby agrees as follows:

 

1. Guaranty. Seller’s Guarantor hereby irrevocably, absolutely, and
unconditionally guarantees to Purchaser and to the Company the full, prompt, and
faithful payment of those liabilities and obligations of Seller now existing or
hereinafter arising under the Purchase and Sale Agreement including, without
limitation, any payment required to be made by Seller under Section 7.2 of the
Purchase and Sale Agreement, in each case to the extent not paid in full by
Seller (the “Guaranteed Obligations”). Seller’s Guarantor hereby irrevocably and
unconditionally covenants and agrees that it is liable for payment of the
Guaranteed Obligations as primary obligor, and that this Guaranty is a guaranty
of payment when due and not of collectibility. Seller’s Guarantor agrees that a
separate action or actions may be brought and prosecuted against Seller’s
Guarantor for any of the Guaranteed Obligations not otherwise satisfied by
Seller, whether action is brought against Seller or whether Seller is joined in
any such action or actions (Seller’s Guarantor hereby waiving any right to
require Purchaser or Company to first proceed against Seller). In no event shall
Seller’s Guarantor’s obligations or liabilities hereunder exceed those of Seller
under the Purchase and Sale Agreement.

 

D-1

Exhibit D

Form of Seller’s Guaranty

--------------------------------------------------------------------------------

2. Nature of Guaranty; Unconditional Obligations.

 

  (a) The obligations of the Seller’s Guarantor under this Guaranty are
independent of the Guaranteed Obligations. The Seller’s Guarantor’s obligations
hereunder with respect to the Guaranteed Obligations shall not be affected by
the existence, validity, enforceability, perfection, or extent of any collateral
for such Guaranteed Obligations. Notwithstanding any termination, this Guaranty
shall continue to be effective or be reinstated, as the case may be, if at any
time any payment of any of the Guaranteed Obligations is rescinded or must
otherwise be returned by the Purchaser upon the insolvency, bankruptcy or
reorganization of Seller or otherwise, all as though such payment had not been
made.

 

  (b) The Purchaser may, at any time and from time to time without the consent
of or notice to the Seller’s Guarantor, except such notice as may be required by
applicable law which cannot be waived, without impairing or releasing the
obligations of the Seller’s Guarantor hereunder:

 

  (i) change the manner, place and terms of payment or change or extend the time
of such payment of, renew, or alter any Guaranteed Obligation, or in any manner
modify, amend or supplement the terms of the Purchase and Sale Agreement, any
Ancillary Agreements, any documents, instruments or agreements executed in
connection therewith, and the Guaranty herein made shall apply to the Guaranteed
Obligations, as changed, extended, renewed, modified, amended, supplemented or
altered in any manner;

 

  (ii) exercise or refrain from exercising any rights against Seller or others
(including the Seller’s Guarantor) or otherwise act or refrain from acting;

 

  (iii) add or release any other guarantor from its obligations, or amend, waive
or consent to any departure from the same, without affecting or impairing the
obligations of Seller’s Guarantor hereunder;

 

  (iv) settle or compromise any Guaranteed Obligations and/or any obligations
and liabilities (including any of those hereunder) incurred directly or
indirectly in respect thereof; and/or

 

  (v) consent to or waive any breach of, or any act, omission or default under,
the Purchase and Sale Agreement or any Ancillary Agreements.

 

D-2

Exhibit D

Form of Seller’s Guaranty

--------------------------------------------------------------------------------

3. Additional Waivers. To the extent permitted by applicable law, Seller’s
Guarantor hereby unconditionally and irrevocably waives and relinquishes all
rights and remedies accorded by applicable law to sureties or guarantors and
agrees not to assert or take advantage of any rights or remedies, including:

 

  (a) Any defense that may arise by reason of the incapacity or lack of
authority of Seller, or which results from any disability of Seller or the
cessation or stay of enforcement from any cause related to such defenses of the
liability of Seller;

 

  (b) Any right to require Purchaser or Company, as a condition of payment by
Seller’s Guarantor, to pursue any other remedy in the power of Purchaser or
Company whatsoever;

 

  (c) Except to the extent Seller’s Guarantor has subordinated such rights to
Purchaser or Company, any right to subrogation, reimbursement, exoneration, or
contribution or any other rights that would result in Seller’s Guarantor being
deemed a creditor of Seller under the federal Bankruptcy Code or any other law,
in each case arising from the existence or performance of obligations of Seller
under the Purchase and Sale Agreement or under any Ancillary Agreements;

