EXHIBIT 10.1
 
EXECUTION COPY

 

 
 

 
 
PURCHASE AGREEMENT
 

BY AND AMONG
 
PEPCO HOLDINGS, INC.,
 
CONECTIV, LLC,
 
CONECTIV ENERGY HOLDING COMPANY, LLC
 
AND
 
NEW DEVELOPMENT HOLDINGS, LLC
 

 
Dated as of April 20, 2010
 

 

 

 
 

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TABLE OF CONTENTS
 

 
ARTICLE I
 
DEFINITIONS
1
1.01
 
Definitions
1
 
ARTICLE II
 
 
SALE AND PURCHASE OF MEMBERSHIP INTERESTS; CLOSING
 
24
2.01
 
Sale and Purchase of Membership Interests
24
2.02
 
Closing Payment
24
2.03
 
Closing
25
2.04
 
Post-Closing Payment
27
2.05
 
Tax Treatment of Payments
28
2.06
 
Withholding Rights
28
 
ARTICLE III
 
 
REPRESENTATIONS AND WARRANTIES OF PARENT, HOLDINGS AND THE COMPANY
 
29
3.01
 
Organization and Qualification
29
3.02
 
Authority to Execute and Perform Agreement
29
3.03
 
Capitalization and Title to Membership Interests
31
3.04
 
Subsidiaries
31
3.05
 
Financial Statements
32
3.06
 
Absence of Undisclosed Liabilities
33
3.07
 
No Material Changes
33
3.08
 
Tax Matters
33
3.09
 
Compliance with Laws
35
3.10
 
No Breach
35
3.11
 
Consents and Approvals
35
3.12
 
Actions and Proceedings
36
3.13
 
Material Contracts
36
3.14
 
Real Property
38
3.15
 
Intellectual Property
40
3.16
 
Benefit Matters
41
3.17
 
Labor Matters
42
3.18
 
Insurance
43
3.19
 
Permits
43
3.20
 
Environmental Matters
44
3.21
 
Brokerage
45
3.22
 
Sufficiency of Assets
46
3.23
 
Personal Property
46
3.24
 
Emission Allowances
46
3.25
 
Delta Project
46
3.26
 
Development Projects
46
3.27
 
Credit Support
46
3.28
 
Regulatory Matters
47
3.29
 
PJM Capacity Awards
47

 
 

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ARTICLE IV
 
REPRESENTATIONS AND WARRANTIES OF PURCHASER
47
4.01
 
Organization and Qualification
47
4.02
 
Authority to Execute and Perform Agreement
48
4.03
 
Compliance with Laws
48
4.04
 
No Breach
48
4.05
 
Consents and Approvals
48
4.06
 
Actions and Proceedings
49
4.07
 
Securities Law Matters
49
4.08
 
Experience; Investigation
49
4.09
 
Financing
50
4.10
 
Brokerage
50
4.11
 
Entity Classification for Tax Purposes
50
4.12
 
Disclaimer Regarding Projections
50
 
ARTICLE V
 
 
CONDUCT OF BUSINESS PENDING THE CLOSING
 
50
5.01
 
Conduct of Business Pending the Closing
50
5.02
 
Casualty Event; Condemnation
55
 
ARTICLE VI
 
 
ADDITIONAL AGREEMENTS
 
58
6.01
 
Regulatory Filings
58
6.02
 
Standard of Efforts
58
6.03
 
Notification of Certain Matters
60
6.04
 
Access to Information; Confidentiality
60
6.05
 
Public Statements
62
6.06
 
No Solicitation
63
6.07
 
Release of Parent Letters of Credit and Parent Guarantees
63
6.08
 
Compliance with ISRA
65
6.09
 
Reorganization
68
6.10
 
Affiliate Obligations
69
6.11
 
Termination or Assignment of Service Contracts
69
6.12
 
Transition Services
69
6.13
 
Insurance
69
6.14
 
No Other Representations or Warranties
70
6.15
 
Financing Related Cooperation
70
6.16
 
Title
70
6.17
 
Non-Solicitation of Employees
71
6.18
 
Indebtedness
71
6.19
 
Confidentiality
71
6.20
 
Company Audited Financial Statements
72
6.21
 
Coal Inventory and Ash Disposal
72
6.22
 
Use of Trade Names
73
6.23
 
Negotiation of Electricity Purchase Option
73
6.24
 
Emission Allowances Filings
73
6.25
 
Peak Season Maintenance and Capacity Testing
73
6.26
 
Post-Closing Settlement Charges
74
6.27
 
Ash Landfill
75

 
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6.28
 
Identification and Agreement Regarding Shared Facilities and Equipment
75
6.29
 
Delta Independent Engineer
76
 
ARTICLE VII
 
 
CONDITIONS
 
76
7.01
 
Conditions to Each Party’s Obligation
76
7.02
 
Conditions to Obligations of Purchaser
76
7.03
 
Conditions to Obligations of Parent, Holdings and the Company
78
 
ARTICLE VIII
 
 
TAX MATTERS
 
79
8.01
 
Tax Return Filings
79
8.02
 
Tax Indemnification
80
8.03
 
Cooperation
82
8.04
 
Cash Grant, Refunds and Credits
82
8.05
 
Tax Sharing Agreements
83
8.06
 
Transfer Taxes
83
8.07
 
Procedures Relating to Indemnification of Tax Claims
83
8.08
 
Exclusive Remedy and Survival
84
8.09
 
Tax Covenants
84
8.10
 
Section 338(h)(10) Election
85
8.11
 
Real Property Tax Legal Proceedings
85
 
ARTICLE IX
 
 
EMPLOYEE MATTERS
 
86
9.01
 
Employee Matters
86
9.02
 
COBRA
92
9.03
 
WARN Act
92
9.04
 
Employee Liabilities
92
9.05
 
No Transfer of Benefit Plans
93
9.06
 
No Additional Rights
93
 
ARTICLE X
 
 
SURVIVAL AND INDEMNIFICATION
 
93
10.01
 
Survival
93
10.02
 
Exclusivity
94
10.03
 
Indemnification
94
10.04
 
Method of Asserting Claims
100
10.05
 
Manner of Payment
102
 
ARTICLE XI
 
 
TERMINATION
 
102
11.01
 
Termination
102
11.02
 
Effect of Termination
104
11.03
 
Termination Damages
104
 
ARTICLE XII
 
 
MISCELLANEOUS
 
107
12.01
 
Notices
107
12.02
 
Expenses
108
12.03
 
Interpretations
108
12.04
 
Governing Law; Jurisdiction
109

 
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12.05
 
Specific Performance and Other Remedies
109
12.06
 
Entire Agreement
110
12.07
 
Disclosure Letter
110
12.08
 
Amendments
110
12.09
 
Waiver
110
12.10
 
Binding Effect; No Third Party Beneficiaries
110
12.11
 
Assignability
111
12.12
 
Severability
111
12.13
 
Counterparts; Facsimile Transmission of Signatures
111

 

                SCHEDULES
 
Schedule I
 
Generating Plants
Schedule II
 
“Knowledge Persons”
Schedule III
 
Working Capital Policies and Procedures
Schedule IV
 
Per Diem Adjustment
Schedule V
 
PJM Capacity Deficiency Charge Calculation
Schedule VI
 
Post-Closing Settlement Charges

                EXHIBITS
 

 
Exhibit A
 
Ash Landfill
 
Exhibit B
 
Form of Amended and Restated Cumberland Lease
 
Exhibit C
 
Form of Amended and Restated Generating Plant Easements
 
Exhibit D
 
Form of Amended Pipeline Agreement
 
Exhibit E
 
Form of Amended Pipeline Operation and Maintenance Agreement
 
Exhibit F
 
Form of Owner’s Affidavit      
  Exhibit G   Form of Potomac Option Agreement   Exhibit H   Form of Transition
Services Agreement   Exhibit I-1   Form of Release from Lien of ACE Mortgage  
Exhibit I-2   Form of Release from Lien of DPL Mortgage   Exhibit J-1   Form of
ACE Tax Exempt Bond Agreement   Exhibit J-2   Form of DPL Tax Exempt Bond
Agreement

 
                   
 

 

 

 
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PURCHASE AGREEMENT
 
THIS PURCHASE AGREEMENT (this “Agreement”), dated as of April 20, 2010, by and
among Pepco Holdings, Inc., a Delaware corporation (“Parent”), Conectiv, LLC, a
Delaware limited liability company (“Holdings”), Conectiv Energy Holding
Company, LLC, a Delaware limited liability company (the “Company”) and New
Development Holdings, LLC, a Delaware limited liability company (“Purchaser”).
 
RECITALS
 
WHEREAS, Parent owns 100% of the membership interests of Holdings;
 
WHEREAS, Holdings owns 100% of the membership interests of the Company (the
“Membership Interests”);
 
WHEREAS, Parent desires that Purchaser acquire, and Purchaser wishes to acquire,
all of the Membership Interests from Holdings, upon the terms and subject to the
conditions set forth in this Agreement; and
 
WHEREAS, prior to the consummation of the transactions contemplated by this
Agreement, Parent, Holdings and the Company shall consummate the Reorganization
(as defined below).
 
NOW, THEREFORE, in consideration of the premises and the mutual representations,
warranties, covenants, and promises set forth in this Agreement, and intending
hereby to be legally bound, subject to the terms and conditions set forth in
this Agreement, Parent, Holdings, the Company and Purchaser hereby agree as
follows:
 
ARTICLE I
DEFINITIONS
1.01          Definitions.  Capitalized words and phrases used and not otherwise
defined in this Agreement shall have the following meanings:
 
Accounting Firm:  means Deloitte LLP or, if unavailable, a nationally-recognized
public accounting firm that is independent with respect to Parent, Holdings, the
Company and Purchaser (within the meaning of Rule 2-01 under Securities and
Exchange Commission Regulation S-X) to be agreed upon by Holdings and Purchaser
in writing.
 
ACE:  means Atlantic City Electric Company.
 
ACE Mortgage:  means the Mortgage and Deed of Trust, dated January 15, 1937, of
ACE to The Bank of New York Mellon, as successor trustee, as amended and
supplemented.
 
ACE Tax Exempt Bond Agreement: means the agreement between ACE and Conectiv
Atlantic Generation L.L.C., substantially in the form attached hereto as Exhibit
J-1.
 

 
 

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Adjusted Restoration Cost:  shall have the meaning set forth in Section 5.02(a).
 
Affiliate:  means any Person that directly or indirectly, through one or more
intermediaries, controls or is controlled by or is under common control with the
Person specified.  For purposes of this definition, control of a Person means
the power, direct or indirect, to direct or cause the direction of the
management and policies of such Person, whether by Contract or otherwise.
 
Agreement:  shall have the meaning set forth in the introductory paragraph.
 
Amended and Restated Generating Plant Easements: mean the agreements evidencing
the Generating Plant Easements, each to be substantially in the form attached
hereto as Exhibit C.
 
Amended and Restated Hay Road and Edge Moor Easement: means an amended and
restated easement between the relevant Company and DPL to be negotiated in good
faith after the date hereof, and consistent (to the extent applicable) with the
Amended and Restated Generating Plant Easements, including, without limitation,
to the extent necessary, an easement for access purposes to the Ash Landfill
(or, as to the Ash Landfill, a separate easement between the relevant Company
and any other Affiliate of Parent designated by Parent).
 
Arbitration Submission:  shall have the meaning set forth in Section 2.04(c).
 
Ash Landfill:  means the ash landfill (Site II) at the Edge Moor Generating
Plant more particularly described on Exhibit A attached hereto.
 
Assumed Post-Closing Non-Union Pension Benefit: means the value of the Service
Cost Accrual of the pension benefits that the applicable Post-Closing Non-Union
Employee would have accrued under the Parent Retirement Plan (based on the
expense which Parent would have been required to report on its income statement
prepared in accordance with GAAP) for the two (2) year period immediately
following the Closing Date had such employee continued as an employee of Parent
or a Subsidiary thereof. The Service Cost Accrual will be calculated by
Purchaser’s actuary for the two (2) year period as of the Closing Date using the
assumptions set forth in Section 1.1(d) of the Disclosure Letter, and Parent’s
actuary shall confirm the reasonableness of such calculations in the aggregate.
 
Assumed Post-Closing Non-Union Retiree Welfare Benefits:  means the value of the
Service Cost Accrual that Parent would have recorded on its income statement in
accordance with GAAP for the Service Cost Accrual of retiree welfare benefits
for Post-Closing Non-Union Employees for the two (2) year period immediately
following the Closing Date had such employee continued as an employee of Parent
or a Subsidiary thereof. The Service Cost Accrual will be calculated by
Purchaser’s actuary for the two (2) year period as of the Closing Date using the
assumptions set forth in Section 1.1(e) of the Disclosure Letter, and Parent’s
actuary shall confirm the reasonableness of such calculations in the aggregate.
 
Balance Sheet:  shall have the meaning set forth in Section 3.05(a).
 
Balance Sheet Date:  shall have the meaning set forth in Section 3.05(a).
 

 
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Bankruptcy and Equity Exception:  shall have the meaning set forth in Section
3.02(e).
 
Benefit Plan:  shall have the meaning set forth in Section 3.16(a).
 
Books and Records: means all files, documents, instruments, papers, books,
reports, records, tapes, microfilms, photographs, letters, budgets, ledgers,
journals, title policies, supplier lists, regulatory filings, operating data and
plans, technical documentation (design specifications, functional requirements,
operating instructions, logic manuals, flow charts, etc), user documentation
(installation guides, user manuals, training materials, release notes, working
papers, etc.), and other similar materials, in all such cases which are
primarily related to the business and the assets and the operations of the
Companies, in whatever form (including electronic), and regardless of whether
maintained by the Company or an Affiliate, but excluding materials relating to
the transactions contemplated by this Agreement; provided, however, that “Books
and Records” shall only include personnel records to the extent permissible by
Law.
 
Bulk Sale Act:  shall have the meaning set forth in Section 8.02(a)(vi).
 
Business Day:  means any day other than Saturday, Sunday or any day on which
commercial banks in New York are authorized or required to close.
 
Business IT:  shall mean the computers, computer software, firmware, middleware,
servers, workstations, routers, hubs, switches, data communications lines, data,
and all other information technology equipment and computer systems currently
used in the businesses of the Companies.
 
Calpine Guarantee:  means the Guarantee, dated as of the date of this Agreement,
made by Calpine Corporation, a Delaware corporation and the indirect parent of
Purchaser, for the benefit of Parent.
 
Cap:  shall have the meaning set forth in Section 10.03(c)(i).
 
Capacity Resource Deficiency Charge:  means the Capacity Resource Deficiency
Charge calculated in accordance with Section A of Schedule V.
 
Cash Collateral:  means, collectively, all cash posted as collateral by the
Companies, including such cash collateral held in NYMEX brokerage accounts or
posted with wholesale counterparties, local distribution companies or
independent system operators.  The amount of Cash Collateral as of the date
hereof, along with the counterparties, and contract or instrument under which it
is posted, is set forth in ‎Section 1.1(c) of the Disclosure Letter.
 
Cash Grant:  means a grant provided for in Section 1603 of the American Recovery
and Reinvestment Act of 2009.

Casualty Event:  shall have the meaning set forth in Section 5.02(a).
 
CES:  means Conectiv Energy Supply, Inc., a Delaware corporation.
 

 
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Citi:  shall have the meaning set forth in Section 4.09.
 
Claim Notice:  means written notification pursuant to Section 10.04(a) of a
Third Party Claim as to which indemnity under Section 10.03(a) or 10.03(b) is
sought by an Indemnified Party, enclosing a copy of all papers served, if any,
and specifying the nature of and basis for such Third Party Claim and for the
Indemnified Party’s claim against the Indemnifying Party under Section 10.03(a)
or 10.03(b), together with the amount or, if not then reasonably ascertainable,
the estimated amount, determined in good faith, of such Third Party Claim.
 
Closing:  shall have the meaning set forth in Section 2.03(a).
 
Closing Condition Satisfaction Date:  shall have the meaning set forth in
Section 2.03(a).
 
Closing Date:  shall have the meaning set forth in Section 2.03(a).
 
Closing Date Capital Expenditures:  means (i) the aggregate amount of all funds
actually expended by the Companies during the period beginning on January 1,
2010 and ending at 11:59 P.M., New York time, on the Business Day immediately
prior to the Closing Date, (A) in respect of Scheduled Capital Expenditures
which are shown on Section 1.1(b) of the Disclosure Letter as budgeted for the
period beginning on July 1, 2010, (B) for additions, improvements or
replacements not exceeding $500,000 in the aggregate, relating to the business
or operations of the Companies that constitute necessary repairs due to
breakdown or casualty made in response to a business emergency or other
unforeseen operational matters occurring after the date hereof, or (C) for any
capital expenditure that is approved by Purchaser in writing, (ii) reduced by
the aggregate amount of Scheduled Capital Expenditures which are shown on
Section 1.1(b) of the Disclosure Letter as budgeted for the period prior to June
30, 2010 and not spent by the Closing, and (iii) without duplication of any
adjustment in clause (ii) of this definition, reduced by the aggregate amount of
any additional costs and capital expenditures that are not identified in the
Delta Construction Budget and that are certified by the Delta Independent
Engineer as required to be expended by any of the Companies following the
Closing to achieve COD and otherwise accomplish the work with respect to the
Delta Project contemplated by the Delta Construction Budget in accordance with
Good Construction Practices and the requirements of the Constellation PPA, net
of any reductions in costs and capital expenditures identified in the Delta
Construction Budget that the Delta Independent Engineer certifies will not be
required to be expended by any of the Companies following the Closing to
accomplish the work with respect to the Delta Project contemplated by the Delta
Construction Budget; provided, however, that any such cost or capital
expenditure reductions are consistent with Good Construction Practices and are
not attributable to (A) any decrease in quality or scope of the construction of
the Delta Project, including, without limitation, with respect to construction
services, equipment and parts, or (B) any change in quantity or scope of the
construction of the Delta Project from that reflected in the Delta Construction
Budget on the date hereof.
 
Closing Date Fuel Inventory:  means the amount equal to the fair market value of
Fuel Inventory as of 11:59 P.M. on the Business Day immediately prior to the
Closing Date,
 

 
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calculated in accordance with the policies and procedures set forth on Schedule
III (which, for purposes of clarity, shall take into account the quantity, grade
and quality of such fuel).
 
Closing Date Inventory Cost:  means the book value of the Inventory determined
in accordance with GAAP (that is, the lower of cost or market value) as of 11:59
P.M. on the Business Day immediately prior to the Closing Date and which, for
the avoidance of doubt, shall not include the cost of any obsolete inventory or
part.
 
Closing Date Working Capital:  means the (i) amount of “cash and cash
equivalents” (including Cash Collateral, but excluding any posted letters of
credit), (ii) “accounts receivable” (including accounts receivable from
Affiliates of Parent to the extent that any one or more of the Companies will
receive the benefits thereof after the Closing and excluding margin deposits)
and (iii) “prepayments” and “pre-paid” expenses made by the Companies at or
prior to the Closing Date (to the extent that any one or more of the Companies
will receive the benefits thereof after the Closing), in each case included in
“current assets” of the Companies minus the amount of “current liabilities” of
the Companies, each calculated in accordance with GAAP and also consistent with
the procedures and definitions set forth on Schedule III, as of 11:59 P.M. on
the Business Day immediately prior to the Closing Date.  For the avoidance of
doubt, “Closing Date Working Capital” shall exclude Fuel Inventory, Emission
Allowances, REC Inventory and Inventory.
 
Closing Deliverables:  shall have the meaning set forth in Section 2.03(b).
 
Closing Extension Date:  means the later of (i) the date that is three (3)
Business Days after the date that is 45 days following the date Purchaser
receives the Company Audited Financial Statements and the Unqualified Opinion in
accordance with Section 6.20 and (ii) the first date as of which the Closing
would have been required to occur had Purchaser not elected to defer the Closing
pursuant to Section 2.03(a).
 
Closing Payment:  shall have the meaning set forth in Section 2.02.
 
COBRA:  means the Consolidated Omnibus Budget Reconciliation Act.
 
COD:  means the date (or, if the Delta Independent Engineer certifies to a range
of dates, the midpoint) that the Delta Project is reasonably expected (i) to be
designated as a capacity resource by PJM, in an amount that is equal to at least
518 megawatts and (ii) to be capable of generating electrical output equal to at
least 518 megawatts, including allowance for sufficient time to run the Facility
Test (as defined in the Constellation PPA).
 
Code:  means the United States Internal Revenue Code of 1986, as amended, and
the regulations promulgated and the rulings issued thereunder.
 
Collective Bargaining Agreement:  means any collective bargaining agreement with
any labor union representing employees of any of the Companies.
 
Columbia Gas Contract:  means the Transportation Agreement, No. 75630, dated May
12, 2003, by and between Columbia Gas Transmission, LLC and CES.
 

 
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Companies:  means the Company and the Subsidiaries, other than the Excluded
Subsidiaries.
 
Company:  shall have the meaning set forth in the introductory paragraph.
 
Company Audited Financial Statements:  means the audited consolidated balance
sheets of the Company and its Subsidiaries as of December 31, 2009 and 2008 and
the audited consolidated statements of income, cash flows and shareholder’s
equity for each of the three years in the period ended December 31, 2009 and the
associated notes to such consolidated financial statements, prepared in
accordance with GAAP and audited in accordance with generally accepted auditing
standards in the United States of America.
 
Company Non-Union Employee:  means any employee employed by the Companies, other
than a Union Employee.
 
Company Pro Forma Balance Sheet: means the consolidated balance sheet of the
Company and its consolidated Subsidiaries as of February 28, 2010, as adjusted
to give effect to the Reorganization and the Push Down Accounting Adjustments.
 
Company Transaction Costs:  means the fees and expenses of any advisor or other
third party paid or payable by the Companies in connection with the transactions
contemplated by this Agreement, including any fees and expenses of Credit
Suisse, Morgan Stanley, any amounts payable by the Companies to any Affiliate,
officer, director or employee in the nature of a “change in control”, closing or
signing bonus or similar payment as a result of this Agreement or the
transactions contemplated hereby and any fees and expenses incurred in
connection with obtaining any third party consents or approvals that are
required to be obtained as a condition to the Closing. 
 
Company Unaudited Financial Statements:  shall have the meaning set forth in
Section 3.05(a).
 
Compliance with ISRA:  means the receipt by Parent or Purchaser of (i) a letter
or letters from the NJDEP, in accordance with Subchapter 5 of the ISRA
regulations, approving, as applicable, a de minimis quantity exemption, an area
of concern review application, a regulated underground storage tank waiver
application, a minimal environmental concern application, a negative declaration
or a remediation-in-progress waiver (as each such term is defined under ISRA),
(ii) a No Further Action Letter issued by the NJDEP, or a Response Action
Outcome issued by an LSRP, or (iii) other written determination by the NJDEP or
an LSRP that the requirements of ISRA are being or have been satisfied with
respect to the New Jersey ISRA Property.
 
Condemnation Value:  shall have the meaning set forth in Section 5.02(d).
 
Confidentiality Agreement:  means the Confidentiality Agreement, dated as of
November 10, 2009, between Parent and Purchaser.
 

 
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Constellation PPA:  means the Tolling Agreement, dated December 13, 2007,
between Conectiv Mid-Merit, LLC and Constellation Energy Commodities Group,
Inc., and all security documents related thereto.
 
Consumed Pre-Closing Emission Allowances:  shall have the meaning set forth in
Section 3.24.
 
Contract:  means any agreement, license, sublicense, easement, sales order,
purchase order, commitment, lease, evidence of Indebtedness, guarantee,
mortgage, indenture, security agreement or other contract, instrument,
understanding or arrangement that is binding on any Person or any of its
property under applicable Laws.
 
Credit Rating:  means, with respect to any Person, the rating then assigned to
such Person’s unsecured, senior long-term debt obligations not supported by
third party credit enhancements, or if such Person does not have such a rating,
then the rating then assigned to such Person as an issuer, by S&P and/or
Moody’s, as applicable, and any successors thereto.
 
Credit Suisse:  means Credit Suisse Securities (USA) LLC.
 
Cumberland Lease:  means the Lease Agreement, dated July 1, 2000, between ACE
and Conectiv Atlantic Generation, LLC.
 
December 2011 Settlement Calculation Notice:  shall have the meaning set forth
in Section 6.26(b).
 
Deductible:  shall have the meaning set forth in Section 10.03(c)(ii).
 
Deepwater Easement: means one or more easement agreements between the relevant
Company and ACE or any other Affiliates of Parent designated by Parent to be
negotiated in good faith after the date hereof, and consistent (to the extent
applicable) with the Amended and Restated Generating Plant Easements, including,
without limitation, an easement for access purposes to the ash disposal parcel.
 
Delta Construction Budget:  shall have the meaning set forth in Section 3.25.
 
Delta Independent Engineer:  means The Shaw Group Inc. (Boston, Massachusetts
office) or, if unavailable, a nationally-recognized engineering firm selected by
mutual agreement of Parent and Purchaser within ten (10) Business Days following
the date of this Agreement, which shall be retained by Purchaser no later than
20 Business Days following the date of this Agreement, with the cost shared
equally by Purchaser and Parent.
 
Delta Pipeline Matter:  means the matter identified as such in Section 3.13 of
the Disclosure Letter.
 
Delta Project:  means the approximately 565 megawatt dual fuel combined cycle
generation plant under construction in Peach Bottom Township, Pennsylvania.
 

 
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Designated Entities:  means Conectiv Atlantic Generation, LLC, Conectiv Delmarva
Generation, LLC, Conectiv Bethlehem, LLC, Conectiv Mid Merit, LLC and Conectiv
Vineland Solar, LLC.
 
Designated Generating Plants:   means the Generating Plants listed in Section
1.1(f) of the Disclosure Letter, including the Real Property associated with
such Generating Plants.
 
Deutsche Bank:  shall have the meaning set forth in Section 4.09.
 
Development Projects:  means the following development projects at various
stages of planning as to which no construction has commenced: (i) Cumberland 3,
a planned dual fuel combustion turbine generation plant of approximately 100
megawatts to be located in Cumberland, New Jersey; (ii) Delta 2, a planned dual
fuel combined cycle generation plant of approximately 565 megawatts to be
located in Peach Bottom Township, Pennsylvania; (iii) Powell, a planned dual
fuel combustion turbine generation plant of approximately 200 megawatts to be
located in Prince Georges County, Maryland; and (iv) Talbert, a planned dual
fuel combustion turbine generation plant of approximately 200 megawatts to be
located in Prince Georges County, Maryland.
 
Disclosure Letter:  means the disclosure letter delivered by Parent, Holdings
and the Company to Purchaser simultaneously with the execution of this
Agreement.
 
Dispute Period: means the period ending 30 days following receipt by an
Indemnifying Party of either a Claim Notice or an Indemnity Notice.
 
Dollars or $:  means dollars in lawful currency of the United States of America.
 
DPL:  means Delmarva Power & Light Company.
 
DPL Mortgage:  means the Mortgage and Deed of Trust, dated October 1, 1943, of
DPL to The Bank of New York Mellon, as successor trustee, as amended and
supplemented.
 
DPL Tax Exempt Bond Agreement: means the agreement between DPL and Conectiv
Delmarva Generation L.L.C., substantially in the form attached hereto as Exhibit
J-2.
 
Easement Real Property:  shall have the meaning set forth in Section 3.14(a).
 
Emission Allowances: means all allowance allocations to emit specified units of
pollutants or Hazardous Substances under any Environmental Laws, including (i)
any air pollution control and emission reduction program designed to mitigate
interstate or intra-state transport of air pollutants or reduce or control the
emission of any air pollutants, including without limitation, SO2, NOx, carbon
dioxide, or other greenhouse gases, (ii) any program designed to mitigate
impairment of surface waters, watersheds, or groundwater, or (iii) any pollution
reduction program with a similar purpose. Emission Allowances include all
allowances as described above, regardless of whether the Governmental or
Regulatory Authority establishing such Emission Allowances designates them as
credits, benefits, offsets, allowances or by any other name.
 

 
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Environmental Claim:  means any complaint, summons, citation, directive, order,
litigation, notice of violation, proceeding or judgment from any Governmental or
Regulatory Authority or Person alleging violations of or Liability under any
Environmental Laws.
 
Environmental Condition:  means the presence or Release to the environment,
including air, surface and subsurface water, groundwater, soil and sediments,
whether at the Real Property or otherwise, of Hazardous Substances, including
any migration of Hazardous Substances through air, surface and subsurface water,
groundwater, soil and sediments, at, to or from the Real Property, or at, to or
from any Off-Site Location, regardless of when such presence or Release occurred
or is discovered.
 
Environmental Laws:  means all federal, state and local laws, regulations,
rules, ordinances, codes, principles of common law, decrees, judgments,
directives, or judicial or administrative orders relating to pollution or
protection of the environment, natural resources or human health and safety,
including laws relating to the Release or threatened Release of Hazardous
Substances (including to air, surface water, groundwater, land, surface and
subsurface strata) or otherwise relating to the manufacture, processing,
distribution, presence, use, treatment, storage, disposal, arrangement for
disposal, Release, transport, handling, removal or remediation of Hazardous
Substances, laws relating to record keeping, notification, disclosure and
reporting requirements respecting Hazardous Substances, and laws relating to the
management, use, restoration or compensation for use of or damage to natural
resources.
 
Environmental Permits:  means all licenses, permits, consents, approvals and
governmental authorizations under Environmental Laws.
 
ERISA:  means the Employee Retirement Income Security Act of 1974, as amended.
 
ERISA Affiliate:  shall have the meaning set forth in Section 3.16(b).
 
Estimated Capital Expenditures:  means Parent’s good faith estimate of the
aggregate amount of Closing Date Capital Expenditures.
 
Estimated Fuel Inventory:  means the aggregate amount of the Fuel Inventory
resulting from the Inventory Audit.
 
Estimated Inventory Cost:  means the aggregate amount of the Inventory resulting
from the Inventory Audit.
 
Estimated Working Capital:  means Parent’s good faith estimate of the aggregate
amount of the Closing Date Working Capital.
 
Excluded Assets:  means the Excluded Contracts, the Excluded Subsidiaries, REC
Inventory, the Ash Landfill and Madison.
 
Excluded Contracts:  means each of the Contracts to which one of the Companies
is a party, but to which one of the Companies will not be a party after giving
effect to the Reorganization.
 

 
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Excluded Subsidiaries:  means each of CES (but not its Subsidiaries), ACE REIT,
Inc. (but not its Subsidiaries), Conectiv Pennsylvania Generation, LLC, Delaware
Operating Services Company, Conectiv Northeast, LLC and Energy Systems
Northeast, LLC.
 
Federal Power Act:  means the Federal Power Act of 1935, as amended.
 
FERC:  means the Federal Energy Regulatory Commission, or any successor agency.
 
FERC Approval:  means the approval by FERC under Section 203 of the Federal
Power Act.
 
Financing Commitments:  shall have the meaning set forth in Section 4.09.
 
Former Property:  means any real property or facility owned, leased or operated
by any of the Companies or a predecessor thereof prior to the Closing Date, that
is not owned, leased or operated  by any of the Companies on or after the
Closing Date.
 
Fuel Inventory:  means the fuel oil inventory related to the operation of the
Generating Plants and located at or in transit to such Generating Plants, which
shall not include coal, natural gas or the chemicals used in the burning of
coal.
 
GAAP:  means United States generally accepted accounting principles, as in
effect from time to time.
 
General Information Notice:  shall have the meaning set forth in Section
6.08(a).
 
Generating Plant:  means the Generating Plants listed on Schedule I.
 
Generating Plant Easement:  means, with respect to Generating Plants that on
Schedule I are designated as located on an easement granted by an Affiliate of
Parent, the real property easement upon which such Generating Plant is located.
 
Good Construction Practices: means (i) those practices, methods, equipment,
specifications and standards of safety and performance, as the same may change
from time to time, as are commonly used by the firms performing engineering
and/or construction services on facilities of the type and size of the Delta
Project, which in the exercise of reasonable judgment and in light of the facts
known at the time the decision was made, are considered good, safe and prudent
practice in connection with the construction, installation and use of electrical
and other equipment, facilities and improvements, with commensurate standards of
safety, performance, dependability, efficiency and economy; and (ii) in
compliance with all applicable Laws.
 
Good Industry Practices:  means any of the practices, methods and acts generally
engaged in or approved by a significant portion of the electric power generation
industry during the relevant time period that, in the exercise of reasonable
judgment in light of the applicable manufacturer’s recommendations and the facts
known or that reasonably should have been known at the time the decision was
made, would reasonably have been expected to accomplish
 

 
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the desired result at a reasonable cost consistent with good business practices,
reliability, safety and expedition.
 
Governmental or Regulatory Authority:  means any government, quasi-governmental
authority, court, tribunal, arbitrator, authority, regulatory body, agency,
commission, official or other instrumentality and any supranational organization
of sovereign states exercising such function for such sovereign states of the
United States or any foreign country or any domestic or foreign state, county,
city or other political subdivision exercising executive, legislative or
judicial authority and including any governmental, quasi-governmental or
non-governmental body administering, regulating or having general oversight over
gas, electricity, power or other markets, including FERC, NERC, any independent
system operator, or any regional transmission organization, including PJM.
 
Hazardous Substances:  means (i) any petrochemical or petroleum products, oil,
radioactive materials, radon gas, asbestos in any form that is or could become
friable, urea formaldehyde foam insulation and transformers or other equipment
that contain dielectric fluid which may contain levels of polychlorinated
biphenyls; (ii) for purposes of this Agreement, oil ash and coal ash; (iii) any
chemicals, materials or substances defined as or included in the definition of
“hazardous substances,” “hazardous wastes,” “hazardous materials,” “restricted
hazardous materials,” “extremely hazardous substances,” “toxic substances,”
“contaminants” or “pollutants” or words of similar meaning and regulatory
effect; or (iv) any other chemical, material or substance, which is prohibited,
limited, subject to regulation, investigation, control or remediation, or that
could give rise to Liability, under any Environmental Law.
 
Holdings:  shall have the meaning set forth in the introductory paragraph.
 
HSR Act:  means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended.
 
Improvements:  means all buildings, structures, fixtures and improvements,
including all building systems, sewer, storm and waste water systems and other
water distribution systems located on or included in the Real Property,
including those under construction.
 
Indebtedness:  of any Person means: (i) any and all Liabilities of any Person
(A) for borrowed money (including the current portion thereof), (B) under or
related to any reimbursement obligation relating to a letter of credit, bankers’
acceptance or note purchase facility, (C) evidenced by a bond, note, debenture
or similar instrument (including a purchase money obligation), (D) for the
payment of money relating to a lease or instrument that is required to be
classified as a capitalized/finance lease obligation in accordance with GAAP,
(E) for all or any part of the deferred purchase price of property or services
(other than trade payables), and (F) under or related to any agreement that is
an interest rate swap agreement, basis swap, forward rate agreement, commodity
swap, commodity option, equity or equity index swap or option, bond option,
interest rate option, forward foreign exchange agreement, rate cap, collar or
floor agreement, currency swap agreement, cross-currency rate swap agreement,
currency option or other similar agreement (including any option to enter into
any of the foregoing), and (ii) any and all Liabilities of others described in
the preceding clause (i) that such Person has
 

 
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guaranteed or that is recourse to such Person or any of its assets or that is
otherwise its legal liability or that is secured in whole or in part by the
assets of such Person.  For purposes of this Agreement, Indebtedness shall
include any and all accrued interest, success fees, prepayment premiums,
make-whole premiums or penalties, and fees or expenses (including, without
limitation, attorneys’ fees) associated with any Indebtedness.
 
Indemnified Party:  means any Person claiming indemnification under any
provision of Article VIII or X.
 
Indemnifying Party:  means any Person against whom a claim for indemnification
is being asserted under any provision of Article VIII or X.
 
Indemnity Notice:  means written notification pursuant to Section 10.04 of a
claim for indemnity under Article X by an Indemnified Party, specifying the
nature of and basis for such claim, together with the amount or, if not then
reasonably ascertainable, the estimated amount, determined in good faith, of
such claim.
 
Institutional Controls:  shall have the meaning set forth in Section 6.08(g).
 
Intellectual Property:  means all:  (i) registered and unregistered
copyrightable works of authorship and copyrights, including software programs
(whether in source code, object code or human readable form) and related
documentation and registrations and applications for any of the foregoing; (ii)
inventions and discoveries, whether or not patentable, patents, patent
applications and industrial designs, including any registrations, invention
disclosures, revisions, provisionals, divisionals, continuations,
continuations-in-part, renewals, reissues, extensions and reexaminations for any
of the foregoing, as applicable; (iii) registered and unregistered trademarks,
service marks, trade names, logos, designs, symbols, trade dress business names,
Internet domain names and other similar designations of source or origin,
together with the goodwill of the business symbolized by any of the foregoing
and registrations and applications relating to any of the foregoing; and (iv)
trade secrets and other confidential ideas, know-how, concepts, methods,
processes, formulae, data, customer lists, mailing lists, business plans or
other proprietary information that gives a competitive advantage.
 
Interconnect Lateral Agreement:  means the Interconnect and Delivery Lateral
Reimbursement and Operating Agreement, dated April 28, 2009, between
Transcontinental Gas Pipe Line Company, LLC and Conectiv Mid-Merit, LLC.
 
Inventory:  means materials, spare parts, consumable supplies and chemical
inventories (other than chemicals used in the burning of coal) relating to the
operation of the Generating Plants; provided, however, that “Inventory” shall
not include (i) Fuel Inventory, (ii) REC Inventory, (iii) subject to Section
6.21, coal, (iv) Emission Allowances or (v) materials, spare parts, consumable
supplies and chemical inventories that are obsolete or otherwise not useful to
the operation of the Generating Plants in the manner in which they are being
operated immediately prior to the Closing.
 
Inventory Audit:  shall have the meaning set forth in Section 2.02.
 
Inventory Target:  shall have the meaning set forth in Section 2.02(e).
 

 
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IRS:  means the United States Internal Revenue Service.
 
ISRA:  means the Industrial Site Recovery Act, N.J.S.A. 13:1K-6 et seq., and the
regulations promulgated thereunder, N.J.A.C. 7:26B-1.1 et seq., as amended by
the SRRA.
 
ISRA Compliance Costs:  means all fees, costs and expenses incurred to achieve
Compliance with ISRA, including attorneys’, consultants’ and engineering fees
and disbursements, NJDEP filing fees and oversight charges, costs associated
with any remedial action permits, costs (including any surcharges) associated
with securing and maintaining any remediation funding source, laboratory and
analytical costs and expenses, equipment charges, costs associated with any
NJDEP audits pursuant to SRRA, and industrial or hazardous waste disposal costs,
including those costs incurred after the Closing pursuant to Section 6.08.
 
Law or Laws:  means all laws, statutes, rules, regulations, ordinances, codes,
Orders, authorizations, judicial decisions, governmental agreements and other
pronouncements having the effect of law of the United States, any foreign
country or any domestic or foreign state, county, city or other political
subdivision or of any Governmental or Regulatory Authority.
 
Lease:  shall have the meaning set forth in Section 3.14(b).
 
Leased Real Property:  shall have the meaning set forth in Section 3.14(a).
 
Legal Proceeding:  means any civil, criminal, judicial, administrative or
arbitral actions, suits, audits, hearings, litigation, proceedings (public or
private), claims, investigations or governmental proceedings.
 
Liabilities:  of any Person means any and all debts, liabilities, commitments
and obligations, whether accrued or fixed, known or unknown, absolute or
contingent, matured or unmatured, determined or determinable.
 
LIBOR:  means the London Interbank Offered Rate, as quoted in The Wall Street
Journal.
 
Lien:  means any mortgage, pledge, assessment, security interest, lease, lien,
equity, adverse claim, levy, charge, obligation or other encumbrance, of every
kind and character.
 
Loss:  means any and all Liabilities, damages, claims, fines, penalties,
deficiencies, losses and expenses (including court costs, reasonable fees of
attorneys, accountants and other experts or other reasonable expenses of
litigation or other proceedings or any claim, default or assessment).
 
Lost Profits:  shall have the meaning set forth in Section 5.02(a).
 
LSRP:  means a Licensed Site Remediation Professional as defined at N.J.S.A.
58:10C-2.
 

 
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Madison: means the retired plant more commonly known as the Madison Street
Combustion Turbine Generating Station located in Wilmington, Delaware.
 
March 2011 Settlement Calculation Notice:  shall have the meaning set forth in
Section 6.26(a).
 
Marks:  shall have the meaning set forth in Section 6.22.
 
Master Leases:  means (i) that certain Master Lease Agreement, dated April 22,
2009, by and between Banc of America Leasing & Capital, L.L.C. and PHI Service
Company et al. and (ii) that certain Master Lease Agreement, dated February 1,
2003, by and between BLC Corporation and PHI Service Company.
 
Material Adverse Effect:  means a materially adverse effect on the business,
assets, Liabilities, condition (financial or otherwise) or results of operations
of (a) the Companies considered as a single enterprise, (b) any Specified
Generating Plant or (c) the Other Generating Plants; provided, however, that in
no event shall any of the following, alone or in combination, be deemed to
constitute, nor shall any of the following be taken into account in determining
whether there has occurred, a Material Adverse Effect:  (i) effects resulting
from changes in the national, regional or local wholesale or retail markets for
electric power; (ii) effects resulting from changes in the national, regional or
local wholesale or retail markets for natural gas; (iii) effects resulting from
changes in the national, regional or local markets for commodities or supplies,
including electric power, natural gas or other fuel and water, as applicable,
used in connection with the business and operations of the Companies; (iv)
effects resulting from changes in the national, regional or local electric
generating, transmission or distribution industry; (v) effects resulting from
changes in the national, regional or local electric transmission or distribution
systems or operations thereof; (vi) effects resulting from any change in PJM
market design and pricing; (vii) effects resulting from changes in applicable
Law or any interpretations of applicable Law by any Governmental or Regulatory
Authority, including any interpretations relating to the wholesale market
serviced by the Companies; (viii) effects resulting from weather conditions or
climate change; (ix) effects resulting from factors generally affecting the
economy, financial markets or capital markets; or (x) effects of any war, act of
terrorism, civil unrest or similar event; provided further, however, that:
 
(A) in the case of items (i) – (x), such adverse items shall only be excluded to
the extent any such effects do not have a disproportionate impact on
respectively (1) the Companies considered as a single enterprise, (2) the
affected Specified Generating Plant or (3) the affected Other Generating Plants,
in each case as compared to other Persons or plants engaged in the fossil fuel
power generation business who is a participant in the PJM power pool;
 
(B) a Casualty Event or Condemnation Event addressed by Section 5.02 shall not
be deemed to constitute, nor shall any such Casualty Event or Condemnation Event
be taken into account in determining whether there has occurred, a Material
Adverse Effect; except that a Casualty Event or Condemnation Event affecting a
Specified Generating Plant may be taken into account in determining whether a
Material Adverse Effect has occurred with the Companies considered as a single
enterprise, but not otherwise; and
 

 
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(C) in no event shall (1) any additional costs or capital expenditures relative
to the Delta Construction Budget as determined by the Delta Independent Engineer
taken into account in determining Closing Date Capital Expenditures or (2) any
delay in achieving COD for which Purchaser is entitled to a Purchase Price
adjustment under Section 2.02(i), be taken into account in determining whether a
Material Adverse Effect has occurred with respect to the Delta Project.
 
Material Contract:  shall have the meaning set forth in Section 3.13.
 
Membership Interests:  shall have the meaning set forth in the Recitals.
 
Moody’s:  means Moody’s Investor Services, Inc.
 
Morgan Stanley:  means Morgan Stanley & Co. Incorporated.
 
NERC: means the North American Electric Reliability Corporation, any regional
reliability entity and any successor agency.
 
New Jersey ISRA Property:  means the Industrial Establishments, as defined at
N.J.A.C. 7:26B-1.4, located in New Jersey on which the following Generating
Plants are situated: Carll’s Corner, Cedar, Deepwater, Mickleton, Middle,
Missouri Avenue, Cumberland, Sherman Avenue and Conectiv Vineland Solar.
 
NJDEP:  means the New Jersey Department of Environmental Protection, its
divisions, bureaus and subdivisions.
 
No Further Action Letter:  shall have the meaning set forth at N.J.S.A. 13:1K-8.
 
Non-Union Employee:  means a Company Non-Union Employee or a Service Company
Employee.
 
Notice of Disagreement:  shall have the meaning set forth in Section 2.04(b).
 
NOx:  means nitrogen oxide.
 
Off-Site Location:  means any real property other than the Real Property.
 
Order:  means any writ, judgment, decree, injunction, award, settlement or
stipulation, decision, determination, ruling, subpoena or verdict or similar
order entered, issued, made or rendered by any Governmental or Regulatory
Authority (in each such case whether preliminary or final).
 
Other Generating Plants:  means any combination of Generating Plants (other than
the Specified Generating Plants) that in the aggregate have a capacity equal to
at least 50% of the aggregate capacity of the Generating Plants (other than the
Specified Generating Plants).
 
Outside Date:  shall have the meaning set forth in Section 11.01(b).
 
Owned Intellectual Property:  means Intellectual Property owned by the Company
or any Subsidiary.
 

 
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Owned Real Property:  shall have the meaning set forth in Section 3.14(a).
 
Parent:  shall have the meaning set forth in the introductory paragraph.
 
Parent Employer Party:  means any of Parent, the Company, a Subsidiary or any of
their respective Affiliates.
 
Parent Guarantees:  means, after giving effect to the Reorganization,
collectively, those indemnities, performance bonds, surety bonds, performance
guaranties, other guaranty obligations, keepwells, net worth maintenance
agreements, reimbursement obligations, letters of comfort and other similar
arrangements to which Parent or any of its Affiliates (other than the Companies)
is a party or by which any of them are bound in favor of, or for the benefit of,
the business and operations of any of the Companies (other than the Parent
Letters of Credit). The outstanding Parent Guarantees (including the maximum
aggregate amount of each such Parent Guarantee and the Contract under which each
such Parent Guarantee is posted), after giving effect to the Reorganization, are
listed in ‎Section 6.07(b) of the Disclosure Letter (as it may be amended from
time to time in accordance with Section 6.07(d)).
 
Parent Letters of Credit:  means, after giving effect to the Reorganization,
collectively, those letters of credit issued to secure an obligation of any of
the Companies under which Parent or any of its Affiliates (other than the
Companies) is the party responsible for the reimbursement of any draws by the
beneficiary. The outstanding Parent Letters of Credit (including the amount of
each such Parent Letter of Credit and the Contract under which each such Parent
Letter of Credit is posted), after giving effect to the Reorganization, are
listed in ‎Section 6.07(a) of the Disclosure Letter (as it may be amended from
time to time in accordance with Section 6.07(d)).
 
Parent Retiree Welfare Plan:  means The Pepco Holdings, Inc. Welfare Plan for
Retirees, as in effect immediately prior to the Closing.
 
Parent Retirement Plan:  means The Pepco Holdings, Inc. Retirement Plan, as in
effect immediately prior to the Closing.
 
Parent Savings Plan:  means The Pepco Holdings, Inc. Retirement Savings Plan, as
in effect immediately prior to the Closing.
 
Parent’s ISRA Compliance Cost Audit:  shall have the meaning set forth in
Section 6.08(e)(v).
 
Payment for Purchased Capacity for Planning Year 2010/11:  means the Payment for
Purchased Capacity for Planning Year 2010/11 calculated in accordance with
Section B of Schedule V.
 
Peak Season Maintenance:  means planned outages and maintenance outages during
the Peak Season (as defined by PJM).
 

 
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Permit:  means all licenses, permits, consents, approvals, franchises,
variances, waivers, exemptions, orders and authorizations required by Law or by
any Governmental or Regulatory Authorities (other than Environmental Permits).
 
Permitted Disclosure Updates:  shall have the meaning set forth in Section
6.03(b).
 
Permitted Liens:  means (i) any Lien for Taxes that is either (A) not yet due
and payable or (B) being contested in good faith by appropriate proceedings;
(ii) purchase money Liens arising in the ordinary course of business consistent
with past practices not exceeding $100,000 in the aggregate; (iii) imperfections
or irregularities of title, easements, covenants, rights of way and other
restrictions of record and other Liens, in each case, (A) not, materially,
individually or in the aggregate, detracting from the value of, or impairing the
use of, the Real Property of any Generating Plant by the Companies, and (B) not
rendering the Real Property unmarketable or uninsurable by a nationally
recognized title insurance company; (iv) the terms and conditions of the Leases
and the Generating Plant Easements, the Material Contracts, the Permits listed
in Section 3.19 of the Disclosure Letter or the Environmental Permits listed in
Section 3.20 of the Disclosure Letter; (v) pledges and deposits made in the
ordinary course of business in compliance with workers’ compensation,
unemployment insurance and other social security Laws; (vi) any statutory
mechanics’, workmen’s, repairmen’s or other like Lien, imposed by applicable Law
and recorded in the applicable land records and not exceeding $1,000,000 in the
aggregate that is either (A) not yet due and payable or (B) being contested in
good faith by appropriate proceedings; (vii) Liens identified in Section 1.1(a)
of the Disclosure Letter; (viii) with respect to Real Property, any and all Laws
relating to zoning, building and the use, occupancy, subdivision or improvement
of the Real Property; (ix) any Lien identified in the most recent version (as of
the date of this Agreement) of the title report or survey listed in Section
3.14(a) of the Disclosure Letter, except such Liens identified in any such title
report or survey and listed in Section 6.16(a)(i) of the Disclosure Letter; and
(x) any other Liens which are deemed Permitted Liens under Section 6.16 hereof;
provided, however, that Permitted Liens shall in no event include Liens securing
any Indebtedness (except as permitted under clause (ii) of this definition),
including without limitation under any bond indenture or mortgage, made by
Parent or any of its Affiliates or any third party grantor of any easement in
favor of one of the Companies.
 