 

  (d) Any circumstance that constitutes a legal or equitable discharge of a
guarantor or surety, other than indefeasible and complete performance of the
Guaranteed Obligations;

 

  (e) Notices, demands, presentments, promptness, diligence, protests, notices
of protest, notices of dishonor and notices of any action or inaction, including
acceptance of this Guaranty, notices of default under the Purchase and Sale
Agreement or any Ancillary Agreements, notices of any renewal, extension or
modification of the Guaranteed Obligations or any agreement related thereto;

 

  (f) Any principles or provisions of law, statutory or otherwise, that are or
might be in conflict with the terms of this Guaranty, and any legal or equitable
discharge of the Seller’s Guarantor’s obligations hereunder;

 

  (g) Any right to require the Purchaser to proceed against Seller or any other
person or to proceed against or exhaust any security held by the Purchaser at
any time or to pursue any other remedy in the Purchaser’s power before
proceeding against Seller’s Guarantor;

 

  (h) Any defense based on any offset against any amounts which may be owed by
any person to Seller’s Guarantor for any reason whatsoever;

 

D-3

Exhibit D

Form of Seller’s Guaranty

--------------------------------------------------------------------------------

  (i) Any defense, setoff, deduction, abatement, suspension, deferment,
diminution, recoupment, limitation, termination or counterclaim which may at any
time be available to or asserted by Seller against the Purchaser or any other
person under the Purchase and Sale Agreement or any Ancillary Agreement (other
than defense of payment of the applicable amounts);

 

  (j) Any defense based upon the lack of validity or enforceability of the
Purchase and Sale Agreement or any Ancillary Agreement or any agreement or
instrument relating thereto;

 

  (k) Any defense based upon any exchange, release or non-perfection of any lien
on any collateral for, or any release or amendment or waiver of any term of any
other guaranty of, or any consent to departure from any requirement of any other
guaranty of, all or any of the Guaranteed Obligations; and

 

  (l) Any defense based on a bankruptcy, insolvency, winding up, dissolution,
liquidation, receivership, or reorganization of, or similar procedure affecting,
Seller or its assets or any resulting release or discharge of any of the
Guaranteed Obligations (except to the extent resulting from performance
thereof).

 

4. Financial Statements and Other Information. Until such time as this Guaranty
terminates pursuant to Section 7 hereof, Seller’s Guarantor covenants and agrees
with Purchaser that it will comply with its reporting requirements under the
Securities and Exchange Act of 1934, as amended.

 

5. Representations and Warranties. Seller’s Guarantor represents and warrants to
Purchaser as follows:

 

  (a) Seller’s Guarantor is a corporation, duly organized, validly existing and
in good standing under the laws of the State of Florida, and has all requisite
corporate power and authority to own, lease, and operate its properties and to
carry on its business as is being conducted.

 

  (b) Seller’s Guarantor has all corporate power to enter into, and carry out
its obligations under, this Guaranty. The execution, delivery and performance of
this Guaranty, and the consummation of the transactions contemplated hereby,
have been duly and validly authorized by all necessary corporate action required
on the part of Seller’s Guarantor, and no other corporate proceedings on the
part of Seller’s Guarantor are necessary to authorize this Guaranty or to
consummate the transactions contemplated hereby. This Guaranty constitutes the
valid and legally binding obligation of Seller’s Guarantor, enforceable against
Seller’s Guarantor in accordance with its terms, except as such enforceability
may be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws of general application relating to or affecting the enforcement of
creditors’ rights and by general equitable principles.

 

D-4

Exhibit D

Form of Seller’s Guaranty

--------------------------------------------------------------------------------

  (c) Neither the execution and delivery of this Guaranty, nor compliance with
any provision hereof, nor the consummation of the transactions contemplated
hereby will:

 

  (i) violate or result in a breach of any provisions of the certificate of
incorporation or by-laws of Seller’s Guarantor;

 

  (ii) result in a default (or give rise to any right of termination,
cancellation or acceleration) under or violate any of the terms, conditions, or
provisions of any note, bond, mortgage, indenture, license or material agreement
to which Seller’s Guarantor is a party or by which Seller’s Guarantor is bound,
except for such defaults (or rights of termination or acceleration) as to which
requisite waivers or consents have been obtained or which would not,
individually or in the aggregate, materially impair Seller’s Guarantor’s
authority, right, or ability to perform the obligations contemplated by this
Guaranty;

 

  (iii) violate any law, rule, regulation, order, writ, injunction, or decree,
applicable to Seller’s Guarantor, except where such violations, individually or
in the aggregate, would not materially impair Seller’s Guarantor’s authority,
right or ability to perform the obligations contemplated by this Guaranty; or

 

  (iv) require consent or approval of, filing with, or notice to any Person
which, if not obtained, would prevent Seller’s Guarantor from performing its
obligations hereunder.

 

6. Subrogation. Seller’s Guarantor waives any rights that it may now or
hereafter acquire against Seller that arise from the existence, payment,
performance or enforcement of Seller’s Guarantor’s obligations under this
Guaranty, the Purchase and Sale Agreement or any Ancillary Agreement, including
any right of subrogation, reimbursement, exoneration, contribution or
indemnification until the time that all Guaranteed Obligations owing to the
Purchaser are fully and indefeasibly paid or discharged. If any amount shall be
paid to Seller’s Guarantor in violation of the preceding sentence at any time
prior to the payment in full in cash of the Guaranteed Obligations and all other
amounts payable under this Guaranty, such amount shall be held in trust for the
benefit of the Purchaser and shall forthwith be paid to the Purchaser to be
credited and applied to any unsatisfied Guaranteed Obligations and all other
amounts payable under this Guaranty, whether matured or unmatured, in accordance
with the terms of the Purchase

 

D-5

Exhibit D

Form of Seller’s Guaranty

--------------------------------------------------------------------------------

and Sale Agreement and any Ancillary Agreement, or to be held as collateral for
any unsatisfied Guaranteed Obligations or other amounts payable under this
Guaranty thereafter arising. Upon such full and indefeasible payment of all the
Guaranteed Obligations, Seller’s Guarantor shall have all applicable rights of
subrogation, reimbursement, exoneration, contribution and indemnification.

 

7. No Impairment. Seller’s Guarantor agrees and covenants that neither it nor
any Affiliates that it controls will take any action that will impair Seller’s
ability to meet its obligations under the Purchase and Sale Agreement and the
Ancillary Agreements when due.

 

8. Assignability. This Guaranty is binding upon and inures to the benefit of the
successors and assigns of Seller’s Guarantor and Purchaser, and is not
assignable or transferable by Seller’s Guarantor without the prior written
consent of Purchaser, which consent may be granted or withheld in Purchaser’s
sole discretion; provided, however that Seller’s Guarantor may assign or
transfer its obligations under this Guaranty to a third party in connection with
Seller’s Guarantor’s sale of its direct or indirect ownership interest in the
Seller or in connection with any merger, consolidation, sale of all or
substantially all the capital stock or assets of Seller’s Guarantor, or other
extraordinary transaction of a similar nature, provided, further, that Seller’s
Guarantor shall not be released from its obligations under this Guaranty unless
and until such assignee shall: (i) assume, by writing reasonably satisfactory to
Purchaser, Seller’s Guarantor’s obligations under this Guaranty and acknowledge
that it is the ultimate parent entity of the Seller; (ii) have had, since the
last day of the third full fiscal year preceding the date of such assignment, a
Net Worth (as defined below), as evidenced by financial statements prepared in
form and substance reasonably acceptable to Purchaser, of no less than Seller’s
Guarantor’s Net Worth for such period; and (iii) have a comparable credit rating
to Seller’s Guarantor. For purposes of this Guaranty, a Person’s Net Worth
means, as of the date of determination thereof, the aggregate sum of the
Person’s common stock, preferred stock, capital surplus and retained earnings
accounts, or similar accounts, as determined in accordance with generally
accepted accounting principles consistently applied (“Equity Value”); provided,
however, that for purposes of Seller’s Guarantor this shall not include that
portion of the Equity Value attributable to the Facility.

 

9. Termination. Seller’s Guarantor’s obligations under Section 1 of this
Guaranty constitute a continuing guaranty and all obligations of Seller’s
Guarantor under this Guaranty shall continue in full force and effect until the
Guaranteed Obligations shall have been fully performed or otherwise extinguished
at which time this Guaranty and all obligations of Seller’s Guarantor under this
Guaranty shall terminate and expire.

 

D-6

Exhibit D

Form of Seller’s Guaranty

--------------------------------------------------------------------------------

10. Notices. All notices, requests, demands, and other communications under this
Guaranty must be in writing and must be delivered in person or sent by certified
mail, postage prepaid, facsimile, or by overnight delivery, and properly
addressed as follows:

 

If to Purchaser:

 

TPF Chesapeake, LLC

1044 N. 115 Street, Suite 400

Omaha, Nebraska 68154-4446

Attention: David Dickey, Legal Department

Tel: 402-691-9500

Fax: 402-691-9723

 

If to Seller’s Guarantor:

 

TECO Energy, Inc.