Person:  means any natural person, corporation, general partnership, limited
partnership, limited liability company, proprietorship, other business
organization, trust, union, association or Governmental or Regulatory Authority.
 
Personal Property:  shall have the meaning set forth in Section 3.23.
 
Pipeline Agreement:  means the Claymont to Hay Road Pipeline Owners’ Agreement
between Conectiv Delmarva Generation, Inc. and DPL, dated July 1, 2000.
 
Pipeline O&M Agreement:  means the Claymont to Hay Road Pipeline Operation and
Maintenance Agreement between Conectiv Delmarva Generation, Inc. and DPL, dated
as of July 1, 2000, as amended by Amendment No. 1 to the Claymont to Hay Road
Pipeline Operation
 

 
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and Maintenance Agreement between Conectiv Delmarva Generation, Inc. and DPL,
dated August 24, 2000.
 
PJM:  means PJM Interconnection, L.L.C. and any successor agency.
 
Post-Closing Non-Union Employee:  means a Company Non-Union Employee whose
employment by any of the Companies, or an Affiliate of Purchaser, continues
following the Closing (including any Service Company Employee whose employment
is transferred to one of the Companies at or prior to the Closing in accordance
with Section 9.01(a)(iii)).
 
Post-Closing Payment Amount:  means if the Purchase Price finally determined,
either through agreement of the parties or pursuant to Section 2.04(c), is
greater than the Closing Payment, the amount of such excess, and if the Purchase
Price is less than the Closing Payment, the amount of such shortfall.
 
Post-Closing Tax Period:  means all taxable periods (or portions thereof)
beginning on or after the Closing Date.
 
Post-Signing Lien:  means any Lien (including, without limitation, a Seller’s
Lien) other than a Permitted Lien that is identified by Purchaser to Parent
after the date of this Agreement, and that is added by Purchaser’s Title
Insurance Company as an update to any title commitment or is shown on any
updated survey listed in Section 3.14(a) of the Disclosure Letter dated after
the date of this Agreement (regardless of when such new matter was actually
recorded or filed), provided that such Lien is identified by Purchaser as
objectionable by written notice to Parent within five (5) Business Days
following Purchaser’s receipt of the updated title commitment or updated survey;
provided, however, that any such new Lien to which Purchaser does not object in
writing to Parent within such five (5) Business Day period shall thereafter
constitute a Permitted Lien and not a Post-Signing Lien.
 
Potomac Option Agreement:                                                      
shall have the meaning set forth in Section 5.01(f)(iv).
 
Powell Option Agreement:  means that certain Option Agreement dated as of
January 2, 2008, between David Powell and Kathryn Powell, as sellers and CES, as
purchaser, as amended by that certain Amendment No. 1 to Option Agreement, dated
as of December 31, 2009.
 
Pre-Closing Tax Filing Period:  means all taxable periods (or portions thereof)
ending on or before the Closing Date.
 
Pre-Closing Tax Period:  means all taxable periods (or portions thereof) ending
before the Closing Date.
 
Property Taxes:  shall have the meaning set forth in Section 8.02(c).
 
Proposed Post-Closing Payment Notice:  shall have the meaning set forth in
Section 2.04(a).
 

 
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PUHCA 2005:  means the Public Utility Holding Company Act of 2005, as amended.
 
Purchase Price:  means (i) One billion, six hundred fifty million dollars
($1,650,000,000), (ii) plus the Closing Date Capital Expenditures; (iii) (A)
plus, if the Closing Date Working Capital is greater than $0, the amount of such
excess on a dollar-for-dollar basis, or (B) minus, if the Closing Date Working
Capital is less than $0, the amount of such shortfall on a dollar-for-dollar
basis; (iv) plus the Closing Date Fuel Inventory; (v) (A) plus, if the Closing
Date Inventory Cost is greater than Inventory Target, the amount of such excess
on a dollar-for-dollar basis, or (B) minus, if the Closing Date Inventory Cost
is less than the Inventory Target, the amount of such shortfall on a
dollar-for-dollar basis; (vi) minus the amount, if any, determined in accordance
with Section 2.02(f); (vii) minus the amount, if any, determined in accordance
with Section 2.02(g); (viii) plus the amount, if any, determined in accordance
with Section 2.02(h); and (ix) minus the amount, if any, determined in
accordance with Section 2.02(i).
 
Purchase Price Allocation:  shall have the meaning set forth in Section 8.09(b).
 
Purchaser:  shall have the meaning set forth in the introductory paragraph.
 
Purchaser Indemnified Parties:  shall have the meaning set forth in Section
10.03(a).
 
Purchaser Indemnitees:  shall have the meaning set forth in Section 8.02(a).
 
Purchaser Letter of Credit:  means an irrevocable, standby letter of credit
issued by a major U.S. commercial bank or the U.S. branch office of a foreign
bank, which, in either case, has a Credit Rating of at least (i) “A-” by S&P and
“A3” by Moody’s, if such entity is rated by both S&P and Moody’s or (ii) “A-” by
S&P or “A3” by Moody’s, if such entity is rated by either S&P or Moody’s, but
not both, and which letter of credit is in a form and substance reasonably
acceptable to Parent.
 
Purchaser’s ISRA Status Report:  shall have the meaning set forth in Section
6.08(e)(v).
 
Purchaser’s Savings Plan:  shall have the meaning set forth in Section
9.01(b)(iv).
 
Purchaser’s Title Insurance Company:  means Stewart Title Company (or another
national title company reasonably acceptable to Purchaser).
 
Purchaser’s Union Pension Plans: shall have the meaning set forth in Section
9.01(c)(ii).
 
Push Down Accounting Adjustments:  means the push down of certain purchase
accounting adjustments related to the acquisition of the Company by Parent in
2002.
 
PWC:  means PricewaterhouseCoopers.
 

 
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Real Property:  shall have the meaning set forth in Section 3.14(a).
 
Real Property Tax Legal Proceeding:  shall have the meaning set forth in Section
8.11.
 
REC Inventory:  means the renewable energy credits attributable to the
Generating Plants prior to the Closing.
 
Recaptured Section 1603 Payments:  means the amount of Section 1603 Payments
that must be repaid to the United States Department of the Treasury as a result
of property being disposed of to a person who is not eligible to receive Section
1603 Payments and/or ceasing to qualify as a “specified energy property” (as
that term is used in Section 1603 of the American Recovery and Reinvestment Tax
Act of 2009).
 
Regulatory Action: means  the commencement of, or inclusion in, any action, suit
or proceeding by a state utility regulatory authority having jurisdiction,
challenging or seeking determination (i) of the ability of Purchaser, Parent,
Holdings, the Company or any of their respective Affiliates to complete the
transactions contemplated by this Agreement or the validity or enforceability of
the Transaction Documents, without the receipt of prior approval of such
regulatory body or (ii) with respect to the current ownership or operation of
the Designated Generating Plants, including with respect to the owner’s use of
or access thereto.  Regulatory Action shall include, without limitation, the
issuance of any injunction or restraining order by such regulatory authority or
court of competent jurisdiction that prevents any Transaction Document Affiliate
from delivering at the Closing any Transaction Document to which it will be a
party or performing its obligations thereunder.
 
Release:  means release, spill, leak, discharge, dispose of, pump, pour, emit,
empty, inject, leach, dump or allow to escape into or through the environment.
 
Released Environmental Claims:  shall have the meaning set forth in Section
10.03(g).
 
Remediation:  means an action of any kind to address an Environmental Condition
or Release of Hazardous Substances, including any or all of the following
activities:  (i) monitoring, investigation, assessment, treatment, cleanup,
containment, removal, mitigation, response or restoration work; (ii) obtaining
any permits, licenses and other governmental authorizations, consents and
approvals necessary to conduct any such activity; (iii) preparing and
implementing any plans or studies for any such activity; (iv) obtaining a
written notice from a Governmental or Regulatory Authority with jurisdiction
over the Company or any Subsidiary under Environmental Laws that no material
additional work is required by such Governmental or Regulatory Authority; (v)
the use, implementation, application, installation, operation or maintenance of
removal actions, remedial technologies applied to the surface or subsurface
soils or sediments, excavation and treatment or disposal of soils or sediments,
systems for long-term treatment of surface water or ground water, engineering
controls or institutional controls; and (vi) any other activities reasonably
determined by a party to be necessary or appropriate or required under
Environmental Laws to address an Environmental Condition or a Release of
Hazardous Substances.
 

 
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Remediation Cap:  shall have the meaning set forth in Section 10.03(a)(vii)(A).
 
Remediation Certification:  shall have the meaning set forth in Section 6.08(a).
 
Reorganization:  shall have the meaning set forth in Section 6.09.
 
Representatives:  means any officer, director, principal, agent, stockholder,
source of financing (including pursuant to the Financing Commitments),
investment banker, employee, counsel, consultant, independent auditor or other
representative of a Person and each of the respective officers, directors,
principals, agents, stockholders, employees, counsel or other representatives of
any of the foregoing.
 
Required Approvals:  means (i) the filings required under the HSR Act, (ii) the
FERC Approval and (iii) the additional approvals and notices set forth in
Section 6.01 of the Disclosure Letter.
 
Response Action Outcome:  shall have the meaning set forth at N.J.S.A. 58:10C-2.
 
Restoration Cost:  shall have the meaning set forth in Section 5.02(a).
 
RGGI CO2 Allowances:  means The Regional Greenhouse Gas Initiative (RGGI) CO2
allowances.
 
S&P:  means Standard & Poor’s Financial Services LLC.
 
Scheduled Capital Expenditures:  means those capital expenditures identified in
Section 1.1(b) of the Disclosure Letter.
 
Section 1603 Payments:  means payments under Section 1603 of the American
Recovery and Reinvestment Tax Act of 2009 by the United States Department of the
Treasury to certain eligible persons who place in service specified energy
property.
 
Securities Act:  means the Securities Act of 1933, as amended.
 
Seller Indemnified Parties:  shall have the meaning set forth in Section
10.03(b).
 
Seller Retained Environmental Liabilities:  shall have the meaning set forth in
Section 10.03(a)(vii).
 
Seller’s Lien: means any Lien other than a Permitted Lien that is placed on the
Real Property or Personal Property after the date of this Agreement by Parent or
any of its Affiliates in violation of Section 5.01(b)(i).
 
Service Company Employee:  means an individual employed by a Parent Employer
Party, other than the Companies, who is employed primarily in connection with
the business and operations of the Companies.
 
Service Contracts:  shall have the meaning set forth in Section 6.11.
 

 
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Service Cost Accrual:  shall have the meaning designated to such term under
Financial Accounting Standards No. 87 and No. 106.
 
Shared Facilities or Services:  shall have the meaning set forth in Section
6.28.
 
Shared Property:  shall have the meaning set forth in Section 6.28.
 
Shared Services Agreement:  shall have the meaning set forth in Section 6.28.
 
Shipper-Must-Have-Title Requirement:  means the capacity release policy adopted
by FERC, which provides that all shippers shall have title to the gas at the
time the gas is delivered to the transporter and while it is being transported
by the transporter.
 
SO2: means sulfur dioxide.
 
Specified Covenants:  shall have the meaning set forth in Section 12.05(a).
 
Specified Generating Plants:  means each of the following Generating Plants:
Bethlehem, Hay Road, the Delta Project and Edge Moor.
 
Specified Representations:  shall have the meaning set forth in Section
10.03(c)(i).
 
Spectra Service Agreement:  means the Service Agreement Rate Schedule FT-1,
Contract No. 830164 (originally No. 800378), dated October 18, 1994, by and
between Spectra (as successor to Texas Eastern Transmission Corporation) and
CES.
 
SRRA:  means the Site Remediation Reform Act, N.J.S.A. 58:10C-1 et seq., and the
regulations promulgated thereunder, including, but not limited to, the
Administrative Requirements for the Remediation of Contaminated Sites, N.J.A.C.
7:26C-1 et seq.
 
Straddle Period:  shall have the meaning set forth in Section 8.02(c).
 
Subsidiary or Subsidiaries:  means any corporation, limited liability company,
partnership, joint venture or any other entity of which the Company (either
alone or through or together with any other Subsidiary) owns, directly or
indirectly, securities or other interests entitling the Company (either alone or
through or together with any other Subsidiary) to elect or appoint at least 50%
of the members of the board of directors or other similar governing body of such
corporation or other legal entity or otherwise conferring on the Company (either
alone or through or together with any other Subsidiary) the power to direct the
business and policies of such corporation or other legal entity.
 
Supplemental Disclosures:  shall have the meaning set forth in Section 6.03(b).
 
Survival Period:  shall have the meaning set forth in Section 10.01.
 
Tax or Taxes:  means (i) all Federal, state, county, local, municipal, foreign
and other taxes, assessments, duties or similar charges of any kind whatsoever,
including all
 

 
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corporate franchise, income, sales, use, ad valorem, receipts, value added,
profits, license, withholding, payroll, employment, excise, premium, property,
customs, net worth, capital gains, transfer, stamp, documentary, social
security, environmental, alternative minimum, occupation, recapture and other
taxes and including all interest, penalties and additions imposed with respect
to such amounts and (ii) any liability for such amounts as a result of (A) being
a transferee or successor or member of a combined, consolidated, unitary or
affiliated group or (B) an obligation under a tax sharing, tax allocation or
similar agreement.
 
Tax Claim:  shall have the meaning set forth in Section 8.07(a).
 
Tax Returns:  means all returns, declarations of estimated tax payments,
reports, estimates, information returns and statements, including any claims for
refunds or any related or supporting information with respect to any of the
foregoing, filed or to be filed with any Taxing Authority in connection with the
determination, assessment, collection or administration of any Taxes.
 
Taxing Authority:  means the IRS and any other domestic, foreign, federal,
national, state, county or municipal or other local government, any subdivision,
agency, commission or authority thereof, or any quasi-governmental body
exercising tax regulatory authority.
 
Third Party Claim:  shall have the meaning set forth in Section 10.04(a).
 
To the knowledge of Parent, Holdings and the Company:  means (i) the actual
knowledge of the individuals listed on Schedule II after due inquiry and (ii)
all knowledge that would reasonably have been expected to be obtained by such
Persons based upon such Person’s position or office.
 
Transaction Document Affiliate:  means an Affiliate of Parent (other than
Holdings or any of the Companies) that is a party to one or more of the
Transaction Documents.
 
Transaction Documents:  means (i) the Transition Services Agreement, (ii) the
amended and restated Cumberland Lease to be substantially in the form attached
hereto as Exhibit B, (iii) the Amended and Restated Generating Plant Easements,
(iv) the amended Pipeline Agreement to be substantially in the form attached
hereto as Exhibit D, (v) the amended Pipeline O&M Agreement to be substantially
in the form attached hereto as Exhibit E, (vi) the Potomac Option Agreement to
be substantially in the form attached hereto as Exhibit G, (vii)  the ACE Tax
Exempt Bond Agreement and the DPL Tax Exempt Bond Agreement to be substantially
in the form attached hereto as Exhibits J-1 and J-2, respectively, (viii) the
Deepwater Easement, (ix) the Amended and Restated Hay Road and Edge Moor
Easement, and (x) the Shared Services Agreement.
 
Transfer Taxes:  shall have the meaning set forth in Section 8.06.
 
Transition Services Agreement:  shall have the meaning set forth in Section
2.03(b)(v).
 

 
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Union Employee:  means any employee of any of the Companies, at the date of
Closing, who is covered by a Collective Bargaining Agreement.
 
Unpermitted Lien:  means (i) a Lien on the Real Property or Personal Property
identified in Section 6.16(a)(i) of the Disclosure Letter or (ii) a Post-Signing
Lien.
 
Unqualified Opinion:  means the unqualified report prepared by
PricewaterhouseCoopers with respect to the Company Audited Financial Statements
indicating that such statements present fairly, in all material respects, the
financial position of the Company and its Subsidiaries and the results of their
operations and their cash flows as of and for the periods presented therein in
conformity with GAAP.
 
Unreleased Parent Guarantees:  shall have the meaning set forth in Section
6.07(b).
 
Unreleased Parent Letters of Credit:  shall have the meaning set forth in
Section 6.07(a).
 
WARN Act: Worker Adjustment and Retraining Notification Act of 1989.
 

 
ARTICLE II
 
SALE AND PURCHASE OF MEMBERSHIP INTERESTS; CLOSING
 
2.01          Sale and Purchase of Membership Interests.  Subject to the terms
and conditions of this Agreement, at the Closing, Holdings shall sell, assign,
transfer, convey and deliver to Purchaser, and Purchaser shall purchase, acquire
and accept from Holdings, all of the right, title and interest of Holdings in
and to the Membership Interests free and clear of all Liens.
 
2.02          Closing Payment.  In consideration for the sale and transfer of
the Membership Interests to Purchaser by Holdings, Purchaser shall pay to
Holdings at the Closing an aggregate amount in cash (the “Closing Payment”)
equal to:
 
(a)           One billion, six hundred fifty million dollars ($1,650,000,000);
 
(b)           plus the Estimated Capital Expenditures;
 
(c)           (i) plus, if the Estimated Working Capital is greater than $0, the
amount of such excess on a dollar-for-dollar basis, or (ii) minus, if the
Estimated Working Capital is less than $0, the amount of such shortfall on a
dollar-for-dollar basis;
 
(d)           plus the Estimated Fuel Inventory;
 
(e)           (i) plus, if the Estimated Inventory Cost is greater than
$18,890,000 (the “Inventory Target”), the amount of such excess on a
dollar-for-dollar basis, or (ii) minus, if the
 

 
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Estimated Inventory Cost is less than the Inventory Target, the amount of such
shortfall on a dollar-for-dollar basis;
 
(f)           minus, for each day commencing on July 1, 2010 through and
including the Closing Extension Date, the per diem amount set forth on Schedule
IV; provided, however, that no such reduction shall be made to the extent the
Closing is delayed beyond July 1, 2010, due to the action or inaction of
Purchaser that results in the failure of Purchaser to satisfy the conditions to
Closing that are within Purchaser’s reasonable control (for the purposes of the
foregoing, Purchaser’s election to defer the Closing Date under Section 2.03(a)
shall not be considered “action or inaction” under this Section 2.02(f));
 
(g)           minus the amount, if any, of the sum of (i) Capacity Resource
Deficiency Charge and (ii) Payment for Purchased Capacity for Planning Year
2010/11;
 
(h)           plus, if Purchaser notifies Parent in writing no later than May
15, 2010 that Purchaser desires to acquire title to any equipment or assets used
by any of the Companies that is located at or used at any of the Generating
Plants or computers, printers or scanners used by any personnel to be hired by
Purchaser or one of its Affiliates at the Closing and leased by Parent or one of
its Affiliates pursuant to a Master Lease, an amount equal to fifty percent
(50%) of the amount required to purchase such equipment or assets under the
terms of the applicable Master Lease; and
 
(i)           minus, if as of the Closing Date the COD for the Delta Project is
later than June 1, 2011, as certified by the Delta Independent Engineer as
contemplated by Section 7.02(m), an amount equal to (i) $150,000, multiplied by
(ii) the number of days from and including June 2, 2011, through and including
such certified COD date,
 
by wire transfer of immediately available funds to an account designated by
Holdings in writing not less than two Business Days prior to the Closing
Date.  At least five (5) Business Days prior to the Closing Date, Parent shall
deliver to Purchaser a statement setting forth Parent’s good faith estimate of
the items set forth in Sections 2.02(b) through (e), which statement shall
quantify in reasonable detail each such amount and shall be calculated in
accordance with this Agreement.  Within five (5) days prior to the Closing Date,
Parent and Purchaser will conduct a joint audit of the Fuel Inventory and the
Inventory (the “Inventory Audit”) in order to determine the Estimated Inventory
Cost and Estimated Fuel Inventory.  Parent shall include the results of such
Inventory Audit in the above pre-Closing statement.
 
2.03          Closing.
 
(a)           The closing of the sale and purchase of the Membership Interests
hereunder (the “Closing”) shall take place at the offices of Covington & Burling
LLP, 1201 Pennsylvania Avenue, N.W., Washington, DC (or such other place as the
parties may agree), on a date to be mutually agreed upon by the parties, which
shall be no later than the third Business Day after the satisfaction or waiver
of the last to be satisfied or waived of the conditions set forth in Article VII
of this Agreement (other than conditions that by their terms are to be satisfied
as of the Closing) (the “Closing Condition Satisfaction Date”); provided,
however, that notwithstanding the satisfaction or waiver of the last to be
satisfied or waived of the conditions
 

 
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set forth in Article VII of this Agreement (other than conditions that by their
terms are to be satisfied as of the Closing), Purchaser may elect from time to
time, upon written notice received by Parent no later than two Business Days
prior to the latest date that the Closing otherwise would be required to occur,
to defer the Closing to a date that is no later than 30 days after the third
Business Day following the Closing Condition Satisfaction Date.  The date on
which the Closing shall occur is referred to in this Agreement as the “Closing
Date.”  The Closing shall be deemed to have occurred at 12:01 a.m. on the
Closing Date, such that Purchaser shall be deemed the owner of the Membership
Interests on and after the Closing Date.
 
(b)           In addition to any other documents to be delivered or actions to
be taken under other provisions of this Agreement, at the Closing, Parent or
Holdings, as applicable, shall deliver, or cause to be delivered, to Purchaser
each of the following documents (the “Closing Deliverables”):
 
(i)           an amended and restated Cumberland Lease substantially in the form
attached hereto as Exhibit B executed by each party thereto;
 
(ii)           amended and restated Generating Plant Easements substantially in
the form attached hereto as Exhibit C executed by each party thereto;
 
(iii)           an amended Pipeline Agreement substantially in the form attached
hereto as Exhibit D executed by each party thereto;
 
(iv)           an amended Pipeline O&M Agreement substantially in the form
attached hereto as Exhibit E executed by each party thereto;
 
(v)           the Transition Services Agreement executed by Parent and Holdings
or their relevant Affiliates substantially in the form attached hereto as
Exhibit H (the “Transition Services Agreement”);
 
(vi)           the ACE Tax Exempt Bond Agreement and the DPL Tax Exempt Bond
Agreement substantially in the form attached hereto as Exhibits J-1 and J-2,
respectively, executed by each party thereto;
 
(vii)           the Deepwater Easement executed by each party thereto;
 
(viii)           the Amended and Restated Hay Road and Edge Moor Easement
executed by each party thereto;
 
(ix)           a written notice of resignation from each of the officers and
directors of each of the Companies which shall be effective as of the Closing
Date;
 
(x)           all Books and Records which are not located at any of the
Generating Plant sites and which Parent and Holdings can reasonably deliver to
Purchaser at or prior to the Closing; provided, however, that (A) any Books and
Records not delivered to Purchaser at or prior to the Closing shall be delivered
by Parent and Holdings as promptly as practicable following the Closing and (B)
subject to Section 6.19, Parent shall be entitled to retain copies of any Books
and Records relating to the
 

 
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business, assets or operations (1) of Parent or any of its Affiliates (other
than the Companies) and (2) of the Companies to the extent required of Parent or
any of its Affiliates (other than the Companies) to comply with obligations of
Parent or any of its Affiliates (other than the Companies) arising after the
Closing pertaining to matters prior to the Closing; and
 
(xi)           such other documents reasonably required by Purchaser to
consummate the transactions contemplated hereby.
 
2.04          Post-Closing Payment.  Following the Closing, a payment may be
required to be paid by Purchaser to Holdings, or by Holdings to Purchaser, as
provided in this Section 2.04.
 
(a)           As promptly as reasonably practicable, but no later than 60 days
immediately following the Closing Date, Parent shall prepare and deliver to
Purchaser a written notice (the “Proposed Post-Closing Payment Notice”) setting
forth the determination made by Parent of the proposed Purchase Price and the
proposed Post-Closing Payment Amount required as a result of Parent’s
determination.  Prior to and following delivery of the Proposed Post-Closing
Payment Notice, each party shall provide the other party and its respective
Representatives with such access to the applicable personnel, books, records,
information, materials and data of the Companies, Parent, Holdings, and
Purchaser, as applicable, and their respective Affiliates as reasonably
requested by each party, for the purposes of allowing the other party to
determine, and verify the accuracy of the determination of, the calculations in
the Proposed Post-Closing Payment Notice, including, with respect to Purchaser,
for the purpose of conducting an audit of the Closing Date Inventory Cost (which
may occur prior to receipt of the Parent Proposed Post-Closing Payment
Notice).  Each party shall cooperate with the other party to assist in their
respective review of the Proposed Post-Closing Payment Notice, and, if requested
by either party, the other party and its Representatives shall meet in person
with the requesting party to discuss the Proposed Post-Closing Payment Notice.
 
(b)           The Proposed Post-Closing Payment Notice shall become final and
binding upon the parties on the 60th day following delivery thereof unless
Purchaser provides written notice of its disagreement (a “Notice of
Disagreement”) to Parent prior to such date.  Any Notice of Disagreement shall
specify in reasonable detail the nature of any disagreement so asserted.
 
(c)           If a Notice of Disagreement is received by Parent within the
60-day period referred to in Section 2.04(b), then the Proposed Post-Closing
Payment Notice (as revised in accordance with this sentence) shall become final
and binding upon the parties on the earlier of (i) the date Parent and Purchaser
resolve in writing all differences they have with respect to the matters
specified in the Notice of Disagreement and (ii) the date all disputed matters
are finally resolved in writing by the Accounting Firm.  During the 14-day
period following the timely delivery of a Notice of Disagreement, Parent and
Purchaser shall negotiate in good faith to resolve in writing any differences
that they may have with respect to the matters specified in the Notice of
Disagreement.  If there is no resolution as to any matter within such 14-day
period, then within five Business Days after the end of such 14-day period,
Parent and Purchaser shall submit to the Accounting Firm for arbitration, in
accordance with the standards set forth in this
 

 
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Section 2.04, only the matters that remain in dispute and were included in the
Notice of Disagreement in accordance with this Section 2.04, in the form of a
written brief (an “Arbitration Submission”).  If an Arbitration Submission is
not timely delivered with respect to a disputed matter by a party, then such
matter shall be deemed to have been resolved against such party. Parent and
Purchaser shall use their respective reasonable best efforts to cause the
Accounting Firm to render a written decision resolving the matters submitted to
the Accounting Firm within 30 days after the receipt of the Arbitration
Submissions.  The Accounting Firm’s decision shall be based solely on the
Arbitration Submissions submitted by Parent and Purchaser and their respective
Representatives and not on independent review.  The Accounting Firm shall
address only those items in dispute and may not assign a value greater than the
greatest value for such item claimed by either party or smaller than the
smallest value for such item claimed by either party.  In the absence of
manifest error, the resolution of disputed items by the Accounting Firm shall
constitute an arbitral award that is final, binding and non-appealable and upon
which a judgment may be entered by a court having jurisdiction thereover against
Parent or Purchaser, as applicable.  The costs and expenses of the Accounting
Firm incurred pursuant to this Section 2.04(c) shall be borne equally by
Purchaser and Parent.
 
(d)           Within three Business Days immediately following the date on which
the Notice of Disagreement is required to be delivered in accordance with
Section 2.04(b), (i) Purchaser shall pay to Holdings an amount equal to the
undisputed amount of the Post-Closing Payment Amount reflected in the Proposed
Post-Closing Payment Notice, being the amount that is payable by Purchaser
irrespective of the resolution of any dispute, if such amount is a positive
number, or (ii) Holdings shall pay to Purchaser an amount equal to the
undisputed amount of the Post-Closing Payment Amount reflected in the Proposed
Post-Closing Payment Notice, being the amount that is payable by Holdings
irrespective of the resolution of any dispute, if such amount is a negative
number.  If the Purchase Price as finally determined pursuant to Section 2.04(c)
is greater than the Closing Payment, then Purchaser shall pay such excess to
Holdings as the Post-Closing Payment Amount.  If the Purchase Price as finally
determined pursuant to Section 2.04(c) is less than the Closing Payment, then
Holdings shall pay such shortfall to Purchaser.  The amount of the Post-Closing
Payment referred to in the two immediately preceding sentences shall account for
any payments made pursuant to the first sentence of this Section 2.04(d). If
there is a dispute with respect to any portion of the Post-Closing Payment
Amount, then within three Business Days immediately following the final
determination (either through agreement of the parties or pursuant to Section
2.04(c)) of all such disputed amounts, Purchaser shall deliver to Holdings, or
Holdings shall deliver to Purchaser, as the case may be, the Post-Closing
Payment finally determined to be payable, plus interest on such amount from the
Closing Date at a rate equal to 30-day LIBOR plus 1%.  Any amounts to be paid
pursuant to this Section 2.04(d) shall be paid in cash in immediately available
funds via wire transfer to an account designated by the receiving party.
 
2.05          Tax Treatment of Payments.  Any payment made with respect to
adjustments made pursuant to Section 2.04 shall be deemed to be, and each of
Parent and Purchaser shall treat such payments as an adjustment to the Purchase
Price for federal, state, local and foreign income tax purposes.
 
2.06          Withholding Rights.  Purchaser and the Company shall be entitled
to deduct and withhold from the consideration otherwise payable to any Person
pursuant to this
 

 
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Article II, such amounts as it is required to deduct and withhold with respect
to the making of such payment under any provision of Federal, state, local or
foreign Tax law.  If Purchaser or the Company, as the case may be, so withholds
amounts, such amounts shall be treated for all purposes of this Agreement as
having been paid to the holder of the Membership Interests in the Company in
respect of which Purchaser or the Company, as the case may be, made such
deduction and withholding.
 
ARTICLE III

 
REPRESENTATIONS AND WARRANTIES OF PARENT,
HOLDINGS AND THE COMPANY
 
Except as otherwise set forth in the Disclosure Letter (it being understood that
any information disclosed in one section of the Disclosure Letter shall be
considered disclosed for any other section of the Disclosure Letter to the
extent the relevance of such disclosure to such other section of the Disclosure
Letter is reasonably apparent from the text of such disclosure), and giving
effect to the actions to be taken by Parent, Holdings or the Company to
consummate the Reorganization, each of Parent, Holdings and the Company jointly
and severally represents and warrants to Purchaser as set forth below.
 
3.01          Organization and Qualification.  The Company is a limited
liability company duly organized, validly existing and in good standing under
the Laws of the State of Delaware, with power and authority to own, lease and
operate its assets and properties and to carry on its business as it is
currently being conducted.  The Company is duly qualified and licensed or
otherwise authorized to transact business and is in good standing as a foreign
limited liability company in each jurisdiction in which such qualification or
license is required by applicable Law, except for jurisdictions in which the
failure to be so qualified or licensed is not, individually or in the aggregate,
reasonably likely to have a Material Adverse Effect.
 
3.02          Authority to Execute and Perform Agreement.
 
(a)           Parent has the requisite corporate power and authority to enter
into, execute and deliver this Agreement and each of the Transaction Documents
to which it will be a party, to perform fully its obligations hereunder and
thereunder and to consummate the transactions contemplated hereby and
thereby.  The execution, delivery and performance by Parent of this Agreement
and each of the Transaction Documents to which it will be a party and the
consummation of the transactions contemplated hereby and thereby have been duly
and validly authorized by the board of directors of Parent and all other
requisite corporate or stockholder action.
 
(b)           Holdings has the requisite limited liability company power and
authority to enter into, execute and deliver this Agreement and each of the
Transaction Documents to which it will be a party, to perform fully its
obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby.  The execution, delivery and performance by
Holdings of this Agreement and each of the Transaction Documents to which it
will be a party and the consummation of the transactions contemplated hereby and
thereby have
 

 
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been duly and validly authorized by all necessary limited liability company
action or proceedings required to be taken by Holdings.
 
(c)           The Company has the requisite power and authority to enter into,
execute and deliver this Agreement and each of the Transaction Documents to
which it will be a party, to perform fully its obligations hereunder and
thereunder and to consummate the transactions contemplated hereby and
thereby.  The execution, delivery and performance by the Company of this
Agreement and each of the Transaction Documents to which it will be a party and
the consummation of the transactions contemplated hereby and thereby have been
duly and validly authorized by all necessary limited liability company action or
proceedings required to be taken by the Company.
 
(d)           Each Transaction Document Affiliate has the requisite power and
authority to enter into, execute and deliver each of the Transaction Documents
to which it will be a party, to perform fully its obligations thereunder and to
consummate the transactions contemplated thereby.  Prior to the execution and
delivery of each such Transaction Document by such Transaction Document
Affiliate, the execution, delivery and performance by such Transaction Document
Affiliate of each such Transaction Document and the consummation by it of the
transactions contemplated thereby will have been duly and validly authorized by
all necessary corporate or stockholder action or proceedings required to be
taken by such Transaction Document Affiliate.
 
(e)           This Agreement has been duly executed and delivered by Parent,
Holdings and the Company and, assuming due authorization, execution and delivery
of this Agreement by Purchaser, this Agreement constitutes a valid and binding
obligation of Parent, Holdings and the Company, enforceable against each of them
in accordance with its terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and other similar Laws of general
applicability relating to or affecting creditors’ rights and to general
principles of equity (regardless of whether enforcement is sought in a
proceeding in equity or Law) (the “Bankruptcy and Equity Exception”).
 
(f)           Upon their execution, each of the Transaction Documents to which
Parent or Holdings will be a party will have been duly executed and delivered by
Parent and Holdings, as applicable, and, assuming due authorization, execution
and delivery thereof by the other parties thereto, will constitute valid and
binding obligations of Parent and Holdings, as applicable, enforceable against
each of them in accordance with their respective terms, subject to the
Bankruptcy and Equity Exception.
 
(g)           Upon their execution, each of the Transaction Documents to which
any of the Companies will be a party will have been duly executed and delivered
by such party thereto and, assuming due authorization, execution and delivery
thereof by the other parties thereto, will constitute valid and binding
obligations of the applicable Companies as of the date of such Transaction
Document.
 
(h)           Upon their execution, each of the Transaction Documents to which a
Transaction Document Affiliate will be a party will have been duly executed and
delivered by the Transaction Document Affiliate and, assuming due authorization,
execution and delivery
 

 
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thereof by the other parties thereto, will constitute valid and binding
obligations of each such Transaction Document Affiliate, enforceable against
each of them in accordance with their respective terms, subject to the
Bankruptcy and Equity Exception.
 
3.03          Capitalization and Title to Membership Interests.
 
(a)           Holdings owns all of the Membership Interests free and clear of
any and all Liens.  All of the Membership Interests have been duly authorized
and are validly issued, fully paid and non-assessable and were not issued in
violation of, and are not subject to, the preemptive rights of any Person or
other similar rights in respect thereto.  Other than the Membership Interests,
no class of interests in or equity interests or other securities convertible
into, or exchangeable for, or evidencing the right to subscribe for or purchase
any membership interest or other securities of the Company is authorized or
outstanding.
 
(b)           Except for this Agreement, there are no outstanding rights,
subscriptions, warrants, calls, preemptive rights, options, claims,
subscriptions, convertible or exchangeable securities or other arrangements or
agreements of any kind (contingent or otherwise) pursuant to which Parent,
Holdings or the Company is or may become obligated to issue, sell, transfer,
otherwise dispose of, register, purchase, return or redeem any membership
interest in or other securities of the Company or other securities convertible
into, exchangeable for or evidencing the right to subscribe for or purchase any
membership interest in or other securities of the Company and no membership
interests or other securities of the Company are reserved for issuance for any
purpose. There are no member agreements, voting trusts, proxies or other
agreements, instruments or understandings with respect to the membership
interests or other securities of the Company or other securities convertible
into, or exchangeable for, or evidencing the right to subscribe for or purchase
any membership interest or other securities of the Company.  Except for this
Agreement, none of Parent, Holdings or the Company is a party to any agreement
relating to the issuance, sale, redemption, transfer, acquisition or other
disposition of the Membership Interests or other securities of the Company or
other securities convertible into, or exchangeable for, or evidencing the right
to subscribe for or purchase any membership interest or other securities of the
Company.
 
(c)           There are no restrictions under the governing instruments of the
Company or under any Contract to which the Company is a party or by which any of
its properties or assets are bound that prevent or restrict the payment of
dividends or other distributions by the Company other than those imposed by the
Laws of general applicability of its jurisdictions of organization.
 
3.04          Subsidiaries.
 
(a)           Section 3.04(a) of the Disclosure Letter sets forth the name and
jurisdiction of organization of each Subsidiary, state in which each Subsidiary
is duly qualified and licensed or otherwise authorized to transact business, the
tax identification number (if applicable) and the officers and directors of each
Subsidiary.  Each Subsidiary is a corporation or a limited liability company
duly organized, validly existing and in good standing under the Laws of the
State of Delaware, with full power and authority, as the case may be, to own,
lease and operate its assets and properties and to carry on its business as it
is currently being conducted.  Each Subsidiary is duly qualified and licensed or
otherwise authorized to transact business and is
 

 
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in good standing as a foreign limited liability company in each jurisdiction in
which such qualification or license is required by applicable Law, except for
jurisdictions in which the failure to be so qualified or licensed is not,
individually or in the aggregate, reasonably likely to have a Material Adverse
Effect.
 
(b)           Except for the Subsidiaries set forth in Section 3.04(a) of the
Disclosure Letter, neither the Company nor any Subsidiary owns, directly or
indirectly, any equity participation or similar interest in any Person, and
neither the Company nor any Subsidiary is a party to any partnership, limited
liability company, joint venture, trust or similar agreement.
 
(c)           All of the outstanding capital stock or membership interests, as
the case may be, of each Subsidiary have been duly authorized and are validly
issued and fully paid and were not issued in violation of the preemptive rights
of any Person, and such interests are owned by the Company or by a Subsidiary
free and clear of any Liens or limitations on voting rights.  There are no
subscriptions, options, warrants, calls, rights, convertible securities or other
agreements or commitments of any character relating to the issuance, transfer,
sales, delivery, voting or redemption (including any rights of conversion or
exchange under any outstanding security or other instrument) for any of the
capital stock, membership interests or other equity interests of, or other
ownership interests in, any Subsidiary.
 
(d)           There are no restrictions under the governing instruments of any
Subsidiary or under any Contract to which any Subsidiary is a party or by which
any of their respective properties or assets are bound that prevent or restrict
the payment of dividends or other distributions by any Subsidiary other than
those imposed by the Laws of general applicability of their respective
jurisdictions of organization.
 
3.05          Financial Statements.
 
(a)           The Company has previously delivered to Purchaser the unaudited
consolidated balance sheets of the Company and its consolidated Subsidiaries as
of December 31, 2009 (the “Balance Sheet” and the date thereof the “Balance
Sheet Date”), and as of December 31, 2008, and the consolidated statements of
income, cash flows and shareholder’s equity for each of the years ended December
31, 2009, 2008 and 2007.  All of such financial statements referred to in this
Section 3.05(a), including the notes thereto, are collectively referred to
herein as the “Company Unaudited Financial Statements.”
 
(b)           All Company Unaudited Financial Statements (i) have been prepared
from, and are in accordance with, the books and records of the Companies and
(ii) present fairly, in all material respects, the consolidated financial
position, the results of operations and cash flows of the Companies as of the
dates and for the periods indicated.  The Company Unaudited Financial Statements
exclude certain footnote disclosures normally included in financial statements
prepared in accordance with GAAP.
 
(c)           The Company has delivered to Purchaser the Company Pro Forma
Balance Sheet.  The Company Pro Forma Balance Sheet (i) has been prepared from,
and is in accordance with, the books and records of the Companies, and (ii)
presents fairly in all material respects the consolidated financial position of
the Company and its consolidated Subsidiaries, as
 

 
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adjusted to give effect to the Reorganization and the Push Down Accounting
Adjustments, as of the date indicated.
 
3.06          Absence of Undisclosed Liabilities.  None of the Companies has any
Liabilities other than Liabilities (a) adequately reflected on the Pro Forma
Balance Sheet or disclosed in the explanatory notes thereto, (b) incurred since
the date of the Pro Forma Balance Sheet in the ordinary course of business
consistent with past practice, (c) disclosed in this Agreement (including the
Disclosure Letter), or (d) specifically addressed by, and permitted to be
incurred after the date of this Agreement in accordance with, Section 5.01(b).
 
3.07          No Material Changes.  Since the Balance Sheet Date, (a) the
Companies have conducted their respective businesses, and the Generating Plants
have been operated, in all material respects in the ordinary course of business
consistent with Good Industry Practices and past practice, and (b) there have
been no events, occurrences or developments which have had or are reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect.
 
3.08          Tax Matters.
 
(a)           All material Tax Returns required to have been filed by the
Companies have been duly and timely filed (including any extensions).  All such
Tax Returns are correct and complete in all material respects and accurately
reflect in all material respects all Liabilities for Taxes of the Companies for
the periods covered thereby.  All Taxes and Tax Liabilities due and payable by
or with respect to the income, assets or operations of the Companies have been
timely paid in full.  All Taxes of the Companies not yet due and payable for a
Pre-Closing Tax Period ending on or before December 31, 2009, have been accrued
and adequately disclosed and fully provided for in accordance with GAAP on the
Company Unaudited Financial Statements.
 
(b)           None of the Companies is i) a party to any agreement extending the
time within which to file any Tax Return or ii) is presently contesting the Tax
Liability of any of the Companies before any court, tribunal or agency.
 
(c)           The Companies have withheld and timely paid all material Taxes
required to have been withheld and paid by the Companies in connection with
amounts paid or owing to any employee, creditor, stockholder, member, licensor
or independent contractor.
 
(d)           There is no written assessment by, or to the knowledge of Parent,
Holdings and the Company any pending assessments with, any Taxing Authority for
additional Taxes against any of the Companies for any past period, which has not
been resolved, and none of the Companies has received any correspondence
regarding such assessments or proposed assessments.
 
(e)           No Liens for Taxes have been filed or exist with respect to the
assets of any of the Companies other than Liens for Taxes not yet due.
 
(f)           No audit or other proceedings by any Taxing Authority is currently
in progress with respect to any Taxes due from any of the Companies.  Any
deficiency resulting from any completed audit or examination by any Taxing
Authority with respect to any Taxes owed by any of the Companies has been timely
paid.
 

 
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(g)           The Company has made available for review by Purchaser (i) all
Federal, state, local and foreign income Tax Returns filed by, and the FIN 48
summary and detail related to any of the Companies with respect to any Tax
period ending on or after January 1, 2007, and (ii) all other state, local and
foreign Tax Returns filed by any of the Companies with respect to any Tax period
ending on or after January 1, 2009.
 
(h)           None of the Companies has agreed to any extension of the statutory
period of limitation applicable to any Tax Returns required to be filed by, or
with respect to any Tax assessment or deficiency of, any of the Companies.
 
(i)           None of the Companies has any Liability for the Taxes of any
Person (other than the Company or any Subsidiary) or entity (i) under
Section 1.1502-6 of the Treasury Regulations (or any similar provision of state,
local or foreign law), (ii) as a transferee or successor, or (iii) by Contract
or otherwise.
 
(j)           Except as contemplated hereunder, none of the Companies is a party
to or bound by any obligations under any Tax sharing, Tax allocation, Tax
indemnity or similar agreement or arrangement other than any agreements to be
terminated pursuant to Section 8.05 hereof.
 
(k)           None of the Companies was included within the past three years, or
is includable, in the Tax Return of any affiliated, consolidated, combined,
unitary or similar group of corporations other than the one in which Parent is
the common parent.
 
(l)           No power of attorney is currently in effect on behalf of any of
the Companies with respect to any Taxes.
 
(m)           Each of the Companies is and always has been treated as a
disregarded entity for Federal, state and local income Tax purposes.
 
(n)           None of the Companies will be required to include any material
item of income in, or exclude any material item of deduction from, taxable
income for any taxable period (or portion thereof) ending on or after the
Closing Date as a result of any of the following that occurred or exists prior
to the Closing Date:  iii) a “closing agreement” as described in Section 7121 of
the Code (or any corresponding or similar provision of state, local or non-U.S.
income Tax law), iv) an installment sale or open transaction, v) a prepaid
amount, vi) an intercompany item under Treasury Regulation Section 1.1502-13 or
an excess loss account under Treasury Regulation 1.1502-19, or vii) change in
the accounting method of the Company or any Subsidiary pursuant to Section 481
of the Code or any similar provision of the Code or the corresponding tax laws
of any nation, state or locality.
 
(o)           During the five-year period ending on the date of this Agreement,
none of the Companies was a distributing corporation or a controlled corporation
in a transaction intended to be governed by Section 355 of the Code.
 
(p)           None of the Companies is a party to any agreement that would
require it to make any payment that would constitute an “excess parachute
payment” for purposes of Sections 280G and 4999 of the Code.
 

 
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(q)           Parent is not a “foreign person” within the meaning of Section
1445 of the Code.
 
(r)           No Indebtedness of the Company consists of “corporate acquisition
indebtedness” within the meaning of Section 279 of the Code.
 
(s)           None of the Companies has engaged in a “reportable transaction”
within the meaning of Treasury Regulations Section 1.6011-4(b).
 
(t)           There are no real property tax Legal Proceedings pending or, to
the knowledge of Parent, Holdings and the Company, threatened against the
Companies or any of their respective properties.
 
3.09          Compliance with Laws.  The Companies are, and since January 1,
2009, have been, in compliance in all material respects with all applicable
Laws.  Since January 1, 2007, none of the Companies has (a) received any written
notice from, (b) provided any self-reporting or like notice to, or (c) been
charged or threatened by, any Governmental or Regulatory Authority regarding any
material violation of, or material failure to comply with, any applicable Law.
 
3.10          No Breach.  Neither the execution and delivery by Parent,
Holdings, the Company or the Transaction Document Affiliates of this Agreement
and each of the Transaction Documents to which it will be a party, in each case
as applicable, nor the consummation by Parent, Holdings, the Company and the
Transaction Document Affiliates of the transactions contemplated hereby and
thereby, will (a) conflict with, violate or result in the breach of any
provision of the certificate of incorporation, by-laws or other governing
instruments of Parent, Holdings, the Companies or the Transaction Document
Affiliates, (b) conflict with, result in a material violation or material breach
of, result in a material default under (with or without notice or lapse of time,
or both), result in acceleration of, or otherwise give any other contracting
party the right to terminate, cancel or accelerate any Material Contract to
which any of the Companies is a party or by which any of them or any of their
property or assets are subject or bound, or (c) conflict with or result in a
material violation or breach of any Law applicable to any of the Companies.
 
3.11          Consents and Approvals.  Except for (a) the Required Approvals,
(b) consents and approvals required in connection with the Reorganization, which
consents and approvals will be obtained at or prior to the Closing, (c) such
filings, notices and consents which become applicable to Parent, Holdings or the
Companies as a result of the specific regulatory status of Purchaser (or any of
its Affiliates) or as a result of any other facts that specifically relate to
the business or activities in which Purchaser (or any of its Affiliates) is or
proposes to be engaged or (d) such filings, notices and consents that if not
made or received are not reasonably likely to be material to any of the
Companies or prevent or materially delay the performance by Parent, Holdings,
any of the Companies or any Transaction Document Affiliate of their obligations
under, or the consummation of the transactions contemplated by, this Agreement
or any Transaction Document to which it is a party, none of Parent, Holdings,
any of the Companies or any Transaction Document Affiliate will be required to
make any filing with or give any notice to, or to obtain any consent from, any
Governmental or Regulatory Authority or
 

 
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other Person in connection with: (i) the execution, delivery or performance by
Parent, Holdings, any of the Companies or any Transaction Document Affiliate of
this Agreement or any of the Transaction Documents to which it will be a party
or any agreement or instrument delivered in connection herewith or (ii) the
consummation of the transactions contemplated hereby or thereby.
 
3.12           Actions and Proceedings.  There are no Legal Proceedings pending
or to the knowledge of Parent, Holdings and the Company, threatened against
Parent, Holdings, the Companies or any Transaction Document Affiliate, or any of
their respective properties or assets, that is reasonably likely to have a
Material Adverse Effect or prevent or materially delay the performance
by Parent, Holdings, the Company or any Transaction Document Affiliate, of their
respective obligations under, or the consummation of the transactions
contemplated by, this Agreement and the Transaction Documents.  There is no
material Order to which any of the Companies is subject, or by which either any
of the Companies or the Generating Plants (or any assets of the Generating
Plants including the Owned Real Property) are bound, other than Orders listed in
Section 3.12 of the Disclosure Letter.  
 
3.13          Material Contracts.  Section 3.13 of the Disclosure Letter
contains a true and complete list of all of the following Contracts (other than
the Excluded Contracts) to which any of the Companies is a party or by which any
of them or any of their properties or assets are bound including, without
limitation, Contracts to which one of the Companies is not currently a party but
to which one of the Companies will be a party following the Reorganization (each
such Contract, a “Material Contract”):
 
(a)           Contracts evidencing Indebtedness to any Person;
 
(b)           Contracts pursuant to which any of the Companies has directly or
indirectly guaranteed Indebtedness of any other Person;
 
(c)           performance bonds or letters of credit issued or posted by any of
the Companies, and the contract or instrument under which such bonds or letters
of credit were posted;
 
(d)           Contracts containing any non-compete provision that restricts or
purports to restrict any of the Companies from engaging or competing in any line
of business or in any geographic area or contains any exclusivity, most favored
nation or similar covenant;
 
(e)           Contracts between any of the Companies, on the one hand, and any
of the Company’s Affiliates (other than any Subsidiary), on the other hand,
other than the Contracts that will be terminated or assigned prior to the
Closing pursuant to Section 6.10 or Section 6.11;
 
(f)           Contracts for the purchase, sale or use of Intellectual Property
that is material to conduct the business of any of the Companies, other than
Intellectual Property that is publicly available on standard commercial terms;
 
(g)           tolling agreements relating to the generation and sale of
electricity;
 

 
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(h)           Contracts for the retail supply of electricity, capacity,
ancillary services, natural gas or steam;
 
(i)           Contracts for the wholesale supply of electric power or power
products to local distribution companies or other customers;
 
(j)           Contracts for the transportation or storage of natural gas;
 
(k)           Contracts with transmission owners for the interconnection of the
generating facilities owned by any of the Companies or otherwise for the
transmission of power (other than Contracts for transmission services provided
under a tariff);
 
(l)           Contracts for the purchase or construction of plant (including,
without limitation, Contracts relating to the Delta Project), property or
equipment, other than Contracts under which the Dollar amount of the purchase is
less than $1,000,000;
 
(m)           Contracts involving a resolution or settlement of any actual or
threatened litigation, arbitration, claim or other dispute and Contracts
involving ongoing environmental remediation involving amounts in excess of
$250,000;
 
(n)           Contracts involving a joint venture, partnership, strategic
alliance, co-marketing, or similar agreement or providing for a loan or
advancement to, or investment in, any Person;
 
(o)           a mortgage, pledge, security agreement, deed of trust or other
instrument granting a Lien (other than a Permitted Lien) upon any Owned Real
Property or Leased Real Property;
 
(p)           other than Contracts addressed by clause (l) above, Contracts
obligating any of the Companies to spend or purchase material, supplies,
equipment or other assets or properties or services (other than purchase orders
for inventory or supplies in the ordinary course of business) in excess of
$500,000 in any twelve-month period;
 
(q)           Collective Bargaining Agreements;
 
(r)           Contracts for the employment of any officer, individual employee
or other Person on a full-time or consulting basis or any change-in-control or
severance payments that may be caused from the transactions contemplated by this
Agreement;
 
(s)           Contracts that provide for the acquisition or disposition by any
of the Companies of any Person, assets or business for consideration with a fair
market value of more than $250,000 or indemnification or contribution by any of
them or any of their Affiliates;
 
(t)           all operating and maintenance agreements, management agreements,
administrative services agreements, long term service or parts agreements, and
agreements with respect to the intake of water and the discharge of wastewater;
 

 
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(u)           the Leases (other than such leases, subleases, licenses or
occupancy agreements under which none of the Companies is the party thereto
using or occupying the premises described therein) and Generating Plant
Easements; and
 
(v)           any other Contract not addressed by clauses (a)-(u) above under
which any of the Companies has a payment obligation in excess of $250,000.
 
Assuming the due authorization, execution and delivery of such Material Contract
by the other parties thereto, each Material Contract constitutes a valid and
binding obligation of, and is enforceable by, the Company or its relevant
Subsidiary, as the case may be, subject to the Bankruptcy and Equity
Exception.  To the knowledge of Parent, Holdings and the Company, each Material
Contract constitutes a valid and binding obligation of, and is enforceable
against, the other parties thereto, subject to the Bankruptcy and Equity
Exception.  None of the Companies is in material violation or breach of any
Material Contract, and no event has occurred and is continuing that after giving
of notice, the lapse of time or both would become a material violation or breach
thereunder or give the other party the right to terminate or accelerate any
obligation thereunder; and to the knowledge of Parent, Holdings and the Company,
no other party to any Material Contract has materially violated or breached any
Material Contract, and no event has occurred and is continuing that after giving
of notice, the lapse of time or both would become a material violation or breach
thereunder or give any other party the right to terminate or accelerate any
obligation thereunder.
 
3.14          Real Property.
 
(a)           Section 3.14(a) of the Disclosure Letter contains viii) a true and
complete list of (A) all real property owned by any of the Companies (together
with (i) all the easements, rights of way, rights and appurtenances pertaining
to such real property, and (ii) the buildings, structures, fixtures and other
improvements situated on such real property, the “Owned Real Property”), (B) all
real property for which any of the Companies has an easement pursuant to any of
the Generating Plant Easements (together with (1) all the easements, rights of
way, rights and appurtenances pertaining to such real property, and (2) the
buildings, structures, fixtures and other improvements situated on such real
property, the “Easement Real Property”) and (C) all real property leased,
subleased, licensed or otherwise occupied or used by any of the Companies,
except the Easement Real Property (together with (1) all the easements, rights
of way, rights and appurtenances pertaining to such real property, and (2) the
buildings, structures, fixtures and other improvements situated on such real
property, the “Leased Real Property” and collectively with the Owned Real
Property and the Easement Real Property, the “Real Property”); and ix) the
street address and legal description of each parcel of Real Property.  One of
the Companies is the sole owner and holder of good, valid and marketable title
to each of the Owned Real Property, subject only to Permitted Liens and
Post-Signing Liens.  No Person has any option or right to acquire or purchase
any ownership interest in the Owned Real Property, including pursuant to
executory contracts of sale and rights of first refusal. No Person other than
the Companies has any right to, nor does any Person other than the Companies,
occupy, lease, sublease or possess any of the Real Property (or any portion
thereof). There is no real property, including easements, other than the Real
Property (i) owned, leased, used, occupied, or subject to easement held by any
of the Companies in connection with the ownership and operation of the
applicable
 

 
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Generating Plant or (ii) otherwise necessary for the conduct of the business of
any of the Companies as conducted on the date hereof.
 
(b)           The Company has made available to Purchaser a true and complete
copy of each lease, sublease, license or occupancy agreement described in
‎Section 3.14(a) of the Disclosure Letter (each, a “Lease”) and each Generating
Plant Easement identified and described in Section 3.14(a) of the Disclosure
Letter. One of the Companies is the sole owner and holder of a valid and
subsisting leasehold interest in and to each of the Leased Real Property,
subject only to Permitted Liens and Post-Signing Liens. One of the Companies is
the sole owner and holder of a valid and subsisting easement interest in and to
all of the Easement Real Property, subject only to Permitted Liens and
Post-Signing Liens. One of the Companies is the sole owner and holder of good,
valid and marketable title to all of the Improvements located on the Leased Real
Property and Easement Real Property, subject only to Permitted Liens and
Post-Signing Liens, or except for the Joint Use Facilities, as such term is
defined in each Generating Facility Easement, or other Improvements owned by the
lessor or grantor under any Lease or Generating Plant Easement which are
permitted by such instrument to be located on such property.  No breach or
default exists by any party under the Generating Plant Easements or the
Cumberland Lease.
 
(c)           None of the Companies or their Affiliates has received written
notice of any condemnation or eminent domain proceedings relating to the Real
Property and, to the knowledge of Parent, Holdings and the Company, no such
condemnation or eminent domain proceedings relating to the Real Property are
pending.
 
(d)           None of the Companies or their Affiliates has received any written
notice of any pending or proposed material special assessments with respect to
the Real Property, except as disclosed in any title policy insuring the Real
Property or any commitments therefor, or in any title reports of the Real
Property delivered to, in the possession of or made available to Purchaser.
 
(e)           None of the Companies or their Affiliates has received written
notice of any pending or proposed significant public improvements that will be
made on the Real Property that will preclude or materially impair (i) the use of
such Real Property for the purposes for which it is currently used as of the
date hereof or (ii) the operation of the subject Real Property in the ordinary
course of business as currently operated as of the date hereof.
 
(f)           None of the Companies or their Affiliates has received any written
notice (i) of any re-zoning proceedings with respect to any of the Real Property
or (ii) that any Laws applicable to the Real Property, including zoning
regulations or ordinances (including with respect to parking), board or fire
underwriters rules, building, fire, health or similar laws, codes, ordinances,
orders or regulations, have been violated with respect to any Real Property,
except for any such proceedings or violations that do not materially interfere
with the conduct of the business of any of the Companies or any of the
Generating Plants as currently operated.
 
(g)           None of the Companies or their Affiliates has received any written
notice that any portion of the Real Property has been classified under any
designation under applicable Law to obtain a special ad valorem tax rate or to
receive either an abatement or deferment of Taxes that may result in any
catch-up or other deferred Taxes.
 

 
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(h)           None of the Companies or their Affiliates has made any commitments
or agreements to any Governmental or Regulatory Authority, utility company, or
any other organization, group or individual, relating to the Real Property which
impose an obligation upon any of the Companies to make any contribution or
dedication of money or land or to construct, install or maintain any
improvements of a public or private nature on or off the Real Property that
would constitute a Material Contract.
 
3.15          Intellectual Property.
 
(a)           The Companies own or have the right to use all Intellectual
Property used in the operation of the Companies’ businesses as currently
conducted by them (including, without limitation, all software and systems
required to dispatch and manage the Generating Plants in PJM), all of which
rights shall survive unchanged by the consummation of the transactions
contemplated by this Agreement.  All material Intellectual Property licensed by
or on behalf of the Companies is set forth in Section 3.15(a) of the Disclosure
Letter and is being used by or on behalf of the Companies in material compliance
with the applicable license agreement.
 
(b)           All Owned Intellectual Property is owned exclusively by one of the
Companies free and clear of any Liens other than Permitted Liens.  Section
3.15(b) of the Disclosure Letter sets forth a true and complete list of all of
the Companies’ registrations or applications for registration for any material
Owned Intellectual Property with any Governmental or Regulatory Authority or
domain name registrar.  Except as indicated in Section 3.15(b) of the Disclosure
Letter as being abandoned, each such registration is valid and in full force and
each such application is, in good standing.
 
(c)           There is no pending or, to the knowledge of Parent, Holdings and
the Company, threatened claim against any of the Companies (i) alleging that the
conduct of one of the Companies’ business, in any material respect, infringes
upon, misappropriates, wrongfully uses or dilutes the Intellectual Property
rights of any Person, or (ii) challenging any of the Companies’ ownership or use
of, or the validity, enforceability or registrability of, any Owned Intellectual
Property.  There are no judgments or settlements, currently in effect against
any of the Companies with respect to Intellectual Property, that materially
adversely impacts the Companies considered as a single enterprise.
 
(d)           None of the Companies has brought or threatened to bring, within
the two-year period prior to the date hereof, a claim against any Person
alleging infringement, misappropriation or dilution of any material Owned
Intellectual Property.  To the knowledge of Parent, Holdings and the Company, no
Person is currently infringing, misappropriating or diluting any material Owned
Intellectual Property.
 
(e)           The Companies own all the Business IT or (except for Business IT
that comprises technology that is widely distributed for free or on a
“commercial off the shelf” basis) have a valid right to use the Business IT. The
Business IT: (i) operates and performs in all material respects as currently
required to operate the Companies’ businesses; (ii) has not materially
malfunctioned or failed within the past three (3) years; (iii) has been
maintained in all material respects in accordance with the Companies’  internal
standards as well as any applicable
 

 
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warranties or other user instructions from suppliers; and (iv) does not, to the
knowledge of Parent, Holdings and the Company, contain any worms, viruses, bugs,
Trojan horses, keylogger software, or other embedded faults or malicious devices
that is reasonably likely to adversely impact its functionality or the operation
of the Companies’ businesses in any material respect.  The Companies have
implemented backup, disaster recovery, virus protection, firewall, and other
information technology security technology and procedures consistent with
applicable regulatory standards and Good Industry Practices.  The Companies have
in their possession, or has all necessary rights to obtain, the source code and
all related technical and other information required to enable a reasonably
skilled information technology professional to maintain and support any part of
the Business IT.
 
3.16          Benefit Matters.
 
(a)           Section 3.16(a) of the Disclosure Letter contains a true and
complete list of all deferred compensation, profit-sharing, retirement and
pension plans and all bonus, incentive, severance, retention, change in control,
and other employee benefit or fringe benefit plans, agreements, trusts, funds,
policies or arrangements maintained, or with respect to which contributions have
been made, by any Parent Employer Party with respect to current or former
employees who are, or were, employed primarily in connection with the business
and operations of the Company or a Subsidiary (collectively, “Benefit Plans”),
other than, solely for purposes of disclosure on Section 3.16(a) of the
Disclosure Letter, those that are immaterial in amount or significance. No
Benefit Plan is sponsored or maintained by any one of the Companies.
 
(b)           The Company and each trade or business (whether or not
incorporated) which are or have ever been under common control, or which are or
have ever been treated as a single employer, with the Company under Section
414(b), (c), (m) or (o) of the Code (an “ERISA Affiliate”) have fulfilled their
respective obligations (if any) under the minimum funding requirements of
Section 302 of ERISA, and Section 412 of the Code, with respect to each Benefit
Plan that is an “employee pension benefit plan” as defined in Section 3(2) of
ERISA. Each Benefit Plan is in compliance in all respects with the presently
applicable provisions of ERISA and the Code, except for such failures to comply
with such provisions which are not, individually or in the aggregate, reasonably
likely to result in a material Liability of any of the Companies.
 
(c)           Neither the Company nor any ERISA Affiliate has incurred any
liability under Section 4062(b), (c) and (e) of ERISA, or any withdrawal
liability under Section 4201 of ERISA in connection with any Benefit Plan that
is subject to Title IV of ERISA which liability remains outstanding, and there
has not been any reportable event (as defined in Section 4043 of ERISA) with
respect to any such Benefit Plan (other than a reportable event with respect to
which the notice requirement has been waived by the Pension Benefit Guaranty
Corporation).
 
(d)           No Benefit Plan and no “employee pension benefit plan” (as defined
in Section 3(2) of ERISA) maintained by the Company or any ERISA Affiliate or to
which the Company or any ERISA Affiliate has contributed is a multiemployer
plan.
 
(e)           The execution of this Agreement and the consummation of the
transactions contemplated hereby do not constitute a triggering event under any
Benefit Plan,
 

 
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policy, arrangement, commitment or agreement, which (either alone or upon the
occurrence of any additional or subsequent event) will or may result in any
payment (whether of severance or otherwise), “parachute payment” (as such term
is defined in Section 280G of the Code), acceleration, vesting or increase in
benefits to any employee of the Companies for which any of the Companies would
be liable.
 
(f)           Parent has delivered or caused to be delivered or made available
to Purchaser or its counsel true and complete copies of (i) each Benefit Plan
(if written), including all amendments thereto, and, in the case of any Benefit
Plan not set forth in writing, a written description thereof; (ii) the current
summary plan description and any summary of material modification with respected
to each Benefit Plan, if applicable; and (iii) the most recent Internal Revenue
Service determination letter and/or opinion letter with respect to any Benefit
Plan intended to be qualified under Section 401(a) of the Code.
 
3.17          Labor Matters.
 
(a)           Section 3.17(a) of the Disclosure Letter contains a true and
complete list as of March 31, 2010 of each Non-Union Employee, each employee of
any of the Companies covered by a Collective Bargaining Agreement and each of
their respective titles and employers.
 
(b)           With respect to employees of the Companies:  (i) the Companies are
in compliance with all applicable Laws respecting employment and employment
practices, terms and conditions of employment and wages and hours, except for
such non-compliance which is not, individually or in the aggregate, reasonably
likely to have a Material Adverse Effect; (ii) none of Parent, Holdings, the
Company or any Subsidiary has received written notice of any unfair labor
practice complaint against any of the Companies that is pending before the
National Labor Relations Board or, to the knowledge of Parent, Holdings and the
Company, that is threatened against any of the Companies; (iii) there is no
labor strike, slowdown, stoppage or labor dispute (other than routine
non-material grievance) that is currently ongoing, or, to the knowledge of
Parent, Holdings and the Company, that is threatened against any of the
Companies; Purchaser acknowledges that it has been informed that the Companies
currently are engaged in collective bargaining negotiations with IBEW Local 1238
and that the Companies and IBEW Local 1238 have agreed to extend the expiring
agreement subject to cancellation on 72 hours notice; (iv) to the knowledge of
Parent, Holdings and the Company, none of Parent, Holdings, the Company or any
Subsidiary has received notice that any representation petition respecting the
employees of any of the Companies has been filed with and is pending before the
National Labor Relations Board (other than with respect to those employees
covered by a Collective Bargaining Agreement); (v) no arbitration proceeding
arising out of or under any Collective Bargaining Agreement is pending relating
to any of the Companies; (vi) none of the Companies has taken any action with
respect to employees or former employees of, or who primarily provide services
to the Company or any Subsidiary, that would reasonably be expected
to constitute a “mass layoff” or “plant closing” within the meaning of the WARN
Act or that would reasonably be expected to otherwise trigger any notice
requirement or Liability under any local or state plant closing notice Law; and
(vii) other than the negotiations with IBEW Local 1238 referenced in clause
(iii) above, to the knowledge of Parent, Holdings and the Company, there are no
pending requests for any material changes to any Collective Bargaining Agreement
 

 
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3.18          Insurance.
 
(a)           Section 3.18(a) of the Disclosure Letter contains a true and
complete list of all insurance policies of the Companies, including all pending
applications for insurance policies of the Companies, and complete and correct
copies of such policies have been delivered to Purchaser.  The insurance
policies set forth in Section 3.18(a) of the Disclosure Letter, together with
the insurance policies maintained for the benefit of the Companies by Parent or
any Affiliate of Parent, provide insurance in such amounts and against such
risks as is prudent in accordance with Good Industry Practices (as such relates
to the regulated electric power generation industry) and as is required by
applicable Law and Contracts to which any of the Companies is party.  All such
insurance policies are in full force and effect and enforceable by and against
Parent or its relevant Subsidiary, all premiums thereon have been paid, and no
notice of cancellation or termination has been received by Parent, Holdings or
the Company with respect to any such policy and none of Parent, Holdings or the
Company has been denied coverage thereunder. Neither  Parent nor any of its
Subsidiaries has taken or failed to take any action, and no event has occurred
and is continuing that after giving of notice, the lapse of time or both would
entitle any insurer to terminate or cancel any such policies. From January 1,
2007, to the date hereof, neither Parent nor any of its Subsidiaries has made
any claim under any of the insurance policies, or suffered any Losses that could
give rise to any such claims, in each case, relating to the Companies for an
amount in excess of $100,000. None of Parent, Holdings, the Company, the
Subsidiaries or any of their respective Affiliates has failed to give, in a
timely manner, any material notice required under any of the insurance policies
to preserve its rights thereunder. Since January 1, 2007, neither Parent nor any
of its Subsidiaries has received, paid or defended any claims relating to the
Companies with respect to any self insured retention
 
(b)           There are no outstanding requirements or recommendations by any
current insurer with respect to the business of the Companies which would
require any material change to the conduct of the business of the Companies or
require any material repairs to be undertaken.
 
3.19          Permits.
 
(a)           Except with respect to Environmental Permits, which are governed
solely by Section 3.20, the Companies hold all Permits (except as set forth in
Section 3.19(a)(ii) of the Disclosure Letter) that are material to the conduct
of their respective businesses as currently conducted by them or are material
for the current construction phase of the Delta Project, and the Companies are
in compliance with the terms of each such Permit in all material respects. All
material applications (including, without limitation, with respect to Permit
renewals), reports, notices and other documents required to be filed by the
Companies with any Governmental or Regulatory Authority with respect to the
Permits have been timely filed and are complete and correct in all material
respects as filed or as amended.  No Governmental or Regulatory Authority has
claimed or alleged in writing that any of the Companies do not have any required
Permit or are in material breach or default under any Permit.  Section 3.19(a)
of the Disclosure Letter sets forth (i) a list of all material Permits held by
the Companies, including, without limitation, those Permits required for the
current construction phase of the Delta Project, and (ii) a list of all material
Permits used or relied upon by any of the Companies in connection with the
conduct of its business that are held by any Affiliate of Parent (other than one
of the Companies).
 

 
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(b)           Section 3.19(b) of the Disclosure Letter sets forth a list of all
material Permits that any of the Companies will require (i) to complete the
construction of the Delta Project and (ii) for the commercial operation of the
Delta Project, but have not yet been obtained.  None of Parent, Holdings or the
Company has any reason to believe that any Permit listed in Section 3.19(b) of
the Disclosure Letter cannot be obtained in due course prior to the time when
such Permit will be required for the applicable stage of the construction of the
Delta Project or the commercial operation thereof.
 
3.20          Environmental Matters.  Except as set forth in Section 3.20 of the
Disclosure Letter or in any environmental site assessment or report prepared by
or for Parent or the Company and listed in Section 3.20 of the Disclosure
Letter:
 
(a)           The Companies hold or have the benefit of, and are in compliance
with, all Environmental Permits required for them to operate their respective
businesses and for the current construction phase of the Delta Project under
applicable Environmental Laws, except for such failures to hold or be in
compliance with applicable Environmental Permits which, individually or in the
aggregate, are not reasonably likely to have a Material Adverse Effect, and all
of such Environmental Permits are in effect and no action of any Governmental or
Regulatory Authority is pending or, to the knowledge of Parent, Holdings and the
Company, threatened, to revoke, suspend, or modify any such Environmental
Permits.  All material applications (including, without limitation, with respect
to Environmental Permit renewals), reports, notices and other documents required
to be filed by the Companies with any Governmental or Regulatory Authority with
respect to the Environmental Permits have been timely filed and are complete and
correct in all material respects as filed or as amended.  Section 3.20(a) of the
Disclosure Letter sets forth (i) a list of the material Environmental Permits
held by the Companies, including, without limitation, those Environmental
Permits required for the current construction phase of the Delta Project, and
(ii) a list of all material Environmental Permits used or relied upon by any of
the Companies in connection with the conduct of its business that are held by
any Affiliate of Parent (other than one of the Companies).
 
(b)           Section 3.20(b) of the Disclosure Letter sets forth a list of all
material Environmental Permits that any of the Companies will require (i) to
complete the construction of the Delta Project and (ii) for the commercial
operation of the Delta Project, but have not yet been obtained.  None of Parent,
Holdings or the Company has any reason to believe that any Environmental Permit
listed in Section 3.20(b) of the Disclosure Letter cannot be obtained in due
course prior to the time when such Environmental Permit will be required for the
applicable stage of the construction of the Delta Project or the commercial
operation thereof.
 
(c)           The Companies are, and since January 1, 2009, have been, in
compliance in all material respects with applicable Environmental Laws.  Since
January 1, 2007, none of the Companies has (i) received any written notice from,
(ii) provided any self-reporting or similar written notice to, or (iii) been
charged or threatened by any Governmental or Regulatory Authority regarding any
material violation of, or material failure to comply with, any applicable
Environmental Law.
 
(d)           There are no pending or, to the knowledge of Parent, Holdings and
the Company, threatened Environmental Claims against any of the Companies or
their respective
 

 
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assets or businesses, except for Environmental Claims which, individually or in
the aggregate, are not reasonably likely to have a Material Adverse
Effect.  Since January 1, 2007, none of the Companies has received any written
notice of any investigation, allegation, complaint, order, directive, citation,
notice of responsibility, notice of potential responsibility or information
request from any Governmental or Regulatory Authority pursuant to applicable
Environmental Law which has not been resolved and is reasonably expected to
result in an Environmental Claim against any of the Companies that is reasonably
likely to have a Material Adverse Effect.
 
(e)           None of the Companies has assumed, retained or agreed to indemnify
any other Person with respect to any material Environmental Claims.
 
(f)           The Companies have made available to Purchaser all material
audits, reports, assessments and studies within their possession or control
prepared during the past five years relating to any real property currently
owned, operated or leased by any one of the Companies.
 
(g)           Since April 1, 2005, there has been no Release of Hazardous
Substances on, under or at any real property currently owned, leased or operated
by any of the Companies that would result in a violation by any of the Companies
of, or Liability of any of the Companies under, any Environmental Law which
violation or Liability is reasonably likely to have a Material Adverse Effect.
 
(h)           Notwithstanding anything to the contrary set forth in this
Agreement, including Sections 3.20(a)-(g) hereof but without limiting Section
10.03(a)(vii)(E), none of Parent, Holdings or the Company makes any
representation or warranty with respect to the Company’s or any Subsidiary’s
compliance with Environmental Laws attributable to the construction of new, or
modification of existing, sources of air emissions, including the following: (i)
construction or modification of an existing source without first
obtaining required construction and operating permits; (ii) failure to comply
with applicable national standards of performance for new or modified stationary
sources; and (iii) failure to comply with applicable state implementation plans
governing construction or modification of stationary sources.
 
(i)           The representations and warranties made in this Section 3.20 are
Parent’s, Holdings’ and the Company’s exclusive representations and warranties
relating to environmental matters.
 
3.21          Brokerage.  Except for Credit Suisse and Morgan Stanley, no
broker, finder, agent or similar intermediary has acted on behalf of Parent,
Holdings or any of the Companies in connection with this Agreement or the
transactions contemplated hereby, and there are no brokerage commissions,
finders’ fees or similar fees or commissions payable by any of the Companies in
connection with the transactions contemplated hereby based on any agreement,
arrangement or understanding entered into by Parent, Holdings or any of the
Companies.  Parent shall be solely responsible for any such fees or commissions
owed or claimed to be owed to Credit Suisse and Morgan Stanley or any of their
respective Affiliates as a result of this Agreement or the consummation of the
transactions contemplated hereby.
 

 
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3.22          Sufficiency of Assets.  The assets of the Companies reflected on
the Pro Forma Balance Sheet, together with the communications and operating
systems used by the Companies, without giving effect to any changes or
modifications to be made by Purchaser or any of its Affiliates, are sufficient
in all material respects for the operation of the Generation Plants by the
Companies and for the physical delivery by the Generating Plants of power
generated by the Generating Plants to the grid.  Section 3.22 of the Disclosure
Letter sets forth a list of all material communications and operating systems
used by the Companies that are owned by any Affiliate of Parent (other than one
of the Companies).
 
3.23          Personal Property.  The Companies have valid title to all tangible
assets and properties that are material to the businesses of the Companies
(“Personal Property”) and the Personal Property is free of all Liens other than
Permitted Liens.  The Personal Property has been maintained in accordance with
Good Industry Practices, in all material respects in good operating condition
and repair (subject to normal wear and tear) and is suitable for the purposes
for which it is presently used.
 
3.24          Emission Allowances.  Section 3.24 of the Disclosure Letter sets
forth a list of all Emission Allowances that will be owned by the Companies as
of the Closing; provided, however, that, for the avoidance of doubt, such list
includes Emission Allowances that Purchaser will be required to retire based on
(i) the operations of the Companies conducted in the ordinary course of business
between January 1, 2010 and the date of this Agreement with respect to SO2 and
NOx (both annual and seasonal), (ii) the operations of the Companies conducted
in the ordinary course of business between January 1, 2009 and the date of this
Agreement with respect to RGGI CO2 Allowances, and (iii) the operations of the
Companies conducted between the date of this Agreement and the Closing not in
violation of Section 5.01(b)(xv)(B), which shall include the use or consumption
of the supplies of coal related to the operation of the Generating Plants as
contemplated by Section 6.21 (collectively, the “Consumed Pre-Closing Emission
Allowances”).
 
3.25          Delta Project.  Section 3.25 of the Disclosure Letter sets forth a
complete and correct copy of the work plan, schedule and budget for the Delta
Project as of the date hereof (the “Delta Construction Budget”).  The Delta
Project is being constructed in accordance with Good Construction Practices and
consistent with the requirements of the Delta Construction Budget and the
Constellation PPA, in each case in all material respects.
 
3.26          Development Projects.  Section 3.26 of the Disclosure Letter sets
forth, with respect to each Development Project, (a) a list of all material
Permits, if any, held by the Companies relating to such Development Project, (b)
a list of all material Permits relating to such Development Project that are
held by any Affiliate of Parent (other than any one of the Companies), (c) a
list of all Contracts relating to such Development Project to which any of the
Companies or any of their respective Affiliates is a party or by which any of
them or any of their properties or assets are bound and (d) a list of all other
assets (including, without limitation, PJM queue positions) owned by any of the
Companies or any of their respective Affiliates for the benefit of such
Development Project.
 
3.27          Credit Support.  Section 3.27 of the Disclosure Letter sets forth
(a) a list of all of the credit support, including, without limitation,
guarantees, letters of credit, bonds or cash (i) posted as of the date of this
Agreement with any third party for the benefit of any of the
 

 
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Companies by Parent or any of its Affiliates (other than the Companies) or any
third party, (ii) posted as of the date of this Agreement by any of the
Companies for the benefit of any third party, and (iii) posted as of the date of
this Agreement with any of the Companies by any third party and (b) the name of
the agreement under which such credit support has been posted.
 
3.28          Regulatory Matters.  The Designated Entities (a) are authorized by
FERC to make wholesale sales of electric energy, capacity and ancillary services
at market-based rates pursuant to Section 205 of the Federal Power Act; (b) have
obtained the blanket authorizations and waivers that are typically granted by
FERC to sellers with market-based rate authorization, including blanket
authorization pursuant to Section 204 of the Federal Power Act to issue
securities and assume liabilities; (c) are, and since January 1, 2009, have
been, in compliance with FERC’s regulations applicable to market-based rate
sellers; (d) are “Exempt Wholesale Generators” pursuant to PUHCA 2005 and FERC’s
regulations and (e) operate their power generation facilities in material
compliance with all applicable standards of NERC and PJM.  None of the Companies
other than the Designated Entities is subject to regulation as a public utility,
electric utility company or public-utility company (or similar designation) by
the United States.   The Companies are not subject to regulation as public
utilities or public service companies (or similar designation) by any state of
the United States, any foreign country or any municipality or any political
subdivision of the foregoing.  The Companies are not subject to regulation
as retail electric or gas suppliers, transmitters or distributors by any state
of the United States, any foreign country or any municipality or any political
subdivision of the foregoing.
 
3.29          PJM Capacity Awards.  Section 3.29 of the Disclosure Letter sets
forth a complete and correct list of all PJM capacity awards of the Companies
and are binding obligations of the Companies, in accordance with PJM’s Open
Access Transmission Tariff.
 
ARTICLE IV
 
REPRESENTATIONS AND WARRANTIES OF PURCHASER
 
Purchaser represents and warrants to Parent, Holdings and the Company as set
forth below.
 
4.01          Organization and Qualification.  Purchaser is a limited liability
company duly organized, validly existing and in good standing under the Laws of
the State of Delaware, with full power and authority to own, lease and operate
its assets and properties and to carry on its business as it is currently being
conducted.  Purchaser is duly qualified and licensed or otherwise authorized to
transact business and is in good standing as a foreign limited liability company
in each jurisdiction in which such qualification or license is required by
applicable Law, except for jurisdictions in which the failure to be so qualified
or licensed is not, individually or in the aggregate, reasonably likely to
prevent or materially delay the performance by Purchaser of its obligations
under, or the consummation of the transactions contemplated by, this Agreement.
 

 
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4.02          Authority to Execute and Perform Agreement.
 
(a)           Purchaser has the requisite corporate power and authority to enter
into, execute and deliver this Agreement and each of the Transaction Documents
to which it will be a party, to perform fully its obligations hereunder and
thereunder and to consummate the transactions contemplated hereby and
thereby.  The execution, delivery and performance by Purchaser of this Agreement
and each of the Transaction Documents to which it will be a party and the
consummation of the transactions contemplated hereby and thereby have been duly
and validly authorized on behalf of Purchaser by all requisite limited liability
company action.
 
(b)           This Agreement has been, and upon its execution each of the
Transaction Documents to which Purchaser will be a party will have been, duly
executed and delivered by Purchaser and, assuming due authorization, execution
and delivery hereof and thereof by the other parties hereto and thereto, this
Agreement constitutes, and upon its execution each of the Transaction Documents
to which Purchaser will be a party will constitute, a valid and binding
obligation of Purchaser, enforceable against Purchaser in accordance with its
terms, subject to the Bankruptcy and Equity Exception.
 
4.03          Compliance with Laws.  Purchaser is in compliance with all
applicable Laws, except for violations that are not, individually or in the
aggregate, reasonably likely to prevent or materially delay the performance by
Purchaser of its obligations under, or the consummation of the transactions
contemplated by, this Agreement.
 
4.04          No Breach.  The execution and delivery by Purchaser of this
Agreement and each of the Transaction Documents to which Purchaser will be a
party, and the consummation by Purchaser of the transactions contemplated hereby
and thereby will not (a) conflict with, violate or result in the breach of any
provision of the certificate of formation, operating agreement or other
governing instruments of Purchaser, (b) conflict with, result in a material
violation or material breach of, result in a material default under, any
material Contract to which Purchaser or any of its Affiliates is a party, except
as is not reasonably likely to prevent or materially delay the performance by
Purchaser or the consummation of the transactions contemplated by this Agreement
or any of the Transaction Documents to which Purchaser will be a party, or (c)
conflict with or result in a material violation or breach of any Permit, Law or
Order applicable to Purchaser or any of its Affiliates, except as is not
reasonably likely to prevent or materially delay the performance by Purchaser of
its obligations under, or the consummation of the transactions contemplated by,
this Agreement or any of the Transaction Documents to which Purchaser will be a
party.
 
4.05          Consents and Approvals.  Except (a) as is not reasonably likely to
prevent or materially delay the performance by Purchaser of its obligations
under, or the consummation of the transactions contemplated by, this Agreement
or any of the Transaction Documents to which Purchaser will be a party, (b) as
required under the Required Approvals or (c) for  filings, notices and consents
which become applicable to Purchaser as a result of the specific regulatory
status of Parent, Holdings or any of the Companies (or any of their Affiliates)
or as a result of any other facts that specifically relate to the business or
activities in which Parent, Holdings or any of the Companies (or any of its
Affiliates) are or propose to be engaged, and in reliance on the representation
made by Parent, Holdings and the Company in Section 3.28, Purchaser is not
 

 
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required to make any filing with or give any notice to, or to obtain any consent
from, any Governmental or Regulatory Authority or other Person in connection
with: (i) the execution, delivery or performance by Purchaser of this Agreement
or any of the Transaction Documents to which Purchaser will be a party or (ii)
the consummation of the transactions contemplated hereby or thereby.
 
4.06          Actions and Proceedings.  There are no pending Legal Proceedings
to which Purchaser or any of its Affiliates is a party and, to the knowledge of
Purchaser, no Governmental or Regulatory Authority or other Person has
threatened to commence any Legal Proceeding with respect to Purchaser or any of
its Affiliates, in each case, that is reasonably likely to prevent or materially
delay the performance by Purchaser of its obligations under, or the consummation
of the transactions contemplated by, this Agreement.  There is no material Order
to which Purchaser or any of its Affiliates or any of the assets owned or used
by Purchaser or any of its Affiliates is subject, except as is not reasonably
likely to prevent or materially delay the performance by Purchaser of its
obligations under, or the consummation of the transactions contemplated by, this
Agreement.
 
4.07          Securities Law Matters.
 
(a)           Purchaser acknowledges that (i) the Membership Interests have not
been registered under the Securities Act or registered or qualified for sale
under any state securities or “blue sky” or non-U.S. securities laws, and (ii)
there is no public market for the Membership Interests and it is not anticipated
that there will be.
 
(b)           Purchaser is acquiring the Membership Interests solely for its own
account for investment and not with a present view to or for sale in connection
with any distribution (within the meaning of the Securities Act) thereof not in
compliance with applicable securities laws.  Purchaser has no present intent of
selling or otherwise distributing the Membership Interests except in compliance
with applicable securities laws.
 
(c)           Purchaser is an “accredited investor” as such term is defined in
Rule 501(a) promulgated under the Securities Act.
 
4.08           Experience; Investigation.
 
(a)           Purchaser is knowledgeable, sophisticated and experienced in
financial and business matters such that it is capable of evaluating the merits
and risks of its investment in the Membership Interests.  Purchaser has
knowledge and experience in transactions of the type engaged in by the Companies
in the conduct of their businesses, in the electric power and natural gas
industry generally, including the nature of full and firm requirements
transactions and the responsibilities related to electric power and natural gas
customers, and in the acquisition and management of businesses.  
 
(b)           Purchaser has been afforded (i) access to the books, records,
facilities and personnel of the Companies for purposes of conducting a due
diligence investigation of the Companies and (ii) the opportunity to ask
questions of, and has received answers satisfactory to it from, the Companies’
management.
 

 
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4.09           Financing. Purchaser has provided the Company with a true and
complete copy of the commitment letter from Credit Suisse AG, Credit Suisse
Securities (USA) LLC, Deutsche Bank Securities Inc. (“Deutsche Bank”), Citigroup
Global Markets Inc. (“Citi”) and Deutsche Bank Trust Company Americas (the
“Financing Commitments”) pursuant to which the financial institutions party
thereto have agreed, subject to the terms and conditions set forth therein, to
provide the amounts set forth therein for the purposes of funding a portion of
the Purchase Price and fees and expenses of Purchaser relating to the
transactions contemplated by this Agreement.  The aggregate proceeds to be
disbursed pursuant to the agreements contemplated by the Financing Commitments,
together with Purchaser’s available cash at Closing, will be sufficient for
Purchaser to pay at Closing the aggregate amount of the Purchase Price and to
pay all related fees and expenses.
 
4.10          Brokerage.  Except for Citi and Deutsche Bank, no broker, finder,
agent or similar intermediary has acted on behalf of Purchaser or any of its
Affiliates in connection with this Agreement or the transactions contemplated
hereby, and there are no brokerage commissions, finders’ fees or similar fees or
commissions payable by Purchaser in connection with the transactions
contemplated hereby based on any agreement, arrangement or understanding entered
into by Purchaser or any of its Affiliates. Purchaser shall be solely
responsible for any such fees or commissions owed or claimed to be owed to Citi
and Deutsche Bank or any of their respective Affiliates as a result of this
Agreement or the consummation of the transactions contemplated hereby.
 
4.11          Entity Classification for Tax Purposes.  Calpine Development
Holdings, Inc. is a C corporation for U.S. federal income tax purposes. 
Purchaser is an entity that is treated for U.S. federal income tax purposes as
disregarded as an entity separate from either (a) Calpine Development Holdings,
Inc., or (b) a direct or indirect subsidiary of Calpine Development Holdings,
Inc. that is  taxable as a C corporation for U.S. federal income tax purposes.
 
4.12          Disclaimer Regarding Projections.  In connection with Purchaser’s
investigation of the Companies, Purchaser has received from Parent, its
Affiliates and its Representatives certain projections and other forecasts,
including projected financial statements, cash flow items and other data of the
Companies and certain business plan information of the Companies.  Purchaser
acknowledges that (a) there are uncertainties inherent in attempting to make
such projections and other forecasts and plans, (b) Purchaser is familiar with
such uncertainties, and (c) absent fraud or willful misrepresentation and
without limitation of the representations made by Parent, Holdings and the
Company in Article III, Purchaser is taking full responsibility for making its
own evaluation of the adequacy and accuracy of all projections and other
forecasts and plans so furnished to it and is not relying on any projection or
forecast disclosed or made available to Purchaser by Parent, Holdings or the
Company.
 
ARTICLE V
 
CONDUCT OF BUSINESS PENDING THE CLOSING
 
5.01          Conduct of Business Pending the Closing.  Parent, Holdings and the
Company jointly and severally covenant and agree that, during the period from
the date of this Agreement until the Closing, except (i) for any actions taken
by Parent, Holdings or the
 

 
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Company that are necessary to consummate the Reorganization (as expressly set
forth in, or reasonably contemplated by, Section 6.09 of the Disclosure Letter),
(ii) with the prior written consent of Purchaser (which consent shall not be
unreasonably withheld, conditioned or delayed), (iii) for actions taken in
response to any emergency (but only to the extent of any such emergency, and for
no longer than as required by such emergency), (iv) as required by applicable
Law, or (v) as set forth in Section 5.01 of the Disclosure Letter:
 
(a)           Parent and the Company shall, and the Company shall cause each of
the Subsidiaries (excluding the Excluded Subsidiaries) to (i) conduct its
business in the ordinary course of business and (ii) use reasonable best efforts
to preserve intact their respective business organizations and maintain
appropriate relationships with Governmental or Regulatory Authorities,
licensors, distributors, customers, suppliers, contractors, and others having
material business relationships with it, and to comply in all material respects
with all applicable Laws;
 
(b)           The Company shall not, and the Company shall cause the
Subsidiaries (excluding the Excluded Subsidiaries) not to:
 
(i)          sell, lease, transfer, encumber, pledge or permit to become subject
to any Lien other than a Permitted Lien, or dispose of, any assets, rights or
securities, other than (A) the sale of obsolete, damaged or broken equipment,
(B) items or materials not exceeding $250,000 in the aggregate, (C) as permitted
by clause (xx) below, or (D) as contemplated by Section 6.16;
 
(ii)         acquire any asset in excess of $500,000 in the aggregate, or
acquire any capital stock or other equity interests of any business or any
corporation, partnership, limited liability company, unincorporated
organization, trust, joint venture, association or other business organization
or division thereof, or acquire all or a substantial portion of the assets, of
any such entity in a single transaction or a series of related transactions,
other than assets acquired pursuant to the Scheduled Capital Expenditures and
electricity and other products provided by utilities pursuant to a tariff or
rate of general applicability;
 
(iii)        amend or propose to amend its certificate of formation, operating
agreement or other governing instruments;
 
(iv)        declare, set aside, make or pay any non-cash dividend or other
non-cash distribution with respect to its membership interests or capital stock;
 
(v)         issue, sell, encumber, dispose of or authorize, propose or agree to
the issuance, sale, encumbrance or disposition by it of, any of its membership
interests or capital stock or any options, warrants, securities or other rights
that are directly or indirectly convertible into, or exercisable or
exchangeable, for any capital stock, or redeem, split, combine, reclassify,
purchase or otherwise acquire any outstanding shares of the capital stock or
membership interest of any of the Companies or make any other change in the
capital structure of any of the Companies;
 
(vi)        (A) establish, adopt, enter into, amend or terminate any Company
employee benefit plan or (B) pay or agree to pay any pension, retirement
allowance or
 

 
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other employee benefit not required by any Benefit Plan in effect on the date
hereof (or Benefit Plan under a replacement collective bargaining agreement
entered into in accordance with clause (vii) below) to any director, officer or
employee, whether past or present, that would impose Liability on the Companies;
 
(vii)       (A) hire any Company Non-Union Employee or Union Employee, except as
to Company Non-Union Employees, an employee who will be terminated from
employment by the Companies prior to the Closing; and as to Union Employees, an
employee hired on a short-term, contract or temporary basis and who would be
terminated prior to the Closing, (B) amend any employment, severance or similar
agreement or plan or enter into any new employment, severance or similar
agreement or plan, (C) other than renewal of an expiring collective bargaining
agreement or entry into a new collective bargaining agreement to replace an
expiring collective bargaining agreement, amend, modify or revise any collective
bargaining agreement or enter into a new collective bargaining agreement;
provided, however, that (1) in any such contract renewal or replacement
negotiated between the date of this Agreement and the Closing, the Companies
will advise Purchaser regularly concerning the progress and any material
developments of such negotiations; (2) none of the Companies will enter into any
new agreement that applies new terms to Union Employees that are materially more
costly or materially different than new terms that apply to other employees
covered by the collective bargaining agreement (for example, none of the
Companies will agree to more costly new wage or benefit terms applicable to
Union Employees when compared to the new wage or benefit terms applicable to
other employees covered by the collective bargaining agreement); and (3) Parent,
Holdings and the Companies will not object to Purchaser entering into
discussions with the labor union, following the first public announcement of the
transactions contemplated by this Agreement and prior to the Closing, regarding
post-Closing issues, (D) announce, implement or effect any reduction in force,
lay-off, early retirement program, severance program or other program or effort
concerning the termination of employment of employees of any of the Companies
(other than routine employee terminations for cause) who (1) Purchaser notifies
Parent prior to the date that is forty (40) days following the date of receipt
by Purchaser of the access and records described in Section 9.01(a)(i) that
Purchaser wishes to retain following the Closing or (2) Parent reasonably
anticipates is necessary to comply with the provisions of Section 5.01(a) and to
perform the services contemplated by the Transition Services Agreement, (E)
transfer any employees of any of the Companies to Affiliates of Parent (other
than the Companies) prior to the date that is forty (40) days following the date
of receipt by Purchaser of the access and records described in Section
9.01(a)(i), or (F) transfer any employees of any Affiliates of Parent (other
than the Companies) to the Companies except as set forth in Section
9.01(a)(iii); provided, however, that, at or prior to the Closing, Parent and
Holdings will use their respective reasonable best efforts to assign any such
employees that Purchaser wishes to retain following the Closing to the roles or
positions reasonably requested by Purchaser;
 
(viii)      except for Scheduled Capital Expenditures and expenditures up to
$500,000 in the aggregate relating to the business or operations of the
Companies that constitute necessary repairs due to breakdown or casualty made in
response to a business emergency or other unforeseen operational matters, make
or incur any capital
 

 
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expenditures, or, in either case, enter into any binding commitment or contract
to make such expenditures;
 
(ix)         other than the Transaction Documents, (A) terminate or assign any
Material Contract, (B) amend, modify, supplement or waive any material provision
of any Material Contract or (C) except for agreements entered into after the
date of this Agreement and with a termination or expiration date prior to the
Closing that does not result in Liability for any of the Companies, enter into
any agreement that, if existing on the date of this Agreement, would be a
Material Contract;
 
(x)          incur any Indebtedness except (A) borrowings from its Affiliates
(other than the Companies) that will be repaid or forgiven prior to the Closing,
and (B) collateral obligations under Contracts existing as of the date of this
Agreement or entered into after the date of this Agreement as permitted by this
Section 5.01(b);
 
(xi)         settle, compromise or otherwise resolve any Legal Proceedings or
other Liabilities that would result in any Liability in excess of $250,000 in
the aggregate or that would result in any Liability to or impose any obligation
on the Companies following the Closing, or settle, compromise or waive any
claims or rights of substantial value;
 
(xii)        make any material changes in its reporting for Taxes or its Tax
accounting methods; make or rescind any Tax election; file any amended Tax
Return or a claim for refund of Taxes with respect to the income, operations, or
property of any of the Companies; make any material change to its method of
reporting income, deductions, or other Tax items for Tax purposes; settle or
compromise any material Tax Liability; prepare any Tax Return in a manner that
is inconsistent with past practice of any of the Companies, with respect to the
treatment of items on such Tax Return; or incur any Liability for Taxes other
than in the ordinary course of business; in each case other than for tax periods
ending on or before the Closing and for which Taxes Parent remains liable
hereunder or which would not materially increase the Tax Liability of the
Companies for any Post-Closing Tax Period;
 
(xiii)       enter into any transaction with an Affiliate not expressly
permitted by this Agreement;
 
(xiv)       adopt a plan of complete or partial liquidation (or resolutions
providing for or authorizing such liquidation), dissolution, merger,
consolidation, restructuring, recapitalization or reorganization of any of the
Companies;
 
(xv)        (A) make any material change in the levels of Inventory or Fuel
Inventory customarily maintained by the Companies, consistent with past practice
or (B) sell, transfer, assign or convey any Emission Allowances, provided that
nothing in this clause (B) shall restrict the use or consumption of, or
obligation to retire, Emission Allowances in the ordinary course of business or
in connection with the use or consumption of the supplies of coal related to the
operation of the Generating Plants as contemplated by Section 6.21;
 

 
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(xvi)       fail to make any material payment as it comes due except in
connection with a good faith dispute or accelerate or decelerate the making of
any payment or the receipt of any accounts receivable or Liability;
 
(xvii)      other than in the ordinary course of business consistent with past
practice, fail to maintain in full force and effect all outstanding letters of
credit, guarantees or other forms of credit support required for the businesses
of any of the  Companies;
 
(xviii)     fail to maintain in full force and effect insurance policies
covering the businesses of any of the Companies in a form and amount consistent
with the current insurance programs (except to the extent any such policies
expire in accordance with their term and are replaced with policies consistent
with Good Industry Practices);
 
(xix)       agree to any covenants, conditions, restrictions affecting, or
rezoning of, the Real Property that would prohibit, limit, restrict, or
materially change the current use and occupancy of the Real Property or
Improvements or limit or restrict the conduct of the business of any of the
Companies as currently being conducted;
 
(xx)         make purchases or sales of power, gas or related products which
would bind any of the Companies beyond one Business Day after the Closing Date,
except as permitted in Section 5.01(d) below;  or
 
(xxi)        authorize any of, or commit or agree in writing or otherwise to
take any of the actions precluded by this Section 5.01(b).
 
(c)           Parent, Holdings, the Company and Purchaser acknowledge and agree
that without, however, limiting any provision in this Section 5.01 or elsewhere
in this Agreement: (i) nothing contained in this Agreement shall give Purchaser,
directly or indirectly, the right to control or direct the Company, any
Subsidiary or any of their respective operations prior to the Closing Date and
(ii) prior to the Closing Date, Parent and Holdings shall exercise, consistent
with the terms and conditions of this Agreement, complete control and
supervision over the Company, the Subsidiaries and their respective operations.
 
(d)           Parent shall cause the Companies to enter offers for the available
capacity of each generation resource unit of the Companies in PJM’s 2013/2014
Base Residual Auction, and any other PJM Incremental Auction (as defined by
PJM), in the ordinary course of business and in accordance with all applicable
Laws and the rules of PJM.
 
(e)           Parent and Holdings shall cause Conectiv Atlantic Generation, LLC
and Conectiv Delmarva Generation, LLC to prepare and file with FERC (i) on or
before May 1, 2010, FERC rate schedule filings to collect cost-based charges for
reactive power for the Hay Road 5-8 Generating Plants and (ii) on or before May
15, 2010, FERC rate schedule filings to collect cost-based charges for reactive
power for the Cumberland Generating Plants.
 