702 North Franklin Street

Tampa, Florida 33602

Attention: General Counsel

 

Any Person may from time to time change its address for the purpose of notices
by a similar notice specifying a new address, but no such change shall be
effective until it is actually received by the Person sought to be charged with
its contents. All notices and other communications required or permitted under
this Guaranty which are addressed as provided in this Section 8 shall be
effective upon receipt at the location set forth in this Section 8, if delivered
personally, by overnight delivery, or by United States mail, postage prepaid,
and if delivered by facsimile, upon completion of the transaction if a
confirmation copy is sent the same day by overnight courier or messenger.

 

11. Other Provisions. This Guaranty is subject to the provisions of Sections
11.3, 11.5, 11.7, and 11.9 through 11.14 of the Purchase and Sale Agreement,
which shall apply to this Guaranty mutatis mutandis.

 

12. Expenses. Seller’s Guarantor agrees to pay, or cause to be paid, and to save
Purchaser harmless against liability for, any and all actual and direct costs
and expenses (including the reasonable fees and disbursements of counsel),
incurred or expended by Purchaser in connection with any action or proceeding
for the enforcement of or preservation of any rights under this Guaranty if
Purchaser is the prevailing party in such action or proceeding.

 

13. Rights Cumulative. The rights, powers, and remedies given to Purchaser by
this Guaranty are cumulative and shall be in addition to and independent of all
rights, powers,

 

D-7

Exhibit D

Form of Seller’s Guaranty

--------------------------------------------------------------------------------

and remedies given to Purchaser by virtue of any statute or rule of law or in
the Purchase and Sale Agreement or the Ancillary Agreements, or any agreement
between Seller’s Guarantor and Purchaser. A waiver by the Purchaser of any right
or remedy hereunder on any one occasion shall not be construed as a bar to any
right or remedy which the Purchaser would otherwise have had on any future
occasion with regard to any subsequent breach. Any forbearance or failure to
exercise, and any delay by Purchaser in exercising, any right, power, or remedy
hereunder shall not impair any such right, power, or remedy or be construed to
be a waiver thereof, nor shall it preclude the further exercise of any such
right, power, or remedy.

 

14. Governing Law.

 

  (a) The validity, interpretation and effect of this Guaranty are governed by
and will be construed in accordance with the laws of the State of New York
without regard to conflicts of law doctrines.

 

  (b) Seller’s Guarantor hereby irrevocably and unconditionally submits, for
itself and its property, to the nonexclusive jurisdiction of any New York State
court or federal court of the United States of America sitting in New York City,
and any appellate court from any thereof, in any action or proceeding arising
out of or relating to this Guaranty. Seller’s Guarantor agrees that a final
judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. Nothing in this Guaranty shall affect any right that any party
may otherwise have to bring any action or proceeding relating to this Guaranty,
the Purchase and Sale Agreement or any of the Ancillary Agreements to which it
is or is to be a party in the courts of any jurisdiction.

 

  (c) Seller’s Guarantor irrevocably and unconditionally waives, to the fullest
extent it may legally do so, any objection that it may now or hereafter have to
the laying of venue of any suit, action or proceeding arising out of or relating
to this Guaranty in any New York State or federal court. Seller’s Guarantor
hereby irrevocably waives, to the fullest extent permitted by law, the defense
of an inconvenient forum to the maintenance of such action or proceeding in any
such court.

 

  (d) Seller’s Guarantor hereby irrevocably waives all right to trial by jury in
any action, proceeding or counterclaim (whether based on contract, tort or
otherwise) arising out of or relating to this Guaranty.

 

[Signature Page Follows.]

 

D-8

Exhibit D

Form of Seller’s Guaranty

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, Seller’s Guarantor has executed this Continuing Guaranty as
of the date first set forth above.