(f)           The Company shall, and the Company shall cause the Subsidiaries
(other than the Excluded Subsidiaries) to:
 

 
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(i)           continue the construction of the Delta Project in accordance with
the Delta Construction Budget and Good Construction Practices, in each case in
all material respects;
 
(ii)          consult with Purchaser, and consider in good faith any comments
and suggestions of Purchaser, with respect to all material acts and decisions in
connection with the Delta Project, including, without limitation, any proposals
to third parties that could reasonably be expected to materially impact the
rights and obligations of the Companies with respect to the Delta
Project.  During the period from the date of this Agreement until the Closing,
Parent will provide Purchaser with monthly reports and weekly updates relating
to the Delta Project, including updates with respect to changes to the Delta
Construction Budget. Without limiting the generality of the foregoing, Purchaser
will be notified of, and provided the opportunity to participate as an observer
in, any third party meetings or negotiations, including those with any third
party providing legal, engineering, procurement and/or construction services for
the Delta Project.  In addition, during the period from the date of this
Agreement until the Closing, Purchaser, at its sole cost and risk, will be
allowed to designate one Representative to be on-site at the Delta Project
during normal business hours and without significant interference with the
operations or construction of the Delta Project.  Such employee may only observe
the operations and construction of the Delta Project, and may not direct the
activities of any employees, consultants or contractors of the Companies or make
any decisions relating to the Delta Project;
 
(iii)         cause CES to (A) refrain from providing any notice of intention
not to exercise the option described in the Powell Option Agreement, (B) pay all
option payments due and payable pursuant to the Powell Option Agreement, (C)
assign the Powell Option Agreement to one of the Companies, as designated by
Purchaser within 60 days following the date of this Agreement and (D) use its
reasonable best efforts to extend the Powell Option Agreement through December
31, 2011; provided, however, that if CES is unable to extend the Powell Option
Agreement through December 31, 2011, then the Company shall, at Purchaser’s
request and sole cost and expense, cause CES to exercise the option described in
the Powell Option Agreement; provided further, however, that in no event shall
such efforts to extend or exercise the Powell Option Agreement delay the
Closing; and
 
(iv)        cause one of the Companies approved by Purchaser to enter into an
option agreement with Potomac Electric Power Company (the “Potomac Option
Agreement”) to be substantially in the form attached hereto as Exhibit G,
pursuant to which such Subsidiary shall have the option, exercisable by such
Subsidiary for nominal value, to enter into a definitive written lease agreement
as contemplated by the Letter of Intent, dated March 16, 2007, between CES and
Potomac Electric Power Company for rental value and on terms otherwise
acceptable to Purchaser.
 
                                5.02          Casualty Event; Condemnation
 
(a)           If, prior to the Closing, (i) any assets or properties of the
Companies (other than Excluded Assets) are damaged or destroyed by fire,
explosion or other casualty loss (a
 

 
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“Casualty Event”), and (A) the cost of restoring such assets or properties to a
condition reasonably comparable to their condition prior to the Casualty Event
plus (B) the amount of lost profits reasonably expected to accrue beginning
sixty (60) days following the Closing Date (“Lost Profits”) as a result of a
Casualty Event to the business and operations of the Companies (net of and after
giving effect to any insurance proceeds available to Parent or any of its
Affiliates for such restoration but not insurance proceeds for Lost Profits), as
each such cost or amount is estimated by a qualified firm reasonably acceptable
to Purchaser and Parent (collectively, the “Restoration Cost”), is $75,000,000
or less with respect to a single Casualty Event, or $100,000,000 or less in the
aggregate in the case of multiple Casualty Events, and (ii) the assets or
properties of the Companies damaged by such Casualty Event can reasonably be
expected to be repaired or restored prior to the Closing, then (A) Parent,
Holdings and their respective Affiliates shall take all necessary action to
repair or restore, or cause to be repaired or restored, the assets or properties
of the Companies damaged by such Casualty Event prior to the Closing and (B)
there shall be no reduction to the Purchase Price as a result of such Casualty
Event.  If the assets or properties of the Companies damaged by a Casualty Event
referred to in Section 5.02(a)(i) cannot reasonably be expected to be repaired
or restored prior to the Closing, then (1) the amount of the Purchase Price
shall be reduced by (x) the Restoration Cost (without the netting of available
insurance proceeds, but including Lost Profits) minus (y) the amount expended by
Parent, Holdings, any of the Companies or any of their respective Affiliates
prior to the Closing relating to the repair or restoration of the assets or
properties of the Companies damaged by such Casualty Event, which reduction may
in no event cause the Purchase Price reduction at the Closing to be less than
the amount required to be expended after the Closing to complete such repair or
restoration plus the amount of Lost Profits, if any (the “Adjusted Restoration
Cost”), (2) Parent, Holdings and their respective Affiliates shall commence, and
until the Closing shall be fully responsible for, the repair or restoration of
the assets or properties of the Companies damaged by such Casualty Event prior
to the Closing, subject only to the condition that the prime contractor (and the
terms and conditions of the contract) selected by Parent to undertake the repair
or restoration shall be reasonably satisfactory to Purchaser, (3) such Casualty
Event shall not affect the Closing and (4) none of Parent, Holdings or any of
their respective Affiliates shall have any obligation with respect to the repair
or restoration of the assets or properties of the Companies damaged by such
Casualty Event after the Closing.
 
(b)           If the Restoration Cost is greater than $75,000,000 with respect
to a single Casualty Event, or greater than $100,000,000 in the aggregate in the
case of multiple Casualty Events, then Purchaser may, by written notice to
Parent within ten (10) days following the date Purchaser has received written
notice of both such Casualty Event and the Restoration Cost, elect to terminate
this Agreement.  If Purchaser fails to provide notice of its election within
such ten (10) day period, then (i) Purchaser shall be deemed to have elected to
have the amount of the Purchase Price reduced by the Adjusted Restoration Cost,
(ii) Parent, Holdings and their respective Affiliates shall commence, and until
the Closing shall be fully responsible for, the repair or restoration of the
assets or properties of the Companies damaged by such Casualty Event prior to
the Closing, subject only to the condition that the prime contractor (and the
terms and conditions of the contract) selected by Parent to undertake the repair
or restoration shall be reasonably satisfactory to Purchaser, (iii) such
Casualty Event shall not affect the Closing and (iv) none of Parent, Holdings or
any of their respective Affiliates shall have any obligation with respect to the
repair or restoration of the assets or properties of the Companies damaged by
such Casualty Event after the Closing.
 

 
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(c)           Purchaser and its Affiliates shall, both prior to and after the
Closing, reasonably cooperate with Parent, Holdings and their respective
Affiliates with respect to any claims they may make under their insurance
policies relating to such Casualty Event, and provide any reasonable assistance
requested by Parent, Holdings or any of their respective Affiliates to assist
such parties in making or pursuing any such claims, including, without
limitation, by providing Parent, Holdings, their respective Affiliates and
representatives of their insurance companies with access (including inspection
rights) to the assets or properties of the Companies damaged by such Casualty
Event that are being repaired or restored, and copies of all contracts, invoices
and other documentation relating to such repair or restoration.  Any insurance
proceeds recovered by Purchaser or its Affiliates attributable to a Casualty
Event that resulted in a reduction to the Purchase Price shall be promptly paid
to Parent.
 
(d)           If the Purchase Price is reduced pursuant to Section 5.02(a) or
(b), as the case may be, and, following the Closing, Purchaser elects not to
complete the repair or restoration of the assets or properties of the Companies
damaged by such Casualty Event and the amount of such Purchase Price reduction
exceeds the fair market value immediately prior to the Casualty Event of the
assets or properties of the Companies damaged by such Casualty Event, then
Purchaser shall promptly pay to Parent the amount of such difference, and if
Purchaser receives any insurance proceeds in respect of such Casualty Event,
Purchaser shall promptly pay such insurance proceeds to Parent.
 
(e)           If the Purchase Price is reduced pursuant to Section 5.02(a) or
(b), as the case may be, and (i) if the amount of the Purchase Price reduction
in respect of the Restoration Cost (without giving effect to Lost Profits) is
greater than the actual cost to Purchaser of restoration after the Closing by
more than $1,000,000, then Purchaser shall promptly pay such excess to Parent;
and (ii) if the amount of the Purchase Price reduction in respect of the
Restoration Cost (without giving effect to Lost Profits) is less than the actual
cost to Purchaser of restoration after the Closing by more than $1,000,000, and
Parent has received insurance proceeds that exceed the Purchase Price reduction,
then Parent shall promptly pay such excess to Purchaser.  In addition, if Parent
has received business interruption insurance proceeds which relate to the period
after Closing and for which Purchaser did not receive a Purchase Price
adjustment at Closing, Parent shall pay such proceeds to Purchaser.
 
(f)           If, prior to Closing, any of the assets or properties of the
Companies (other than the Excluded Assets) are taken by condemnation or eminent
domain, and if the condemnation value of such condemned properties (including
lost profits reasonably expected to accrue after the Closing) is $75,000,000 or
less, as such value or amount is estimated by a qualified firm reasonably
acceptable to Purchaser and Parent (the “Condemnation Value”), then the entire
amount of the award will be retained by Parent,  and the Purchase Price shall be
reduced by the amount of such Condemnation Value and such condemnation or
eminent domain action shall not affect the Closing.  If the Condemnation Value
is greater than $75,000,000, then Purchaser may elect, by written notice to
Parent within ten (10) days following the date Purchaser receives written notice
of such condemnation, to terminate this Agreement. If the Condemnation Value is
in excess of $75,000,000 and Purchaser does not so elect to terminate this
Agreement, then Purchaser shall be deemed to have elected to take a reduction in
Purchase Price as set forth above.
 
 
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ARTICLE VI
 
ADDITIONAL AGREEMENTS
 
6.01          Regulatory Filings.  Parent, Holdings, the Company and Purchaser
shall each, promptly after the date of this Agreement (and in any event
within twenty (20) Business Days following the date of this Agreement), prepare
and file or cause to be filed with the appropriate Governmental or Regulatory
Authority (a) the notifications required to be filed under the HSR Act, (b) any
application, form or report required for the FERC Approval, and (c) the required
notifications, forms, reports or applications for all other Governmental or
Regulatory Authority approvals listed in Section 6.01 of the Disclosure Letter.
 
6.02          Standard of Efforts.
 
(a)           Subject to the terms and conditions provided herein, each of
Parent, Holdings, the Company and Purchaser agrees to use its reasonable best
efforts to take, or cause to be taken, all action, and to do, or cause to be
done, and to assist and cooperate with the other parties in doing, all things
necessary, proper or advisable to consummate and make effective in the most
expeditious manner practicable, the transactions contemplated by this Agreement,
including (i) obtaining all Permits, Environmental Permits, consents, approvals,
authorizations and actions or confirmations of nonaction required of
Governmental or Regulatory Authorities for or in connection with the
consummation of the transactions contemplated by this Agreement, (ii) taking all
action as may be necessary to obtain an approval or waiver from, or to avoid an
action or proceeding by, a Governmental or Regulatory Authority, including any
waivers from FERC’s capacity release requirements that are necessary permanently
to release and assign to one or more of the Companies (as designated by
Purchaser) the firm gas storage and transportation contracts listed in Section
6.09 of the Disclosure Letter, (iii) taking any actions or submitting any
applications, documents or other information to FERC, PJM or any other
Governmental or Regulatory Authority that may be required to ensure that
Purchaser or its designated entities receives any and all revenues for the PJM
capacity awards set forth in Section 3.29 of the Disclosure Letter, and any and
all revenues for reactive power and voltage support (including the total annual
reactive revenue requirement currently allocated by PJM to CES in the PJM AE
Zone and in the PJM Delmarva Zone (as set forth in Section 6.02(a) of the
Disclosure Letter) other than revenue for Commonwealth Chesapeake), black start
service, and any energy, capacity, or ancillary services awards to which the
Companies are entitled as of the Closing, (iv) obtaining all necessary consents,
approvals or waivers from third parties, and (v) executing and delivering any
additional instruments reasonably necessary to consummate the transactions
contemplated hereby in accordance with the terms of this Agreement and to fully
carry out the purposes of this Agreement (including the delivery of Books and
Records following the Closing that cannot reasonably be delivered to Purchaser
at or prior to Closing).  Parent shall have the right to review and approve in
advance all characterizations of the information relating to Parent, Holdings or
the Company; Purchaser shall have the right to review and approve in advance all
characterizations of the information relating to Purchaser; each of Parent and
Purchaser shall have the right to review in advance all characterizations of the
information relating to the transactions contemplated by this Agreement, in each
case that appear in any material filing made in connection with the transactions
contemplated hereby; and without limiting the foregoing each of Parent and
Purchaser shall cooperate in the preparation of, and
 

 
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have the joint right to approve, any application, form or report that must be
submitted jointly by Parent and Purchaser prior to filing.  Parent and Purchaser
agree that they will consult with each other with respect to the obtaining of
all such necessary Permits, Environmental Permits, consents, approvals and
authorizations, and to secure all actions or confirmation of nonaction, of third
parties and Governmental or Regulatory Authorities required for or in connection
with the consummation of the transactions contemplated by this Agreement.
 
(b)           In furtherance of, and not in limitation of the foregoing, the
parties shall respond promptly to any requests for additional information made
by any Governmental or Regulatory Authority, and use their respective reasonable
best efforts to cause the waiting period under the HSR Act to terminate or
expire at the earliest possible date after the date of filing.  Parent, Holdings
and the Company agree not to extend directly or indirectly any waiting period
under the HSR Act or enter into any agreement with a Governmental or Regulatory
Authority to delay or not to consummate the transactions contemplated by this
Agreement, except with the prior written consent of Purchaser, and Purchaser
agrees not to take any such action without the prior written consent of Parent,
which consent, in any such case, shall not be unreasonably withheld, conditioned
or delayed.  Each of Parent and Purchaser shall (i) promptly notify the other
party of any written communication to that party from any Governmental or
Regulatory Authority and, subject to applicable Law, permit the other party to
review in advance any proposed written communication to any such Governmental or
Regulatory Authority and incorporate the other party’s reasonable comments, (ii)
not agree to participate in any substantive meeting or discussion with any such
Governmental or Regulatory Authority in respect of any filing, investigation or
inquiry concerning this Agreement or the transactions contemplated hereby unless
it consults with the other party in advance and, to the extent permitted by such
Governmental or Regulatory Authority, gives the other party the opportunity to
attend, and (iii) furnish the other party with copies of all correspondence,
filings and written communications between them and their Affiliates and their
respective representatives on one hand, and any such Governmental or Regulatory
Authority or its staff on the other hand, with respect to this Agreement and the
transactions contemplated hereby.
 
(c)           Notwithstanding anything to the contrary contained in this Section
6.02 or elsewhere in this Agreement, if any action or proceeding by any
Governmental or Regulatory Authority is instituted (or threatened to be
instituted) challenging any transaction contemplated by this Agreement, the
parties shall use their reasonable best efforts to (i) contest, resist or
resolve any such proceeding or action and (ii) have vacated, lifted, reversed or
overturned any injunction resulting from such proceeding or action.
 
(d)           The parties hereto shall consult with each other prior to
proposing or entering into any stipulation or agreement with any Governmental or
Regulatory Authority or any third party in connection with any Required
Approvals and shall not propose or enter into any such stipulation or agreement
without the other party's prior written consent, which consent shall not be
unreasonably withheld, delayed or conditioned.
 
(e)           Notwithstanding anything in this Section 6.02 or elsewhere in this
Agreement to the contrary, neither Purchaser nor any of its Affiliates shall be
required to (i) (A) sell, lease, license, transfer, dispose of, divest or
otherwise encumber, or to hold separate, or (B) proffer, propose, negotiate,
offer to effect or consent, commit or agree to any sale, divestiture,
 

 
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lease, licensing, transfer, disposal, divestment or other encumbrance of, or to
hold separate, in each case before or after the Closing, any assets, licenses,
operations, rights, businesses or interests of Purchaser or any of its
Affiliates or of the Companies, or (ii) take or agree to take any other action,
or agree or consent to any limitations or restrictions on the freedom of action
with respect to, or its ability to own, retain or make changes in, any assets,
licenses, operations, rights, businesses or interests of Purchaser or any of its
Affiliates or of the Companies.
 
6.03          Notification of Certain Matters.
 
(a)           During the period from the date of this Agreement until the
Closing, each of Parent and Purchaser shall notify the other in writing after
learning of any event, condition, fact or circumstance that would make the
timely satisfaction of any of the conditions set forth in Article VII impossible
or unlikely, and Parent shall promptly notify Purchaser of all material
developments affecting any of the Companies.  Without limiting the generality of
the foregoing, each of Parent and Purchaser shall advise the other in writing of
any Legal Proceeding or claim threatened in writing, commenced or asserted
against it with respect to the transactions contemplated by this Agreement.
 
(b)           During the period from the date of this Agreement until ten (10)
Business Days prior to the Closing, Parent, Holdings and the Company shall
supplement or amend the Disclosure Letter (such supplements or additions being
referred to as “Supplemental Disclosures”) with respect to any matter of which
any of Parent, Holdings or the Company acquires knowledge which, if existing or
occurring on or before the date this Agreement is executed, would have been
required to be set forth or described in the Disclosure Letter.  Parent agrees
to advise Purchaser promptly in writing of any matter or occurrence of which any
of Parent, Holdings or Company has or obtains knowledge that would be required
to be set forth or described in the Disclosure Letter.  Prior to the Closing,
for all purposes of this Agreement, including for purposes of determining
whether the conditions set forth in Article VII have been fulfilled, the
Disclosure Letter shall be deemed to include only that information contained
therein on the date of this Agreement and shall be deemed to exclude all
information contained in any Supplemental Disclosures other than (i) new or
amended Material Contracts entered into or amended after the date of this
Agreement consistent with the requirements of Section 5.01, (ii) Permit renewals
after the date of this Agreement that contain substantially similar terms as the
Permits being renewed, (iii) new Permits obtained after the date of this
Agreement that were not required to be held as of the date of this Agreement and
(iv) Contracts entered into after the date of this Agreement consistent with the
requirements of Section 5.01 relating to any Development Project (such
supplements or additions being referred to as “Permitted Disclosure
Updates”).  Following the Closing, for purposes of the indemnification
obligations of Parent and Holdings in Article X, any information with respect to
any matter occurring after the date of this Agreement that is a Permitted
Disclosure Update shall be deemed to be included in the Disclosure Letter but no
other Supplemental Disclosure shall be deemed to be included in the Disclosure
Letter.
 
6.04          Access to Information; Confidentiality.
 
(a)           During the period from the date of this Agreement until the
Closing, Parent, Holdings and the Company shall afford the Representatives of
Purchaser, at Purchaser’s
 

 
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sole cost and risk, reasonable access during normal business hours, upon
reasonable notice to Parent and without significant interference with the
operations or properties of the Companies, to the Companies’ officers,
employees, properties, facilities, books, records, contracts and other assets as
Purchaser may reasonably request, including for the purpose of observing the
operation of the facilities and for understanding the Companies’ compliance and
compliance programs relating to all FERC, PJM and NERC rules and regulations,
subject in all cases to reasonable restrictions and requirements for safety
purposes and compliance with all applicable security requirements or other
limitations on access imposed by applicable Law.  Such Representatives of
Purchaser may only observe the operations of the Companies and may not direct
the activities of any Representatives of any of the Companies or make any
decisions relating to the operations of any of the Companies.  Any such access
to the properties of any of the Companies shall be under the supervision of
Representatives of the Companies.  In addition, Parent shall provide Purchaser
for the period commencing on the date of this Agreement until the Closing with a
conference room, cubicles or other suitable space located at the headquarters of
the Company, on a rent-free basis, for use by up to four Representatives of
Purchaser during normal business hours or otherwise for the purpose of effecting
the transition of ownership of the Companies to Purchaser.  If Purchaser
requests that the assistance of any Representatives of any of the Companies
after normal business hours, then the decision to allow such assistance shall be
within the sole discretion of the Companies and Purchaser shall pay to Parent,
at the internal billing rate of Parent, the associated costs of such
overtime.  If Purchaser requests that any of the Companies perform contract work
on behalf of Purchaser to facilitate the transition of operations to Purchaser
following the Closing, then Parent and Purchaser shall negotiate in good faith
regarding the terms and conditions under which Parent would provide such
services and the compensation arrangement in connection
therewith.  Notwithstanding anything to the contrary in this Section 6.04(a),
the installation and testing by Purchaser of equipment, facilities, hardware or
software prior to the Closing shall be within Parent’s reasonable discretion and
(i) shall not interfere with the operations or properties of any of the
Companies, (ii) shall be in compliance with all restrictions and requirements
reasonably established by Parent for safety purposes and (iii) shall be in
compliance with all applicable security requirements and other requirements of
Law; provided, however, that in no event shall Purchaser or any of its
Representatives be permitted to connect to any equipment of any of the Companies
prior to the Closing.
 
(b)           Notwithstanding anything to the contrary in Section 6.04(a), (i)
none of Parent, Holdings, the Company or any Subsidiary shall be obligated to
disclose to Purchaser or permit Purchaser access to any information that could
reasonably be expected to (A) violate any applicable Law, (B) result in the loss
of attorney-client privilege with respect to such information, (C) result in a
breach of an agreement to which Parent, Holdings, the Company or any Subsidiary
is a party, if Parent, Holdings or the Company have made reasonable efforts to
obtain consent of such other party to the agreement to such disclosure, or (D)
result in the disclosure of any trade secret or confidential information of
third parties, if Parent, Holdings or the Company have used reasonable efforts
to obtain consent of such third party to such disclosure, and (ii) Purchaser
shall not be entitled to perform or conduct any environmental sampling or
testing at, in, on or underneath any of the facilities or properties of the
Company or any Subsidiary.
 
(c)           Purchaser shall indemnify and hold harmless Parent, Holdings and
the Companies and their respective Affiliates from and against any Losses
incurred by any of them
 

 
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resulting from personal injury or property damage incurred or caused by
officers, employees, agents and other  Representatives of Purchaser while
present at the properties, facilities or other premises of any of the Companies,
except to the extent that such Losses result from or arise out of the gross
negligence or willful misconduct of any of Parent, Holdings or any of the
Companies or any of their respective Affiliates or Representatives.
 
(d)           The provisions of the Confidentiality Agreement shall remain in
full force and effect in accordance with its terms, provided that, after the
Closing, the Companies and Purchaser shall have no confidentiality obligation
with respect to the Companies and the businesses of any of the Companies.
 
(e)           For a period of seven years after the Closing, Parent and Holdings
on the one hand and Purchaser on the other hand shall afford each other, and
Purchaser shall cause the Companies to afford Parent, upon receipt of reasonable
advance notice and during normal business hours, access to all of the books and
records (including, without limitation, all material returns, statements, forms,
declarations, estimates, schedules, notices, notifications, elections or other
documents with respect to Taxes) of the Companies containing information
relating to the period prior to the Closing to the extent that such access may
reasonably be required by the other party in connection with matters relating to
or affected by the operation of the Companies prior to the Closing Date, which
shall include, without limitation, access as may be required to assist Purchaser
in preparing audited financial statements of the Companies after the Closing. 
If Parent or Holdings on the one hand or Purchaser or the Companies on the other
hand shall desire to dispose of any such books and records prior to the
expiration of such seven-year period, then such party shall, prior to such
disposition, give the other party a reasonable opportunity, at the electing
party’s expense, to segregate and remove such books and records as the electing
party may select.  Notwithstanding anything to the contrary in this Section
6.04(e), none of Parent, Holdings or Purchaser shall be obligated to disclose,
or cause to be disclosed, any information to the other party or parties, as
applicable, that could reasonably be expected to (i) violate any applicable Law,
(ii) result in the loss of attorney-client privilege with respect to such
information, (iii) result in a breach of an agreement to which Parent, Holdings,
the Company or Purchaser is a party, if Parent, Holdings, the Company or
Purchaser, as applicable, have made reasonable efforts to obtain consent of such
the other party to the agreement to such disclosure, or (iv) result in the
disclosure of any trade secret or confidential information of third parties, if
Parent, Holdings, the Company or Purchaser, as applicable, have used reasonable
efforts to obtain consent of such third party to such disclosure.
 
(f)           For a period of thirty-six (36) months after the Closing, Parent
and Holdings shall provide any documents and information then in its possession,
and shall use commercially reasonable efforts to cooperate with Purchaser
(subject to reimbursement for reasonable costs and expenses), in each case as
may be reasonably requested by Purchaser to assist it in connection with any
internal investigation by Purchaser, or any FERC, PJM or NERC audit,
investigation or other proceeding, that relates to the Companies’ compliance or
non-compliance with FERC, PJM or NERC requirements prior to the Closing.
 
6.05          Public Statements.  During the period from the date of this
Agreement until the Closing, Parent and Purchaser shall not, without the prior
written consent of the other party, issue any press release with respect to this
Agreement or the transactions contemplated hereby,
 

 
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and shall provide the other party with the opportunity to review and comment on
any press release, including the initial press releases to be issued by the
parties with respect to their execution and delivery of this Agreement, that
contains a description of the transactions contemplated by this Agreement;
provided, however, that this obligation shall not prevent Parent, Purchaser or
any of their Affiliates from making any disclosure (a) required by Law, court
order or listing agreement with any national securities exchange or (b) to
rating agencies or lenders or other source of financing to such party.
 
6.06          No Solicitation.  From and after the date of this Agreement until
the first to occur of the Closing or the termination of this Agreement, none of
Parent, Holdings, the Company, their respective Affiliates nor any of their
respective Representatives shall, directly or indirectly, solicit, initiate,
encourage (including by way of furnishing information) or take any other action
to facilitate the submission of any inquiries, proposals or offers from any
Person relating to, and will not participate in any negotiations regarding, or
furnish to any Person any information with respect to, any purchase, transfer or
other disposition of all or any part of the Membership Interests, any merger,
consolidation, business combination, acquisition, recapitalization, liquidation,
dissolution, or similar transaction involving the Company or any of its
Subsidiaries, or the sale of all or any part of the assets of the Company or any
of its Subsidiaries (other than the Excluded Assets and assets sold in the
ordinary course of business).
 
6.07         Release of Parent Letters of Credit and Parent Guarantees.
 
(a)           Prior to the Closing, Purchaser shall use its commercially
reasonable efforts to obtain and deliver to Parent a full and unconditional
release, as of the Closing, of all of the obligations of Parent and any of its
Affiliates (other than the Companies) with respect to each Parent Letter of
Credit, which release shall be in form and substance reasonably acceptable to
Parent.  As part of Purchaser’s commercially reasonable efforts, Purchaser shall
offer to obtain and deliver to the beneficiary of each Parent Letter of Credit a
substitute letter of credit or other form of security acceptable to the
beneficiary in an amount equal to the amount of the Parent Letter of Credit that
it is intended to replace.  In the event Purchaser has not, as of the Closing,
obtained and delivered releases with respect to all of the Parent Letters of
Credit in accordance with the preceding sentences (such unreleased Parent
Letters of Credit being referred to as the “Unreleased Parent Letters of
Credit”):
 
(i)           Purchaser shall use its commercially reasonable efforts to obtain
a release as promptly as practicable following the Closing and shall indemnify
and hold harmless each of Parent and its Affiliates (other than the Companies)
from and against any and all Losses incurred by Parent or any of its Affiliates
arising out of or relating to the Unreleased Parent Letters of
Credit  (including reimbursing Parent, on a quarterly basis, for the actual
issuing bank’s fees incurred by Parent or any of its Affiliates in connection
with maintaining all Unreleased Parent Letters of Credit);
 
(ii)          Purchaser shall not permit the Company, any Subsidiary or any of
their respective Affiliates to (A) renew or extend the term of, (B) increase the
obligations under, or (C) transfer to another third party, any written or oral
contract, loan, agreement, commitment, franchise, indenture, lease, purchase
order, license, other binding
 

 
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understanding or arrangement or other obligation that is covered by an
Unreleased Parent Letter of Credit;
 
(iii)         Purchaser shall deliver to Parent at the Closing, and maintain at
all times until the full and unconditional release of all of the Unreleased
Parent Letters of Credit, a Purchaser Letter of Credit in an amount equal to the
aggregate amount of all Unreleased Parent Letters of Credit; and
 
(iv)         In no event shall Parent or any of its Affiliates be required to
renew any Unreleased Parent Letter of Credit following the Closing whether
pursuant to an evergreen provision or otherwise.
 
(b)           Prior to the Closing, Purchaser shall use its commercially
reasonable efforts to obtain and deliver to Parent a full and unconditional
release, as of the Closing, of all of the obligations of Parent and any of its
Affiliates (other than the Companies) with respect to each Parent Guarantee,
which release shall in form and substance be reasonably acceptable to
Parent.  As part of Purchaser’s commercially reasonable  efforts, Purchaser
shall offer to obtain and deliver to the beneficiary of each Parent Guarantee a
substitute guarantee or, in Purchaser’s sole discretion, other form of security
acceptable to the beneficiary having terms and conditions substantially similar
to the Parent Guarantee that it is intended to replace; provided, however, that
if the beneficiary of such Parent Guarantee does not accept a substitute
guarantee (or other security) and (i) the terms of the Parent Guarantee or of
any Contract requiring such Parent Guarantee to be maintained permit the
replacement of such Parent Guarantee with another form of credit support, then
Purchaser shall offer the beneficiary of such Parent Guarantee such other form
of credit support in order to obtain the release of such Parent Guarantee or
(ii) the terms of the Parent Guarantee or of any Contract requiring such Parent
Guarantee to be maintained do not so permit the replacement of such Parent
Guarantee with another form of credit support, then Purchaser shall offer to
replace such Parent Guarantee with a Purchaser Letter of Credit or cash in an
amount at least equal to the maximum amount of such Parent Guarantee in order to
obtain the release of such Parent Guarantee.  In the event Purchaser has not, as
of the Closing, obtained and delivered releases with respect to all of the
Parent Guarantees in accordance with the preceding sentences (such unreleased
Parent Guarantees being referred to as the “Unreleased Parent Guarantees”):
 
(i)           Purchaser shall use its reasonable best efforts to obtain a
release as promptly as practicable following the Closing and shall indemnify and
hold harmless each of Parent and its Affiliates (other than the Companies) from
and against any and all Losses incurred by Parent or any of its Affiliates
arising out of or relating to the Unreleased Parent Guarantees;
 
(ii)          Purchaser shall not permit the Company, any Subsidiary or any of
their respective Affiliates to (A) renew or extend the term of, (B) increase the
obligations under, or (C) transfer to another third party, any written or oral
contract, loan, agreement, commitment, franchise, indenture, lease, purchase
order, license, other binding understanding or arrangement or other obligation
covered by an Unreleased Parent Guarantee; and
 

 
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(iii)         Purchaser shall deliver to Parent at the Closing, and maintain at
all times until the full and unconditional release of all Unreleased Parent
Guarantees, cash or a Purchaser Letter of Credit in an amount equal to the
maximum aggregate amount of all Unreleased Parent Guarantees.
 
To the extent that Parent or any of its Affiliates has performance obligations
under any Parent Guarantee as of the Closing, Purchaser shall (i) perform such
obligations on behalf of Parent or its Affiliates if practicable, or (ii)
otherwise take such action as requested by Parent so as to put Parent or its
Affiliates in the same position as if Purchaser, and not Parent or such
Affiliates, had performed or was performing such obligations.
 
(c)           Parent and Holdings shall provide, and shall cause the Companies
and each of their respective Representatives to provide, upon the reasonable
request of Purchaser, and at Purchaser’s sole cost and expense, all cooperation
reasonably necessary and the taking of any actions reasonably requested by
Purchaser in connection with the arrangement of substitute letters of credit or
other form of security as contemplated by this Section 6.07.
 
(d)           During the period from the date of this Agreement until the
Closing, Parent, Holdings and the Company shall not, and the Company shall cause
the Subsidiaries not to renew or extend the term of, or increase the obligations
under any Parent Letter of Credit or Parent Guarantee, except as provided in
Section 6.07 of the Disclosure Letter, or as required by the terms of the
obligation(s) to which such Parent Letter of Credit or Parent Guarantee relates.
 
(e)           Notwithstanding the foregoing, nothing in this Section 6.07 shall
require Purchaser to obtain a guarantee or other credit support from Calpine
Corporation.
 
6.08          Compliance with ISRA.
 
(a)           With respect to the New Jersey ISRA Property and the transactions
contemplated by this Agreement, Parent shall submit or cause to be submitted to
NJDEP (i) within five days after the execution of this Agreement, a General
Information Notice (as such term is defined under ISRA), for each New Jersey
ISRA Property, and (ii) prior to the Closing Date (A) a Remediation
Certification (as such term is defined under ISRA) (“Remediation
Certification”), for each New Jersey ISRA Property, regarding the consummation
of the transactions contemplated by this Agreement and (B) as part of that
Remediation Certification, evidence of the establishment by Purchaser of a
remediation funding source (as such term is defined under ISRA) in an amount of
the estimated cost of the remediation as certified by an LSRP, who is mutually
agreed upon by Parent and Purchaser and engaged by Purchaser, or a minimum
surrogate cost estimate as required by the NJDEP, which remediation funding
source shall be in conformance in form and substance with the requirements of
N.J.A.C. 7:26C-5.  The type of remediation funding source, to be established in
accordance with the requirements of N.J.A.C. 7:26C-5.2(f) and (g), shall be in
the discretion of Purchaser.  Purchaser shall execute all Remediation
Certifications identifying Purchaser as the party agreeing to conduct
remediation for each of the New Jersey ISRA Properties and the transactions
contemplated by this Agreement.  With respect to any subsequent transaction by
or among Purchaser, Parent, Holdings or any of their respective Affiliates that
will “close operations” or “transfer ownership or operations” of any of the New
Jersey ISRA Property that is also Leased Real Property or
 

 
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Easement Real Property, the party undertaking such transaction shall timely
submit or cause timely to be submitted to NJDEP the General Information Notice
required by ISRA, and all other responsibilities for Compliance with ISRA in
such cases shall be as provided in this Section 6.08.
 
(b)           Following the Closing, Purchaser shall have complete
responsibility for directing the remediation subject to Section 6.08(d) and (e),
and shall assume all costs and Liabilities associated with, the performance of
any Remediation at the New Jersey ISRA Property necessary to achieve Compliance
with ISRA.  Purchaser shall submit all filings and certifications and take all
actions required under the Remediation Certifications and ISRA to achieve
Compliance with ISRA.  If any such filings or certifications are required to be
submitted by Parent, then Purchaser shall prepare such filings or certifications
and provide them to Parent for submission.
 
(c)           Purchaser shall, within five Business Days of sending or receipt
thereof, provide Parent with complete and correct copies of all documents,
including correspondence and final workplans and reports, field and laboratory
data, summaries, proposals and recommendations, prepared by Purchaser or the
LSRP or submitted by Purchaser or the LSRP to, or received by Purchaser or the
LSRP from, the NJDEP in connection with Purchaser’s actions to achieve
Compliance with ISRA.
 
(d)           Notwithstanding anything to the contrary contained in this
Agreement, or in any lease or easement agreement in respect of any Leased Real
Property or Easement Real Property that is also a New Jersey ISRA Property, (i)
Purchaser shall be responsible for ISRA Compliance Costs in respect of
Environmental Conditions existing on or prior to the Closing Date, up to the
Remediation Cap (and, if advanced by Parent, shall be promptly reimbursed by
Purchaser on request); and (ii) all ISRA Compliance Costs in respect of
Environmental Conditions existing on or prior to the Closing Date in excess of
the Remediation Cap shall be the sole responsibility of Parent and Holdings, on
a joint and several basis, (and, if advanced by Purchaser, shall be promptly
reimbursed by Parent on request).  Except to the extent such Losses arise from
or are caused by the post-Closing acts or omissions of Parent or its Affiliates
(or their respective employees, agents, representatives, consultants,
contractors, successors, assigns, invitees or licensees), Purchaser shall
indemnify and hold harmless Parent and its Affiliates from and against any and
all Losses incurred by Parent or any of its Affiliates arising out of or
relating to (i) achieving prompt and timely Compliance with ISRA in accordance
with the regulatory and mandatory timeframes as specified by ISRA, SRRA, and the
Administrative Requirements for the Remediation of Contaminated Sites, N.J.A.C.
7:26C-1.1 et seq., and (ii) any failure by Purchaser (or consultants,
contractors or LSRPs retained by Purchaser) to satisfy and comply with the
obligations of this Section 6.08.
 
(e)           As to any Remediation or other activities that Purchaser
undertakes or performs at or with respect to the New Jersey ISRA Property after
Closing pursuant to this Section 6.08 in order to achieve Compliance with ISRA,
Purchaser shall:
 
(i)           retain and engage a properly licensed LSRP to assist Purchaser in
achieving Compliance with ISRA, unless the New Jersey ISRA Property under
review, or
 

 
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any portion thereof, is subject to the regulatory requirements of direct
oversight by the NJDEP;
 
(ii)          perform, and cause all consultants and contractors (including the
LSRP) retained by Purchaser to perform, all such Remediation in a workmanlike
manner, on a prompt and timely basis, and consistent with all applicable
Environmental Laws;
 
(iii)         comply with all Environmental Laws applicable to the
implementation of such Remediation at the New Jersey ISRA Property and obtain
all permits, authorizations and consents required under applicable Environmental
Laws or by the NJDEP or the LSRP or other Governmental or Regulatory Authority
in order to implement such Remediation at the New Jersey ISRA Property.  Without
limiting or affecting the generality of the foregoing, Purchaser shall satisfy
and comply with, and cause its contractors and consultants (including the LSRP)
to satisfy and comply with, c) all timeframes as established by the NJDEP
pursuant to ISRA, as such timeframes may be extended, and (a) the public
notification requirements set forth at N.J.A.C. 7:26E-1.1 et seq. (as such
requirements may be amended, modified or supplemented after the Closing Date);
 
(iv)         cause all consultants and contractors (including the LSRP)
performing such Remediation to provide and maintain in full force and effect
insurance in commercially reasonable types and amounts as are customarily
maintained by contractors and consultants for the performance of comparable work
or services until 90 days following the date that Compliance with ISRA has been
achieved;
 
(v)          provide Parent a written project status report, cost estimate, and
accounting, on a semi-annual basis, of all ISRA Compliance Costs incurred for
the New Jersey ISRA Property (“Purchaser’s ISRA Status Report”) and, if
determined appropriate by Parent in its sole discretion, allow Parent, at its
sole cost and expense, to conduct a financial audit on a semi-annual basis of
ISRA Compliance Costs expended by Purchaser (“Parent’s ISRA Compliance Cost
Audit”);
 
(vi)         if and when ISRA Compliance Costs incurred by Purchaser reach
$7,000,000 and thereafter until such time as Compliance with ISRA has been
achieved by either Parent or Purchaser for the New Jersey ISRA Property,
Purchaser shall provide Parent with (A) a reasonable opportunity to review and
comment upon any workplans or reports (including any workplans and reports
prepared by the LSRP) respecting any Remediation and other material submissions
to NJDEP prior to submission and implementation, (B) reasonable advance notice
of, and an opportunity to have a representative present during, the performance
of any Remediation, (C) reasonable advance notice of, and an opportunity to have
a representative present during, any meeting with, or site visit or inspection
by, the LSRP or NJDEP, and (D) Purchaser’s ISRA Status Report and the
opportunity to conduct Parent’s Compliance Audit, both on a quarterly basis
rather than on a semi-annual basis.  For the purposes of this subsection (vi),
ten (10) Business Days (or less if not feasible under the circumstances) shall
be deemed a reasonable opportunity for Parent to review and comment upon
submissions or receive advance notice of a meeting, site visit or inspection);
and
 

 
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(vii)        if and when the ISRA Compliance Costs incurred by Purchaser reach
the Remediation Cap, provide Parent with the opportunity to receive, review and
comment upon any and all Remediation bid proposals of $100,000 or more.
 
(f)           Purchaser shall promptly execute such documents prepared by Parent
or take such other actions as reasonably requested by Parent in connection with
the satisfaction of Purchaser’s obligations under this Section 6.08.
 
(g)           If Purchaser fails to (i) materially satisfy any of its
obligations under this Section 6.08 or (ii) materially comply with the
requirements of ISRA or other applicable Environmental Laws in connection with
Purchaser’s actions to achieve Compliance with ISRA, then Parent shall have the
right, but not the obligation, to take such actions, including Remediation,
reasonably necessary in Parent’s sole discretion to cure such default, or to
achieve Compliance with ISRA, provided Parent has given at least (30) thirty
days prior written notice to Purchaser and Purchaser has failed to cure such
default within such period.  In such event, Purchaser shall remain responsible
for ISRA Compliance Costs up to the Remediation Cap and, in addition, shall be
responsible for Parent’s internal administrative costs incurred to achieve
Compliance with ISRA.  Further, Purchaser agrees to grant Parent access to the
New Jersey ISRA Properties and consents to Parent’s use, sampling and
maintenance of equipment and facilities installed by Purchaser in connection
with the performance of the Remediation with respect to soil or groundwater at
the New Jersey ISRA Property, including groundwater monitoring wells,
groundwater treatment facilities, underground piping, and such other similar
facilities, piping and wells necessary or required in order to monitor, treat or
recover groundwater from beneath or emanating from the New Jersey ISRA
Property.  In the event Parent takes on Remediation pursuant to this paragraph,
Purchaser acknowledges and agrees that completion of Remediation and the
obtaining of a No Further Action Letter, Remedial Action Outcome or equivalent
document may be conditioned on the implementation of institutional and/or
engineering controls (as defined by the Brownfield and Contaminated Site
Remediation Act, N.J.S.A. 58:10B-1 et seq.; Classification Exception Areas
(CEAs) for groundwater; and deed notice(s) and/or Deed Restriction(s) which may
include but are not limited to references to the extent and location of
environmental impacts remaining on the New Jersey ISRA Properties (collectively,
“Institutional Controls”)).  Parent shall have the right to encumber the New
Jersey ISRA Properties through the use of Institutional Controls to obtain a No
Further Action Letter, Remedial Action Outcome or equivalent document.
 
6.09          Reorganization.  Notwithstanding anything to the contrary
contained in this Agreement (including the provisions of Article V), prior to
the Closing, Parent and Holdings shall, and Parent and Holdings shall cause the
Companies to, take the actions described in Section 6.09 of the Disclosure
Letter (collectively, the “Reorganization”), at Parent’s sole cost and expense;
provided, however, that the obligations of Parent and Holdings under this
Section 6.09 shall not relieve Purchaser of any obligations under Section
6.07.  If a third party requires that Purchaser or one of the Companies provide
credit support as a condition to granting its consent or approval to effect the
transfer or assignment of any Contract to any of the Companies as part of the
Reorganization (but only if the right to request such credit support is
expressly included in such Contract), then Purchaser shall, or shall cause one
of the Companies to, as of the Closing, provide such credit support, including,
without limitation, by posting a guarantee, letter of credit, bond, cash or
other credit support required by such third party; otherwise Purchaser
 

 
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shall not be so obligated.  Parent and Holdings shall provide Purchaser a copy
of any third party consents obtained by Parent or Holdings in order to effect
the Reorganization.  In the event that any Contract (other than the Columbia Gas
Contract and the Spectra Services Contract) is subject to FERC’s capacity
release requirements (unless those requirements have been waived by FERC) and a
third party submits a bid for such Contract, Parent shall provide notice to
Purchaser and Parent shall allow such third party to acquire such Contract and
such Contract shall not be included as part of the Reorganization.  If in
connection with any transfer or assignment of a Contract to any of the Companies
in connection with the Reorganization, (i) such Contract is amended or modified
such that the terms of the Contract as amended or modified are more favorable to
the counterparty than the terms of such Contract immediately prior to such
amendment or modification and (ii) at any time following the Closing Purchaser
becomes aware that the products or services obtained under such Contract become
available on terms that are materially more favorable than under such Contract,
then Purchaser shall use commercially reasonable efforts to renegotiate or
replace such Contract, but at no added cost, expense or liability to Purchaser.
 
6.10          Affiliate Obligations.  On or before the Closing Date, except as
set forth on Section 6.10 of the Disclosure Letter, all Liabilities between any
of the Companies on the one hand and Parent, Holdings or any of their Affiliates
(other than any of the Companies) on the other hand, including (a) any and all
Indebtedness and (b) any and all contracts, agreements and instruments (other
than this Agreement and any ancillary agreement relating to the transactions
contemplated hereby) shall be terminated in full, without any Liability for the
Companies following the Closing.
 
6.11          Termination or Assignment of Service Contracts.  At or prior to
the Closing, Parent, Holdings and the Company shall cause each of the Contracts
listed in Section 6.11 of the Disclosure Letter (the “Service Contracts”) to be
terminated or assigned, at Parent’s sole cost and expense, such that none of the
Companies shall be responsible for any obligations and Liabilities, or receive
the benefits, under such Service Contracts after the Closing.
 
6.12          Transition Services.  At the Closing, Purchaser, Parent, Holdings
or their relevant Affiliates shall enter into the Transition Services
Agreement.  While the intention of the parties is for Purchaser to complete its
ownership transition prior to the Closing with Parent’s reasonable cooperation,
during the period from the date of this Agreement until the Closing, Parent and
Purchaser shall negotiate in good faith regarding the scope and duration of any
transition services that may be provided by Parent or one of its Affiliates
following the Closing to Purchaser and the Companies.  The specific scope and
duration of any such transition services that are so agreed to between Parent
and Purchaser shall be included in a schedule to the Transition Services
Agreement as of the Closing.
 
6.13          Insurance.  Parent shall maintain or cause to be maintained in
full force and effect the material insurance policies covering the business and
operations of the Companies until the Closing or comparable replacement
policies. All such insurance coverage maintained for the benefit of the
Companies by Parent or any Affiliate of Parent (other than policies maintained
by the Companies) shall be terminated as of the Closing; provided, however, that
Parent shall use its reasonable best efforts to assign to Purchaser or one of
the Companies the builder’s risk policy for the Delta Project.  Purchaser shall
be solely responsible for providing
 

 
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insurance to the business and operations of the Companies for any event or
occurrence that occurs after the Closing.
 
6.14          No Other Representations or Warranties.    Except for the
representations and warranties contained in Article III, as supplemented by the
Disclosure Letter, none of Parent, Holdings, the Company or any other Person
acting on behalf of Parent, Holdings or the Company makes any representation or
warranty, express or implied, regarding the Company or any Subsidiary.  In
entering into this Agreement and acquiring the Membership Interests from
Holdings, Purchaser expressly acknowledges and agrees that it is not relying on
any statement, representation or warranty, including those that may be contained
in any confidential information memorandum or similar materials containing
information regarding Parent, Holdings, the Company or any Subsidiary or any of
their businesses or in any material provided to Purchaser during the course of
its due diligence investigation of Parent, Holdings, the Company or any
Subsidiary, other than those representations and warranties expressly set forth
in Article III, as supplemented by the Disclosure Letter, and except to the
extent any such statements, representations or warranties constitutes fraud or a
willful misrepresentation.
 
6.15          Financing Related Cooperation.  During the period from the date of
this Agreement until the Closing, Parent and Holdings shall provide, and shall
cause the Companies and each of their respective Representatives to provide,
upon the reasonable request of Purchaser, all cooperation reasonably necessary
in connection with the arrangement of the financing contemplated by the
Financing Commitments, including (a) participation in a reasonable number of
meetings, due diligence sessions, management presentation sessions and sessions
with rating agencies and (b) assisting Purchaser with its preparation of
materials required in connection with the Financing Commitments.
 
6.16          Title.
 
(a)           Parent shall use its commercially reasonable efforts to cure or
remove as an exception to title, prior to the Closing Date, any Unpermitted
Liens and the Liens set forth in Section 6.16(a)(ii) of the Disclosure Letter.
 
(b)           Purchaser shall pay the premium for the title policies and
endorsements thereto issued pursuant to the title insurance commitments.
 
(c)           At the Closing, for any and all Real Property, Parent shall cause
to be delivered to Purchaser’s Title Company affidavits and other agreements in
the forms attached hereto as Exhibit F, each as executed by Parent, Holdings or
an Affiliate of Parent (other than one of the Companies), or as otherwise
acceptable to Purchaser’s Title Company.
 
(d)           Parent shall be responsible for maintaining accurate payment
records relating to work provided by contractors for the Delta Project (and for
significant construction projects at the Bethlehem and Edge Moor Generating
Plants), and after the date hereof Parent shall condition any payment to a
contractor holding a contract in excess of $50,000 in the aggregate, on such
contractor executing a lien release in a form to be mutually agreed upon between
Parent and Purchaser or otherwise reasonably acceptable to Purchaser’s Title
Insurance Company.  Parent shall be responsible for providing to Purchaser’s
Title Insurance Company
 

 
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such evidence of payment and lien releases as such title company may reasonably
request (in combination with such other instruments or credit assurances from
Purchaser) in order to provide insurance against loss arising from mechanic’s
and materialman’s liens relating to the Delta Project (and for significant
construction projects at the Bethlehem and Edge Moor Generating Plants) for work
performed prior to the Closing, other than work performed in the 60-day period
prior to Closing which, under the terms of the applicable contractor agreement,
was not required to be paid for prior to Closing.  In no event, however, shall
Parent be obligated to provide Purchaser’s Title Insurance Company with other
than (i) final lien waivers with respect to contractor agreements for which
final payment has been made to such contractors; (ii) partial lien waivers with
respect to outstanding contractor agreements covering work completed and paid
for; and (iii) a copy of the last available cancelled check evidencing a recent
payment to each contractor.
 
6.17          Non-Solicitation of Employees.  Parent and Holdings shall not, and
shall cause their respective Affiliates and Representatives not to, from and
after the Closing Date for a period of one (1) year, except as may otherwise be
agreed to by Purchaser, directly or indirectly solicit for employment or hire or
attempt to solicit for employment or hire any employee of the Companies;
provided, however, that this Section 6.17 shall not preclude Parent, Holdings or
their respective Affiliates or Representatives from employing any such Person
who (a) responds to a general solicitation through a public medium or general or
mass mailing by or on behalf of Parent or Holdings or any of their respective
Affiliates or Representatives that is not targeted at employees of any of the
Companies, or (b) has been terminated by the Companies, as applicable, prior to
being solicited by Parent, Holdings or their Affiliates; provided further,
however, that none of Parent, Holdings or any of their respective Affiliates or
Representatives shall employ any such employee who Purchaser notifies Parent in
writing is subject to a non-competition obligation preventing such employee from
competing with Purchaser or its Affiliates.
 
6.18          Indebtedness. At or prior to the Closing, Parent shall cause the
Companies to pay and discharge all Indebtedness of the Companies owing to any
Person other than one of the Companies.
 