 

Seller’s Guarantor:

TECO ENERGY, INC.,

a Florida corporation

By:

 

 

--------------------------------------------------------------------------------

Name:

   

Title:

   

 

D-9

Exhibit D

Form of Seller’s Guaranty

--------------------------------------------------------------------------------

EXHIBIT E

FORM OF SELLER OFFICER CERTIFICATE

 

I,                     ,              of TM DELMARVA POWER, L.L.C., a limited
liability company organized under the laws of Delaware (the “Seller”), hereby
certify as of the date hereof that:

 

The Seller’s representations and warranties made in Article 4 of the Purchase
Agreement (as defined below) that are qualified with respect to materiality
(whether by reference to Material Adverse Effect or otherwise) are true and
correct, and the Seller’s representations and warranties made in Article 4 of
the Purchase Agreement that are not so qualified are true and correct in all
material respects, on and as of the date hereof, in each case as though made on
and as of the date hereof.

 

This certificate is given pursuant to Section 8.6 of the Purchase and Sale
Agreement (the “Purchase Agreement”), dated as of January     , 2005, by and
among [                                ], and the Seller. Capitalized terms used
and not otherwise defined herein shall have the meanings assigned to them as in
the Purchase Agreement.

 

IN WITNESS WHEREOF, I hereunto sign my name.

 

Dated:             , 2005

 

TM DELMARVA POWER, L.L.C.

By:

 

 

--------------------------------------------------------------------------------

Name:

   

Title:

   

 

E-1

Exhibit E

Form of Seller Officer Certificate

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EXHIBIT F

 

FORM OF LEGAL OPINION OF SELLER’S COUNSEL

 

Defined terms used herein but not otherwise defined shall have the respective
meanings set forth in the Agreement. Subject to customary qualifications and
limitations, the exceptions contained therein, and the accuracy of customary
certificates of Seller, the Company and Seller’s Guarantor as to matters of
fact, the legal opinion shall be to the following effect:

 

  1. Seller is a limited liability company validly existing and in good standing
under the laws of the State of Delaware. The Company is a limited liability
company validly existing and in good standing under the laws of the Commonwealth
of Virginia. Seller’s Guarantor is a corporation validly existing and in good
standing under the laws of the State of Florida.

 

  2. Seller has all requisite limited liability company power and authority to
execute and deliver, and perform its obligations under, the Agreement and the
Ancillary Agreements to which it is a party (collectively, the “Transaction
Documents”). Seller’s Guarantor has all requisite corporate power and authority
to execute and deliver, and perform its obligations under, Seller’s Guaranty.
The execution, delivery and performance by Seller of the Transaction Documents
and by Seller’s Guarantor of Seller’s Guaranty have been duly and validly
authorized by all necessary action on the part of Seller and Seller’s Guarantor.
Each of the Transaction Documents has been duly executed and delivered by Seller
and Seller’s Guaranty has been duly executed and delivered by Seller’s Guarantor
and, assuming each such agreement constitutes a valid and binding obligation of
each other party thereto, constitute valid and binding obligations of Seller and
Seller’s Guarantor, respectively, enforceable against each of them in accordance
with their respective terms.

 

  3. The Membership Interests constitute all of the limited liability company
interests in the Company and have been duly authorized and validly issued. To
our knowledge, there are no outstanding contractual obligations of the Company,
Seller or Seller’s Guarantor to issue, deliver, sell, repurchase, redeem or
otherwise acquire any limited liability company interest in, or other equity
security issuable by, the Company, except obligations under the Agreement.

 

  4. The execution, delivery and performance by Seller of the Transaction
Documents and by Seller’s Guarantor of Seller’s Guaranty do not: (a) violate or
result in a breach of any of the provisions of the certificate of formation or
operating agreement of Seller or the Company or the articles of incorporation or
bylaws of Seller’s Guarantor; or (b) violate or result in a breach of or a
default under (with

 

F-1

Exhibit F

Form of Legal Opinion of Seller’s Counsel

--------------------------------------------------------------------------------

or without notice or lapse of time or both) any other agreement or instrument
known to us to which Seller or the Company is a party or by which Seller or the
Company is bound, other than any such violation, breach or default as to which
requisite waivers or consents have been obtained or which, either individually
or in the aggregate, would not have a Company Material Adverse Effect.

 

  5. The execution, delivery and performance by Seller of the Transaction
Documents and by Seller’s Guarantor of Seller’s Guaranty will not require Seller
or Seller’s Guarantor to obtain the authorization, consent, approval,
certification, license, or order of, or make any filing with, any Governmental
Authority on or before the Closing Date (collectively “Authorizations”), except
for (a) the expiration or termination of the waiting period under the HSR Act,
(b) Seller’s Required Regulatory Approvals (which Authorizations have been duly
obtained) and (c) Authorizations of such a nature that the failure to obtain or
to make the same will not have a Company Material Adverse Effect.

 

Qualifications, Etc.

 

Such opinions may also contain customary limitations, qualifications,
assumptions and exceptions.

 

F-2

Exhibit F

Form of Legal Opinion of Seller’s Counsel

--------------------------------------------------------------------------------

EXHIBIT G

 

FORM OF CERTIFICATES OF INCUMBENCY OF SELLER AND SELLER’S GUARANTOR

 

I,                                 , Secretary of                     , a
Delaware limited liability company (hereinafter called the “Company”), DO HEREBY
CERTIFY that:

 

The person whose name appears below is a duly elected and qualified officer of
the Company, holding the respective office set forth opposite his/her name, and
the signature set forth opposite his/her name is his/her genuine signature.

 

Name

--------------------------------------------------------------------------------

 

Office

--------------------------------------------------------------------------------

 

Signature

--------------------------------------------------------------------------------

       

 

--------------------------------------------------------------------------------

       

 

--------------------------------------------------------------------------------

       

 

--------------------------------------------------------------------------------

       

 

--------------------------------------------------------------------------------

       

 

--------------------------------------------------------------------------------

 

WITNESS my hand this      day of             , 2005

 

 

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Secretary

 

I,                                 ,                                 , DO HEREBY
CERTIFY that              is the duly elected and qualified Secretary of the
Company and that the signature set forth above his name is his true signature.

 

 

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G-1

Exhibit G

Form of Certificates of Incumbency of Seller and Seller’s Guarantor

--------------------------------------------------------------------------------

EXHIBIT H

 

WAIVER, TERMINATION, AND RELEASE

 

This WAIVER, TERMINATION AND RELEASE AGREEMENT (this “Agreement”), by and among
Chesapeake Commonwealth Company, LLC, a Virginia limited liability company
(“CCC”), TM DELMARVA POWER, L.L.C., a Delaware limited liability company
(“TMDP”), TPS Virginia Operations Company, a Virginia corporation (“TPS”), and
TECO EnergySource, Inc., a Florida corporation and an affiliate of TMDP (“TECO
EnergySource”), is dated as of                     , 2005, and is executed and
delivered pursuant to Section 8.11(g) of that certain Purchase and Sale
Agreement (the “Purchase Agreement”) by and between TMDP and TPF Chesapeake,
LLC, a Delaware limited liability company (“TPF”). All capitalized terms used
and not otherwise defined in this Agreement shall have the respective meanings
given to such terms in the Purchase Agreement.

 

RECITALS

 

WHEREAS, CCC and TPS are parties to that certain Operations and Maintenance
Agreement (the “Facility Operations Agreement”) dated as of May 15, 2000, as
amended, pursuant to which TPS provides certain services to CCC with respect to
the operation of the electric generating facility owned by CCC located in
Accomack County, Virginia (the “Facility”);

 

WHEREAS, TECO EnergySource and CCC are parties to that certain oral agreement
(the “TECO EnergySource Agreement”) pursuant to which TECO EnergySource provides
certain services to CCC;

 

WHEREAS, as a condition to the obligations of TPF to consummate the Transactions
contemplated by the Purchase Agreement, TMDP is required to cause the Facility
Operations Agreement and the TECO EnergySource Agreement to be terminated prior
to or concurrently with the Closing;

 

WHEREAS, upon and as a result of the Closing, TMDP shall have reduced its
aggregate direct and indirect ownership interest in the Facility below fifty
percent (50%), thus entitling each of CCC and TPS to terminate the Facility
Operations Agreement pursuant to Section 6.1(b) thereof by providing written
notice to the other party thereto not later than six (6) months prior to the
effective date of such termination (the “Early Termination Notice”);

 

WHEREAS, in accordance with Section 15.12 of the Facility Operations Agreement,
each of CCC and TPS desires to waive its right to receive Early Termination
Notice;

 

WHEREAS, each of CCC and TPS desires to terminate the Facility Operations
Agreement in its entirety effective immediately upon the Closing and to provide
a general release of claims as set forth herein; and

 

WHEREAS, each of CCC, TMDP and TECO EnergySource desires to terminate the TECO
EnergySource Agreement effective immediately upon the Closing and to provide a
general release of claims as set forth herein;

--------------------------------------------------------------------------------

NOW, THEREFORE, the undersigned hereby agree as follows:

 

1. Waiver of Early Termination Notice. Each of CCC and TPS hereby waives its
right to Early Termination Notice in connection with the termination of the
Facility Operations Agreement as contemplated in Section 2 hereof.