6.19          Confidentiality. From and after the Closing Date, Parent and
Holdings acknowledge that it and their respective Affiliates shall be in
possession of Confidential Property (as defined in the Confidentiality
Agreement) concerning Purchaser, the Companies and their respective businesses
and operations. From and after the Closing Date, Parent and Holdings shall, and
shall cause their Affiliates and respective Representatives to, treat strictly
confidential and not disclose all or any portion of such Confidential Property
and shall not use such Confidential Property in any manner detrimental to any of
the Companies or Purchaser.  Except as provided in the last sentence of this
Section 6.19, if Parent, Holdings, their respective Affiliates or any of their
respective Representatives are required by Law or requested by any Governmental
or Regulatory Authority to disclose any of the Confidential Property (whether by
deposition, interrogatory, request for documents, subpoena, civil investigative
demand or similar process), Parent, Holdings or such Affiliate or Representative
shall, to the extent reasonably practicable under the circumstances, provide
Purchaser with prompt written notice of such request so that Purchaser may seek
an appropriate protective order or other appropriate remedy.  If such protective
order or remedy is not obtained, Parent, Holding or such Affiliate or
Representative may disclose only that portion of the Confidential Property which
such Person is
 

 
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required by Law or is requested to disclose, and such Person shall, at
Purchaser’s request, request that confidential treatment be accorded to such
Confidential Property.  Notwithstanding anything in this Section 6.19 to the
contrary, Parent, Holdings and their Affiliates shall be entitled to disclose
and use any Confidential Property in connection with any litigation between the
parties, routine filings with any Governmental or Regulatory Authority
consistent with past practice, and the preparation of financial statements and
Tax Returns, in each case pertaining to matters prior to the Closing.
 
6.20          Company Audited Financial Statements.
 
(a)           Parent and Holdings shall cause the Company Audited Financial
Statements to be prepared and shall use their reasonable best efforts to have
the Company Audited Financial Statements delivered to Purchaser, accompanied by
the Unqualified Opinion, as promptly as practicable following the date of this
Agreement.
 
(b)           Within (i) forty-five (45) days after the date hereof and (ii)
forty-five (45) days after the last day of each calendar quarter ending after
the date hereof and prior to the Closing Date, Parent shall deliver to Purchaser
unaudited quarterly financial statements of the Company and its consolidated
Subsidiaries for the applicable quarter and year to date, which shall be
certified by the chief financial officer of Parent as having been prepared in a
manner consistent with past practice and consistent with the preparation of the
Company Unaudited Financial Statements.
 
(c)           Within forty-five (45) days after the date hereof, Parent shall
deliver to Purchaser (i) unaudited consolidated pro forma balance sheets of the
Company and its consolidated Subsidiaries as of March 31, 2010, and as of
December 31, 2009, in each case as adjusted to give effect to the
Reorganization, (ii) an unaudited pro forma statement of income of the Company
and its consolidated Subsidiaries for the 12-month period ended December 31,
2009, as adjusted to give effect to the Reorganization, and (iii) a comparative
unaudited pro forma statement of income of the Company and its consolidated
Subsidiaries for the three-month periods ended March 31, 2009, and March 31,
2010, as adjusted to give effect to the Reorganization.  From time to time after
the date hereof and after the Closing, Parent and Holdings will reasonably
cooperate with Purchaser with respect to the preparation of other financial
statements of the Company and its consolidated Subsidiaries relating to periods
prior to the Closing as may be reasonably requested by Purchaser.
 
6.21          Coal Inventory and Ash Disposal.  Prior to the Closing, Parent and
Holdings shall cause, at Parent’s sole expense, the supplies of all coal related
to the operation of the Generating Plants and located at or in transit to such
Generating Plants to be transported off-site or to be consumed or used in
accordance with Good Industry Practices; provided, however, that if Purchaser
elects to accept any coal related to the operation of the Generating Plants,
Purchaser shall within ninety (90) days prior to the Closing Date deliver to
Parent a written notice setting forth the amount of coal it intends to accept
and the Purchase Price shall be increased by the fair market value of such coal
as of 11:59 P.M. on the Business Day immediately prior to the Closing
Date.  Parent and Holdings shall cause, at Parent’s sole expense, the ash
byproduct from coal operations to be transported off-site in accordance with
Good Industry Practices.
 

 
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6.22          Use of Trade Names.  No later than six (6) months following the
Closing Date, Purchaser shall cause the Companies to change their names and
cause their certificates of formation (or equivalent organizational documents),
as applicable, to be amended to remove any reference to “Conectiv”.  Following
the Closing, Purchaser shall cause the Companies to, as soon as practicable, but
in no event later than six (6) months following the Closing Date, cease to (a)
make any use of (i) any names or marks that include the term “Conectiv” and (ii)
any names or marks related thereto or containing or comprising the foregoing,
including any names or marks confusingly similar thereto or dilutive thereof
(collectively, the “Marks”), and (b) hold themselves out as having any
affiliation with Parent or any of its Affiliates.  In furtherance thereof, as
soon as practicable but in no event later than six (6) months following the
Closing Date, Purchaser shall cause the Companies to remove, strike over or
otherwise obliterate all Marks from all assets and other materials owned by the
Companies, including any vehicles, business cards, schedules, stationery,
packaging materials, displays, signs, promotional materials, manuals, forms,
websites, email, computer software and other materials and systems.  Purchaser
and its Affiliates shall indemnify and hold harmless Parent and any of its
Affiliates for any Losses relating to or arising from the use by Purchaser or
any of its Affiliates of the Marks pursuant to this Section 6.22.
 
6.23          Negotiation of Electricity Purchase Option. Purchaser agrees to
enter into good faith negotiations with Parent regarding the entry into an
agreement under which Purchaser or one of its Affiliates will agree to provide
through a call option or other mutually acceptable transaction a portion of the
electricity required to satisfy the current load service obligations of Parent
or one of its Affiliates following the Closing.
 
6.24          Emission Allowances Filings.  Purchaser shall make all filings
with any Governmental or Regulatory Authority necessary to retire the Consumed
Pre-Closing Emission Allowances when and as required by applicable Law.
 
6.25          Peak Season Maintenance and Capacity Testing.
 
(a)           During the period from the date of this Agreement until the
Closing, the Company shall not perform any Peak Season Maintenance without PJM’s
prior approval.
 
(b)           During the period from the date of this Agreement until the
earlier to occur of (i) the Closing and (ii) July 31, 2010, the Company shall
perform generating unit capacity tests in the ordinary course of business and in
accordance with industry standards, and the Company shall notify Purchaser of
such tests on the Business Day following the performance of such tests.  Prior
to submitting the results of any such test to PJM prior to July 31, 2010, the
Company shall provide the results to Purchaser and Purchaser shall approve the
submission of such results to PJM.  If the test results for any unit are less
than the median test result submitted by the Company to PJM compared with the
previous three summers, the Company shall re-test such unit at its own cost.  If
Purchaser reasonably requests that the Company perform any tests (including any
tests requested to support the conversion of units to burning gas rather than
coal), then Purchaser shall reimburse the Company for any incremental costs
incurred in connection therewith.
 

 
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6.26          Post-Closing Settlement Charges.  Following the Closing, payments
may be required to be paid by Parent to Purchaser as provided in this Section
6.26.
 
(a)           As promptly as reasonably practicable following the availability
of all relevant information, Purchaser shall prepare and deliver to Parent a
written notice (the “March 2011 Settlement Calculation Notice”) setting forth
the determination made by Purchaser of the March 2011 settlement calculation,
calculated in accordance with Schedule VI, and the payment, if any, required to
be paid by Parent to Purchaser as a result of Purchaser’s determination.  Prior
to and following delivery of the March 2011 Settlement Calculation Notice, each
party shall provide the other party and its respective Representatives with such
access to the applicable personnel, books, records, information, materials and
data of the Companies, Parent, Holdings, and Purchaser, as applicable, and their
respective Affiliates as reasonably requested by each party, for the purposes of
allowing the other party to determine, and verify the accuracy of the
determination of, the calculations in the March 2011 Settlement Calculation
Notice.  Each party shall cooperate with the other party to assist in their
respective review of the March 2011 Settlement Calculation Notice, and, if
requested by either party, the other party and its Representatives shall meet in
person with the requesting party to discuss the March 2011 Settlement
Calculation Notice.  Parent and Purchaser shall negotiate in good faith to
resolve any differences that they may have with respect to the matters specified
in the March 2011 Settlement Calculation Notice.  If Parent and Purchaser are
not able to resolve any such differences, then they shall select a mutually
acceptable nationally-recognized independent engineer or consultant to review
the appropriate information, materials and data, and to determine the amount, if
any, to be paid by Parent with respect to the March 2011 Calculation
Notice.  The costs and expenses of such independent engineer or consultant shall
be borne equally by Purchaser and Parent.   Within three Business Days
immediately following the date of the final determination of the amount to be
paid by Parent with respect to the March 2011 Calculation Notice (either by
agreement between Parent and Purchaser or as a result of the final determination
by the independent engineer or consultant), Parent shall pay to Purchaser, by
wire transfer of immediately available funds, such amount.
 
(b)           As promptly as reasonably practicable following the availability
of all relevant information, Purchaser shall prepare and deliver to Parent a
written notice (the “December 2011 Settlement Calculation Notice”) setting forth
the determination made by Purchaser of the December 2011 settlement calculation,
calculated in accordance with Schedule VI, and the payment, if any, required to
be paid by Parent to Purchaser as a result of Purchaser’s determination.  Prior
to and following delivery of the December 2011 Settlement Calculation Notice,
each party shall provide the other party and its respective Representatives with
such access to the applicable personnel, books, records, information, materials
and data of the Companies, Parent, Holdings, and Purchaser, as applicable, and
their respective Affiliates as reasonably requested by each party, for the
purposes of allowing the other party to determine, and verify the accuracy of
the determination of, the calculations in the December 2011 Settlement
Calculation Notice.  Each party shall cooperate with the other party to assist
in their respective review of the December 2011 Settlement Calculation Notice,
and, if requested by either party, the other party and its Representatives shall
meet in person with the requesting party to discuss the December 2011 Settlement
Calculation Notice.  Parent and Purchaser shall negotiate in good faith to
resolve any differences that they may have with respect to the matters specified
in the December 2011 Settlement Calculation Notice.  If Parent and Purchaser are
not
 

 
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able to resolve any such differences, then they shall select a mutually
acceptable nationally-recognized independent engineer or consultant to review
the appropriate information, materials and data, and to determine the amount, if
any, to be paid by Parent with respect to the December 2011 Calculation
Notice.  The costs and expenses of such independent engineer or consultant shall
be borne equally by Purchaser and Parent.  Within three Business Days
immediately following the date of the final determination of the amount to be
paid by Parent with respect to the December 2011 Calculation Notice (either by
agreement between Parent and Purchaser or as a result of the final determination
by the independent engineer or consultant), Parent shall pay to Purchaser, by
wire transfer of immediately available funds, such amount.
 
6.27          Ash Landfill.
 
(a)           Following the Closing, Parent and Holdings shall retain full
responsibility for the Ash Landfill, including undertaking, at their own
expense, any and all Remediation or other activities that may be required with
respect thereto at any time under any applicable Environmental Law or by any
Governmental or Regulatory Authority.  Purchaser shall provide Parent and
Holdings with reasonable access to the area for such purposes and shall comply
with reasonable requests from Parent or Holdings to execute any forms or
documents as required by Governmental or Regulatory Authorities in furtherance
of such Remediation or other activities, provided that nothing therein shall
obligate Purchaser to assume any costs or liabilities.  Parent and Holdings
shall keep Purchaser fully informed as to the status and conduct of any
Remediation or other activities, and shall provide Purchaser with appropriate
documentation thereof until completion.
 
(b)           In the event that the Ash Landfill cannot be transferred to Parent
or one of its Affiliates (as Parent shall designate) at or prior to the Closing
due to the requirement that the applicable site must be subdivided or otherwise,
Purchaser shall have the right, following the Closing, to seek any required
subdivision or other approvals, and Parent and Holdings shall cooperate in all
reasonable respects with Purchaser’s efforts in achieving same and reimburse
Purchaser for its reasonable out of pocket costs and expenses in connection
therewith.  Following receipt of all required approvals, Parent or one of its
Affiliates (as Parent shall designate) shall accept from Purchaser a fee title
conveyance of the Ash Landfill.
 
6.28          Identification and Agreement Regarding Shared Facilities and
Equipment.  Promptly following the date of this Agreement (and in any event
within twenty (20) days following the date of this Agreement), representatives
of Parent and Purchaser, accompanied by representatives of ACE or DPL, as
applicable, shall visit each Generating Plant (other than Bethlehem 1-8 and
Delta 1-4) (a “Shared Property”), and otherwise reasonably cooperate with each
other for the purpose of identifying any equipment and facilities and other
services or assets that are used both for the generation operations of one of
the Companies and the transmission or distribution operations of ACE or DPL
(“Shared Facilities or Services”).  If there are any Shared Facilities or
Services at the Shared Property, the companies operating at such Shared Location
shall enter into an agreement (the “Shared Services Agreement”) governing the
terms of use of Shared Facilities or Services reflecting commercially reasonable
terms (including appropriate compensation based on cost).  If any equipment and
facilities or other assets identified on the Shared Property that either (a) are
used solely for the transmission or distribution operations of ACE or DPL and
not for the generation operations of one of the Companies or (b) are used solely
 

 
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for the generation operations of one of the Companies and not for the
transmission or distribution operations of ACE or DPL, and such equipment and
facilities or other assets shall subject the other party to materially increased
regulatory or compliance requirements or other incremental costs of a material
nature, then the burdened party may request that the other party reasonably
cooperate in the relocation of such equipment and facilities or other assets to
another appropriate location and the requesting party shall bear the costs of
such removal and relocation.
 
6.29          Delta Independent Engineer.  Each of Parent, Holdings, the Company
and Purchaser agrees to reasonably cooperate with the Delta Independent
Engineer, including, without limitation, by promptly providing the Delta
Independent Engineer with all information it reasonably requests, for the
purpose of determining (i) the certification of COD for the Delta Project
contemplated by Section 7.02(m) and (ii) any additional costs or capital
expenditures relative to the Delta Construction Budget to be taken into account
in determining Closing Date Capital Expenditures.
 
ARTICLE VII
 
CONDITIONS
 
7.01          Conditions to Each Party’s Obligation.  The respective obligations
of each party to effect the transactions contemplated by this Agreement are
subject to the satisfaction or, to the extent permitted by applicable Law,
written waiver on or prior to the Closing Date of each of the following
conditions:
 
(a)           HSR Act.  The waiting period (and any extension thereof)
applicable to the transactions contemplated by this Agreement under the HSR Act
shall have expired or been terminated.
 
(b)           Required Approvals.  The Required Approvals shall have been
obtained, in each case in form and substance reasonably satisfactory to
Purchaser.
 
(c)           No Injunctions or Restraints.  No Order issued by a court of
competent jurisdiction or by a Governmental or Regulatory Authority, nor any Law
or other legal restraint or prohibition, shall be in effect that would make the
transactions contemplated by this Agreement illegal or otherwise prevent the
consummation thereof.
 
7.02          Conditions to Obligations of Purchaser.  The obligations of
Purchaser to effect the transactions contemplated by this Agreement are further
subject to the satisfaction, or to the extent permitted by applicable Law, the
waiver on or prior to the Closing Date of each of the following conditions:
 
(a)           Representations and Warranties.  The (i) representations and
warranties of Parent, Holdings and the Company contained in Article III of this
Agreement that are not qualified by “material”, “materially”, “Material Adverse
Effect”, “material adverse effect” or similar qualification or standard shall be
true and correct, in the aggregate, in all material respects at and as of the
Closing as if made on the Closing Date (except to the extent expressly made as
of another date, in which case as of such other date) and (ii) representations
and
 

 
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warranties of Parent, Holdings and the Company contained in Article III of this
Agreement that are qualified by “material”, “materially”, “Material Adverse
Effect”, “material adverse effect” or similar qualification or standard shall be
true and correct in all respects at and as of the Closing as if made on the
Closing Date (except to the extent expressly made as of another date, in which
case as of such other date).
 
(b)           Performance.  Parent, Holdings and the Company shall have duly
performed and complied in all material respects with all agreements, covenants
and obligations required by this Agreement to be so performed or complied with
by them at or before the Closing.
 
(c)           Certificates.  Purchaser shall have received certificates executed
on behalf of Parent by an authorized officer of Parent certifying that the
conditions set forth in Sections 7.02(a) and (b) have been satisfied.
 
(d)           Absence of Material Adverse Effect.  Since the date of this
Agreement, there shall not have occurred any events, conditions, effects,
changes, developments or circumstances that, individually or in the aggregate,
have had or are reasonably likely to have, a Material Adverse Effect.
 
(e)           Assignment of Membership Interests.  Purchaser shall have received
(i) an assignment and assumption agreement in form and substance reasonably
satisfactory to Purchaser assigning to Purchaser the Membership Interests (free
and clear of all Liens), all membership rights and all rights to participate in
the management of the Company, including the appointment of Persons identified
to Holdings in writing prior to the Closing as the entire Board of Managers of
the Company as of the Closing, and (ii) an accession signature page to the
Limited Liability Company Agreement admitting Purchaser as the sole member of
the Company.
 
(f)            FIRPTA Certificate.  Purchaser shall have received a
certification of non-foreign status from Parent in accordance with Treasury
Regulation Section 1.1445-2(b).
 
(g)           Closing Deliverables. The Closing Deliverables shall have been
delivered to Purchaser in accordance with Section 2.03(b).
 
(h)           Permits.  Except as set forth in Section 7.02(h) of the Disclosure
Letter, each of the Companies shall hold all Permits and Environmental Permits
necessary to conduct its businesses in all material respects in accordance with
applicable Laws.
 
(i)            Lender Consents.  Parent shall have received the Lender Consents
identified in Section 3.11 of the Disclosure Letter.
 
(j)            Title and Survey Matters.  Purchaser shall have received title
insurance policies or “marked up” title commitments from Purchaser’s Title
Insurance Company covering all of the Real Property effective as of the Closing
Date and such title commitments shall evidence that each Unpermitted Lien and
each Seller’s Lien has either been cured, removed as an exception to title, or
otherwise waived by Purchaser in its sole discretion.
 

 
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(k)           Company Audited Financial Statements.  Parent shall have delivered
to Purchaser the Company Audited Financial Statements accompanied by the
Unqualified Opinion.  The consolidated results of operations of the Company for
the periods set forth in the Company Audited Financial Statements and the
consolidated financial condition of the Company as of December 31, 2009 as set
forth in the Company Audited Financial Statements shall not be materially
different from that which is reflected in the Company Unaudited Financial
Statements (except to the extent that the difference is attributable to (i) the
Push Down Accounting Adjustments, (ii) adjustments associated with the reduced
materiality threshold associated with the Company Audited Financial Statements
when considered separately from the Parent consolidated financial statements and
(iii) adjustments associated with the Excluded Assets, in each case which
adjustments are identified in Section 7.02(k) of the Disclosure Letter).
 
(l)            Reorganization.  Subject to the second sentence of Section 6.09,
the actions comprising the Reorganization shall have been consummated in all
material respects as set forth in Section 6.09 of the Disclosure Letter.
 
(m)          Delta Project.  As of the Closing Date, the Delta Project shall be
on schedule for COD no later than March 1, 2012, as certified by the Delta
Independent Engineer.
 
(n)           Utility Mortgages. (i) The trustee with respect to the ACE
Mortgage shall have executed and delivered (A) a release substantially in the
form attached hereto as Exhibit I-1 releasing each of the applicable amended and
restated Generating Plant Easements from the lien of the ACE Mortgage, (B) to
the extent not previously released, a release in customary form and acceptable
to Purchaser’s Title Insurance Company releasing the rights of the lessee under
the Cumberland Lease from the lien of the ACE Mortgage, and (C) a release in
ACE’s customary form and acceptable to Purchaser’s Title Insurance Company
releasing the Deepwater Real Property from the lien of the ACE Mortgage, and
(ii) the trustee with respect to the DPL Mortgage shall have executed and
delivered (A) a release substantially in the form attached hereto as Exhibit
I-2, releasing each of the applicable amended and restated Generating Plant
Easements from the lien of the DPL Mortgage and (B) to the extent not previously
released, a release in customary form and acceptable to Purchaser’s Title
Insurance Company releasing the Edge Moor and Hay Road Real Property.
 
(o)           Delta Pipeline Matter.  Parent shall have satisfied or caused to
be satisfied the conditions set forth in Section 7.02(o) of the Disclosure
Letter.
 
(p)           Regulatory Action.  No Regulatory Action shall be pending
regarding the Designated Generating Plants.
 
7.03          Conditions to Obligations of Parent, Holdings and the
Company.  The obligations of Parent, Holdings and the Company to effect the
transactions contemplated by this Agreement are further subject to the
satisfaction, or to the extent permitted by applicable Law, the written waiver
on or prior to the Closing Date of each of the following conditions:
 
(a)           Representations and Warranties.  The (i) representations and
warranties of Purchaser contained in Article IV of this Agreement that are not
qualified by “material”, “materially”, “Material Adverse Effect”, “material
adverse effect” or similar qualification or
 

 
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standard shall be true and correct, in the aggregate, in all material respects
at and as of the Closing as if made on the Closing Date (except to the extent
expressly made as of another date, in which case as of such other date) and (ii)
representations and warranties of Purchaser contained in Article IV of this
Agreement that are qualified by “material”, “materially”, “Material Adverse
Effect”, “material adverse effect” or similar qualification or standard shall be
true and correct in all respects at and as of the Closing as if made on the
Closing Date (except to the extent expressly made as of another date, in which
case as of such other date).
 
(b)           Performance.  Purchaser shall have duly performed and complied in
all material respects with all agreements, covenants and obligations required by
this Agreement to be so performed or complied with by it at or before the
Closing.
 
(c)           Certificates.  Holdings shall have received a certificate executed
on behalf of Purchaser by an authorized officer of Purchaser certifying that the
conditions set forth in Sections 7.03(a) and (b) have been satisfied.
 
(d)           Closing Payment.  Holdings shall have received the Closing Payment
in accordance with Section 2.02.
 
(e)           Parent Letters of Credit.  Purchaser shall have (i) obtained and
delivered to Parent a full and unconditional release of all of the obligations
of Parent and its Affiliates (other than the Companies) with respect to each
Parent Letter of Credit, each of which releases shall be reasonably acceptable
to Parent or (ii) delivered to Parent cash collateral or a Purchaser Letter of
Credit in an amount equal to the aggregate amount of all Unreleased Parent
Letters of Credit.
 
(f)           Parent Guarantees.  Purchaser shall have (i) obtained and
delivered to Parent a full and unconditional release of all of the obligations
of Parent and its Affiliates (other than the Companies) with respect to each
Parent Guarantee, each of which releases shall be reasonably acceptable to
Parent or (ii) delivered to Parent cash collateral or a Purchaser Letter of
Credit in an amount equal to the maximum aggregate amount of all Unreleased
Parent Guarantees.
 
ARTICLE VIII
 
TAX MATTERS
 
8.01          Tax Return Filings.
 
(a)           Parent shall timely prepare (or cause to be timely prepared) all
Tax Returns of the Companies that are due with respect to any Pre-Closing Tax
Filing Period.  Such Tax Returns shall be prepared on a basis consistent with
the past practices of the Companies.  Except as provided in Section 8.01(b),
Parent shall provide copies of such Tax Returns to Purchaser, in the case of
income Tax Returns, not less than fifteen (15) days prior to the due date for
the filing of such Tax Returns, and, in the case of all other Tax Returns, not
less than five (5) Business Days prior to the due date for the filing of such
Tax Returns, and Purchaser may provide comments to such Tax Returns, but Parent
shall not be obligated to accept any such comments.  Parent shall cause the
relevant Companies to execute and file such Tax Returns and
 

 
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to provide Purchaser a copy of such Tax Returns.  In addition, Parent shall pay
on or prior to the due date, any amount due and payable on such Tax Returns.
 
(b)
 
(i)           Any Tax Return which Parent is responsible to prepare (or cause to
be prepared) and cause to be executed and filed pursuant to Section 8.01(a) and
which reflects a position taken on such Tax Return that is (A) inconsistent with
past practices of the Company (other than changes to the names of certain
Companies as a result of the Reorganization) and (B) likely to negatively affect
the Companies for a Post-Closing Tax Period, shall, in the case of income Tax
Returns, not less than fifteen (15) days prior to the due date for the filing of
such Tax Returns, and, in the case of all other Tax Returns, not less than five
(5) Business Days prior to the due date for the filing of such Tax Returns, be
prepared and submitted by Parent to Purchaser for Purchaser’s consent, which
consent shall not be unreasonably withheld or delayed.  If Purchaser consents to
such Tax Return, Parent shall (1) cause the relevant Company to execute and file
such Tax Return, and (2) shall pay on or prior to the due date, any amount due
and payable on such Tax Return.
 
(ii)           Any Tax Return of the Companies which relates to any Straddle
Period shall, not less than fifteen (15) days prior to the due date for the
filing of such Tax Return, be prepared and submitted by the party responsible
for its filing pursuant to this Section 8.01 to Parent or Purchaser, as the case
may be, for such non-filing party’s consent, which consent shall not be
unreasonably withheld or delayed.  If the non-filing party consents to such Tax
Return, the party responsible for filing such Tax Return shall (A) cause the
relevant Company to execute and file such Tax Return, and (B) shall pay on or
prior to the due date, any amount due and payable on such Tax Return.
 
(c)           Except as provided in Section 8.01(a), Purchaser shall have the
exclusive authority and obligation to prepare and timely file, or cause to be
prepared and timely filed, all Tax Returns of the Companies.
 
8.02          Tax Indemnification.
 
(a)           From and after the Closing, Parent and Holdings, jointly and
severally, shall be liable for, and shall indemnify Purchaser, its Affiliates
(including the Companies) and each of their respective directors, officers,
employees, shareholders, agents, successors and assigns (the “Purchaser
Indemnitees”) against and hold them harmless (without duplication) from (i) all
Liability for Taxes of the Companies with respect to any Pre-Closing Tax Period
or attributable to the income, assets or operations of the Companies for any
Pre-Closing Tax Period; (ii) all Taxes and Losses resulting from, arising out
of, or incurred with respect to, any claims that may be asserted by any party
based on, attributable to, or resulting from any breach of any representation or
warranty contained in Section 3.08 or covenant contained in this Article VIII;
(iii) all Taxes of Parent and its Subsidiaries (other than Taxes of the
Companies that are not described in clause (ii) of the definition of Taxes)
imposed on the Companies as a result of the provisions of Treasury Regulations
Section 1.1502-6 or the analogous provisions of any state, local or foreign law;
(iv) all Taxes (other than the Transfer Taxes that are the responsibility of
 

 
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Purchaser pursuant to Section 8.06) resulting from, arising out of, or incurred
with respect to (A) the transfer of the Membership Interests pursuant to this
Agreement (including, but not limited to, any Tax resulting from any election
made under Section 338(h)(10) of the Code (and any corresponding elections under
state, local or other applicable law) pursuant to Section 8.10) and (B) any
other transfer or other transaction contemplated by this Agreement or any
Transaction Document, including, without limitation, any action taken in
connection with or related to the Reorganization; (v) all other Taxes of Parent,
Holdings and their Subsidiaries and Affiliates (other than the Companies) for
any period; (vi) all Liabilities and Taxes imposed on Purchaser or any of the
Companies as a result of (A) N.J. Rev. Stat. §54:50-38, et seq., together with
all regulations, announcements, guidance and other administrative releases or
requirements relating thereto (collectively, the “Bulk Sale Act”) or (B) a
failure by Purchaser, any of the Companies or any other Person to comply in any
or all respects with the Bulk Sale Act, in connection with (1) any of the
transactions contemplated by this Agreement or any Transaction Document
(including, but not limited to, the purchase of the Membership Interests, and
any other sale, transfer or assignment, whether in connection with the
Reorganization or otherwise) or (2) any other transaction engaged in by any of
the Companies occurring on or prior to the Closing Date; (vii) Recaptured
Section 1603 Payments related to any transfer by Parent or Holdings (other than
any Recaptured Section 1603 Payment resulting from Purchaser’s breach of Section
4.11) or action taken by the Parent or Holdings related to property eligible for
the Cash Grant; and (viii) any Tax indemnity obligation of Conectiv Mid-Merit,
LLC pursuant to Article II.H. of the Interconnect Lateral Agreement with respect
to any taxable event occurring in a Pre-Closing Tax Period.  Notwithstanding the
foregoing, Parent and Holdings shall have no Liability for the payment of any
Tax pursuant to this Section 8.02(a) to the extent of Taxes reflected as current
liabilities in the calculation of Closing Date Working Capital or if such Tax is
imposed as a result of Purchaser’s breach of any covenant contained in this
Article VIII.
 
(b)           From and after the Closing, Purchaser shall be liable for and
shall indemnify Parent, Holdings and their Affiliates and each of their
respective directors, officers, employees, shareholders, agents, successors and
assigns against and hold them harmless from (i) all Liability for Taxes (other
than (A)  the Transfer Taxes that are the responsibility of the Parent pursuant
to Section 8.06 and (B) the Taxes described in clauses (iii)-(viii) of Section
8.02(a)) of the Companies attributable to the income, assets or operations of
the Companies for any Post-Closing Tax Period, (ii) any breach by Purchaser of,
or failure by Purchaser to perform, any of its covenants or obligations
contained in this Article VIII; (iii) any Liability for Taxes arising solely
from any actions taken by Purchaser on the Closing Date that are not
contemplated by this Agreement; and (iv) any Recapture Section 1603 Payment
related to any transfer by Purchaser, any action taken by the Purchaser related
to property eligible for the Cash Grant, or any breach by Purchaser with respect
to Section 4.11.
 
(c)           In the case of any taxable period that includes (but does not
begin on) the Closing Date (a “Straddle Period”):  (i) real, personal and
intangible property Taxes (“Property Taxes”) of any of the Companies for the
Pre-Closing Tax Period shall equal the Property Taxes owed by the Company or
such Subsidiary for such Straddle Period multiplied by a fraction, the numerator
of which is the number of days during the Straddle Period that are in the
Pre-Closing Tax Period and the denominator of which is the number of days in the
Straddle Period; and (ii) Taxes of the Companies, other than Property Taxes, for
the Pre-Closing Tax Period shall be computed as if the entire Straddle Period
ended on the day preceding the Closing Date.  Parent
 

 
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shall be liable for Taxes of the Companies that are attributable to the portion
of the Straddle Period ending on the day preceding the Closing Date, and shall
pay such amounts to Purchaser on or before five (5) days prior to the due date
of such Taxes (except to the extent such amount was taken into account in
calculating Closing Date Working Capital).
 
(d)           Notwithstanding anything in this Agreement to the contrary, any
transaction that occurs outside of the ordinary course of business and is not
contemplated pursuant to this Agreement, and that occurs on the Closing Date,
but prior to the Closing (which for the purpose of this Section 8.02(d) shall
mean the actual time of Closing and not the Closing as deemed to occur at
12:01am on the Closing Date) or after Closing as a result of an action taken by
Parent or any of its Affiliates prior to Closing, shall be deemed for purposes
of this Article VIII as occurring in a Pre-Closing Tax Period.  For the
avoidance of doubt, any transaction not contemplated by this Agreement that
occurs on the Closing Date but after the actual time of Closing shall be deemed
to occur for purposes of this Article VIII in a Post-Closing Tax Period.
 
(e)           Parent has requested, and Purchaser hereby agrees, that none of
Parent, Purchaser or any of the Companies shall make any filings pursuant to the
Bulk Sale Act with respect to the transactions contemplated by this
Agreement.  Notwithstanding anything in this Agreement to the contrary, the
failure of Purchaser, any of the Companies or any other Person, including Parent
and Holdings, to comply in any respect with any or all obligations imposed by or
under the Bulk Sale Act shall not be treated as a breach or failure to perform
by Purchaser, Parent or Holdings of any representation, warranty, covenant,
agreement or other obligation contained in this Agreement, and shall not in any
way limit or reduce the obligations of Purchaser, Parent and Holdings pursuant
to this Agreement, including, without limitation, the indemnification
obligations of Purchaser, Parent and Holdings pursuant to this Article VIII.
 
8.03          Cooperation.  Parent, Holdings, the Company and Purchaser shall
reasonably cooperate, and shall cause their respective Affiliates and
Representatives reasonably to cooperate, in preparing and filing all Tax
Returns, including maintaining and making available to each other all records
necessary in connection with Taxes, and in resolving all disputes and audits
with respect to all taxable periods relating to Taxes, including all Tax Claims.
 
8.04          Cash Grant, Refunds and Credits.  Any Cash Grant or refund or
credit of Taxes of the Company or any Subsidiary attributed to any Pre-Closing
Tax Period shall be for the account of Parent (other than any Cash Grant, refund
or credit taken into account as a current asset of any of the Companies in the
calculation of Closing Date Working Capital); provided, however, that Parent and
Holdings shall be required to indemnify the Purchaser Indemnitees pursuant to
Section 8.02 for any Taxes subsequently determined to be owing with respect to
any refund or credit.  Any refund or credit of Taxes of any of the Companies
attributed to any Post-Closing Tax Period shall be for the account of
Purchaser.  Any refund or credit of Taxes of any of the Companies for any
Straddle Period shall be equitably apportioned between Parent and Purchaser
based on the allocation criteria set forth in Section 8.02(c).  Each party
shall, or shall cause its Affiliates to, forward to any other party entitled
under this Section 8.04 to any Cash Grant or refund or credit of Taxes any such
Cash Grant or refund within 15 days after such Cash Grant or refund is received
or reimburse such other party for any such credit within 15 days after the
credit is allowed or applied against another Tax Liability.  The parties shall
treat any
 

 
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payments under this Section 8.04 as an adjustment to the Purchase Price.  The
control of the prosecution of a claim for refund of Taxes paid pursuant to a
deficiency assessed subsequent to the Closing Date as a result of an audit shall
be governed by the provisions of Section 8.07.
 
8.05          Tax Sharing Agreements.  Parent shall cause any and all Tax
sharing allocations, indemnifications, or similar agreements in effect, written
or unwritten, between (a) Parent or any of its Affiliates (other than the
Companies) on the one hand, and (b) the Companies on the other hand, to be
terminated on or before the Closing Date for all Taxes imposed by any Taxing
Authority, regardless of the period in which such Taxes are imposed.  After the
Closing Date, no party shall have any rights or obligations under any such Tax
sharing agreements.
 
8.06          Transfer Taxes.  Notwithstanding anything in this Agreement to the
contrary, Parent and Purchaser shall share equally in the payment of all sales,
use, transfer, recordation, stamp, conveyance, value added or other similar
Taxes, duties, excises or governmental charges imposed by any Taxing Authority,
domestic or foreign, and all recording or filing fees, notarial fees and other
similar costs of Closing (collectively, “Transfer Taxes”) with respect to the
purchase of the Membership Interests by Purchaser; provided, however, that
Parent shall be responsible for all other Transfer Taxes, if any, in connection
with any other transfer or other transaction contemplated by this Agreement,
including, without limitation, the Reorganization.
 
8.07          Procedures Relating to Indemnification of Tax Claims.
 
(a)           If any fact, circumstance, or event shall exist with respect to
which any Purchaser Indemnitee intends to seek an indemnity payment pursuant to
Section 8.02(a), Purchaser shall promptly notify Parent in writing within 5
Business Days of receipt of such fact, circumstance or event (a “Tax
Claim”).  Failure to give notice of a Tax Claim to Parent in writing within 5
Business Days of receipt and in reasonably sufficient detail to allow Parent to
effectively contest such Tax Claim shall affect the Liability of Parent to any
Purchaser Indemnitee only to the extent that Parent’s position is materially
prejudiced as a result thereof.
 
(b)           Parent, at its sole cost and expense, shall have the authority to
control all proceedings taken in connection with any Tax Claim relating solely
to Taxes of any of the Companies for a Pre-Closing Tax Period, and may make all
decisions in connection with such Tax Claim; provided, however, that
(i) Purchaser and counsel of its own choosing shall have the right to
participate fully in all aspects of the prosecution or defense of such Tax Claim
(at Purchaser’s sole cost and expense), and (ii) Parent shall not settle or
compromise any Tax Claim that could adversely affect Purchaser, the Companies or
any Affiliate of the foregoing without the prior written consent of Purchaser
(not to be unreasonably withheld or delayed).  Parent and Purchaser shall
jointly control all proceedings taken in connection with any Tax Claim relating
solely to Taxes of the Companies for a Straddle Period, and neither party shall
settle any such Tax Claim without the prior written consent of the other party
(not to be unreasonably withheld or delayed).  Purchaser shall control all
proceedings with respect to all other Tax Claims.
 
(c)           Except as otherwise provided in this Section 8.07(c), any
indemnity payment to be made under Section 8.02 shall be paid within 30 Business
Days after the
 

 
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applicable indemnitee makes written demand upon the indemnifying party, but in
no case later than five (5) Business Days prior to the date on which the
relevant Taxes are required to be paid to the relevant Taxing Authority
(including as estimated Tax payments).  Notwithstanding the foregoing, in the
case of a payment relating to an assessment by a Taxing Authority that is being
contested by Parent, Holdings or a Purchaser Indemnitee, any payment to be made
by Parent or Holdings under Section 8.02 with respect to the assessment shall be
paid by Parent or Holdings within 30 Business Days following the conclusion of
the applicable contest unless applicable law requires such payment to be made by
an earlier date.  Any request for an indemnity payment under this Article VIII
shall include calculations or other materials supporting such Liability.
 
8.08          Exclusive Remedy and Survival.  Except as otherwise specifically
provided in Section 10.03(d), this Article VIII shall exclusively govern any
claim for indemnification with respect to Taxes, including with respect to
representations and warranties contained in Section 3.08.  All representations
and warranties of Parent contained in Section 3.08 and all rights and
responsibilities relating to the indemnification of Taxes shall survive for 60
days beyond the expiration of the applicable statute of limitations (including
extensions thereof).
 
8.09          Tax Covenants.
 
(a)           Parent, Holdings and Purchaser shall treat the purchase of
Membership Interests contemplated by this Agreement as the purchase of all of
the assets of the Company for federal and applicable state and local income Tax
purposes and shall take no position inconsistent with such treatment in any Tax
Return, any proceeding before any Taxing Authority or otherwise unless required
by applicable Law.
 
(b)           As soon as practicable after the Closing, but in no event more
than 120 days after Closing, Purchaser shall deliver to Holdings a statement
(the “Purchase Price Allocation”) allocating all amounts constituting
consideration for the Membership Interests to the Company’s assets (including
the assets of Subsidiaries treated as disregarded entities) in accordance with
Code Section 1060.  If within 60 days after the delivery of the Purchase Price
Allocation Holdings notifies Purchaser in writing that Holdings objects to the
allocation set forth in the Purchase Price Allocation, Purchaser and Holdings
shall use reasonable best efforts to resolve such dispute within 20 days.  In
the event that Purchaser and Holdings are unable to resolve such dispute within
20 days, Purchaser and Holdings shall jointly retain the Accounting Firm (which
may in turn select an appraiser if needed) to resolve the disputed item.  Upon
resolution of the disputed items, the allocation reflected on the Purchase Price
Allocation shall be adjusted to reflect such resolution.  The costs, fees and
expenses of the Accounting Firm shall be borne equally by Purchaser and
Holdings.
 
(c)           Purchaser, Parent and Holdings agree to act in accordance with the
Purchase Price Allocation (as adjusted, if applicable) in the preparation,
filing and audit of any Tax Return, including IRS Form 8594.  Purchaser, Parent
and Holdings agree to cooperate with the others in preparing IRS Form 8594 and
to furnish the other with a copy of such Form prepared in draft form at least
thirty (30) days before its filing due date.
 
(d)           Parent, Holdings and/or any of the Companies shall not agree to
any settlement or other negotiated resolution relating to the real property tax
Legal Proceedings that
 

 
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would bind Purchaser to any future assessment, methodology, calculation, or
other stipulated method of determining the assessment by agreement or precedent,
without Purchaser’s consent, which consent shall not be unreasonably withheld.
 
8.10          Section 338(h)(10) Election.  At Purchaser’s option, Parent and
Purchaser shall join in making an election under Section 338(h)(10) of the Code
(and any corresponding elections under state, local, or other applicable tax
law) on Form 8023 or in such other manner as may be required by rule or
regulation of the IRS, with respect to the acquisition of Conectiv Mid Merit,
LLC and any other entity that is treated as a C corporation for U.S. federal
income tax purposes that is being purchased pursuant to this
Agreement.  Purchaser will prepare and file the forms necessary for such
election and will provide such forms to Parent at least sixty (60) days prior to
the due date of filing.  Parent shall deliver to Purchaser at least thirty (30)
days prior to the due date of filing such completed forms as are required to be
filed under Section 338(h)(10) of the Code (and analogous provisions of state or
local law).  Purchaser and Parent shall use their commercially reasonable
efforts to agree, as soon as practicable after Closing but in no event later
than one hundred and twenty (120) days following the Closing Date, on the
computation of the modified aggregate deemed sale price (as defined under
Treasury Regulations Section 1.338-4).
 
8.11          Real Property Tax Legal Proceedings.   At any time following the
date of this Agreement, Purchaser may request permission (such permission not to
be unreasonably withheld or denied) to commence, in its own name, a real
property tax Legal Proceeding challenging a municipal tax assessment on any
property of the Companies for years 2010 and thereafter (“Real Property Tax
Legal Proceeding”).  Parent, Holdings and the Company shall reasonably
cooperate, in making available to Purchaser all records necessary in connection
with the Real Property Tax Legal Proceeding, and Purchaser shall provide to
Parent all documents relating to such Real Property Tax Legal Proceeding for
Parent’s approval prior to filing by Purchaser.  At the request of Purchaser,
Parent, Holdings and the Company shall commence, or cause the Subsidiaries to
commence, a Real Property Tax Legal Proceeding in the name(s) of Parent,
Holdings, the Company or any Subsidiary, unless Parent or Holdings reasonably
believes that Parent, Holdings or the Company is likely to be adversely affected
as a result of such Real Property Tax Legal Proceeding.  Parent, Holdings and
the Company shall have the obligation to consult with Purchaser before
commencing and during any Real Property Tax Legal Proceeding in the name(s) of
Parent, Holdings, the Company or any Subsidiary, and, in the case of a Real
Property Tax Legal Proceeding that is not requested by Purchaser, shall obtain
Purchaser's prior written consent to the Real Property Tax Legal Proceeding,
which shall not be unreasonably withheld.  Parent, Holdings and the Company’s
right and obligation to commence a Real Property Tax Legal Proceeding shall
cease upon Closing.  Parent, Holdings, and the Company shall also promptly
provide Purchaser with all real estate assessments and notices received after
the date of this Agreement with respect to real property owned by the Companies.
 

 

 
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ARTICLE IX
 
EMPLOYEE MATTERS
 
9.01           Employee Matters.
 
(a)           Employment of Non-Union Employees.
 
(i)           During the 30-day period following the date of this Agreement,
Parent shall (or Parent shall cause the applicable Parent Employer Party to),
upon reasonable notice and to the extent not disruptive to the business and
operations of the applicable Parent Employer Party, provide Purchaser with
reasonable access to each Non-Union Employee for the purpose of enabling
Purchaser to determine whether it wishes to make a post-Closing offer of
employment to such Non-Union Employee.  No later than fifteen (15) days
following the date of this Agreement, Purchaser shall provide Parent with any
requests for personnel records of Non-Union Employees, and, to the extent
permitted by applicable Law without the consent of such employee, Parent shall
(or Parent shall cause the applicable Parent Employer Party to) provide
Purchaser such Non-Union Employee’s personnel records no later than fifteen (15)
days following receipt by Parent of such request; provided, however, that if
Parent receives such request prior to the date of this Agreement, then Parent
shall (or Parent shall cause the applicable Parent Employer Party to) provide
such personnel records no later than the later of (A) fifteen (15) days
following receipt by Parent of such request and  (B) ten (10) days following the
date of this Agreement.
 
(ii)           Within forty (40) days following the date of receipt by Purchaser
of substantially all of the access and records described in Section 9.01(a)(i),
Purchaser shall (a) make offers of employment to those Company Non-Union
Employees that Purchaser elects to retain as an employee following the Closing
(such offers shall be in compliance with the provisions of Section 9.01(b) and
shall be effective as of the Closing Date) and (b) notify Parent as to the
identity of those Company Non-Union Employees that Purchaser does not elect to
retain as an employee of the Companies following the Closing.  Prior to the
Closing Date, Parent shall (or cause the Companies to) terminate or transfer to
a Parent Employer Party other than any one of the Companies the employment of
each Company Non-Union Employee so designated by Purchaser as well as each
Company Non-Union Employee that does not accept Purchaser’s offer of
employment.  Parent shall be responsible for any and all severance or other
post-termination benefits due each such terminated or transferred Company
Non-Union Employees (including, but not limited to, pursuant to the WARN Act and
any applicable state and local Laws and regulations), and Purchaser shall have
no Liability with respect to such terminated or transferred Company Non-Union
Employees, or to any Company Non-Union Employee that declines Purchaser’s offer
of employment.
 
(iii)           Within forty (40) days following the date of receipt by
Purchaser of substantially all of the access and records described in Section
9.01(a)(i), Purchaser shall notify Parent as to the identity of those Service
Company Employees the services of which Purchaser wishes to retain following the
Closing and Purchaser shall make offers
 

 
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of employment to such Service Company Employees (such offers shall be in
compliance with the provisions of Section 9.01(b) and shall be effective as of
the Closing Date).
 
(b)           Obligations with respect to Post-Closing Non-Union Employees.
 
(i)           In General.  During the two-year period beginning on the Closing
Date, Purchaser shall, or shall cause an Affiliate to, provide to each
Post-Closing Non-Union Employee:
 
(A)           an annual base salary that is not less that the annual base salary
of the Post-Closing Non-Union Employee immediately prior to the Closing Date;
 
(B)           bonus and other short-term and long-term incentive
opportunities  substantially equivalent to the Post-Closing Non-Union Employee’s
bonus and other incentive opportunities under the Benefit Plans for the most
recent calendar year ending prior to the Closing Date (excluding any stock-based
compensation);
 
(C)           severance benefits substantially equivalent in the aggregate to
those specified in paragraph (ii);
 
(D)           health, dental, life, disability benefits, vacation leave, and any
other welfare benefits, in each case substantially equivalent in the
aggregate  to such benefits in effect under the Benefit Plans  immediately prior
to the Closing Date (excluding any retiree welfare benefits);
 
(E)           compensation with substantially equivalent value (as determined on
an after-tax basis, meaning that the value of tax deferral is taken into account
based on a reasonable tax rate, reflecting the applicable employee’s marginal
federal, state and FICA tax rate) in the aggregate to the Assumed Post-Closing
Non-Union Pension Benefits for such employee, which benefits, for the avoidance
of doubt, may be provided in whatever form Purchaser, at its discretion,
selects, including, without limitation, cash, stock or other comparable
benefits, and may be subject to vesting in accordance with criteria similar to
the criteria in the Parent Retirement Plan; provided, however, that such
benefits are in addition to any other benefits required under this Section 9.01;
and
 
(F)           compensation with substantially equivalent value (as determined on
an after-tax basis, meaning that the value of the exclusion of taxation, if any,
is taken into account based on a reasonable tax rate, reflecting the applicable
employee’s marginal federal, state and FICA tax rate) in the aggregate to the
Assumed Post-Closing Non-Union Retiree Welfare Benefits, which benefits may be
provided in whatever form Purchaser, at its discretion selects, including,
without limitation, cash, stock or other comparable benefits, and may be subject
to vesting in accordance with criteria similar to the criteria in Parents’
retiree welfare benefit plan; provided, however, that such benefits are in
addition to any other benefits required under this Section 9.01.
 

 
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In respect of the foregoing benefits, Purchaser may use different providers,
establish its own benefit plans or use its existing plans.
 
(ii)           Severance Benefits.  Purchaser shall provide severance benefits
substantially equivalent to those set forth in Section 9.01(b)(ii) of the
Disclosure Letter to any Post-Closing Non-Union Employee if, within the two-year
period immediately following the Closing Date, (A) the employment of the
Post-Closing Non-Union Employee is terminated by the Companies, other than for
“cause” (as defined in Section 9.01(b)(ii) of the Disclosure Letter), (B) the
Post-Closing Non-Union Employee terminates his or her employment by the
Companies for good reason (as defined in Section 9.01(b)(ii) of the Disclosure
Letter), or (C) the office or workplace location of the Post-Closing Non-Union
Employee is relocated such that it is not within a fifty (50) mile radius of the
Post-Closing Non-Union Employee’s office or workplace location immediately prior
to the Closing Date.  Nothing in this Agreement shall alter the at-will
employment status of any Non-Union Employee.
 
(iii)           Service Credit; Health Plan Provisions.  Purchaser and its
benefit plans shall recognize each Post-Closing Non-Union Employee’s service
with the applicable Parent Employer Party for purposes of eligibility, vesting,
benefit accrual, and benefit calculation in any benefit plan, program, or fringe
benefit arrangement, except that no duplication of benefits is required and
excluding the Calpine Employee Service Recognition Program, which provides for
nominal milestone anniversaries awards.  For purposes of healthcare coverage,
Purchaser shall waive all limitations regarding pre-existing condition
exclusions, actively at work exclusions and waiting periods for Post-Closing
Non-Union Employees.  During the calendar year in which the Closing occurs, all
healthcare expenses incurred by Post-Closing Non-Union Employees that were
qualified to be taken into account for purposes of satisfying any deductible or
out-of-pocket limit under a Parent Employer Party’s health care plans shall be
taken into account for purposes of satisfying any deductible or out-of-pocket
limit under Purchaser’s health care plans for such calendar year.  For the
avoidance of doubt, Purchaser shall give all Post-Closing Non-Union Employees
full credit for all vacation, sick leave or comp time benefits accrued and not
used as of the Closing Date, to the extent included in the Closing Date Working
Capital as a current liability.
 
(iv)           401(k) Plan.  As soon as practicable, and in any event within
forty-five (45) days after the Closing Date, Purchaser shall establish or
designate a defined contribution pension plan (or plans) and trust (or trusts)
intended to qualify under Sections 401(a) and 501(a) of the Code (such plan or
plans referred to as “Purchaser’s Savings Plan”) in which all Post-Closing
Non-Union Employees shall be eligible to participate as of the later of the
Closing Date or the effective date of Purchaser’s Savings Plan.  Purchaser’s
Savings Plan shall provide for deferral options and employer matching
contributions with respect to the Post-Closing Non-Union Employees that are no
less favorable than those provided immediately prior to the Closing Date to the
Post-Closing Non-Union Employees under the Parent Savings Plan (including an
opportunity to make up for any lost deferrals that were unavailable because of a
delay between the Closing Date and the effective date of Purchaser’s Savings
Plan, provided that such opportunity
 

 
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does not cause Purchaser’s Savings Plan to fail to satisfy the safe harbor
requirements under Section 401(k)(12) or Section 401(k)(13) of the
Code).  Contributions to the Parent Savings Plan with respect to the
Post-Closing Non-Union Employees shall cease effective as of the Closing
Date.  Each Post-Closing Non-Union Employee shall be afforded the option of
rolling over his or her account balance (if any) under the Parent Savings Plan
into the Purchaser’s Savings Plan, including any outstanding loan balances
attributable to such accounts.  Any such rollovers may be in the form of cash or
other property, as Parent and Purchaser shall mutually agree prior to such
rollover (which Purchaser agrees shall include promissory notes evidencing loans
from the Parent Savings Plan to Post-Closing Non-Union Employees that are
outstanding on the Closing Date).  Prior to such rollover, Purchaser will
provide Parent with such documents and other information as Parent shall
reasonably request to assure itself that Purchaser’s Savings Plan and the trust
or trusts established pursuant thereto (i) provide for voluntary participant
after-tax contributions and (ii) contain participant loan provisions and
procedures necessary to effect the orderly transfer of participant loan balances
associated with the rollover.  Notwithstanding anything in this Article IX to
the contrary, no such rollover shall take place unless and until Parent has
received written evidence of the adoption of Purchaser’s Savings Plan and the
trust (or trusts) thereunder by Purchaser and either (A) a copy of a favorable
determination letter or opinion letter issued by the IRS and satisfactory to
Parent’s counsel with respect to Purchaser’s Savings Plan or (B) an opinion,
satisfactory to Parent’s counsel, of Purchaser’s counsel to the effect that the
terms of Purchaser’s Savings Plan and its related trust or trusts qualify in
form under Sections 401(a) and 501(a) of the Code. Purchaser and Parent shall
provide each other with such records and information as may be necessary or
appropriate to carry out their obligations under this Section 9.01(b) for the
purposes of administration of Purchaser’s Savings Plan.
 
(v)           Service Company Employee. Parent shall be responsible for any and
all Liabilities (including, but not limited to, severance and post-termination
benefits and/or notice pursuant to the WARN Act and applicable state and local
law and regulations) for each Service Company Employee who is not transferred or
assigned to any one of the Companies as of the Closing Date as contemplated by
Section 9.01(a).
 
(c)           Employment of Union Employees.
 
(i)           Immediately following the Closing, each Union Employee shall
continue to be employed by one of the Companies under the terms of the
applicable Collective Bargaining Agreement.  During the 30-day period following
the date of this Agreement, Parent shall (or Parent shall cause the applicable
Parent Employer Party to), upon reasonable notice and to the extent not
disruptive to the business and operations of the applicable Parent Employer
Party, provide Purchaser with reasonable access, to the extent permitted by
applicable Law and the applicable Collective Bargaining Agreement without the
consent of such employee, to such Union Employee’s personnel records.
 
(ii)           Effective as of the Closing Date, Purchaser shall have in effect
defined benefit pension plans (“Purchaser’s Union Pension Plans”) intended to
be  qualified pursuant to Section 401(a) of the Code, providing benefits as of
the Closing
 

 
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Date identical in all material respects (except for such changes as may be
required by law) to the benefits provided to such Union Employees under the
Parent Retirement Plan as of the Closing Date.
 
(iii)           Union Employees participating in the Parent Retirement Plan
immediately prior to the Closing Date shall become participants in Purchaser's
Union Pension Plans as of the Closing Date. Without limiting the generality of
Section 9.01(c), such Union Employees shall receive credit for all compensation
and service with Parent, Holdings, the Company or a Subsidiary, as applicable,
(subject to the terms of the Parent Retirement Plan) for purposes of eligibility
for participation, vesting, eligibility for early retirement and early
retirement subsidies and benefit accrual under Purchaser's Union Pension Plans.
Parent shall be responsible for Union Employees’ pension benefits accrued up to
the Closing Date, and Purchaser shall be responsible for pension benefits
accrued by Union Employees on and after the Closing Date as provided
herein.  For the avoidance of doubt, Purchaser’s Union Pensions shall provide
each Union Employee early retirement subsidies with respect to benefits accrued
under the Parent Retirement Plan before the Closing Date, except to the extent
that the Union Employee was eligible for early retirement subsidies before the
Closing Date.  Purchaser may offset against the accrued benefits determined
under Purchaser’s Union Pension Plans the accrued benefits determined under the
Parent Retirement Plan.  Parent shall make pension distributions to Union
Employees of the vested portion of their accrued benefits in accordance with the
terms of the Parent Retirement Plan as in effect from time to time. As soon as
reasonably practicable following the Closing Date, Parent shall provide
Purchaser a list showing, as of the Closing Date, the accrued benefit of each
Union Employee under the Parent Retirement Plan.
 
(iv)           Parent, and not Purchaser, shall be responsible for retiree
welfare benefits for each Union Employee, and Parent shall indemnify Purchaser
with respect to such benefits up to the level in effect on the Closing Date, as
described in this Section 9.01(c)(iv):
 
(A)           Parent shall attempt in good faith to enter into an agreement with
each union representing Union Employees that (1) Parent shall provide after the
Closing Date retiree welfare benefits to each Union Employee represented by such
union at the same level as Parent provides its employees represented by such
union at the time the Union Employee retires, and (2) neither Purchaser nor any
of its Affiliates shall be responsible for any retiree welfare benefits for
Union Employees represented by such union.
 
(B)           If Parent enters into an agreement with any union as described in
clause (A) above, Parent shall provide all retiree welfare benefits to Union
Employees represented by each such union.  However, if Purchaser or any of its
Affiliates enters into an agreement with any such union to provide additional or
enhanced retiree welfare benefits to Union Employees represented by such union
beyond the level required under the Collective Bargaining Agreement with such
union that Purchaser inherits, Purchaser and not Parent shall provide such
additional or enhanced benefits.
 

 
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(C)           If Parent does not enter into an agreement with any union as
described in clause (A) above, (1) Purchaser will make good faith efforts to
negotiate, with each union, retiree welfare benefits for Union Employees at the
same level as Parent provides its employees represented by such union at the
time the Union Employee retires, and (2) Parent shall provide to Union Employees
represented by such union whatever level of retiree welfare benefits is agreed
between Purchaser and such union, but not to exceed the level of retiree welfare
benefits in effect on the Closing Date.  If Purchaser or any of its Affiliates
enters into an agreement with any such union to provide additional or enhanced
retiree welfare benefits to Union Employees represented by the union beyond the
level of retiree welfare benefits in effect on the Closing Date, Purchaser and
not Parent shall provide such additional or enhanced benefits beyond the level
of retiree welfare benefits in effect on the Closing Date.
 
(D)           For the avoidance of doubt, Parent shall provide retiree welfare
benefits to a Union Employee only if the Union Employee satisfies the
eligibility criteria for such benefits. For this purpose, the Union Employee’s
service with Purchaser and its Affiliates will be taken into account and
combined with years of service with Parent to determine eligibility for this
benefit at the time of retirement, and the Union Employee must retire from
Parent and Purchaser (including its Affiliates) at the same time.
 
(E)           In order for Parent to provide retiree welfare benefits pursuant
this Section 9.01(c)(iv), Purchaser agrees to provide to Parent by each February
15 sufficient personnel data (including pensionable earnings) for FAS 87 and FAS
106 (or any successor thereto) actuarial valuation purposes (as reasonably
determined by Parent) for the preceding year for each Union Employee until the
year after the Union Employee retires. Parent shall not be required to provide
retiree welfare benefits with respect to any Union Employee for which such data
is not provided; provided, however, that Parent will notify Purchaser if it
claims that there has been any failure by Purchaser to provide the required data
and Purchaser will have a reasonable opportunity to cure any such failure.
 
(v)           401(k) Plan.  As soon as practicable, and in any event within
forty-five (45) days after the Closing Date, Purchaser shall establish or
designate a defined contribution pension plan (or plans) and trust (or trusts)
intended to qualify under Sections 401(a) and 501(a) of the Code (such plan or
plans referred to as “Purchaser’s Union Savings Plan”) in which Union Employees
who are employed by the Companies immediately after the Closing Date shall be
eligible to participate as of the later of the Closing Date or the effective
date of Purchaser’s Savings Plan.  Each such Union Employee shall be afforded
the option of rolling over his or her account balance (if any) under the Parent
Savings Plan into the Purchaser’s Union Savings Plan, including any outstanding
loan balances attributable to such accounts.  Any such rollovers may be in the
form of cash or other property, as Parent and Purchaser shall mutually agree
prior to such rollover (which Purchaser agrees shall include promissory notes
evidencing loans from the Parent Savings Plan to such Union Employees that are
outstanding on the
 

 
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Closing Date).  Prior to such rollover, Purchaser will provide Parent with such
documents and other information as Parent shall reasonably request to assure
itself that Purchaser’s Union Savings Plan and the trust or trusts established
pursuant thereto (i) provide for voluntary participant after-tax contributions
and (ii) contain participant loan provisions and procedures necessary to effect
the orderly transfer of participant loan balances associated with the
rollover.  Notwithstanding anything in this Article IX to the contrary, no such
rollover shall take place unless and until Parent has received written evidence
of the adoption of Purchaser’s Union Savings Plan and the trust (or trusts)
thereunder by Purchaser and either (A) a copy of a favorable determination
letter or opinion letter issued by the IRS and satisfactory to Parent’s counsel
with respect to Purchaser’s Union Savings Plan or (B) an opinion, satisfactory
to Parent’s counsel, of Purchaser’s counsel to the effect that the terms of
Purchaser’s Union Savings Plan and its related trust or trusts qualify in form
under Sections 401(a) and 501(a) of the Code. Purchaser and Parent shall provide
each other with such records and information as may be necessary or appropriate
to carry out their obligations under this Section 9.01(c)(v) for the purposes of
administration of Purchaser’s Union Savings Plan.
 
9.02           COBRA.  Purchaser shall provide notice of, and the opportunity to
purchase, continuation coverage as required by COBRA to any dependent or former
dependent of a Post-Closing Non-Union Employee or Union Employee who incurs a
“qualifying event” (as such term is defined in COBRA) on or after the Closing
Date.
 
9.03           WARN Act.  Purchaser shall be responsible, with respect to the
transactions contemplated by this Agreement, for satisfying all requirements of
the WARN Act and any applicable state and local Laws and regulations for the
notification of its employees of any “employment loss” within the meaning of the
WARN Act (or such similar term under any applicable state or local laws and
regulations) that occurs following the Closing Date.  However, Parent will be
responsible for satisfying all requirements of the WARN Act and any applicable
state and local Laws and regulations for the notification of any “employment
loss” within the meaning of the WARN Act (or such similar term under any
applicable state or local laws and regulations) required to be given to any
Non-Union Employees who do not become or remain employees of Purchaser as of the
Closing Date or any Union Employee who terminated prior to the Closing Date.
 
9.04           Employee Liabilities.  Except as otherwise provided in this
Article IX, Parent and its Affiliates (other than the Companies) shall retain
all Liabilities for claims of employees and former employees of the Companies
(and their spouses and dependents) under the Benefit Plans other than Benefit
Plans maintained or sponsored by any of the Companies, whether such claims are
incurred or made before, on or after the Closing Date.  Parent and its
Affiliates (other than the Companies) shall be solely responsible for paying and
providing long-term disability and life insurance benefits with respect to any
employee of the Company or its Subsidiaries (and any individual formerly
employed by the Company or any such Subsidiary) who is receiving long-term
disability benefits as of the Closing Date until the obligation to pay such
benefits first terminates.  Parent shall take such action as is necessary to
provide that all Non-Union Employees and Union Employees who are employed by any
of the Companies following the Closing, who are participants in the Parent
Retirement Plan and have a fully vested and non-forfeitable right to their
respective accrued benefits under such Parent Retirement Plan
 

 
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as of the Closing Date (regardless of their respective years of vesting credit
under the Parent Retirement Plan).
 
9.05           No Transfer of Benefit Plans.  (a) Purchaser or its Affiliates
shall not be obligated to assume, continue or maintain any of the Benefit Plans
(except as otherwise provided in this Article IX); (b) no assets or Liabilities
of any Benefit Plans shall be transferred to, or assumed by, Purchaser or its
Affiliates or their respective  benefit plans; and (c) Parent shall be solely
responsible for funding and/or paying any benefits under any of the Benefit
Plans other than Benefit Plans maintained or sponsored by any of the Companies,
including any termination benefits and other employee entitlements accrued under
such plans by or attributable to employees of any of Parent and the Parent
Employer Parties.
 
9.06           No Additional Rights.  Nothing in this Agreement, express or
implied, shall: (a) be treated as an amendment or other modification of any
Benefit Plan or any employee benefit plan, program, agreement or arrangement of
Purchaser or its Affiliates, (b) confer upon any employee of Parent, any Parent
Employer Party or the Company or any Subsidiary, or any representative of any
such employee, any rights or remedies, including any right to employment or
continued employment for any period or terms of employment, for any nature
whatsoever, or (c) be interpreted to prevent or restrict Purchaser or its
Affiliates from modifying or terminating the employment or terms of employment
of any Post-Closing Non-Union Employee or any Union Employee (subject to any
applicable Collective Bargaining Agreement), including the amendment or
termination of any employee benefit or compensation plan, program or
arrangement, after the Closing Date.
 
ARTICLE X
 
SURVIVAL AND INDEMNIFICATION
 
10.01          Survival.  Except as otherwise provided in Section 8.08, all of
the representations and warranties contained in this Agreement shall remain
operative and in full force and effect until the date that is eighteen (18)
months after the Closing Date; provided, however, that (a) the representations
and warranties contained in Section 3.01 (Organization and Qualification),
Section 3.02 (Authority to Execute and Perform Agreement), Section 3.03
(Capitalization and Title to Membership Interests), Section 3.04 (Subsidiaries),
Section 3.21 (Brokerage), the last two sentences of Section 3.28 (Regulatory
Matters), Section 4.01 (Organization and Qualification), Section 4.02 (Authority
to Execute and Perform Agreement) and Section 4.10 (Brokerage) shall survive the
Closing indefinitely; (b) the representations and warranties contained in
Section 3.20 (Environmental Matters) shall survive until the date that is three
(3) years after the Closing Date; and (c) the representations and warranties
contained in Section 3.16 (Benefit Matters) and Section 3.17 (Labor Matters)
shall survive for sixty (60) days beyond the applicable statute of limitations
(giving effect to any extensions and waivers thereof) (such applicable period,
the “Survival Period”).  No claim for indemnification hereunder for breach of
any such representations or warranties may be made after the expiration of the
applicable Survival Period; provided, however, that any claim made or asserted
by a party within the applicable Survival Period shall survive such expiration
until such claim is finally resolved and all obligations with respect thereto
are fully satisfied.  Each covenant and agreement contained in this Agreement
shall remain operative and in full force and effect until the date that
 

 
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is eighteen (18) months after the last date that a Person is required to take
any action or refrain from taking any action under such covenant or agreement.
 
10.02          Exclusivity.  After the Closing, to the fullest extent permitted
by applicable Law, the indemnities set forth in Section 8.02 and Section 10.03
shall be the exclusive remedies of Purchaser and its Affiliates against Parent,
Holdings and their respective Affiliates, on the one hand, and of Parent,
Holdings and their respective Affiliates against Purchaser and its Affiliates
and Representatives, on the other hand, for any breach of representation or
warranty or breach of any covenant or agreement contained in this
Agreement.  Notwithstanding the foregoing, nothing herein will eliminate the
availability to the parties after the Closing of any remedies available under
applicable Law for fraud, bad faith or willful misconduct.
 
10.03          Indemnification.
 
(a)           Subject to Section 10.03(c) and the other Sections of this Article
X, Parent and Holdings, jointly and severally, shall indemnify Purchaser and its
Affiliates and each of their respective directors, officers, successors and
assigns (collectively, the “Purchaser Indemnified Parties”) in respect of, and
save and hold each of them harmless from and against, any and all Losses arising
out of or relating to:
 
(i)           any breach of a representation or warranty made by Parent,
Holdings or the Company contained in this Agreement (other than Section 3.08,
indemnity for which is provided in Article VIII) as of the Closing Date;
provided, however, that, (A) for purposes of determining whether any such breach
has occurred (other than with respect to the Specified Representations), all
qualifications of Material Adverse Effect and materially adverse to the
Companies as a whole shall be disregarded; (B) for purposes of determining
whether any such breach by Parent, Holdings or the Company of the Specified
Representations has occurred, all qualifications of materiality, material,
materially adverse, Material Adverse Effect and similar qualifications or
standards shall be disregarded; and (C) after it has been determined that any
such breach of representation or warranty has occurred, the Losses shall be
calculated with respect to such breach of representation or warranty without
regard to qualifications of materiality, material, materially adverse, Material
Adverse Effect or similar qualifications or standards;
 
(ii)           any breach or non-fulfillment of any covenant or agreement by
Parent, Holdings or the Company contained in this Agreement (other than Article
VIII, indemnity for which is provided for therein);
 
(iii)           (A) actions taken (or not taken but required to have been taken)
by Parent, Holdings or the Company to consummate the Reorganization, (B) any
costs, expenses or penalties incurred by any of the Companies to effect the
Reorganization, (C) any part of the Reorganization that is not completed prior
to the Closing, (D) any increase in rates or charges to any of the Companies
resulting from the failure to obtain a waiver from FERC’s capacity release
requirements necessary permanently to release or assign the Columbia Gas
Contract and the Spectra Service Agreement, (E) any costs and expenses resulting
from any amendment or modification to any Contract transferred
 

 
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or assigned to any of the Companies in connection with the Reorganization, to
the extent that such costs and expenses exceed those in effect under the terms
of such Contract immediately prior to such amendment or modification, and (F)
any claims of any kind arising after the Closing under any Contracts transferred
or assigned by any of the Companies to Parent or any of its Affiliates (other
than any of the Companies) as part of the Reorganization; provided, however,
that in no event shall Parent or Holdings be obligated to indemnify any
Purchaser Indemnified Party under this Section 10.03(a)(iii) for any costs or
expenses that are attributable to Purchaser being required to provide credit
support under the express terms of any Contract transferred or assigned to any
of the Companies in connection with the Reorganization;
 
(iv)           the Excluded Assets;
 
(v)           except for matters addressed by Section 10.03(a)(vii)(D), any
claims by any Person (including employees, directors and officers) for tort or
personal injury, including bodily injury and loss of life, which relate to the
period prior to the Closing;
 
(vi)           except as otherwise provided in Article IX, (A) any claims by
current or former directors, officers or employees of any of the Companies
relating to the period of service prior to Closing including, without
limitation, claims for indemnity under any charter or bylaw provisions and any
claims arising out of or relating to the agreements set forth in Section 3.13(r)
of the Disclosure Letter, (B) obligations under any Benefit Plan or any other
employee plan, program, policy, arrangement or agreement sponsored or
maintained, or entered into, by Parent or any of its Affiliates (other than the
Companies) and (C) any claims, obligations or Liabilities whatsoever relating
to, or with respect to, current or former employees of Parent or any of its
Affiliates who are not employed by Purchaser or any of its Affiliates after
Closing;
 
(vii)           any of the following locations or matters (collectively the
“Seller Retained Environmental Liabilities”), as to which Parent and Holdings
shall retain all Liabilities:
 
(A)           in accordance with Section 6.08, any ISRA Compliance Costs
incurred by Purchaser in respect of the New Jersey ISRA Property in excess of
$10,000,000 (the “Remediation Cap”);
 
(B)           any Environmental Claims, Environmental Conditions, or Liabilities
of any kind under Environmental Laws, in respect of any Former Property;
 
(C)           any Environmental Claims, Environmental Conditions, or Liabilities
of any kind under Environmental Laws, in respect of any Off-Site Location to the
extent attributable to the business or operations of the Companies prior to the
Closing Date;
 
(D)           any Liability to third parties (including employees) for bodily
injury or loss of life, to the extent caused or allegedly caused by the exposure
to Hazardous Substances, or by any Environmental Conditions, at the Real
Property or at any Former Property or (to the extent attributable to the
business or operations of the Companies on or prior to the
 

 
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Closing Date) any Off-Site Location, in each case to the extent attributable to
the business or operations of any of the Companies prior to the Closing Date;
 
(E)           the failure by the Company or any Subsidiary to comply with, on or
prior to the Closing Date, Environmental Laws attributable to the construction
of new, or modification of existing, sources of air emissions, including the
following: (i) construction or modification of an existing source without first
obtaining required construction and operating permits; (ii) the applicable
national standards of performance for new or modified stationary sources; and
(iii) the applicable state implementation plans governing construction or
modification of stationary sources;
 
(F)           any monetary penalties, fines or assessments relating to
Administrative Order and Notice of Civil Administrative Penalty Assessment
PEA070002-65495 with respect to Deepwater Unit 6/8 and Unit 1 received April 10,
2007;
 
(G)           any monetary penalties, fines or assessments relating to
Administrative Order and Notice of Civil Administrative Penalty Assessment
PEA070001-65001 with respect to Deepwater Unit 6/8 and Unit 1 received May 29,
2007;
 
(H)           the Ash Landfill at the Edge Moor location as depicted on DPL
drawing no. RE-00011 presented in the Edge Moor Station Overview dated January
26, 2010;
 
(I)            any Environmental Conditions existing on the Real Property as of
the Closing attributable to transmission and distribution facilities or
equipment owned or operated by Parent or any of its Affiliates, including but
not limited to transformers, substations, cables, poles and pole yards, service
centers and equipment storage sites; and
 
(J)            the following environmental remediation sites (as identified in
the Form 10-K for the fiscal year ended December 31, 2009, filed by Parent with
the Securities and Exchange Commission on February 26, 2010):  the Indian River
Power Plant site; the Metal Bank/Cottman Avenue site; the Wilmington Coal Gas
South site; the Peck Iron and Metal site; the Ward Transformer site; the Delilah
Road Landfill site; the Frontier Chemical site; and the Franklin Slag Pile site;
 
(viii)         any PJM capacity market availability charges, deficiency charges,
test failure charges, penalty charges, or emergency procedure charges incurred
by any of the Companies applicable to the period ending May 31, 2010, net of any
bonus or credit for superior performance;
 
(ix)           any violation prior to the Closing of the Shipper-Must-Have-Title
Requirements;
 
(x)            any and all violations (including, but not limited to, “possible
violations”, “alleged violations” and “confirmed violations”, as such terms are
used by NERC) of any NERC reliability standard occurring prior to the Closing
Date;
 
(xi)           any refunds attributable to periods prior to the Closing
resulting from the pending appeal in D.C. Circuit Case No. 09-1296 (challenge to
PJM RPM);
 

 
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(xii)           the failure of any of Parent’s Affiliates to comply with (A) the
purchase option contained in Article 23 of the amended and restated Cumberland
Lease or (B) the purchase option contained in Section 8.17 of the Amended and
Restated Generating Plant Easements;
 
(xiii)          matters identified as indemnification obligations of Parent in
Section 7.02(o) of the Disclosure Letter;
 
(xiv)         any bills or other charges (including any interest or penalties)
received by any of the Companies after the Closing (and not included in the
calculation of Closing Date Working Capital) for electric service provided to
any of the Generating Plants by an Affiliate of Parent prior to the Closing, and
the cost of installing or replacing any electricity metering devices that an
Affiliate of Parent elects to install to measure the electricity provided to the
Generating Plants to the extent chargeable to the Generating Plants; and
 
(xv)           during the period of 10 years following the Closing Date, the
failure by Parent, Holdings or any of the Companies, or their Affiliates, to
obtain any state utility regulatory commission approval required for (A) the
current ownership by one or more of the Companies of the Designated Generating
Plants or the owner’s use of or access thereto or (B) the consummation of the
transactions contemplated by this Agreement and including, without limitation,
the execution, validity and enforceability of the Transaction Documents (except
to the extent that any such state utility regulatory commission approvals are
contemplated by any such Transaction Document), including any Losses
attributable to any related restrictions or adverse conditions imposed by a
state utility regulatory commission on the ownership or operation of the
Designated Generating Plants, or any Losses (including increases to the purchase
prices or other restrictions on ownership or use) with respect to the exercise
by the relevant Company of any purchase option contained in a Transaction
Document.
 
(b)           Subject to Section 10.03(c) and the other Sections of this Article
X, Purchaser shall indemnify Parent, Holdings and their respective Affiliates
and each of their respective directors, officers, successors and assigns
(collectively, the “Seller Indemnified Parties”) in respect of, and save and
hold each of them harmless from and against, any and all Losses incurred by any
of them arising out of or relating to:
 
(i)             any breach of a representation or warranty made by Purchaser
contained in this Agreement; provided, however, that, (A) for purposes of
determining whether any such breach by Purchaser of the Specified
Representations has occurred, all qualifications of materiality, material,
materially adverse, and similar qualifications or standards shall be
disregarded; and (B) after it has been determined that any such breach has
occurred, the Losses shall be calculated with respect to such breach without
regard to qualifications of materiality, material, materially adverse, or
similar qualifications or standards;
 

 
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(ii)           any breach or non-fulfillment of any covenant or agreement by
Purchaser contained in this Agreement (other than Section 8.09, indemnity for
which is provided in Article VIII);
 
(iii)           except for Seller Retained Environmental Liabilities and any
matters addressed by Section 10.03(a)(i), any violation or alleged violation of,
or noncompliance or alleged noncompliance with, any Environmental Law prior to,
on or after the Closing Date (A) by the Companies, (B) arising from or relating
to the business or operations of the Companies (or any former owner or operator
of the Real Property) prior to, on or after the Closing Date, or (C) relating to
the Real Property or the Generating Plants, including the presence or alleged
presence of Hazardous Substances on, in, under or migrating to or from the Real
Property, prior to, on or after the Closing Date, including the cost of
correcting such violations or noncompliance and fines and penalties arising out
of such violations or noncompliance;
 
(iv)           except for Seller Retained Environmental Liabilities and any
matters addressed by Section 10.03(a)(i), the treatment, storage, disposal,
recycling or the Release of Hazardous Substances prior to, on, or after the
Closing Date at, on, in, under or migrating to or from the Real Property;
 
(v)           except as otherwise provided in Article IX, (A) any claims by
current or former directors, officers or employees of the Companies relating to
the period of service after the Closing including, without limitation, claims
for indemnity under any charter or bylaw provisions, and (B) after Closing, any
such plan, program, policy, arrangement or agreement (including a Benefit Plan)
sponsored or maintained by Purchaser or any of its Affiliates (including the
Companies); and
 
(vi)           subject to Section 10.03(a)(iii), any claims of any kind arising
after the Closing under any Contracts transferred or assigned to any of the
Companies as part of the Reorganization, but excluding claims relating to
non-performance or default prior to the Closing.
 
(c)           Notwithstanding anything to the contrary contained in this
Agreement:
 
(i)             in no event shall Parent and Holdings, on the one hand, or
Purchaser, on the other hand, be liable under Section 10.03(a)(i) or Section
10.03(b)(i) of this Agreement, as the case may be, for an amount that
exceeds Three Hundred and Twenty million Dollars ($320,000,000) (the “Cap”);
provided, however, that (A) indemnification with respect to the representations
and warranties in Section 3.01 (Organization and Qualification), Section 3.02
(Authority to Execute and Perform Agreement), Section 3.03 (Capitalization and
Title to Membership Interests), Section 3.04 (Subsidiaries), Section 3.10 (No
Breach), Section 3.11 (Consents and Approvals), Section 3.21 (Brokerage), the
first sentence of Section 3.23 (Personal Property), Section 4.01 (Organization
and Qualification), Section 4.02 (Authority to Execute and Perform Agreement)
and Section 4.10 (Brokerage) (collectively, the “Specified Representations”),
and (B) indemnification based upon or arising out of fraud, bad faith or willful
misconduct, shall not be subject to the Cap; and
 

 
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(ii)            in no event shall Parent and Holdings, on the one hand, or
Purchaser, on the other hand, be liable under Section 10.03(a)(i) or Section
10.03(b)(i) of this Agreement, as the case may be, unless and until the
Indemnified Parties thereunder have suffered, incurred, sustained or become
subject to Losses referred to in such Section in excess of Ten Million Dollars
($10,000,000) in the aggregate (the “Deductible”), and then only to the extent
of any such excess (subject to the Cap, if applicable); provided, however, that
(A) indemnification with respect to the Specified Representations and Section
3.24 (Emission Allowances) and (B) indemnification based upon or arising out of
fraud, bad faith or willful misconduct, shall not be subject to the Deductible.
 
(d)           To the extent permissible by Law, any indemnity payment under this
Agreement (including, for the avoidance of doubt, such a payment under Article
VIII) shall be deemed to be, and each of Parent and Purchaser shall treat such
payments as, an adjustment to the Purchase Price for federal, state, local and
foreign income tax purposes.
 
(e)           In calculating amounts payable to an Indemnified Party under this
Agreement, the amount of any indemnifiable Losses shall be determined without
duplication of any other indemnifiable Loss for which an indemnification claim
has been made under any other covenant, agreement, representation or
warranty.  The amount of any indemnifiable Loss shall be reduced to the extent
that the Indemnified Party receives any insurance proceeds or other payment with
respect to an indemnifiable Loss from an unaffiliated party.
 
(f)            In addition to the other limitations set forth in this Article X,
with respect to any claim for indemnification regarding any breach of any
representation and warranty set forth in Section 3.20 (Environmental Matters),
to the extent applicable, Parent’s and Holdings’ indemnification obligations
shall be limited to the cost of the least restrictive standard or remedy
acceptable under applicable Environmental Law (including engineering or
institutional controls) based on the industrial use of the relevant facility or
property; provided, however, that if any contamination at any real property that
is subject to indemnity by Parent and Holdings is exacerbated due to the
negligence, gross negligence or willful misconduct of Purchaser, the Company,
any Subsidiary or any of their respective Affiliates after the Closing Date, to
the extent such exacerbation increases the cost of the investigation or
remediation of such contamination, Parent and Holdings shall not be responsible
for any such increase in costs.
 
(g)           Purchaser, on the one hand, and Parent and Holdings, on the other
hand, for themselves and their Affiliates and on behalf of their respective
successors and assigns, do hereby irrevocably release, hold harmless and forever
discharge each other and their respective Affiliates from any and all
Environmental Claims resulting from or arising out of or in connection with any
Environmental Condition or Hazardous Substances or Environmental Law, in each
case as applicable to the Real Property, the Generating Plants or (to the extent
attributable to the business or operations of the Companies) any Off-Site
Location, other than claims arising from the indemnification obligations set
forth in this Section 10.03 and claims based on fraud, bad faith or willful
misconduct (collectively, “Released Environmental Claims”).  In furtherance of,
but subject to, the foregoing, Purchaser, on the one hand, and Parent and
Holdings, on the other hand, for themselves and their Affiliates and on behalf
of their respective successors and assigns, hereby irrevocably waive any and all
rights and benefits with respect to such Environmental Claims that they now
have, or in the future may have conferred upon them
 

 
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by virtue of any applicable Law or common law principle which provides that a
general release does not extend to claims which a party does not know or suspect
to exist in its favor at the time of executing the release, if knowledge of such
claims would have materially affected such party’s settlement with the
obligor.  In this connection, Purchaser, Parent and Holdings each hereby
acknowledge that they are aware that factual matters now unknown to them or any
of their respective Affiliates may have given, or hereafter may give, rise to
Released Environmental Claims that have not been made prior to the date of this
Agreement, and will not be made prior to the Closing Date, and Purchaser, on the
one hand, and Parent and Holdings, on the other hand further agree that this
release set forth in this Section 10.03(g) has been negotiated and agreed upon
in light of that awareness, and Purchaser, on the one hand, and Parent and
Holdings, on the other hand, for themselves and their Affiliates and on behalf
of their respective successors and assigns, nevertheless hereby intends
irrevocably to release, hold harmless and forever discharge each other and their
respective Affiliates from all such Environmental Claims.
 
(h)           The right to indemnification, payment of Losses or other remedy
based upon breach of representations, warranties, covenants, agreements or
obligations will not be affected by any investigation conducted by Purchaser
with respect to, or knowledge acquired (or capable of being acquired) at any
time, whether before or after the execution and delivery of this Agreement or
the Closing Date, with respect to the accuracy or inaccuracy of or compliance by
Parent or Holdings with any such representation, warranty, covenant, agreement
or obligation.
 
10.04          Method of Asserting Claims.  All claims for indemnification by
any Indemnified Party under Section 10.03 will be asserted and resolved as
follows:
 
(a)           In the event any claim or demand in respect of which an
Indemnifying Party might seek indemnity under Section 10.03(a) or 10.03(b) is
asserted against or sought to be collected from such Indemnified Party by a
Person other than Parent, Holdings, Purchaser or any of their respective
Affiliates (a “Third Party Claim”), the Indemnified Party shall deliver a Claim
Notice with reasonable promptness to the Indemnifying Party; provided, however,
that the failure to so notify the Indemnifying Party shall not relieve the
Indemnifying Party of its obligations hereunder except to the extent (and only
to the extent) that such failure shall have caused the damages for which the
Indemnifying Party is obligated to be greater than such damages would have been
had the Indemnified Party given the Indemnifying Party prompt notice
hereunder.  The Indemnifying Party will notify the Indemnified Party as soon as
practicable within the Dispute Period whether the Indemnifying Party disputes
its liability to the Indemnified Party under Section 10.03(a) or 10.03(b) or
whether the Indemnifying Party desires, at its sole cost and expense, to defend
the Indemnified Party against such Third Party Claim.
 
(i)           If the Indemnifying Party acknowledges its indemnity obligation in
writing and notifies the Indemnified Party within the Dispute Period that the
Indemnifying Party desires to defend the Indemnified Party with respect to the
Third Party Claim pursuant to this Section 10.04(a), then the Indemnifying Party
will have the right to defend, with counsel selected by the Indemnifying Party
who shall be reasonably acceptable to the Indemnified Party and at the sole cost
and expense of the Indemnifying Party, such Third Party Claim by all appropriate
proceedings, which proceedings will be vigorously and diligently prosecuted by
the Indemnifying Party to a final conclusion; provided, however, that the
Indemnifying Party shall obtain the prior written consent of
 

 
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the Indemnified Party (which consent shall not be unreasonably withheld, delayed
or conditioned) before entering into any settlement of a claim or ceasing to
defend such claim.  If the Indemnifying Party assumes defense of a Third Party
Claim, the Indemnifying Party will have full control of such defense and
proceedings, including (except as provided in the immediately preceding
sentence) any settlement thereof; provided, however, that the Indemnified Party
may, at the sole cost and expense of the Indemnified Party, at any time prior to
the Indemnifying Party’s delivery of the notice referred to in the first
sentence of this clause (i), file any motion, answer or other pleadings or take
any other action that the Indemnified Party reasonably believes to be necessary
or appropriate to protect its interests and not prejudicial to the Indemnifying
Party; provided further, that the Indemnified Party may participate, at its own
cost and expense (except as otherwise provided in the final sentence of this
clause (i)), in the defense of such Third Party Claim; and provided further,
that if requested by the Indemnifying Party, the Indemnified Party will, at the
sole cost and expense of the Indemnifying Party, cooperate with the Indemnifying
Party and its counsel in contesting any Third Party Claim that the Indemnifying
Party elects to contest, or, if appropriate and related to the Third Party Claim
in question, in making any counterclaim against the Person asserting the Third
Party Claim, or any cross-complaint against any Person (other than the
Indemnified Party or any of its Affiliates).  The Indemnified Party will be
entitled to participate in any such defense with separate counsel at the expense
of the Indemnifying Party if (A) so requested by the Indemnifying Party to
participate or (B) the Indemnified Party reasonably determines, after seeking
the advice of counsel to the Indemnified Party, that a conflict or potential
conflict exists between the Indemnified Party and the Indemnifying Party that
would make such separate representation advisable.
 
(ii)           If the Indemnifying Party fails to acknowledge its indemnity
obligation in writing or fails to notify the Indemnified Party within the
Dispute Period that the Indemnifying Party desires to defend the Third Party
Claim pursuant to this Section 10.04(a), or if the Indemnifying Party gives such
notice but fails to prosecute vigorously and diligently or settle the Third
Party Claim, or if the Indemnifying Party fails to respond to the Claim Notice
within the Dispute Period, then the Indemnified Party will have the right to
defend, at the sole cost and expense of the Indemnifying Party, the Third Party
Claim by all appropriate proceedings, which proceedings will be vigorously and
diligently prosecuted by the Indemnified Party to a final conclusion or, with
the consent of the Indemnifying Party (which consent will not be unreasonably
withheld, delayed or conditioned), may be settled by the Indemnified Party.  If
the Indemnified Party defends any Third Party Claim, then the Indemnifying Party
shall be required to reimburse the Indemnified Party for the reasonable costs
and expenses of defending such Third Party Claim within 30 Business Days after
the date of receipt of any invoice that sets forth in reasonable detail the
costs and expenses incurred.  The Indemnified Party will have full control of
such defense and proceedings, including (except as provided in the immediately
preceding sentence) any settlement thereof but shall not thereby waive any right
to indemnity therefor pursuant to this Agreement; provided, however, that if
requested by the Indemnified Party, the Indemnifying Party will, at the sole
cost and expense of the Indemnifying Party, cooperate with the Indemnified Party
and its counsel in contesting any Third Party Claim which the Indemnified Party
is contesting, or, if
 

 
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appropriate and related to the Third Party Claim in question, in making any
counterclaim against the Person asserting the Third Party Claim, or any
cross-complaint against any Person (other than the Indemnifying Party or any of
its Affiliates).  The Indemnifying Party may participate in any defense
controlled by the Indemnified Party pursuant to this clause (ii) at its own cost
and expense.
 
(b)           In the event any Indemnified Party should have a claim under
Section 10.03(a) or 10.03(b) against any Indemnifying Party that does not
involve a Third Party Claim, the Indemnified Party shall deliver an Indemnity
Notice to the Indemnifying Party with reasonable promptness following its
determination that it has such a claim.  The Indemnifying Party shall notify the
Indemnified Party within the Dispute Period if the Indemnifying Party disputes
its liability to the Indemnified Party under this Article X.  If the
Indemnifying Party does not so notify the Indemnified Party, the claim specified
by the Indemnified Party in such notice shall be conclusively deemed to be a
liability of the Indemnifying Party under this Article X, and the Indemnifying
Party shall pay the amount of such liability to the Indemnified Party on demand,
or, in the case of any notice in which the amount of the claim (or any portion
of the claim) is estimated, on such later date when the amount of such claim (or
such portion of the claim) becomes finally determined.
 
(c)           If the Indemnifying Party disputes its liability to the
Indemnified Party under this Article X, then the Indemnified Party shall be free
to seek enforcement of its rights to indemnification under this Agreement.
 
10.05          Manner of Payment.  Any indemnification of a Purchaser
Indemnified Party pursuant to Section 10.03(a) shall be effected by wire
transfer of immediately available funds from Parent to an account designated by
such Purchaser Indemnified Party within 15 days after the determination
thereof.  Any indemnification of a Seller Indemnified Party pursuant to Section
10.03(b) shall be effected by wire transfer of immediately available funds from
Purchaser to an account designated by such Seller Indemnified Party within 15
days after the determination thereof.
 
ARTICLE XI
 
TERMINATION
 
11.01          Termination.  This Agreement may be terminated at any time prior
to the Closing, and the transactions contemplated hereby may be abandoned:
 
(a)           by mutual written consent of Parent, Holdings, the Company and
Purchaser;
 
(b)           by either Parent or Purchaser, upon written notice given to the
other party, if the Closing shall not have occurred on or before December 31,
2010 (the “Outside Date”); provided, however, that the right to terminate this
Agreement pursuant to this ‎Section 11.01(b) shall not be available to any party
whose failure to fulfill any obligation under this Agreement has been the cause
of, or resulted in, the failure of the Closing to occur on or before the Outside
Date;
 

 
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(c)           by either Parent or Purchaser, if any Order issued by a court of
competent jurisdiction or by a Governmental or Regulatory Authority, or Law or
other legal restraint or prohibition in each case making the transactions
contemplated by this Agreement illegal or permanently restraining, enjoining or
otherwise preventing the consummation thereof shall be in effect and shall have
become final and nonappealable; provided, however, that the right to terminate
pursuant to this Section 11.01(c) shall not be available if the issuance of such
legal restraint or prohibition was primarily due to the failure of such party to
perform any of its obligations under this Agreement;
 
(d)           by Purchaser upon written notice given to Parent (provided that
Purchaser is not then in material breach of any representation, warranty,
covenant or other agreement contained herein), if there has been a material
violation or breach by Parent, Holdings or the Company of any representation,
warranty, covenant or other agreement contained in this Agreement which would
prevent the satisfaction of any condition to the obligations of Purchaser at the
Closing, and such violation or breach has not been waived by Purchaser or cured
by Parent, Holdings or the Company within 45 days after written notice thereof
from Purchaser; provided, however, that there shall be no cure period if such
violation or breach by Parent, Holdings or the Company is such party’s willful
and intentional refusal to effect the Closing in breach of this Agreement
following the satisfaction or waiver of the last to be satisfied or waived of
the conditions set forth in Article VII of this Agreement (other than conditions
that by their terms are to be satisfied as of the Closing);
 
(e)           by Parent upon written notice given to Purchaser (provided that
none of Parent, Holdings or the Company is then in material breach of any
representation, warranty, covenant or other agreement contained herein), if
there has been a material violation or breach by Purchaser of any
representation, warranty, covenant or other agreement contained in this
Agreement which would prevent the satisfaction of any condition to the
obligations of Parent, Holdings and the Company at the Closing and such
violation or breach has not been waived by Parent, Holdings or the Company or
cured by Purchaser within 45 days after written notice thereof by Parent or
Holdings; provided, however, that if Purchaser elects to defer the Closing
pursuant to Section 2.03(a), then the period of such deferral and the cure
period contained in this Section 11.01(e) shall run concurrently and not
consecutively; provided further, however, that there shall be no cure period if
such violation or breach by Purchaser is its willful and intentional refusal to
effect the Closing in breach of this Agreement following the satisfaction or
waiver of the last to be satisfied or waived of the conditions set forth in
Article VII of this Agreement (other than conditions that by their terms are to
be satisfied as of the Closing);
 
(f)           by Purchaser upon written notice to Parent on or before June 30,
2010, if Parent has not satisfied the Closing condition set forth in Section
7.02(k) prior to June 1, 2010;
 
(g)           by Purchaser upon written notice to Parent on or before June 30,
2010, if Parent has not obtained the Lender Consents identified in Section 3.11
of the Disclosure Letter prior to June 1, 2010;
 
(h)           by Purchaser upon written notice to Parent (i) on or before July
15, 2010, if any Transaction Document Affiliate has failed, prior to June 15,
2010, to execute and place into escrow with Parent pending the Closing, each
Transaction Document to which it will be a
 

 
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party as of the Closing; or (ii) if the trustees have not executed the releases
from Liens under the ACE Mortgage and DPL Mortgage in accordance with Section
7.02(n) prior to June 15, 2010, provided that if Parent is unable to obtain such
releases within such period, the period shall be extended to July 30, 2010; and
 
(i)           by Purchaser upon written notice to Parent at any time after
September 30, 2010, if there shall be pending a Regulatory Action regarding the
Designated Generating Plants at the time of such termination; provided, however,
that the right to terminate this Agreement pursuant to this Section 11.01(i)
shall not be available to Purchaser unless it has, prior to termination, engaged
in good faith negotiations with Parent between the date of the Regulatory Action
and the first to occur of (A) the 45th day after the date of such Regulatory
Action and (B) December 30, 2010, with a view to amending this Agreement to
allow the transactions contemplated hereby to proceed in a manner that would
enable Purchaser to realize economic value from the Designated Generating Plants
that is at least equal to the economic value that Purchaser would have realized
in the absence of such Regulatory Action (it being understood that Parent
acknowledges that any such amendment shall be subject to Purchaser’s lenders’
consent, and the failure of Purchaser to obtain such consent shall not prohibit
Purchaser from having the termination right under this Section
11.01(i)).  Parent shall also be required to engage in good faith negotiations
with Purchaser as provided above in this Section 11.01(i).
 
11.02          Effect of Termination.   Upon the termination of this Agreement
pursuant to Section 11.01, this Agreement shall forthwith become null and void
and there shall be no liability or obligation on the part of any party hereto,
except as set forth in Section 11.03 and except for the provisions of
(a) Section 3.21 (Brokerage), (b) Section 4.10 (Brokerage), (c) Section 6.04(d)
(Confidentiality), (d) this Section 11.02, and (e) Article XII, which shall
survive such termination.
 
11.03          Termination Damages.
 
(a)           If this Agreement is terminated by Purchaser pursuant to Section
11.01(d) and if the basis for such termination is that the representations and
warranties of Parent, Holdings and the Company contained in Article III failed
to satisfy the condition set forth in Section 7.02(a) due to a breach of a
representation or warranty made as of the date of this Agreement and such breach
of representation and warranty is due to the negligence of Parent, Holdings or
the Company, and at the time of such termination by Purchaser there is no state
of facts or circumstances that would reasonably be expected to cause the
conditions in Section 7.01 and 7.03 to not be satisfied at the time of such
termination, then, in lieu of all other claims and remedies that might otherwise
be available to Purchaser with respect thereto and as Purchaser’s exclusive
remedy therefor against Parent, its Affiliates and their Representatives, Parent
shall pay to Purchaser, by wire transfer of immediately available funds within
three (3) Business Days following the date of such termination, as liquidated
damages and not as a penalty, an amount equal to $40,000,000.
 
(b)           If this Agreement is terminated by Purchaser pursuant to Section
11.01(d) and if the basis for such termination is that the representations and
warranties of Parent, Holdings and the Company contained in Article III failed
to satisfy the condition set forth in Section 7.02(a) due to a breach of a
representation or warranty made as of the date of this Agreement
 

 
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(excluding negligent breaches, which are governed by Section 11.03(a), and
willful and intentional breaches, which are governed by Section 11.03(d)), and
at the time of such termination by Purchaser there is no state of facts or
circumstances that would reasonably be expected to cause the conditions in
Section 7.01 and 7.03 to not be satisfied at the time of such termination, then,
in lieu of all other claims and remedies that might otherwise be available to
Purchaser with respect thereto and as Purchaser’s exclusive remedy therefor
against Parent, its Affiliates and their Representatives, Parent shall pay to
Purchaser, by wire transfer of immediately available funds within three (3)
Business Days following the date of such termination, as liquidated damages and
not as a penalty, an amount equal to $20,000,000.
 
(c)           If this Agreement is terminated by Purchaser pursuant to Section
11.01(d) and if the basis for such termination is that Parent, Holdings or the
Company has violated or breached a covenant or other agreement contained in this
Agreement (excluding willful and intentional breaches, which are governed by
Section 11.03(d)), and at the time of such termination by Purchaser there is no
state of facts or circumstances that would reasonably be expected to cause the
conditions in Section 7.01 and 7.03 to not be satisfied at the time of such
termination, then, in lieu of all other claims and remedies that might otherwise
be available to Purchaser with respect thereto and as Purchaser’s exclusive
remedy therefor against Parent, its Affiliates and their Representatives, Parent
shall pay to Purchaser, by wire transfer of immediately available funds within
three (3) Business Days following the date of such termination, as liquidated
damages and not as a penalty, an amount equal to $40,000,000.
 
(d)           If this Agreement is terminated by Purchaser pursuant to Section
11.01(d) and if the basis for such termination is that there has been a material
violation or breach by Parent, Holdings or the Company of any covenant or other
agreement contained in this Agreement, including refusal to effect the Closing
in breach of this Agreement, and such breach is willful and intentional, and at
the time of such termination by Purchaser there is no state of facts or
circumstances that would reasonably be expected to cause the conditions in
Section 7.01 and 7.03 to not be satisfied at the time of such termination, then,
in lieu of all other claims and remedies that might otherwise be available to
Purchaser with respect thereto and as Purchaser’s exclusive remedy therefor
against Parent, its Affiliates and their Representatives, Parent shall pay to
Purchaser, by wire transfer of immediately available funds within three (3)
Business Days following the date of such termination, as liquidated damages and
not as a penalty, an amount equal to $175,000,000.
 
(e)           If this Agreement is terminated by Parent pursuant to Section
11.01(e) and if the basis for such termination is that the representations and
warranties of Purchaser contained in Article IV failed to satisfy the condition
set forth in Section 7.03(a) due to a breach of a representation or warranty
made as of the date of this Agreement and such breach of representation and
warranty is due to the negligence of Purchaser, and at the time of such
termination by Parent there is no state of facts or circumstances that would
reasonably be expected to cause the conditions in Section 7.01 and 7.02 to not
be satisfied at the time of such termination, then, in lieu of all other claims
and remedies that might otherwise be available to Parent with respect thereto
and as Parent’s exclusive remedy therefor against Purchaser, its Affiliates
(other than with respect to matters governed by the Calpine Guarantee) and their
Representatives, Purchaser shall pay to Parent, by wire transfer of immediately
available funds
 

 
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within three (3) Business Days following the date of such termination, as
liquidated damages and not as a penalty, an amount equal to $40,000,000.
 