 

2. Termination of Facility Operations Agreement; General Release. CCC and TPS
hereby mutually terminate the Facility Operations Agreement pursuant to Section
6.1(b) thereof effective immediately upon the Closing. Notwithstanding anything
to the contrary in the Facility Operations Agreement, effective upon termination
of the Facility Operations Agreement in accordance with this Agreement: (a) the
Facility Operations Agreement shall be of no further force and effect, and (b)
each of CCC and TPS shall hereby irrevocably and unconditionally release and
forever discharge the other, its respective officers, directors, agents,
servants, attorneys, accountants and representatives from, and with respect to,
any and all liabilities or obligations whatsoever, whether current, future,
accrued or contingent, under or pursuant to the Facility Operations Agreement.
For the avoidance of doubt, upon termination as set forth herein, the Facility
Operations Agreement shall be terminated in its entirety, and CCC and TPS shall
not be bound under any provision thereunder, including without limitation
Sections 6.5, 6.7 and 6.8 thereof.

 

3. Termination of TECO EnergySource Agreement; General Release. CCC, TMDP and
TECO EnergySource hereby terminate the TECO EnergySource Agreement effective
immediately upon the Closing. Effective upon termination of the TECO
EnergySource Agreement in accordance with this Agreement: (a) the TECO
EnergySource Agreement shall be of no further force or effect, and (b) each of
CCC, TMDP and TECO EnergySource shall hereby irrevocably and unconditionally
release and forever discharge the other parties to the TECO EnergySource
Agreement, their respective officers, directors, agents, servants, attorneys,
accountants and representatives from, and with respect to, any and all
liabilities or obligations whatsoever, whether current, future, accrued or
contingent, under or pursuant to the TECO EnergySource Agreement.

 

4. Governing Law. The validity, interpretation and effect of this Agreement are
governed by and will be construed in accordance with the laws of the State of
New York without regard to conflicts of law doctrines.

 

5. Counterparts. This Agreement may be executed in any number of counterparts,
each of which, when so executed and delivered, shall be an original, but all of
which together shall constitute one and the same instrument.

 

6. Entire Agreement. This Agreement constitutes the entire agreement among the
parties about or relating to the subject matter hereof and supersedes any and
all prior agreements or understandings among the parties with respect thereto.

 

[Remainder of page intentionally left blank.]

 

2

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the date first above written.

 

COMMONWEALTH CHESAPEAKE

COMPANY, LLC

By:  

 

--------------------------------------------------------------------------------

Name:     Title:     TM DELMARVA POWER, L.L.C. By:  

 

--------------------------------------------------------------------------------

Name:     Title:     TPS VIRGINIA OPERATIONS COMPANY By:  

 

--------------------------------------------------------------------------------

Name:     Title:     TECO ENERGYSOURCE, INC. By:  

 

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Name:     Title:    

 

[Signature page to Waiver, Termination and Release Agreement]

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EXHIBIT I

 

FORM OF PURCHASER OFFICER CERTIFICATE

 

I,                                 ,                      of TPF Chesapeake,
LLC, a limited liability company organized under the laws of the State of
Delaware (the “Purchaser”), hereby certify as of the date hereof that:

 

The Purchaser’s representations and warranties made in Article 5 of the Purchase
Agreement (as defined below) that are qualified with respect to materiality
(whether by reference to Material Adverse Effect or otherwise) are true and
correct, and the Purchaser’s representations and warranties made in Article 5 of
the Purchase Agreement that are not so qualified are true and correct in all
material respects, on and as of the date hereof, in each case as though made on
and as of the date hereof.

 

This certificate is given pursuant to Section 9.6 of the Purchase and Sale
Agreement (the “Purchase Agreement”), dated as of January     , 2005, by and
among TM DELMARVA POWER, L.L.C., a limited liability company organized under the
laws of Delaware, and the Purchaser. Capitalized terms used and not otherwise
defined herein shall have the meanings assigned to them as in the Purchase
Agreement.

 

IN WITNESS WHEREOF, I hereunto sign my name.