(f)           If this Agreement is terminated by Parent pursuant to Section
11.01(e) and if the basis for such termination is that Purchaser has violated or
breached a covenant or other agreement contained in this Agreement (excluding
willful and intentional breaches, which are governed by Section 11.03(g)), and
at the time of such termination by Parent there is no state of facts or
circumstances that would reasonably be expected to cause the conditions in
Section 7.01 and 7.02 to not be satisfied at the time of such termination, then,
in lieu of all other claims and remedies that might otherwise be available to
Parent with respect thereto and as Parent’s exclusive remedy therefor against
Purchaser, its Affiliates (other than with respect to matters governed by the
Calpine Guarantee) and their Representatives, Purchaser shall pay to Parent, by
wire transfer of immediately available funds within three (3) Business Days
following the date of such termination, as liquidated damages and not as a
penalty, an amount equal to $40,000,000.
 
(g)           If this Agreement is terminated by Parent pursuant to Section
11.01(e) and if the basis for such termination is that there has been a material
violation or breach by Purchaser of any covenant or other agreement contained in
this Agreement, including refusal to effect the Closing in breach of this
Agreement, and such breach is willful and intentional, and at the time of such
termination by Parent there is no state of facts or circumstances that would
reasonably be expected to cause the conditions in Section 7.01 and 7.02 to not
be satisfied at the time of such termination, then, in lieu of all other claims
and remedies that might otherwise be available to Parent with respect thereto
and as Parent’s exclusive remedy therefor against Purchaser, its Affiliates
(other than with respect to matters governed by the Calpine Guarantee) and their
Representatives, Purchaser shall pay to Parent, by wire transfer of immediately
available funds within three (3) Business Days following the date of such
termination, as liquidated damages and not as a penalty, an amount equal to
$175,000,000.
 
(h)           If this Agreement is terminated by Purchaser pursuant to Section
11.01(f), Section 11.01(g) or Section 11.01(h), then, in lieu of all other
claims and remedies that might otherwise be available to Purchaser with respect
thereto and as Purchaser’s exclusive remedy therefor against Parent, its
Affiliates and their Representatives, Parent shall pay to Purchaser, by wire
transfer of immediately available funds within three (3) Business Days following
the date of such termination, as liquidated damages and not as a penalty, an
amount equal to $40,000,000.
 
(i)           If this Agreement is terminated and if the basis for such
termination is due to the failure of the condition set forth in Section 7.02(d)
and the failure of such condition is the result of any action taken, or any
omission to act, by Purchaser or any of its Affiliates (notwithstanding the
exercise by Purchaser and its Affiliates of due care), other than any willful
and intentional act or omission that are governed by clause (g) above, then, in
lieu of all other claims and remedies that might otherwise be available to
Parent in the event that the Closing shall not have occurred due to the failure
of the condition set forth in Section 7.02(d) due to any action taken, or any
omission to act, by Purchaser or any of its Affiliates, and as Parent’s
exclusive remedy therefor against Purchaser, its Affiliates (other than with
respect to matters governed by the Calpine Guarantee) and their Representatives,
Purchaser shall pay to Parent, by wire transfer of immediately available funds
within three (3) Business Days following the date of such termination, as
liquidated damages and not as a penalty, an amount equal to $40,000,000;
 

 
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provided, however, that nothing in this Section 11.03(i) shall relieve Purchaser
of its indemnification obligations to Parent and its Affiliates resulting from
any such action taken, or any omission to act, by Purchaser or any of its
Affiliates.
 
(j)            If this Agreement is terminated by Purchaser pursuant to Section
11.01(i), then, in lieu of all other claims and remedies that might otherwise be
available to Purchaser with respect thereto and as Purchaser’s exclusive remedy
therefor against Parent, its Affiliates and their Representatives, Parent shall
pay to Purchaser, by wire transfer of immediately available funds within three
(3) Business Days following the date of such termination, as liquidated damages
and not as a penalty, an amount equal to $40,000,000.
 
(k)           The liquidated damages provided for in clauses (a)-(j) above are
alternative remedies, and in no event shall Parent or Purchaser be entitled to
receive liquidated damages pursuant to more than one such clause.
 
(l)            Except as otherwise provided in Section 12.05, the remedies
described in Section 11.03 shall be the sole and exclusive remedies of Parent,
Holdings and the Company against Purchaser, its Affiliates (other than with
respect to matters governed by the Calpine Guarantee) and their Representatives
prior to the Closing in connection with the transactions contemplated
hereby.  Except as otherwise provided in Section 12.05, the remedies described
in Section 11.03 shall be the sole and exclusive remedies of Purchaser against
Parent, Holdings, the Company and their respective Affiliates and
Representatives prior to the Closing in connection with the transactions
contemplated hereby.
 
ARTICLE XII
 
MISCELLANEOUS
 
12.01          Notices.  All notices and other communications hereunder shall be
in writing and shall be deemed to have been duly given if delivered personally,
mailed by certified mail (return receipt requested) or sent by overnight courier
or by facsimile (upon confirmation of receipt) to the parties at the following
addresses or at such other addresses as shall be specified by the parties by
like notice:
 
(a)           if to Purchaser (and after the Closing, to the Company), to:
 
Calpine Corporation
717 Texas Avenue, Suite 1000
Houston, TX  77002
Attention:  Chief Legal Officer
Fax:  (713) 830-2001

 
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with a copy to:
 
White & Case, LLP
1155 Avenue of the Americas
New York, NY  10036
Attention:      Gregory Pryor, Esq.
Michael S. Shenberg, Esq
Fax:  (212) 354-8113
 
(b)           if to Parent and Holdings (and before the Closing, to the
Company), to:
 
Pepco Holdings, Inc.
701 Ninth Street, N.W.
Washington, DC  20068
Attention: General Counsel
Fax:  (202) 872-3281

with copy to:
 
Covington & Burling LLP
1201 Pennsylvania Avenue, N.W.
Washington, DC  20004
Attention:  D. Michael Lefever
Fax:  (202) 778-5276
 
Notice so given shall be deemed to be given when received.
 
12.02          Expenses.  Except as otherwise expressly provided in this
Agreement, whether or not the transactions contemplated hereby are consummated,
each party shall pay its own costs and expenses incurred in connection with the
negotiation, execution and closing of this Agreement and the transactions
contemplated hereby, including all fees and expenses of agents, representatives,
brokers, investment bankers, financial advisors, counsel and accountants;
provided, however, that, notwithstanding the foregoing, Parent shall be solely
responsible for the payment of Company Transaction Costs.
 
12.03          Interpretations.  When a reference is made in this Agreement to
Articles, Sections or Schedules, such reference shall be to an Article, Section
or Schedules to this Agreement unless otherwise indicated.  The words “include,”
“includes” and “including” when used herein shall be deemed in each case to be
followed by the words “without limitation.”  Any references in this Agreement to
“the date hereof” refers to the date of execution of this Agreement.  The word
“or” shall not be exclusive.  The table of contents and headings contained in
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement.  This Agreement shall be
construed without regard to any presumption or rule requiring construction or
interpretation against the party drafting or causing any instrument to be
drafted.
 

 
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12.04          Governing Law; Jurisdiction.
 
(a)           This Agreement shall be governed by, and construed in accordance
with, the laws of the State of New York regardless of the laws that might
otherwise govern under applicable principles of conflicts of laws thereof.
 
(b)           Each of the parties hereby (i) consents to submit itself to the
exclusive jurisdiction of any state or federal court located within the borough
of Manhattan in the State of New York in the event any dispute arises out of
this Agreement or any of the transactions contemplated hereby, including, but
not limited to, any dispute arising out of or relating to the Financing
Commitments or the performance thereof, (ii) agrees that it will not attempt to
deny or defeat such personal jurisdiction by motion or other request for leave
from any such court, and (iii) agrees that it will not bring, and will not
permit any of its Affiliates to bring, any action relating to this Agreement or
any of the transactions contemplated hereby, including, but not limited to, any
dispute arising out of or relating to the Financing Commitments or the
performance thereof by the Company or its Representatives, in any court other
than a state or federal court located in located within New York County in the
State of New York.
 
(c)           Each of the parties hereby irrevocably waives any and all right to
trial by jury in any legal proceeding arising out of or relating to this
Agreement or any of the transactions contemplated hereby, including, but not
limited to, any dispute arising out of or relating to the Financing Commitments
or the performance thereof by the Company or its Representatives.
 
12.05          Specific Performance and Other Remedies.
 
(a)           With respect to their respective obligations set forth in Sections
6.04(d) (Confidentiality), 6.06 (No Solicitation), 6.17 (Non-Solicitation of
Employees) and 6.19 (Confidentiality) and Article IX (Employee Matters) (the
“Specified Covenants”), the parties agree that irreparable damage would occur,
damages would be difficult to determine and would be an insufficient remedy and
no other adequate remedy would exist at law or in equity, in each case in the
event that such obligations are not performed in accordance with their specific
terms or were otherwise breached (or any party hereto threatens such a
breach).  It is accordingly agreed that (i) the parties shall be entitled at
their election to an injunction or injunctions to prevent breaches of the
Specified Covenants and to enforce specifically the terms and provisions of the
Specified Covenants, this being in addition to any other remedy to which the
parties are entitled at law or in equity, (ii) the parties waive any requirement
for the securing or posting of any bond, guarantee or other undertaking in
connection with the obtaining of any specific performance or injunctive relief
and (iii) the parties will waive, in any action for specific performance, the
defense of adequacy of a remedy at law.  Any party’s pursuit of specific
performance at any time will not be deemed an election of remedies or waiver of
the right to pursue any other right or remedy to which such party may be
entitled, including, without limitation, the right to pursue remedies for
liabilities or damages incurred or suffered by such party in the case of a
breach of this Agreement involving fraud or willful or intentional misconduct.
 
(b)           Except as otherwise provided in Section 12.05(a), each party
acknowledges and agrees that in the event any provision of this Agreement is not
performed in
 

 
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accordance with its specific terms or is otherwise breached, (i) such party will
have an adequate remedy at law in the form of money damages (in the case of
Section 11.03 in the amounts set forth therein) and (ii) such party and its
Affiliates shall have no right to enforce specifically the terms and provisions
of this Agreement and shall not be entitled to an injunction or any form of
equitable relief to prevent breaches of, or to require compliance with, this
Agreement.
 
12.06         Entire Agreement. This Agreement, the Schedules and Disclosure
Letter referred to herein, and the Calpine Guarantee constitute the entire
agreement and supersede all prior agreements and understandings, both written
and oral, among the parties with respect to the subject matter hereof and
thereof; provided, however, that the Confidentiality Agreement shall not be
superseded and shall remain in full force and effect in accordance with its
terms.
 
12.07          Disclosure Letter.  Any information disclosed in one Section of
the Disclosure Letter shall be considered to be made for purposes of all other
Sections of the Disclosure Letter to the extent that the relevance of any such
disclosure to any other Section of the Disclosure Letter is reasonably apparent
from the text of such disclosure. Inclusion of any information in the Disclosure
Letter does not imply that such information would, under the provisions of this
Agreement, have to be included in any Section of the Disclosure Letter or that
such information is otherwise material. In addition, information disclosed in
the Disclosure Letter is not necessarily limited to information required by this
Agreement to be disclosed in the Disclosure Letter, and any such additional
information is set forth for informational purposes only and does not
necessarily include other information of a similar nature.
 
12.08          Amendments.  This Agreement may not be modified, amended, altered
or supplemented except upon the execution and delivery of a written agreement
executed by all the parties hereto.
 
12.09          Waiver.  Any failure of any of the parties to comply with any
obligation, covenant, agreement or condition herein may be waived at any time
prior to the Closing by any of the parties entitled to the benefit thereof only
by a written instrument signed by each such party granting such waiver, but such
waiver or failure to insist upon strict compliance with such obligation,
representation, warranty, covenant, agreement or condition shall not operate as
a waiver of or estoppel with respect to, any subsequent or other failure.  No
failure on the part of any party to exercise any power, right, privilege or
remedy under this Agreement, and no delay on the part of any party in exercising
any power, right, privilege or remedy under this Agreement, shall operate as a
waiver of such power, right, privilege or remedy; and no single or partial
exercise of any such power, right, privilege or remedy shall preclude any other
or further exercise thereof or of any other power, right, privilege or remedy.
 
12.10          Binding Effect; No Third Party Beneficiaries.  This Agreement
shall be binding upon, and shall be enforceable by and inure solely to the
benefit of, the parties and their respective successors and permitted
assigns.  Subject to Sections 8.02(a) and (b), 10.03(a) and (b), 11.03 and
12.04, nothing in this Agreement, express or implied, is intended to or shall
confer upon any Person (other than the parties and their respective successors
and permitted assigns) any rights, claims or benefits whatsoever, and this
Agreement does not create or establish any third party beneficiary rights in any
Person, including any employee or former employee of Parent or any of its
Affiliates (including any beneficiary or dependent thereof) in respect of
 

 
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continued employment, and no provision of this Agreement will create any rights
in any such Persons in respect of any benefits that may be provided, directly or
indirectly, under any employee benefit plan or arrangement except as expressly
provided for thereunder.  Notwithstanding the foregoing, the provisions of
Sections 11.03 and 12.04 insofar as it concerns such lenders and other
Representatives of Purchaser shall be enforceable by the lenders who have
provided the Financing Commitment and other Representatives of Purchaser and by
such Persons’ successors and assigns.
 
12.11         Assignability. Neither this Agreement nor any party’s rights or
obligations hereunder may be assigned or delegated by such party without the
prior written consent of the other parties, and any attempted assignment or
delegation of this Agreement or any of such rights or obligations by any party
without the prior written consent of the other parties shall be void and of no
effect; provided, however, that any of Parent, Holdings, the Company or
Purchaser may assign or transfer this Agreement to one or more of its respective
Affiliates, but any such assignment shall not, without the express written
consent of the other parties, release the assignor from its obligations
hereunder; provided, further, that Purchaser may assign or transfer its rights
and interests under this Agreement as security or collateral obligations in
connection with any financing transaction involving one or more of the
Companies, but any such assignment shall not release Purchaser from its
obligations hereunder.
 
12.12          Severability.  If any provision of this Agreement shall be held
to be illegal, invalid or unenforceable under any applicable Law, then such
contravention or invalidity shall not invalidate the entire Agreement.  Such
provision shall be deemed to be modified to the extent necessary to render it
legal, valid and enforceable, and if no such modification shall render it legal,
valid and enforceable, then this Agreement shall be construed as if not
containing the provision held to be invalid, and the rights and obligations of
the parties shall be construed and enforced accordingly.
 
12.13          Counterparts; Facsimile Transmission of Signatures.  This
Agreement may be executed in any number of counterparts and by different parties
hereto in separate counterparts, and delivered by means of facsimile
transmission or otherwise, each of which when so executed and delivered shall be
deemed to be an original and all of which when taken together shall constitute
one and the same agreement.
 
[Remainder of Page Intentionally Left Blank.]

 

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

 
PEPCO HOLDINGS, INC.
             
By:
/s/  JOSEPH M. RIGBY
   
Name:  Joseph M. Rigby
   
Title:  Chairman, President and CEO

 
CONECTIV, LLC
             
By:
/s/  JOSEPH M. RIGBY
   
Name:  Joseph M. Rigby
   
Title:  Chairman, President and CEO

 
CONECTIV ENERGY HOLDING COMPANY, LLC
             
By:
/s/  JOSEPH M. RIGBY
   
Name:  Joseph M. Rigby
   
Title:  Chairman

 
NEW DEVELOPMENT HOLDINGS, LLC
             
By:
/s/  JACK A. FUSCO
   
Name:  Jack A. Fusco
   
Title:  President

 

 
 

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Schedule I
 
Generating Plants
 

Conectiv Delmarva Generation, LLC
 
Conectiv Atlantic Generation, LLC
 
Edge Moor 3-5
 
Carll’s Corner*
 
Hay Road 1-8
 
Cedar*
 
Christiana*
 
Cumberland 1 & 2
 
Edge Moor 10
 
Mickelton*
 
Delaware City
 
Middle*
 
Tasley*
 
Missouri Avenue*
 
West*
 
Sherman Avenue*
 
Crisfield*
 
Deepwater 1 & 6*
 
Bayview*
 
   
Conectiv Mid Merit, LLC
 
Conectiv Bethlehem, LLC
 
Delta 1-4 (under construction)
 
Bethlehem 1-8
 
 
Conectiv Solar, LLC
 
 
Conectiv Vineland Solar
 
 

____________________________
 
* Subject to easement granted by an Affiliate of Parent
 

 

 

 
 

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Schedule II
 
“Knowledge Persons”

Gary J. Morsches
President & Chief Executive Officer, Conectiv Energy

Arturo F. Agra
Senior Vice President  & Chief Financial Officer, Conectiv Energy

Robert M. Collacchi  Jr.
Vice President – Wholesale Operations, Conectiv Energy

Mario Giovannini
Vice President & Chief Risk Officer, Conectiv Energy

Albert F. Kirby
Generation & Engineering, Conectiv Energy

Krishnam Raju
Director – Strategy & Business Planning, Conectiv Energy

James W. Klickovich
Senior Manager - Environmental, Conectiv Energy

Jeanmarie S. Leopold
Manager of Tax, Conectiv Energy

 
 

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Schedule III

Working Capital Policies and Procedures

Closing Date Working Capital Calculations:
 
For the purpose of calculating the Estimated Working Capital and Closing Date
Working Capital under the Agreement, the following balance sheet categories
(included on the unaudited pro forma balance sheet of the Company and its
consolidated subsidiaries as of the Closing Date,  as adjusted to give effect to
the Reorganization) will be used:
 
Current Assets include:
 

  ●
“cash and cash equivalents” that will be delivered to Purchaser at Closing
(including Cash Collateral, but excluding any letters of credits posted by one
of the Companies), if any
  ●
“accounts receivable” (including accounts receivable from Affiliates of Parent
to the extent that any one or more of the Companies will receive the benefits
thereof after the Closing Date and excluding margin deposits)
  ●
“prepayments” and “prepaid” expenses made by the Companies at or prior to the
Closing Date (to the extent that any one or more of the Companies will receive
the benefits thereof after the Closing Date)

 
Current Assets exclude:
 

  ●
Other current assets relating to (a) other derivatives, (b) deferred income tax
assets and income tax receivables, (c) prepaid income taxes, and (d) insurance
prepayments (except for prepayments relating to insurance policies listed in
Section 3.18 of the Disclosure Letter)
  ●
Fuel Inventory (calculated in accordance with the procedures described below)
  ●
Materials Inventory (see sample calculation in Attachment A to this Schedule
III)
  ● REC Inventory   ●
Emission Allowance Inventory

 

 
 
 

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

 

 
Current Liabilities include:
 
 

  ● Accounts Payables   ● Including, but not limited to, any liabilities
associated with pipeline imbalances as of the Closing Date   ● Vacation accrual
  ● Comp time benefits accrual   ● Any other current liabilities that will be
obligations or costs of the Companies (including any Affiliate obligations)
after the Closing Date, excet as noted below

 
Current Liabilities exclude:
 

  ● Income Taxes   ●
Environmental Liabilities - Deepwater
  ●
Accounts Payable related to all capital projects in Section 1.1(b) of the
Disclosure Letter
  ●
Any current liabilities on the unaudited pro forma balance sheet as of the
Closing Date that will not be obligations or expenses of the Purchaser after the
Closing Date (because the Purchaser will not incur the obligations represented
by such liabilities), if any

 
 
A sample Estimated Working Capital calculation, for purposes of Section 2.02(c)
of the Agreement, is shown in Table I, using the Company Pro Forma Balance Sheet
for illustration purposes.
 

 

 
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Table I – Sample Working Capital Calculation

 
Modified
     
Consolidated Balance Sheets
     
February 28, 2010  (Unaudited)
       
Balance Sheet
 
Working
(in thousands of dollars)
2010
 
Capital
Assets
     
 Current Assets
     
     Cash and cash equivalents
 $                 -
   
     Accounts receivable
            4,634
 
          4,634
     Accounts receivable from assoc cos (on-going)
                    -
 
                  -
     Accounts receivable from assoc cos (PHI & PHISCO)
                    -
   
     Margin Deposits
                    -
   
     Inventory
                     0
   
     Fuel Inventory - Plants
           41,276
 
                  -
     Materials Inventory
           18,963
 
                  -
     Gas Storage
                    -
 
                  -
     Petron Oil Inventory
                    -
 
                  -
     REC Inventory
                    -
 
                  -
     Emission Allowance Inventory
             7,373
 
                  -
     Unrealized gains on derivative contracts, short-term
                    -
 
 .
     Prepaid taxes
                    -
   
     Prepayments
                     0
 
                   0
     Prepaid Property & Other Taxes
                 341
 
               341
     Prepayments - General
                   91
 
                 91
     Prepayments - Auto Liability Insurance
                   (0)
   
     Prepayments - Workmen's Compensation
                   (0)
   
     Prepayments - Fire Insurance
                   (0)
   
     Prepayments - Real Estate Option Premium
                  38
 
                38
     Prepayments - Options/Hedges Unregulated
                    -
 
                  -
     Deferred Premiums on Physical Petroleum Options
                    -
 
                  -
     Deferred Income Tax Asset - Federal - Short-term
                    -
   
     Deferred Income Tax Asset - State - Short-term
                    -
   
     Federal Income Tax Receivable-Current
                    -
   
          Total current assets
            72,715
 
     5,104
Liabilities and Shareholder's Equity
     
 Current liabilities
     
     Accounts payable
 $          13,175
 
           13,175
     Accounts payable to associated companies
                    -
   
     Margin Deposits
                    -
   
     Taxes accrued (TOTIT)
             1,632
 
           1,632
     Interest accrued
                    -
   
     Unrealized losses on derivative contracts, short-term
                    -
   
     Environmental Liabilities - Deepwater
              1,700
   
     Severance - Deepwater
                    -
   
     Federal Income Tax Payable-Current
                    -
   
     Accrued Liab-General
                 187
 
               187
     Accrued Liab-Environmental Fees
                397
 
              397
     Accrued Liab-Required Health Claims Reserve
                    -
   
     Accrued Liab-General Liability
                   (0)
   
     Accrued Liabilities - Workers Comp - Current
                     0
   
     Accrued Liabilities - Disability - Current
                     0
   
     Accrued Liab-Incentive Pay Current
                   (0)
   
     Accrued Liab-Safety Incentive
                   (0)
   
     Accrued Liab-Vacation
              1,579
 
            1,579
     Accrued Liab-Unclaimed Monies - Escheat Pending
                     6
 
                   6
     Accrued Liab - Other Energy Purchased
                    -
 
                  -
     Other
                   (0)
 
                 (0)
          Total current liabilities
           18,676
 
   16,976
       
Sample Estimated Working Capital
   
  (11,872)

 

 
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Fuel Inventory Calculations:
 
The Estimated Fuel Inventory will be calculated pursuant to the results of the
Inventory Audit. The basic intent and procedures for the Inventory Audit with
respect to the Estimated Fuel Inventory are described below. Fair market value
of Fuel Inventory at each Generating Plant will be the product of Fuel Quantity
(as defined below) multiplied by Fuel Price (as defined below), consistent with
the procedures and guidelines described below.  As part of the Inventory Audit
contemplated by Section 2.02 of the Agreement, Parent and Purchaser will
mutually select an independent fuel inspector to conduct a Fuel Inventory
Assessment (“FIA”), defined by the procedures and principles described
below.  Parent and Purchaser shall equally share the costs of conducting such
initial FIA as part of the Inventory Audit.
 
In order to determine the Closing Date Fuel Inventory, Parent and Purchaser
agree to negotiate in good faith to determine the appropriate procedures to be
used to calculate the adjustments to be made to the Estimated Fuel Inventory to
account for changes in the Fuel Inventory between the Inventory Audit and 11:59
P.M. on the Business Day immediately prior to the Closing Date.  Notwithstanding
the previous sentence, both Parent or Purchaser have the option to request that
an additional FIA be conducted as of or immediately prior to the Closing Date,
at the requesting Party’s sole expense, for purposes of determining the Closing
Date Fuel Inventory; such additional FIA shall follow the same procedures and
principles described herein.
 
Fuel Quantity: The FIA will identify the quantity of Usable Fuel (as defined
below, such quantity, the “Fuel Quantity”) at each Generating Plant through
certain procedures, including but not be limited to physical observation at each
Generating Plant to identify the amount of Usable Fuel in each tank, taking into
consideration the fuel contents at various locations in the tank. “Usable Fuel”
is defined as the fuel at each Generating Plant that is able to be used (without
requiring mixing with other fuels or dilution) by such Generating Plant to
produce electricity, as determined by the applicable plant permit, operating
specifications and the applicable turbine manufacturer’s specifications; for the
avoidance of doubt, Usable Fuel may exist both above and below the suction line
of the tank. All fuel quantities that are determined to be Usable Fuel, per the
definition above, will be included in the Fuel Quantity and subject to the
pricing mechanisms described below.

 
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Fuel Price:  To determine the relevant fair market value pricing for the Fuel
Quantity identified in the FIA (the “Fuel Price”), the quality and grade of such
Fuel Quantity will be taken into account.  To determine quality and grade,
multiple samples from multiple levels in each tank will be taken at each
Generating Plant during the FIA, including a bottom sample, lower sample, middle
sample, top sample and water cut. For the avoidance of doubt, the intent of
these procedures will be to assess the quality and grade of the Usable Fuel in
each tank.  For any jet fuel that is determined to be Usable Fuel per the above
definition and has a btu content of at least 120,000 btu’s per gallon, the Fuel
Price will be the applicable index and adders shown in Table II below.  For all
other fuel types that are deemed to be Usable Fuel, the resulting samples will
be compared to the marketable ASTM specifications for the applicable index
listed in Table II at each Generating Plant (such marketable ASTM specifications
are identified in the column labeled “Descriptions” in Table II) – if the
samples are within these marketable ASTM specifications, the index listed for
the applicable Generating Plant will be used as the relevant Fuel Price,
including the identified adders. If the samples are outside the marketable ASTM
specifications, the parties will work together in good faith to determine a Fuel
Price for such quantity of Fuel Inventory; for the avoidance of doubt, the adder
associated with each Generating Plant in Table II shall apply to the Fuel Price
regardless of whether the fuel is within the indicated marketable ASTM
specifications.
 
Table III reflects a sample calculation.
 
Table II

Description
   
Fuel Inventory - Plants
 
Fuel Index to determine the fair market value of the fuel
Fuel-Edgemoore #2 Oil
 
Daily Posting for OPIS Average Philadelphia Rack for #2 FO plus $0.14/gal adder
Fuel-Edgemoor #6 Oil
 
Platts Barge Mean NY Harbor 0.3% #6FO plus $0.22/gal adder
Fuel-Bethlehem Low Sulfur Diesel Oil
 
Daily Posting for OPIS Average Philadelphia Rack for ULSD plus $0.15/gal adder
Fuel-Crisfield #2 Oil
 
Daily Posting for OPIS Average Philadelphia Rack for #2 FO plus $0.14/gal adder
Fuel-Tasley Turbine #2 Oil
 
Daily Posting for OPIS Average Philadelphia Rack for #2 FO plus $0.14/gal adder
Fuel-Bayview #2 Oil
 
Daily Posting for OPIS Average Philadelphia Rack for #2 FO plus $0.14/gal adder
Fuel- Hay Road Kerosene
 
Daily Posting for OPIS Average Philadelphia Rack for Ultra Low Sulfur Kerosene
plus $0.15/gal adder
Fuel-West Sub #2 Oil
 
Daily Posting for OPIS Average Philadelphia Rack for #2 FO plus $0.14/gal adder
Fuel-Delaware City #2 Oil
 
Daily Posting for OPIS Average Philadelphia Rack for #2 FO plus $0.14/gal adder
Fuel-Christiana #2 Oil
 
Daily Posting for OPIS Average Philadelphia Rack for #2 FO plus $0.14/gal adder
Fuel-DW #2 Oil
 
Daily Posting for OPIS Average Philadelphia Rack for #2 FO plus $0.15/gal adder
Fuel-Missouri Avenue Jet Fuel
 
Daily Posting for OPIS Average Philadelphia Rack for Ultra Low Sulfur Kerosene
plus $0.16/gal adder
Fuel-Cedar Jet Fuel
 
Daily Posting for OPIS Average Philadelphia Rack for Ultra Low Sulfur Kerosene
plus $0.16/gal adder
Fuel-Middle Jet Fuel
 
Daily Posting for OPIS Average Philadelphia Rack for Ultra Low Sulfur Kerosene
plus $0.16/gal adder
Fuel-Carl's Corner Jet Fuel
 
Daily Posting for OPIS Average Philadelphia Rack for Ultra Low Sulfur Kerosene
plus $0.16/gal adder
Fuel-Cumberland Jet Fuel
 
Daily Posting for OPIS Average Philadelphia Rack for Ultra Low Sulfur Kerosene
plus $0.16/gal adder
Fuel-Ultra Light Sulfur Kerosene (Cumb2)
 
Daily Posting for OPIS Average Philadelphia Rack for Ultra Low Sulfur Kerosene
plus $0.16/gal adder
Fuel-Sherman Avenue Jet Fuel
 
Daily Posting for OPIS Average Philadelphia Rack for Ultra Low Sulfur Kerosene
plus $0.16/gal adder

 
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Table III – Sample Fair Market Value of Fuel Inventory Calculation
 

 
Description
 
Volume
 
Unit
 
$/Gal
         
$/Gal
                     
based on Fuel
               
Fair market vlaue of
   
Fuel Inventory - Plants
         
Index
   
Adder
   
Total
   
Fuel Inventory
 
Fuel Index to determine the fair market value of the fuel
Fuel-Edgemoore #2 Oil
    27,500  
Gal
  $ 2.1386     $ 0.1400     $ 2.2786     $ 62,661.50  
Daily Posting for OPIS Average Philadelphia Rack for #2 FO plus $0.14/gal adder
Fuel-Edgemoor #6 Oil
    11,002,779  
Gal
  $ 1.8488     $ 0.2200     $ 2.0688     $ 22,762,549.20  
Platts Barge Mean NY Harbor 0.3% #6FO plus $0.22/gal adder
Fuel-Bethlehem Low Sulfur Diesel Oil
    2,991,440  
Gal
  $ 2.2417     $ 0.1500     $ 2.3917     $ 7,154,627.05  
Daily Posting for OPIS Average Philadelphia Rack for ULSD plus $0.15/gal adder
Fuel-Crisfield #2 Oil
    82,577  
Gal
  $ 2.1386     $ 0.1400     $ 2.2786     $ 188,159.95  
Daily Posting for OPIS Average Philadelphia Rack for #2 FO plus $0.14/gal adder
Fuel-Tasley Turbine #2 Oil
    281,528  
Gal
  $ 2.1386     $ 0.1400     $ 2.2786     $ 641,489.70  
Daily Posting for OPIS Average Philadelphia Rack for #2 FO plus $0.14/gal adder
Fuel-Bayview #2 Oil
    73,263  
Gal
  $ 2.1386     $ 0.1400     $ 2.2786     $ 166,937.07  
Daily Posting for OPIS Average Philadelphia Rack for #2 FO plus $0.14/gal adder
Fuel- Hay Road Kerosene
    3,777,166  
Gal
  $ 2.3415     $ 0.1500     $ 2.4915     $ 9,410,809.84  
Daily Posting for OPIS Average Philadelphia Rack for Ultra Low Sulfur Kerosene
plus $0.15/gal adder
Fuel-West Sub #2 Oil
    95,927  
Gal
  $ 2.1386     $ 0.1400     $ 2.2786     $ 218,579.26  
Daily Posting for OPIS Average Philadelphia Rack for #2 FO plus $0.14/gal adder
Fuel-Delaware City #2 Oil
    44,490  
Gal
  $ 2.1386     $ 0.1400     $ 2.2786     $ 101,374.00  
Daily Posting for OPIS Average Philadelphia Rack for #2 FO plus $0.14/gal adder
Fuel-Christiana #2 Oil
    238,822  
Gal
  $ 2.1386     $ 0.1400     $ 2.2786     $ 544,179.81  
Daily Posting for OPIS Average Philadelphia Rack for #2 FO plus $0.14/gal adder
Fuel-DW #2 Oil
    5,595  
Gal
  $ 2.1386     $ 0.1500     $ 2.2886     $ 12,804.72  
Daily Posting for OPIS Average Philadelphia Rack for #2 FO plus $0.15/gal adder
Fuel-Missouri Avenue Jet Fuel
    396,979  
Gal
  $ 2.3415     $ 0.1600     $ 2.5015     $ 993,042.49  
Daily Posting for OPIS Average Philadelphia Rack for Ultra Low Sulfur Kerosene
plus $0.16/gal adder
Fuel-Cedar Jet Fuel
    613,316  
Gal
  $ 2.3415     $ 0.1600     $ 2.5015     $ 1,534,209.97  
Daily Posting for OPIS Average Philadelphia Rack for Ultra Low Sulfur Kerosene
plus $0.16/gal adder
Fuel-Middle Jet Fuel
    553,693  
Gal
  $ 2.3415     $ 0.1600     $ 2.5015     $ 1,385,063.74  
Daily Posting for OPIS Average Philadelphia Rack for Ultra Low Sulfur Kerosene
plus $0.16/gal adder
Fuel-Cal's Corner Jet Fuel
    313,724  
Gal
  $ 2.3415     $ 0.1600     $ 2.5015     $ 784,781.35  
Daily Posting for OPIS Average Philadelphia Rack for Ultra Low Sulfur Kerosene
plus $0.16/gal adder
Fuel-Cumberland Jet Fuel
    760,887  
Gal
  $ 2.3415     $ 0.1600     $ 2.5015     $ 1,903,359.72  
Daily Posting for OPIS Average Philadelphia Rack for Ultra Low Sulfur Kerosene
plus $0.16/gal adder
Fuel-Ultra Light Sulfur Kerosene (Cumb2)
    284,504  
Gal
  $ 2.3415     $ 0.1600     $ 2.5015     $ 711,687.53  
Daily Posting for OPIS Average Philadelphia Rack for Ultra Low Sulfur Kerosene
plus $0.16/gal adder
Fuel-Sherman Avenue Jet Fuel
    1,420,021  
Gal
  $ 2.3415     $ 0.1600     $ 2.5015     $ 3,552,182.03  
Daily Posting for OPIS Average Philadelphia Rack for Ultra Low Sulfur Kerosene
plus $0.16/gal adder
                                             
Fair market value of Fuel Inventory
                                    $ 52,128,499    

 
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Attachment A: Inventory Cost
 
The Estimated Inventory Cost will be calculated pursuant to the results of the
Inventory Audit. The Estimated Inventory Cost will be used to calculate the
Closing Payment as follows:
 
·
If the Estimated Inventory Cost is greater than $18,890,000, then the amount of
such excess on a dollar-for-dollar basis will be added to the calculation of the
Closing Payment.

 
·
If the Estimated Inventory Cost is less than $18,890,000, then the amount of
such shortfall on a dollar-for-dollar basis will be subtracted from the
calculation of the Closing Payment.

 
·
If the Estimated Inventory Cost is equal to $18,890,000, there is no adjustment
to the calculation of the Closing Payment for Estimated Inventory Cost.

Such amounts will be subject to a post-Closing adjustment pursuant to Section
2.04 of the Agreement, and the Closing Date Inventory Cost will be used to
calculate the post-Closing adjustment to the Purchase Price.

Sample Calculation:
If the Estimated Inventory Cost resulting from the Inventory Audit is
$18,963,000, in accordance with Section 2.02(e) of the Agreement, $73,000 shall
be added to the Closing Payment that Purchaser shall pay to Holdings at the
Closing ($18,963,000 - $18,890,000 = $73,000). Such amount will be subject to a
post-Closing adjustment pursuant to Section 2.04 of the Agreement.
 

 
 

 

 

 
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Schedule IV
 
Per Diem Adjustment
 

July
 
$360,000
 
August
 
$363,500
 
September
 
$237,500
 
October
 
$195,000
 
November
 
$189,500
 
December
 
$219,500
 

 

 
 

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Schedule V
 

 
PJM Capacity Deficiency Charge Calculation
 

 
A.
Capacity Resource Deficiency Charge

The Capacity Resource Deficiency Charge will be calculated as the total monthly
charges from the PJM ISO that Purchaser will incur to fill its 2010/11 planning
year UCAP obligation.

2010/11 Capacity Resource Deficiency Charge = (Cleared 2010/11 UCAP of 3,627 MW
– Owned UCAP of 3651.5 MW ) x Cost2010/11 x 365

where:

Owned UCAP of 3,651.5 MW includes 25.6 MW of Available Capacity from Tasley 10
unit and 34.1 MW purchased UCAP.

Cost2010/11 = Net cost in $ per MW-Day of the UCAP obligation make whole
position already executed by the Company

If the result of such calculation above is negative, then the value that will be
applied for the Capacity Resource Deficiency Charge shall be zero.

B. Payment for Purchased Capacity for Planning Year 2010/11

Purchased UCAP payment = Purchased UCAP of 34.1 MW x Purchased Price of
$50/MW-day x 365 days less any purchased capacity payments made by Parent
through the Closing Date.
 

 

 
-123-

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Schedule VI
 
Post-Closing Settlement Charges
 

 
A.           March 2011 Settlement Calculation

March 2011 Settlement Calculation: (i) Allocation of 2011/2012 Capacity Resource
Deficiency Charge + (ii) Allocation of Charges for Summer Capacity Testing
Charges

(i)           Allocation of 2011/2012 Capacity Resource Deficiency Charge

Comment:  The intent is to allocate a known charge (based on published PJM data,
net of any UCAP buy-backs) to Parent and Purchaser based on their share of
contributed equivalent forced outage hours.

PJM will publish rolling 12-month historical performance information in the Fall
of 2010 which will affect Purchaser’s capacity position and revenues for the
2011/12 planning year.  The cost associated with any shortfall in UCAP for
2011/12 determined will be allocated between Parent and Purchaser according to
the share of outage time which occurred under their respective ownership.  The
portion of the total estimated PJM charge attributable to forced outages that
occurred under Parent’s ownership will be covered by Parent:

Allocated 2011/12 Capacity Resource Deficiency Charge = EFOHPHI / EFOHTotal x
2011/12 Capacity Resource Deficiency Charge

where:

EFOHPHI = MW-Weighted Equivalent Forced Outage Hours from 10/1/09 to the Closing
Date

EFOHTotal = MW-Weighted Equivalent Forced Outage Hours from 10/1/09 to 9/30/10

MW-Weighted = EFOH x by related plant ICAP

2011/12 Capacity Resource Deficiency Charge = (Cleared 2011/12 UCAP of 3,747.4
MW – Actual UCAP Position as determined by PJM) x Cost2011/12 x 365

Cost2010/11 =
A.) Applicable clearing price in the February 2011 Incremental Auction for the
2011/12 planning year (if capacity is successfully procured), or
B.) a MW-Weighted average price of the Incremental Auction clearing price and
the BRA Price for EMAAC + 20% (if the capacity shortfall is only partially
cleared in the Incremental Auction), or

 
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C.) the BRA Price for EMAAC + 20% (if capacity cannot be procured in the
Incremental Auction)

Comment: The 2011/12 Capacity Resource Deficiency Charge will reflect the
pricing level at which Purchaser covers the position in the Incremental Auction
unless capacity cannot be procured.

(ii)           Allocation of Charges for Summer Capacity Testing Charges

Comment:  The intent is to create a fall-back mechanism for ICAP test results in
the event the Closing Date is delayed beyond August 1, 2010.  If the Closing
occurs prior to August 1, 2010, then this calculation does not apply.

If the Closing is delayed and Purchaser’s ownership period during the Summer of
2010 is compressed, then the capacity tests under the Company’s ownership could
have an impact on Purchaser’s economics for the full 2010/11 planning year.  If
the Closing Date is delayed beyond August 1, 2010, then the 2010/11 Capacity
Testing Charge will be calculated as:

2010/11 Capacity Testing Charge = ICAP Shortfall (if applicable) x (1 –
EFORdeffective) x BRA Price x 365

where:

ICAP Shortfall = Unit ICAP Shortfall as determined by PJM

EFORdeffective = Published unit effective EFORd for 2010/11 planning year

BRA Price = 2010/11 Base Residual Auction UCAP clearing price for EMAAC of
$174.29 per MW-Day

B.           December 2011 Settlement Calculation (“Capacity Charge True-Up B”)

(i)           Peak Hour Availability Charges

PJM will finalize its calculations of peak hour availability performance during
the Fall of 2011 and either charge Purchaser for performance below target or pay
Purchaser for performance above target.  A second capacity charge true-up will
be determined in the Fall of 2011 if a charge is levied by PJM.  Parent and
Purchaser will allocate any charge between themselves according to outage time
under each period of ownership:

Capacity Charge True-Up B = Allocated 2010/11 Peak Hour Availability Charge (if
applicable)

 
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Final 2010/11 Peak Hour Availability Charge Adjustment =
If PJM charge is positive (Purchaser owes PJM) = EFOHPHI / EFOHTotal x
Total Peak Hour Availability Charge per PJM

where:

EFOHPHI = MW-Weighted Equivalent Forced Outage Hours from 6/1/10 to the Closing
Date, during peak period hours as defined by PJM (for units assessed by the
EFORp metric in PJM’s calculations) or all hours (for units assessed by the
EFORd metric)

EFOHTotal = MW-Weighted Equivalent Forced Outage Hours from 6/1/10 to 5/31/11,
during peak period hours as defined by PJM (for units assessed by the EFORp
metric in PJM’s calculations) or all hours (for units assessed by the EFORd
metric)

Total Peak Hour Availability Charge per PJM = as determined by PJM

Capacity Charge True-Up B will be payable to Purchaser from Parent (if PJM
charge is positive) in December of 2011.
 
-126-

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AMENDED AND RESTATED
LEASE AGREEMENT1
 
FOR
 
CUMBERLAND (NJ) PROPERTY
 
BETWEEN
 
ATLANTIC CITY ELECTRIC COMPANY
 
AS LANDLORD
 
AND
 
CONECTIV ATLANTIC GENERATION, LLC
 
AS TENANT
 
[____] 2010
 
(COVER SHEET FOR INFORMATIONAL PURPOSE ONLY)
 

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

 
1 A MEMORANDUM OF LEASE IN RECORDABLE FORM WILL BE DELIVERED AT CLOSING.

 
 

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

 

AMENDED AND RESTATED
 
LEASE AGREEMENT
 
BETWEEN
 
ATLANTIC CITY ELECTRIC COMPANY,
 
AS LANDLORD
 
AND
 
CONECTIV ATLANTIC GENERATION, LLC,
 
AS TENANT
 
Dated as of ___ Day of ________, 2010
 

 
 

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

 
TABLE OF CONTENTS

 
 
ARTICLE 1
 
 
Definitions and Construction
 
 
1
 
ARTICLE 2
 
Term
 
6
 
ARTICLE 3
 
Rent
 
6
 
ARTICLE 4
 
Use, Maintenance, Repairs, Compliance with Laws, Etc.
 
7
 
ARTICLE 5
 
Alterations; Easements and Other Agreements
 
9
 
ARTICLE 6
 
Insurance and Indemnification
 
10
 
ARTICLE 7
 
Damage to or Destruction of the Building
 
12
 
ARTICLE 8
 
Condemnation
 
12
 
ARTICLE 9
 
Assignment, Mortgage, Subletting, Etc.
 
14
 
ARTICLE 10
 
Landlord’s Right to Perform Tenant’s Covenants; Cumulative Remedies; Waivers
 
18
 
ARTICLE 11
 
Dispute Resolution
 
19
 
ARTICLE 12
 
[Intentionally Omitted]
 
20
 
ARTICLE 13
 
Brokerage
 
20
 
ARTICLE 14
 
Landlord’s Warranties
 
20
 
ARTICLE 15
 
[Intentionally Omitted]
 
21
 
ARTICLE 16
 
Quiet Enjoyment
 
21
 
ARTICLE 17
 
Notices
 
21
 
ARTICLE 18
 
Estoppel Certificate; Memorandum of Lease
 
22
 
ARTICLE 19
 
Consent of Landlord and Tenant
 
22
 
ARTICLE 20
 
End of Term; Surrender
 
22
 
ARTICLE 21
 
True Lease
 
23
 
ARTICLE 22
 
Reservation of Use
 
24
 
ARTICLE 23
 
[Purchase Option]
 
25
 
ARTICLE 24
 
Miscellaneous Provisions
 
28
 

 
 

 
i

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

 

 
 
SCHEDULES
 
SCHEDULE A
Description of the Land (Approximately 140 acres)
SCHEDULE B
Description of Landlord Property (Landlord’s existing Utility Facilities within
the Land)
SCHEDULE C
Title Exceptions
SCHEDULE D
Joint Use Facilities
SCHEDULE E
Form of Appurtenant Easements

 
 
 
 
 
 
 
 

 
 
ii

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

 

THIS AMENDED AND RESTATED LEASE AGREEMENT (this “Lease”), originally dated as of
the June 1, 2000 (and amended September 24, 2003), and amended and restated as
of this ____ day of ______, 2010, is entered into by and between THE ATLANTIC
CITY ELECTRIC COMPANY, a Public Utility of the State of New Jersey, having an
address of 5100 Harding Highway, Mays Landing, New Jersey 08330 (the
“Landlord”), and CONECTIV ATLANTIC GENERATION, LLC, a Delaware limited liability
company, having an address of 800 King Street, Wilmington, Delaware 19899 (the
“Tenant”).
 
WITNESSETH:
 
Landlord, for and in consideration of the rents to be paid and of the covenants
and agreements hereinafter contained to be kept and performed by Tenant, hereby
leases to Tenant, and Tenant hereby hires from Landlord the property more
particularly described on Schedule “A” annexed hereto (the “Land”), consisting
of approximately one hundred and forty (140) acres of land located in the City
of Millville, County of Cumberland and State of New Jersey; and
 
TOGETHER with all right, title and interest, if any, of Landlord in and unto any
street or road abutting or included within the Land and any strips or gores
adjoining or included within the Land; and
 
TOGETHER with all easements appurtenant to the Land, including, without
limitation, all drainage easements; and
 
SUBJECT only to the matters set forth on Schedule “C” annexed hereto (“Title
Exceptions”); and
 
SUBJECT to the reservation of use in favor of Landlord as provided in Article
22;
 
TO HAVE AND TO HOLD the same unto Tenant, its successors and assigns, for the
term hereinafter provided, upon and subject to the covenants, agreements, terms,
provisions, conditions and limitations hereinafter set forth.
 
And Landlord and Tenant hereby covenant and agree as follows:
 
ARTICLE 1
 

 
Definitions and Construction
 
Section 1.01.                          Unless the context otherwise requires,
for all purposes of this Lease and all agreements supplemental hereto, the terms
defined in this Section shall have the following meanings:
 
(a)               “Affiliate” shall mean any corporation which, directly or
indirectly, controls, is controlled by or is under common control with Tenant,
any corporation, joint venture, partnership or other business association formed
by or on behalf of any of the foregoing and any successor (whether by merger,
consolidation or sale of all or substantially all of the assets of such entity)
to any of the foregoing.
 

 
1

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

 

(b)               “Alterations” shall have the meaning set forth in Section 5.01
hereof.
 
(c)               “Annual Rent” shall have the meaning set forth in Section 3.01
hereof.
 
(d)               “Buildings” shall mean and include all buildings erected on
the Land (other than the Landlord Property) and those other buildings to be
erected on the Land (other than the Landlord Property) after the Commencement
Date of this Lease, the foundations and footings, any and all fixtures,
equipment and machinery of every kind and nature whatsoever affixed or attached
thereto or used or procured for use in connection with the operation, use or
occupancy thereof, and the appurtenances thereto, existing now or in the future,
and any and all renewals and replacements thereof, additions thereto and
substitutes therefor, but excluding therefrom all personal property, any or all
of which Landlord hereby agrees may be removed from the Land at any time by
Tenant or any Subtenant (as hereinafter defined).
 
(e)               “Casualty Termination Date” shall have the meaning set forth
in Section 7.01 hereof.
 
(f)                “Closing” shall have the meaning set forth in Section 23.01
hereof.
 
(g)               “Commencement Date” shall have the meaning set forth in
Section 2.01 hereof.
 
(h)               “Condemnation Proceeds” shall have the meaning set forth in
Section 8.01 hereof.
 
(i)                “Constructive Total Taking” shall have the meaning set forth
in Section 8.01 hereof.
 
(j)                “Default Rate” shall have the meaning set forth in Section
10.03 hereof.
 
(k)               “Designated Equipment” shall mean equipment identified as
Designated Equipment in Part 2 of Schedule D, attached hereto and incorporated
herein, as amended from time to time, which do not constitute Joint Use
Facilities, but which are owned by Landlord or Tenant and, in the case of
equipment owned by Landlord, are located on the Premises (other than the
Landlord Property) and, in the case of equipment owned by Tenant are located on
the Landlord Property.
 
(l)                “Expiration Date” shall have the meaning set forth in Section
2.01 hereof.
 
(m)              “First Leasehold Mortgagee” shall mean any holder of record of
a Leasehold Mortgage which is prior in lien to all other Leasehold Mortgages.
 
(n)               “Good Utility Practice” shall mean any of the practices,
methods and acts engaged in or approved by a significant portion of the electric
utility industry during the relevant time period, or any of the practices,
methods and acts which, in the exercise of reasonable judgment in light of the
facts known at the time the decision was made, could have been expected to
accomplish the desired result at a reasonable cost consistent with
 

 
2

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

 

good business practices, reliability, safety and expedition, Good Utility
Practice is not intended to be limited to the optimum practice, method, or act
to the exclusion of all others, but rather to the acceptable practices, methods,
or acts generally accepted in the region, including those practices required by
Federal Power Act Section 215(a)(4).
 