 

Dated:             , 2005

 

TPF CHESAPEAKE, LLC

By:

 

 

--------------------------------------------------------------------------------

Name:

   

Title:

   

 

I-1

Exhibit I

Form of Purchaser Officer Certificate

--------------------------------------------------------------------------------

Confidential Draft November 24, 2004

 

EXHIBIT J

 

FORM OF LEGAL OPINION OF PURCHASER’S COUNSEL

 

Defined terms used herein but not otherwise defined shall have the respective
meanings set forth in the Agreement. Subject to customary qualifications and
limitations, the exceptions contained therein, and the accuracy of customary
certificates of Purchaser and Purchaser’s Guarantor as to matters of fact, the
legal opinion shall be substantially to the following effect:

 

  1. Purchaser is a limited liability company validly existing and in good
standing under the laws of the State of Delaware, with all requisite limited
liability company power and authority to enter into the transactions
contemplated by the Agreement and the Ancillary Agreements to which it is a
party (collectively the “Transaction Documents”). Purchaser’s Guarantors are a
corporation and a limited liability company. Each is validly existing and in
good standing under the laws of the State of Delaware, with all requisite
corporate and limited liability company power (as applicable) to enter into the
Purchaser’s Guaranty.

 

  2. Each of the Transaction Documents has been duly authorized, executed and
delivered by Purchaser, and Purchaser’s Guaranty has been duly authorized,
executed and delivered by Purchaser’s Guarantors. Assuming such agreements
constitute valid and binding obligations of each other party thereto each
Transaction Document constitutes the legal, valid and binding obligation of
Purchaser, enforceable against Purchaser in accordance with its terms. Assuming
the Purchaser’s Guaranty constitutes the valid and binding obligation of the
other party thereto, the Purchaser’s Guaranty constitutes the legal, valid and
binding obligation of Purchaser’s Guarantors, enforceable against Purchaser’s
Guarantors in accordance with its terms.

 

  3. The execution, delivery and performance by Purchaser of the Transaction
Documents and by Purchaser’s Guarantors of Purchaser’s Guaranty do not: (a)
violate or result in a breach of any of the provisions of the [Charter
Documents] of Purchaser or Purchaser’s Guarantors or (b) violate or result in a
breach of or a default under (with or without notice or lapse of time or both)
any agreement or instrument known to us and to which Purchaser or Purchaser’s
Guarantors is a party or by which Purchaser or Purchaser’s Guarantors are bound,
other than any such violation, breach or default that, either individually or in
the aggregate, would not have a Purchaser Material Adverse Effect.

 

  4. The execution, delivery and performance by Purchaser of the Transaction
Documents and by Purchaser’s Guarantors of Purchaser’s Guaranty will not require
Purchaser to obtain the authorization, consent, approval, certification,

 

J-1

Exhibit J

Form of Legal Opinion of Purchaser’s Counsel

--------------------------------------------------------------------------------

Confidential Draft November 24, 2004

 

license, or order of, or make any filing with, any Governmental Authority on or
before the Closing Date (collectively “Authorizations”), except for (a) the
expiration or termination of the waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, (b) Purchaser’s Required
Regulatory Approvals (which Authorizations have been duly obtained) and (c)
Authorizations of such a nature that the failure to obtain or to make the same
will not have a Purchaser Material Adverse Effect.

 

Qualifications, Etc.

 

Such opinions may also contain customary limitations, qualifications,
assumptions and exceptions.

 

J-2

Exhibit J

Form of Legal Opinion of Purchaser’s Counsel

--------------------------------------------------------------------------------

EXHIBIT K

 

FORM OF CERTIFICATES OF INCUMBENCY OF PURCHASER AND PURCHASER’S GUARANTORS

 

I,                                 , Secretary of                     , a
Delaware limited liability company (hereinafter called the “Company”), DO HEREBY
CERTIFY that:

 

The person whose name appears below is a duly elected and qualified officer of
the Company, holding the respective office set forth opposite his/her name, and
the signature set forth opposite his/her name is his/her genuine signature.

 

Name

--------------------------------------------------------------------------------

 

Office

--------------------------------------------------------------------------------

 

Signature

--------------------------------------------------------------------------------

       

 

--------------------------------------------------------------------------------

       

 

--------------------------------------------------------------------------------

       

 

--------------------------------------------------------------------------------

       

 

--------------------------------------------------------------------------------

       

 

--------------------------------------------------------------------------------

 

WITNESS my hand this      day of             , 2005

 

 

--------------------------------------------------------------------------------

Secretary

 

I,                                 ,                                 , DO HEREBY
CERTIFY that                      is the duly elected and qualified Secretary of
the Company and that the signature set forth above his name is his true
signature.

 

 

 

K-1

Exhibit K

Form of Certificates of Incumbency of Purchaser and Purchaser’s Guarantors