(o)               “Governmental or Regulatory Authority” shall have the meaning
set forth in Section 23.01(b)(ii) hereof.
 
(p)               “Hazardous Materials” shall mean (i) any petrochemical or
petroleum products, oil,  radioactive materials, radon gas, asbestos in any form
that is or could become friable, urea formaldehyde foam insulation and
transformers or other equipment that contain dielectric fluid which may contain
levels of polychlorinated biphenyls; (ii) for purposes of this Lease, oil ash
and coal ash; (iii) any chemicals, materials or substances defined as or
included in the definition of “hazardous substances,” “hazardous wastes,”
“hazardous materials,” “restricted hazardous materials,” “extremely hazardous
substances,” “toxic substances,” “contaminants” or “pollutants” or words of
similar meaning and regulatory effect; or (iv) any other chemical, material or
substance, which is prohibited, limited, subject to regulation, investigation,
control or remediation, or that could give rise to liability, under any
environmental law.
 
(q)               “Impositions” shall mean all ad valorem real property taxes,
assessments, special assessments and other governmental levies and charges,
general and special, ordinary and extraordinary, foreseen and unforeseen, of any
kind and nature whatsoever other than User Fees (as hereinafter defined) which
shall during the term of this Lease be assessed, levied, charged or imposed by
any governmental authority upon or become payable out of or become a lien on the
Premises, or any part thereof, the appurtenances thereto or the sidewalks,
streets or vaults adjacent thereto; provided, however, that “Impositions” shall
not include any taxes in respect of Landlord Property or any inheritance,
estate, succession, transfer, gift, capital stock tax levied upon Landlord or
any tax on the overall net income of Landlord imposed by the federal government
of the United States or by the State of New Jersey.
 
(r)                “Insurance Requirement” shall mean all requirements of any
insurance policy carried by Tenant and applicable to all or any part of the
premises or the use thereof.
 
(s)               “Joint Use Facilities” shall mean equipment, identified as
Joint Use Facilities in Part 1 of Schedule “D”, attached hereto and incorporated
herein, as amended from time to time, which are owned by Landlord or Tenant and
which are used for both generation operations and transmission and/or
distribution systems and are, therefore, jointly-operated by Landlord and
Tenant.
 
(t)                “Land” shall have the meaning set forth in the Preamble to
this Lease.
 
(u)               “Landlord” shall mean Atlantic City Electric Company, a
corporation of the State of New Jersey.
 
(v)               “Landlord Property” shall have the meaning set forth in
Section 22.01 hereof.
 

 
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(w)               “Lease” shall mean this Amended and Restated Lease Agreement.
 
(x)               “Leasehold Mortgage” shall mean any mortgage of this Lease
(which may also include Tenant’s interest as sublandlord in any present or
future Subleases and any interest of Tenant in the personal property upon the
Premises).  “Leasehold Mortgagee” shall mean the holder of record of a Leasehold
Mortgage.
 
(y)               “Legal Requirements” shall mean all present and future laws,
rules, regulations and ordinances of any federal, state, county, municipal or
other governmental, public or quasi-public authority, department, bureau, board,
agency or office applicable to the Premises or any part thereof or the
sidewalks, curbs or other areas adjacent thereto.
 
(z)               “Mortgage” shall have the meaning set forth in Section 9.04(d)
hereof.
 
(aa)             “Notices” shall have the meaning set forth in Section 17.01
hereof.
 
(bb)            "Option” shall have the meaning set forth in Section 23.01
hereof.
 
(cc)             “Optioned Property” shall have the meaning set forth in Section
23.01 hereof.
 
(dd)            “Original Lease” shall mean the Lease Agreement, dated as of
July 1, 2000, by and between Landlord and Tenant.
 
(ee)             “Permitted Exceptions” shall have the meaning set forth in
Section 23.01(a)(ii) hereof.
 
(ff)              "Premises” shall mean the Land and the Buildings.
 
(gg)            “Property Transfer” shall have the meaning set forth in Section
23.01(b)(ii) hereof.
 
(hh)            “Regulatory Approval Costs” shall have the meaning set forth in
Section 23.01(b)(ii) hereof.
 
(ii)               “Release” shall mean release, spill, leak, discharge, dispose
of, pump, pour, emit, empty, inject, leach, dump or allow to escape into or
through the environment.
 
(jj)               “Required Landlord Regulatory Approval” shall have the
meaning set forth in Section 23.01(b)(ii) hereof.
 
(kk)             “Requirements” shall have the meaning set forth in Section 4.04
hereof.
 
(ll)               “Rules” shall have the meaning set forth in Section 12.01
hereof.
 
(mm)           “Subtenant” shall mean any tenant or licensee (whether or not in
possession) or other occupant (other than Tenant) of all or any part of the
Premises which is granted such rights by Tenant; and the term “Sublease” shall
mean any lease or other
 

 
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agreement by which Tenant grants such rights for the use or occupancy of any
such space to a Subtenant.
 
(nn)            “Tenant” shall mean Conectiv Atlantic Generation, L.L.C., a
Delaware limited liability company and the successors and assigns of its
interests as Tenant hereunder, while they hold such interests.
 
(oo)            “Tenant Approvals” shall have the meaning set forth in Section
23.01(b)(i) hereof.
 
(pp)            “Term” shall have the meaning set forth in Section 2.01 hereof.
 
(qq)            “Termination Date” shall have the meaning set forth in Section
20.01 hereof.
 
(rr)              "Title Exceptions” shall have the meaning set forth in the
Preamble to this Lease.
 
(ss)             “Unavoidable Delays” shall mean delays due to any and all
causes beyond Tenant’s reasonable control, including delays caused by Landlord
or due to strikes, lockouts or any other type of labor dispute, acts of God,
governmental restriction, shortages of or inability to obtain labor, fuel,
steam, water, electricity or materials, enemy action, civil commotion, fire or
other casualty, insurance settlements and all other causes, whether similar or
dissimilar beyond Tenant’s reasonable control.
 
(tt)              “User Fees” shall mean all use and occupancy taxes, vault,
water and sewer charges, rates and rents, charges for public utilities, license
and permit fees and all other governmental levies and charges which shall during
the term of this Lease be levied, charged or imposed by any governmental
authority upon utilities and services rendered to Tenant or the rent and income
received by or for the account of Tenant from any Subtenant or for any use or
occupancy of the premises by Tenant or any Subtenant.
 
(uu)            “Utility Facilities” shall mean present or future substation,
transmission, distribution and communication equipment and lines, Joint Use
Facilities, and communication towers located on the Land.
 
(vv)            “Utility Facilities Easement” shall have the meaning set forth
in Section 23.01.
 
(ww)           “Work” shall have the meaning set forth in Section 7.02 hereof.
 
Section 1.02.                          The following rules of construction shall
be applicable for all purposes of this Lease and all agreements supplemental
hereto, unless the context otherwise requires:
 
(a)               The terms “hereby”, “hereof”, “hereto”, “herein”, “hereunder”
and any similar terms shall refer to this Lease and the term “hereafter” shall
mean after, and the term “heretofore” shall mean before, the date of this Lease.
 

 
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(b)               Words of the masculine, feminine or neuter gender shall mean
and include the correlative words of the other genders and words importing the
singular number shall mean and include the plural number and vice versa.
 
(c)               Words importing persons shall include firms, associations,
partnerships (including limited partnerships), trust, corporations and other
legal entities, including public bodies, as well as natural persons.
 
(d)               The Terms “include”, “including” and similar terms shall be
construed as if followed by the phrase “without being limited to”.
 
(e)               All references in this Lease to numbered Articles and Sections
and to lettered Schedules are references to the Articles and Sections of this
Lease and the Schedules annexed to this Lease, unless expressly otherwise
designated in context.
 
Section 1.03.                          The captions under the Article numbers of
this Lease are for convenience and reference only and in no way define, limit or
describe the scope or intent of this Lease nor in any way affect this Lease.
 
Section 1.04.                          The Table of Contents preceding this
Lease, although under the same cover, is for the purpose of convenience and
reference only and is not to be deemed or construed in any way as part of this
Lease, nor as supplemental thereto or amendatory thereof.
 
ARTICLE 2
 

 
Term
 
Section 2.01.                          The term of this Lease (the “Term”)
commenced on July ____, 2000 (the “Commencement Date”) in accordance with the
Original Lease and shall expire on July ____, 2098 (the “Expiration Date”),
unless otherwise sooner terminated.
 
ARTICLE 3
 

 
Rent
 
Section 3.01.                          Tenant covenants and agrees to pay to
Landlord from and after the Commencement Date and for the remainder of the term
of this Lease, an annual rent (“Annual Rent”) in the amount of one Dollar ($1),
payable in advance on the first business day of each calendar year during the
term.  Landlord acknowledges that Tenant has prepaid the Annual Rent for the
entire Term.
 
Section 3.02.                          Tenant will, at Tenant’s sole cost and
expense, bear, pay and discharge prior to delinquency, as additional rent, all
Impositions which shall, pursuant to present or future law or otherwise, prior
to or during the term hereby granted, have been or be levied, charged, assessed,
or imposed, and any interest or penalties for late payment thereof; it being the
intention of the parties hereto that the rents reserved herein shall be received
and enjoyed by Landlord as a net sum free from all such Impositions. Landlord
shall be responsible for all taxes, including ad valorem real estate taxes,
imposed on or otherwise relating to the Landlord Property.
 

 
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Section 3.03.                          All payments of rent made by Tenant to
Landlord hereunder shall be payable without prior notice or demand, and all
other payments required to be made by Tenant to Landlord hereunder shall be
payable upon such notice as is herein required, in lawful currency of the United
States of America, or by check subject to collection, and shall be paid to
Landlord by delivering or mailing the same by regular mail to the party to whom
notices are to be sent pursuant to Section 17.01 or to such other person and/or
at such other place as Landlord may from time to time designate in writing.
 
Section 3.04.                          Tenant shall pay to Landlord throughout
the term of this Lease the rents, additional rent and other payments hereunder,
without abatement, deduction or set-off except as otherwise expressly provided
herein; provided, however, that Tenant shall not be required to pay any
Impositions or any mortgage indebtedness or any interest on any mortgages that
at any time may encumber the interests of Landlord in the Premises.
 
Section 3.05.                          All additional rent and other payments
provided for under this Lease shall constitute rent payable hereunder with the
same effect as if the same were the rent reserved herein and, in the event of
the non-payment by Tenant of any such additional rent or other payments when due
according to the terms of this Lease, Landlord shall have the same rights and
remedies in respect thereof as Landlord shall have or may have in respect of the
rent herein reserved.
 
ARTICLE 4
 

 
Use, Maintenance, Repairs, Compliance with Laws, Etc.
 
Section 4.01.                          Tenant has leased the Premises after a
full and complete examination thereof.  Except as otherwise provided in this
Lease (a) Tenant accepts the same without any representation or warranty by
Landlord, express or implied in fact or by law (other than as provided in
Article 13), and without recourse to Landlord, as to the fact or by law, and
without recourse to Landlord, as to the title thereto, the nature, condition or
usability thereof, or the use or uses to which the Premises or any part thereof
may be put and (b) Landlord shall not be required to furnish any services or
facilities or to make any repairs or alterations in or to the Premises
throughout the term of this Lease.  Tenant shall maintain any equipment
installed by it in the Premises (other than the Landlord Property) in reasonably
good order and condition, and in compliance with all environmental and other
Legal Requirements.
 
Section 4.02.                          The Premises may be used and occupied for
any lawful purpose, subject, however, to the provisions of Section
5.01.  Landlord hereby acknowledges that it has leased the Premises to Tenant
solely in consideration of the rents to be paid by Tenant and the performance of
the obligations expressly assumed by Tenant to be performed, and that, except as
set forth in this Lease, neither Landlord nor Tenant has made any representation
or warranty, express or implied in fact or by law, as to the use or uses to
which the Premises or any part thereof may be put.
 
Section 4.03.                          Tenant shall pay or cause to be paid all
User Fees.
 

 
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Section 4.04.                          From and after the Commencement Date and
during the balance of the term of this Lease, each party (the “indemnifying
party”) shall indemnify and hold harmless the other party (the “indemnified
party”) from and against all fines, penalties, claim or claims for damages of
every kind and nature arising out of the indemnifying party’s (or its
Affiliate’s) failure to comply with any Legal Requirements for which it is
responsible under this Agreement; provided, however, that the indemnifying party
(or its Affiliate) may, in good faith contest the validity or application of any
such Legal Requirement and, pending the final determination of such contest, may
postpone compliance therewith but not so as to subject the indemnified party (or
its Affiliate) to any fine or penalty or to prosecution for a crime, to cause
the Premises or any part thereof to be condemned or to be vacated or to cause
any public liability or casualty insurance to become void;. If civil liability
is incurred by reason of noncompliance, the indemnifying party may nevertheless
make such contest and postpone compliance.  The indemnified party shall execute
and deliver to the indemnifying party any document or authorization which may be
necessary to enable the indemnifying party so to contest any such requirement
and shall fully cooperate with the indemnifying party in connection with any
such contest, but the indemnified party shall incur no liability for the payment
of any costs or expenses in connection therewith and the indemnifying party
agrees to indemnify and hold the indemnified party harmless from any such costs
or expenses.
 
Section 4.05.                          Landlord shall not be responsible or
liable for any damage or injury to any property (exclusive of the Landlord
Property) or to any person or persons at any time on the Premises nor shall
Landlord be in any way responsible or liable in case of any accident or injury
to any of Tenant’s servants, employees, or tenants or to any person or persons
in or about the Premises (exclusive of the Landlord Property); and Tenant agrees
that it will not hold Landlord in any way responsible or liable therefor and
will further indemnify and hold harmless Landlord from and against any and all
claims made by any party and all liability, penalties, damages, expenses and
judgments arising from injury to persons or property of any nature and also for
any matter or thing which shall or may happen in or upon, growing out of the
occupation of or otherwise in connection with the Premises (exclusive of the
Landlord Property); provided, however, that the foregoing provisions of this
Section shall not apply to any claims, liability, injury, damage or thing caused
by a negligent act or willful misconduct on the part of Landlord or its agents,
servants or employees.
 
Section 4.06.                          Both Landlord (in furtherance of its
reservation of rights pursuant to Section 22.01 hereof), and Tenant (in
furtherance of the grants encompassed by this Article 4) shall have the right to
install their interconnection equipment within the Premises (including within
the Landlord Property) as reasonably required to implement the interconnection
contemplated under any applicable interconnection agreement, including without
limitation, the right to "connect to" or "mount upon" the other Party's
equipment or facilities, so long as such use is consistent with Good Utility
Practice and does not materially burden the other party's use of the Premises or
Landlord Property, respectively.
 

 
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ARTICLE 5
 

 
Alterations; Easements and Other Agreements
 
Section 5.01.                          Tenant may, at its expense, at any time
and from time to time, make such alterations, changes, replacements,
improvements and additions in and to the Premises (other than the Landlord
Property) and may construct on all or any part of the Land (other than the
Landlord Property) such buildings, parking areas, driveways, walks and other
similar improvements, including (anything to the contrary herein
notwithstanding) the demolition of the Building or any other improvements that
hereafter may be situated or erected on the Land (which such alterations,
changes, demolitions, replacements, improvements, additions and constructions
are hereinafter collectively referred to as “Alterations”), as Tenant may deem
desirable; provided, that during the course of such Alterations, Tenant shall
carry or cause to be carried workers’ compensation insurance covering Tenant’s
employees in the State of New Jersey.  Tenant shall require that all contractors
certify similar coverage.  Tenant is responsible for the placement of all
policies required by this Section and the payment of all premiums in connection
therewith.  Tenant is further responsible for the payment of any deductible
under such policies.  Except as provided in Article 7, the Building shall not be
demolished nor shall any structural Alterations be made which are inconsistent
with the use of the Building for any of the uses which are permitted under the
laws of the State of New Jersey, and the local zoning ordinances.  Tenant shall
not be entitled to any abatement, allowance, reduction or suspension of the rent
or additional rent, nor shall Tenant be released of or from any other obligation
imposed upon Tenant under this Lease, on account of the making of such
Alterations.
 
Section 5.02.                          Subject to the provisions of Section 5.01
above, Tenant may grant permission to each Subtenant to make such alterations,
additions, substitutions and improvements to the space subleased to each of them
respectively as each Subtenant may reasonably deem necessary or desirable, from
time to time, to adapt said space for its purpose.
 
Section 5.03.                          Title to the Building and all Alterations
situated or erected on the Land (other than the Landlord Property), and the
equipment and all other items installed on the Premises (other than the Landlord
Property), shall remain solely in Tenant and Tenant alone shall be entitled to
deduct all depreciation on Tenant’s income tax returns for the Building and such
Alterations, equipment and items.
 
Section 5.04.                          Tenant shall have the right to enter into
agreements with public utility companies and municipal or other governmental
authorities, agencies or departments creating such easements or other rights in
favor thereof as may be reasonably necessary or convenient to the servicing or
development of the Premises.  Landlord agrees to consent to such agreements and
to execute any and all documents, agreements and instruments and to take all
other actions as may reasonably be necessary to effectuate the same, all at
Tenant’s expense.
 

 
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ARTICLE 6

 
Insurance and Indemnification
 
Section 6.01.          (a)  From and after the Commencement Date, Tenant shall,
at its sole cost and expense, keep and maintain commercial general liability
insurance protecting Tenant, against any and all claims for damages to persons
or property or for loss of life or property occurring upon, in or about the
Premises.  Such insurance shall be written with limits determined by Leasehold
Mortgagee, if any, or otherwise established by Tenant. Tenant and any Subtenants
shall add the Landlord and any Leasehold Mortgagee as additional insureds on
their commercial general liability policies.  Tenant shall be fully responsible
for the payment of any deductible, and Tenant shall not make a claim against
Landlord for recovery of any deductible.  Landlord reserves the right to discuss
with Tenant the type and limits of coverages required to be carried by Tenant
hereunder; provided, that Tenant shall not be required to increase the coverage
hereunder.
 
(b)               During the term of this Lease, Tenant shall, at its sole cost
and expense, keep and maintain all risk property insurance on the Building in an
amount not less than one hundred percent (100%) of the full insurable
replacement value of the Building, exclusive of the cost of excavation,
footings, foundations, site work and underground utilities.  However, for the
perils of flood, wind and earthquakes, Tenant shall procure limits as are
reasonably prudent or are required by a Leasehold Mortgagee which may be less
than one hundred percent (100%) replacement value of the Building. Any
deductible is to be borne by Tenant.
 
(c)               All insurance policies carried pursuant to Subsections (a) and
(b) of Section 6.01 may expressly provide that any losses thereunder shall be
adjusted with Tenant and any Leasehold Mortgagee.
 
Section 6.02.          [Intentionally Omitted].
 
Section 6.03.         Landlord shall, at Tenant’s cost and expense, cooperate
fully with Tenant in order to obtain the largest possible recovery under any
insurance policy carried by Tenant and shall execute any and all consents or
other documents and take all other actions necessary in order to effectuate the
same and to cause such proceeds to be paid in accordance with the provisions of
this Lease.
 
Section 6.04.          (a)  Tenant shall require of all Subtenants a waiver of
subrogation on their property and time element policies in favor of Landlord and
Tenant.
 
(b)               If the inclusion of such clause or endorsement in a policy
procured by Subtenant would result in an increase in the premium for such
Subtenant, such Subtenant shall notify Tenant of the amount of such increase and
the Tenant may, but shall not be obligated to, pay the same; provided, that if
Tenant does not pay the same within ten (10) days after such notice, such
Subtenant may omit such clause or endorsement.
 
Section 6.05.          Each insurance policy carried pursuant to this Article 6
shall, to the extent obtainable, contain an agreement by the insurer that such
policy shall not be cancelled
 

 
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without at least thirty (30) days prior written notice, except for ten (10) days
prior written notice as respects non-payment of premium, to Landlord and any
Leasehold Mortgagee.
 
Section 6.06.          Tenant Indemnification. Tenant shall indemnify, hold
harmless and defend Landlord and its Affiliates, and their respective officers,
directors, employees, agents, contractors, subcontractors, invitees, and
successors, as the case may be, from and against any and all claims,
liabilities, costs, damages, and expenses (including reasonable attorney and
expert fees, and disbursements incurred by any of them in any action or
proceeding brought by any third party or tenant) (i) for damages to property,
injury to or death of any person, including Landlord’s employees or any third
parties, to the extent caused wholly or in part by any act or omission,
negligent or otherwise, by Tenant and/or its officers, directors, employees,
agents, contractors, subcontractors, or invitees arising out of or connected
with this Lease, including a failure by Tenant to perform its obligations
hereunder or (ii) on account of the presence, alleged presence, Release or
threatened Release of any Hazardous Materials on, under or migrating from the
Premises (other than Landlord Property and except to the extent attributable to
Landlord’s operation and maintenance of its transmission and distribution
facilities). Landlord shall not be entitled to indemnity under the preceding
sentence to the extent that a court of competent jurisdiction determines that
its gross negligence or willful misconduct caused such damages.
 
Section 6.07.          Landlord Indemnification.  Landlord shall indemnify, hold
harmless and defend Tenant and its Affiliates, and their respective officers,
directors, employees, agents, contractors, subcontractors, invitees and
successors, as the case may be, from and against any and all claims,
liabilities, costs, damages and expenses (including reasonable attorney and
expert fees, and disbursements incurred by any of them in any action or
proceeding brought by any third party or Landlord) (i) for damages to property,
injury to or death of any person, including Tenant’s employees or any third
parties, to the extent caused wholly or in part by any act or omission,
negligent or otherwise, by Landlord and/or its officers, directors, employees,
agents, contractors, subcontractors, or invitees arising out of or connected
with this Lease, including a failure by Landlord to perform its obligations
hereunder or (ii) on account of the presence, alleged presence, Release or
threatened Release of any Hazardous Materials on, under or migrating from the
Landlord Property or the Landlord’s transmission and distribution facilities.
Tenant shall not be entitled to indemnity under the preceding sentence to the
extent that a court of competent jurisdiction determines that its gross
negligence or willful misconduct caused such damages.
 
Section 6.08.          Indemnification Procedures.  If a party intends to seek
indemnification under this Article 6 from the other party, the party seeking
indemnification shall give the other party notice of such claim within ninety
(90) days after the later of (a) the commencement of, or (b) the party’s actual
knowledge of, such claim. Such notice shall describe the claim in reasonable
detail, and shall indicate the amount (estimated if necessary) of the claim that
has been, or may be sustained by, said party. To the extent that the other party
is actually and materially prejudiced as a result of failure to provide such
notice, such notice shall be a condition precedent to any liability of such
other party under the provisions for indemnification contained in this Lease.
Neither party may settle or compromise any claim with respect to which indemnify
may be sought under Sections 6.06 and/or 6.07 without the prior consent of the
other party; provided, however, that said consent shall not be unreasonably
withheld, delayed or conditioned.
 

 
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Section 6.09.          The indemnification obligations of each party under this
Article 6 shall continue in full force and effect regardless of whether this
Lease has either expired or been terminated or canceled.
 
ARTICLE 7

 
Damage to or Destruction of the Building
 
Section 7.01.          If the Building or any other part of the Premises shall
be wholly destroyed or substantially damaged by fire or other casualty at any
time during the term of this Lease and Tenant shall decide not to rebuild or
restore the Building or such other part of the Premises, then each of Tenant and
Landlord may elect to terminate this Lease as hereinafter provided.  Within one
hundred twenty (120) days after the date of such damage or destruction, Tenant
shall give Landlord a notice indicating whether or not Tenant elects to rebuild
or restore the Building or such other part of the Premises and stating that
either (i) Tenant has elected not to terminate this Lease or (ii) Tenant has
elected to terminate this Lease, which latter notice shall specify a date at
least thirty (30) days after the date of the giving of such notice upon which
date this Lease shall terminate (the “Casualty Termination Date”).  If Tenant
has elected to terminate this Lease, Tenant shall, at Tenant’s option, either
(i) be responsible for demolishing any and all improvements on the Land and
returning the Land to its natural state, all in full compliance with
environmental laws and other Legal Requirements applicable to closing out a
facility, or (ii) pay to Landlord an amount equal to the cost of such demolition
and restoration.  Upon payment of any sums due Landlord hereunder, this Lease
and the term and estate hereby granted shall terminate on the Casualty
Termination Date with the same effect as if such date were the Expiration
Date.  If Tenant shall decide not to rebuild the Building or restore the
Premises and shall elect not to terminate this Lease as aforesaid, Landlord may
elect to terminate this Lease by giving written notice of such election to
Tenant within thirty (30) days after receipt of Tenant’s notice of election.  In
the event of termination of this Lease by either Landlord or Tenant as
aforesaid, any insurance proceeds payable on account of such damage or
destruction shall belong to and be the property of Leasehold Mortgagee to the
extent of amounts owed to Leasehold Mortgagee, and the balance of any insurance
proceeds shall belong to and be the property of Tenant.  If neither party shall
elect to terminate this Lease as above provided, this Lease shall continue in
full force and effect, Tenant having no obligation to rebuild or restore the
Building or the Premises, but Tenant shall perform such work as may be required
by Legal Requirements to render the Building safe and secure.
 
ARTICLE 8

 
Condemnation
 
Section 8.01.          (a)  If, at any time during the term of this Lease, there
should be a taking of all or substantially all of the Building or the Premises
or a Constructive Total Taking of the Building or the Premises by the exercise
of any of condemnation or eminent domain or by agreement between Landlord and
Tenant or among Landlord, Tenant and those authorized to exercise such right,
this Lease shall terminate on, and the rent and all other charges payable
hereunder shall be apportioned as of and paid to, the date of such taking.  In
such event, Tenant (as to the Premises and the Buildings, including any and all
improvements thereto and equipment
 

 
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thereon owned by Tenant) and Landlord (as to Landlord's Property) shall remove
all improvements and equipment in accordance with applicable law, prior to
the date of such taking provided that Landlord shall be responsible for removing
its equipment located on the Premises or in the Buildings, and Tenant shall be
responsible for removing its equipment located on Landlord’s Property.  For the
purposes of this Article, the term a “Constructive Total Taking” shall mean a
taking of such portion of the Building or the Premises that, in Tenant’s
reasonable discretion, the untaken portion of the Premises is insufficient to
permit the continued use of the Building or the Premises, or the remaining
portion thereof, for Tenant’s purposes.
 
(b)               In the event of any such taking, each of Landlord and Tenant
shall be entitled to share in the proceeds to such taking (the “Condemnation
Proceeds”) to the extent of its respective interest in the Premises, taking into
account the value of Tenant’s leasehold interests under this Lease and
Landlord’s residual interests in and to the Premises, the remaining term under
this Lease and the rent payable hereunder.
 
(c)               If at the time of any total taking or Constructive Total
Taking any insurance proceeds payable on account of damage to or destruction of
the Premises shall be held by Tenant, such insurance proceeds shall belong to
and be the property of the Leasehold Mortgagee to the extent of amounts owed to
any such Leasehold Mortgagee, and the remainder of such insurance proceeds shall
belong to and be the property of Tenant.
 
Section 8.02.         In the event of a taking under circumstances in which this
Lease has not been terminated, each of Landlord and Tenant shall be entitled to
share in the Condemnation Proceeds as shall represent compensation for the value
of the portion of the Premises so taken to the extent of its respective interest
in such portion of the Premises, taking into account the value of Tenant’s
ownership of the Building and its leasehold interests under this Lease and
Landlord’s residual interests in and to the Premises, the remaining term under
this Lease and the rent payable hereunder.
 
Section 8.03.          If the whole or any part of the Premises, or Tenant’s
leasehold estate under this Lease, shall be taken in condemnation proceedings or
by any right of eminent domain for temporary use or occupancy, the foregoing
provisions of this Article shall not apply and Tenant shall continue to pay, in
the manner and at the times herein specified, the full amount of the rent and
all additional rent and, except only to the extent that Tenant may be prevented
from so doing pursuant to the terms of the order of the condemning authority.
Tenant shall perform and observe all of the other terms, covenants, conditions
and obligations hereof upon the part of Tenant to be performed and observed, as
though such taking has not occurred.  In the event of any taking of the
character referred to in this Section, Tenant, subject to any Leasehold
Mortgagee’s right to Condemnation Proceeds in respect of such taking, shall be
entitled to receive the entire amount of such Condemnation Proceeds, whether
paid by way of damages, rent or otherwise, unless such period of temporary use
or occupancy shall extend beyond the Expiration Date of this Lease, in which
case the Condemnation Proceeds shall be apportioned between Landlord and Tenant
as of the Expiration Date.
 
Section 8.04.         If the order or decree in any condemnation or similar
proceeding shall fail separately to state each amount to be awarded to Landlord
and each amount to be awarded to Tenant under the foregoing provisions of this
Article, by way of compensation, damages, rent,
 

 
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the cost (estimated or actual) of demolition, removal or restoration, or
otherwise, and if Landlord and Tenant cannot agree thereon within thirty (30)
days after the final award or awards shall have been fixed and determined, such
dispute shall be resolved in the manner provided in Article 12.
 
ARTICLE 9

 
Assignment, Mortgage, Subletting, Etc.
 
Section 9.01.          (a)   Without the consent of Landlord, Tenant shall have
the right, at any time and from time to time, to assign, mortgage, pledge,
encumber and in any manner transfer this Lease, or any part hereof, and sublease
the Premises, or any part thereof, and assign, mortgage, pledge, encumber and in
any manner transfer the interest of Tenant in any Sublease of all or a part of
the Premises or the rentals thereunder.  In the event that Tenant shall make an
assignment of this Lease, Tenant shall cause the assignee to assume all the
obligations of the assignor first accruing from and after the date of such
assignment and Landlord agrees that, except for the assignor’s liabilities
accruing before the date of assignment, the assignor shall ipso facto and
without the necessity of Landlord’s execution of any instrument, be released
from its obligations under this Lease.
 
(b)           Without the consent of Tenant, Landlord shall have the right, at
any time and from time to time, to assign, mortgage, pledge, encumber and in any
manner transfer its interest in this Lease, in whole but not in part hereof.  In
the event of a sale by Landlord of its interests in the Premises as provided
herein and the assumption by the buyer of all of the obligations of the seller
first accruing from and after the date of such sale, Tenant agrees that, except
for the seller’s liabilities accruing before the date of sale, the seller shall
ipso facto and without the necessity of Tenant’s execution of any instrument, be
released from its obligations under this Lease. For avoidance of doubt, any
conveyance of and any encumbrance of or security interest in all or part of
Landlord’s interest in the Premises shall be subject and subordinate to and
shall be subject to the terms and conditions of this Lease and to Tenant’s (or
Tenant’s mortgagee’s, pursuant to Section 9.03) rights hereunder.
 
Section 9.02.          (a)   Tenant shall give notice to Landlord of each
Sublease of all or part of the Premises setting forth the identity of the
Subtenant, the nature of its business and its proposed use of the subleased
premises.  Each Sublease shall be subject and subordinate to this Lease and the
rights of Landlord hereunder and any violation of any provisions of this Lease
by any Subtenant shall be deemed a violation of such provision by Tenant.  No
Sublease shall provide for a term which extends beyond the day prior to the
Expiration Date hereunder.  In the event of Tenant’s default beyond any
applicable grace period, Landlord may collect rent from any Subtenant so long as
such default shall continue, and Landlord may apply the same to the curing of
any default hereunder in any order of priority Landlord may select, any
unapplied balance thereof to be applied by Landlord against subsequent
installments of rent, but Landlord’s collection of rent from a Subtenant shall
not constitute a recognition by Landlord of attornment by such Subtenant.
 

 
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(b)               Any act required to be performed by Tenant pursuant to the
provisions of this Lease may be performed by any Subtenant and Landlord shall
accept such performance on the part of the Subtenant as though the same had been
performed by the Tenant.
 
(c)               Each and every assignee, whether as assignee or as successor
in interest to any assignee of the Tenant herein named, including any purchaser
of this Lease under a foreclosure of any Leasehold Mortgage or other lien on
this Lease, shall, except as otherwise provided herein, immediately be and
become and remain liable for the payment of the rent and other charges payable
under this Lease, and for the due performance of all the covenants, agreements,
terms and provisions of this Lease on Tenant’s part to be performed, including
to the full end of the term of this Lease and each and every provision of this
Lease applicable to Tenant shall also apply to and bind every such assignee and
purchaser with the same force and effect as though such assignee or purchaser
were the Tenant named in this Lease.
 
(d)               Except as provided in this Article 9, no assignment of
Tenant’s interest in this Lease shall be valid and no assignee shall take
possession of the Premises or any portion thereof until an executed counterpart
of the agreement of assignment and an agreement by the assignee assuming the
obligations of Tenant hereunder for the balance of the term of this Lease, both
of which agreements shall be in recordable form, shall have been delivered to
Landlord.
 
(e)               Without limiting the generality of Section 9.01, Tenant may
assign its interests in this Lease or its interests as sublandlord in any
Subleases to a Leasehold Mortgagee as further security for the indebtedness
outstanding under such Leasehold Mortgage without obtaining an agreement from
such Leasehold Mortgagee assuming the obligations of Tenant hereunder; provided,
that as a condition precedent to the exercise of such Leasehold Mortgagee of its
enforcement remedies against this Lease under any such assignment, the Leasehold
Mortgagee shall assume Tenant’s obligations under this Lease first accruing on
and after the date of exercise of such enforcement remedies by Leasehold
Mortgagee.
 
Section 9.03.          Tenant from time to time during the term of this Lease,
may encumber its interests under this Lease and in the Premises by entering into
one or more Leasehold Mortgages, in each case without the consent of Landlord;
provided, that any such Leasehold Mortgage shall be expressly subject to the
terms of this Lease, including the rights of Landlord under this Lease. Tenant
or the Leasehold Mortgagee shall promptly deliver to Landlord a true copy of
each Leasehold Mortgage and of any assignment thereof and shall notify Landlord
of the address of the Leasehold Mortgagee to which notices may be sent.  So long
as any such Leasehold Mortgage shall remain unsatisfied of record or until
written notice of satisfaction is given by the holder thereof to Landlord, the
following provisions shall apply:
 
(a)               When giving notice to Tenant of any default under the
provisions of this Lease, Landlord will simultaneously also send a copy of such
notice to each Leasehold Mortgagee for whom Landlord has received a notice
setting forth such Leasehold Mortgagee’s address and a copy of the Leasehold
Mortgage and of any assignment thereof,
 

 
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as set forth above, and no such notice to Tenant shall be effective unless a
copy of such notice is so sent to each Leasehold Mortgagee who is not an
Affiliate;
 
(b)               If Tenant shall default under any provisions of this Lease,
any Leasehold Mortgagee shall have the right to cure such default whether the
same consists of the failure to pay rent or the failure to perform any other
matter or thing which Tenant is hereby required to do or perform and Landlord
shall accept such performance on the part of the Leasehold Mortgagee as though
the same had been performed by Tenant;
 
(c)               Each Leasehold Mortgagee will have a period of sixty (60) days
after the giving of the aforesaid notice to Leasehold Mortgagee within which to
remedy a monetary default or cause the same to be remedied;
 
(d)               In the case of any default by Tenant, other than in the
payment of money hereunder, Landlord shall give any First Leasehold Mortgagee
reasonable time within which either (i) to obtain possession of the Premises
(including possession by a receiver) and cure such default in the case of a
default which is susceptible of being cured when the First Leasehold Mortgagee
has obtained possession, or (ii) to institute foreclosure proceedings and
complete such foreclosure, or otherwise acquire Tenant’s interests under this
Lease, with diligence and continuity in the case of a default which is not so
susceptible of being cured by the First Leasehold Mortgagee; provided, however,
that the First Leasehold Mortgagee shall not be required to continue such
possession or continue such foreclosure proceedings if the default which would
have been the reason for serving such second notice shall be cured; and provided
further, that nothing in this Subsection (d) shall require Landlord to refrain
from taking action to terminate this Lease (A) unless the First Leasehold
Mortgagee has agreed to perform the obligations of Tenant hereunder upon
obtaining possession of the Premises, the completion of foreclosure proceedings
or otherwise acquiring Tenant’s interest under this Lease, and (B) in the case
of a monetary default or a default in the performance of a nonmonetary
obligation of Tenant hereunder which may be cured by the First Leasehold
Mortgagee without first obtaining possession of the Premises, completing a
foreclosure proceeding or otherwise acquiring Tenant’s interests under this
Lease, unless the First Leasehold Mortgagee shall cure any such monetary default
and agree to thereafter perform such monetary obligation and/or shall agree to
procure any such nonmonetary default and to thereafter perform such nonmonetary
obligation, as the case may be, and (C) if the First Leasehold Mortgagee shall
not have a net worth in excess of one hundred million Dollars ($100,000,000.00)
unless the First Leasehold Mortgagee shall by cash, by a surety company bond or
by other security (all of which shall be in an amount, with a company and in
substance approved by Landlord) secure performance of the obligations which the
First Leasehold Mortgagee has agreed to perform pursuant to clauses (A) and (B)
above;
 
(e)               A Leasehold Mortgagee or its designee may become the legal
owner and holder of this Lease by foreclosure of its Leasehold Mortgage or as a
result of the assignment of this Lease in lieu of foreclosure, whereupon such
Leasehold Mortgagee or its designee shall immediately become and remain liable
under this Lease as provided herein, except that any liability imposed hereby
upon such Leasehold Mortgagee or its designee
 

 
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shall be expressly limited to the period of ownership by such Leasehold
Mortgagee or its designee of this Lease;
 
(f)                         Landlord shall notify each Leasehold Mortgagee
within two (2) business days after the termination of this Lease or of any
succeeding lease made pursuant to the provisions of this Subsection (f) prior to
its stated expiration date. Within ten (10) days after the First Leasehold
Mortgagee’s making the request specified in Section 9.03(f)(i) below, Landlord
will enter into a new lease of the Premises with the First Leasehold Mortgagee
or its designee for the remainder of the term, effective as of the date of such
termination, at the rent and additional rent and upon the covenants, agreements,
terms, provisions and limitations herein contained, and subject to the then
existing condition of the Premises and any rights of Subtenants; provided, that:
 
(i)           Such First Leasehold Mortgagee makes written request upon Landlord
for such new lease within forty (40) days from the date of such termination; and
 
(ii)          Such First Leasehold Mortgagee pays to Landlord at the time of the
execution and delivery of said new lease any and all out of pocket sums incurred
by Landlord for fees of its legal advisors in connection with the execution and
delivery of such new lease;
 
(g)               Upon the execution and delivery of such new lease in
accordance with the provisions of Subsection (f) above, all Subleases which
theretofore may have been assigned and transferred to Landlord shall thereupon
be assigned and transferred without recourse by Landlord to the First Leasehold
Mortgagee (or its designee), as the new Tenant; except that any liability
imposed thereunder upon the First Leasehold Mortgagee (or its designee) as
tenant thereunder shall be expressly limited to such obligations first accruing
during the period while the First Leasehold Mortgagee (or its designee) is the
tenant under such new lease; and
 
(h)               If under the provisions of Subsection (e) above or under any
new lease made in accordance with the provisions of Subsection (f) above, a
Leasehold Mortgagee shall be the Tenant, as a trustee, each and every obligation
of such trustee shall be binding upon it solely in its fiduciary capacity and
shall have no force or effect against such Leasehold Mortgagee in its individual
capacity.
 
Section 9.04.          (a)  Except for the rights of a First Leasehold Mortgagee
to obtain a new lease of the Premises as set forth in Section 9.03(f), no
mortgage now or hereafter a lien upon this Lease, the Premises, or any portion
thereof, shall extend or affect the reversionary interest and estate of Landlord
in and to the Premises.
 
(b)               Each Leasehold Mortgagee shall be given notice of any
mediation proceedings or litigation by the parties hereto, and shall have the
right to participate in such proceedings.
 
(c)               The term “Mortgage” whenever used herein, shall also include
any instruments required in connection with a sale-leaseback or other financing
transaction of Tenant’s interest under this Lease.
 

 
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ARTICLE 10

 
Landlord’s Right to Perform Tenant’s Covenants;
 
Cumulative Remedies; Waivers
 
Section 10.01.        If (a) Tenant shall at any time fail to perform any act
required on its part to be performed under this Lease and (b) such default shall
continue for a period of thirty (30) days (or, in the event of an emergency,
such shorter period of time as shall be reasonable under the circumstances)
after written notice thereof, specifying such default, shall have been given to
Tenant or, in the case of a non-monetary default which cannot with reasonable
diligence be remedied by Tenant within thirty (30) days, if Tenant shall fail to
proceed as promptly as may reasonably be possible after the service of such
notice and with reasonable diligence to remedy the default or shall thereafter
fail to prosecute the remedying of such default with reasonable diligence, then
Landlord may, but shall not be obligated, upon not less than ten (10) days,
written notice to Tenant (or, in the event of an emergency, upon such shorter
notice as shall be reasonable under the circumstances) and without waiving or
releasing Tenant from any obligation of Tenant in this Lease contained, perform
such act for the account of and at the expense of Tenant.  All sums so paid and
all expenses incurred by Landlord in connection with the performance of any such
act, together with interest thereon from the date of such expenditure at the
Default Rate, shall be payable by Tenant to Landlord on demand or at the option
of Landlord may be added to any rent then due or thereafter becoming due under
this Lease.  All sums which may become payable to Landlord by Tenant in
accordance with this Article 10 and all other charges and expenses of whatsoever
nature which Tenant is required to pay pursuant to this Lease, if not paid when
due, shall be deemed additional rent hereunder and payable as aforesaid, and
Landlord shall have (in addition to any other right or remedy of Landlord) the
same rights and remedies in the event of the non-payment of any such sums by
Tenant as in the case of default by Tenant in the payment of rent.
 
Section 10.02.        Landlord may waive any breach or threatened breach of any
covenant, agreement, provision or condition herein contained, but the mention
herein of any particular remedy shall not preclude Landlord from any other
remedy it might have either at law or in equity.  The failure of Landlord to
insist upon the strict performance of any one of the covenants, agreements,
provisions or conditions contained in this Lease or to exercise any right,
remedy or election herein contained or permitted by law shall not constitute or
be construed as a waiver or relinquishment of any right arising out of the
failure to perform such covenant, agreement, provision or condition, or of the
right to exercise any remedy or election with respect thereto, but the same
shall continue and remain in full force and effect.  Any right or remedy of
Landlord in this Lease specified and any other right or remedy that Landlord may
have at law, in equity or otherwise, upon breach of any covenant, agreement,
provision or condition in this Lease contained upon the part of Tenant to be
performed shall be distinct, separate and cumulative rights or remedies and no
one of them, whether exercised by Landlord or not, shall be deemed to be to the
exclusion of any other.  No covenant, agreement, term, provision or condition of
this Lease shall be deemed to have been waived by Landlord unless such waiver be
in writing and signed by Landlord or Landlord’s agent duly authorized in
writing.  Except as provided in Article 17, the consent of Landlord to any act
or matter must be in writing and shall apply only with respect to the particular
act or matter to which such consent is given and shall not relieve Tenant from
the obligation wherever required under this Lease to obtain the consent of
Landlord
 

 
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to any other act or matter.  Receipt or acceptance of any rental by Landlord
shall not be deemed to be a waiver of any default under the covenants,
agreements, provisions and conditions of this Lease or of any right which
Landlord may be entitled to exercise hereunder.  In the event that Tenant is in
arrears in the payment of any rent or other charge payable hereunder, Tenant
waives Tenant’s right, if any, to designate the items against which any payments
made by Tenant are to be credited and Tenant agrees that Landlord may apply any
payments made by Tenant to any items Landlord sees fit irrespective of and
notwithstanding any designation or request by Tenant as to the items against
which any such payments shall be credited.
 
Section 10.03.        If Tenant shall fail to make any payment due to Landlord
under this Article 10 or otherwise required hereunder within five (5) days after
the due date thereof, such payment shall bear interest from the date on which
the same shall have become due at an annual rate (the “Default Rate”) equal to
the greater of (a) four (4) percentage points above the fluctuating annual
interest rate from time to time announced by Citibank, N.A. as its commercial
prime rate and (b) twelve percent (12%), but in no event in excess of the
maximum legal rate of interest then chargeable to Tenant under the laws of the
State of New Jersey.
 
ARTICLE 11

 
Dispute Resolution
 
Section 11.01.        The parties hereto agree to use their best efforts to
resolve any dispute arising hereunder through discussions between senior
representatives of Landlord and Tenant.  To the extent, however, that any such
dispute cannot be resolved following good faith discussions between the parties,
the parties shall endeavor to settle any dispute arising out of or relating to
this Lease by mediation under the CPR Mediation Procedure then in effect (the
“Rules”).
 
Section 11.02.        (a)   Unless otherwise agreed, the parties will select a
mediator from the CPR Panels of Distinguished Neutrals.
 
(b)                If the dispute has not been resolved by mediation within
forty-five [45] days of the initiation of such procedure, either party may
initiate litigation; provided, however, that if one party has requested the
other to participate in mediation and the other has failed to participate, the
requesting party may initiate litigation before expiration of the above period.
 
(c)               During the pendency of any mediation process, all time periods
during which either party was to perform under this Lease shall be tolled.
 
(d)               Provisions of the Rules which are inconsistent with the
provisions of this Section shall not apply.
 
(e)               Any mediation shall occur in Cumberland County, New
Jersey.  The fees and expenses relating to the mediator(s) shall be borne
equally by the parties and each party shall pay for the fees and expenses of its
own experts and legal counsel.
 

 
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ARTICLE 12

 
[Intentionally Omitted]
 
ARTICLE 13

 
Brokerage
 
Section 13.01.        Landlord and Tenant each represent to the other that it
has not dealt with any broker in connection with this transaction.
 
ARTICLE 14

 
Landlord’s Warranties
 
Section 14.01.        Landlord hereby warrants and represents to Tenant, upon
which warranties and representations Tenant has relied in the execution of this
Lease, that:
 
(a)               There are no tenants, occupants or other parties having any
right to the use or possession of all or any portion of the Land other than
Tenant and Landlord;
 
(b)               Landlord has full right and lawful authority to execute this
Lease for the term, in the manner and upon the conditions and provisions herein
contained; and
 
(c)               By Resolution of its Board of Directors duly adopted, a
certified copy of which has been delivered to Tenant, Landlord is duly empowered
to execute this Lease on its behalf, and thereby to bind Landlord to the terms,
conditions and covenants herein set forth.
 
Section 14.02.        Tenant hereby warrants and represents to Landlord, upon
which warranties and representations Landlord has relied in the execution of
this Lease, that:
 
(a)               Tenant has full right and lawful authority to execute this
Lease for the term, in the manner and upon the conditions and provisions herein
contained; and
 
(b)               By Resolution of the Members of the Limited Liability Company,
a certified copy of which has been delivered to Landlord, Tenant is duly
empowered to execute this Lease on its behalf and thereby to bind Tenant to the
terms, conditions and covenants herein set forth.
 

 
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ARTICLE 15

 
[Intentionally Omitted]
 
ARTICLE 16

 
Quiet Enjoyment
 
Section 16.01.        Landlord covenants that if and so long as Tenant keeps and
performs each and every covenant, agreement, term, provision and condition
herein contained on the part of and on behalf of Tenant to be kept and
performed, Tenant shall quietly enjoy the Premises without hindrance or
molestation by Landlord or any party claiming by, through or under Landlord or
any other party not claiming by, through or under Tenant, subject to the
covenants, agreements, terms, provisions and conditions of this Lease.
 
ARTICLE 17

 
Notices
 
Section 17.01.        All notices, demands, requests, approvals or other
communications (“Notices”) hereunder shall be in writing and shall be given as
follows:
 
(a)               If intended for Tenant – either by delivery thereof personally
(if an individual) or by delivery thereof to an officer (if a corporation) or by
mailing by registered or certified mail, return receipt requested, with the
postage prepaid, or by sending by reputable overnight courier, addressed to
Tenant at its address hereinabove set forth, marked Attention:  [____].
 
(b)               If intended for Landlord – either by delivery thereof
personally (if an individual) or by delivery thereof to an officer (if a
corporation) or by mailing by registered or certified mail, return receipt
requested, with the postage prepaid, or by sending by reputable overnight
courier, addressed to Landlord at its address hereinabove set
forth:  Attention:  [____].
 
(c)               If intended for a Leasehold Mortgage – either by delivery
thereof personally (if an individual) or by delivery thereof personally to an
officer (if a corporation) or by mailing by registered mail with the postage
prepaid, or by sending by reputable overnight courier, addressed to such
Leasehold Mortgagee at the address furnished to Landlord pursuant to the
provisions of Section 9.03.
 
Each party and each Leasehold Mortgagee may designate in the manner aforesaid a
new address to which Notices shall be given.  Each Notice which shall be given
in the manner aforesaid shall be deemed sufficiently given for all purposes
hereunder at the time such Notice shall be delivered personally or delivered by
any overnight courier or [three (3) business days after deposited] at any post
office or branch post office or mail box regularly maintained by the government
of the United States of America as the case may be.
 

 
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ARTICLE 18

 
Estoppel Certificate; Memorandum of Lease
 
Section 18.01.        At any time and from time to time during the term of this
Lease upon written request of either party and at the reasonable cost and
expense of the party requesting the same, Landlord or Tenant, as the case may
be, will, within ten (10) days after such request, execute, acknowledge and
deliver to the other party a certificate stating:
 
(a)               This Lease is unmodified and in full force and effect (or, if
this Lease has been modified, stating that this Lease is in full force and
effect as modified and identifying the modifications);
 
(b)               The dates to which the rent payable hereunder has been paid;
and
 
(c)               Whether or not there are any existing defaults hereunder to
the knowledge of the party executing the certificate, and specifying the nature
of such defaults, if any.
 
Section 18.02.        Landlord and Tenant shall, at the request of either party
and at Tenant’s expense, promptly execute and deliver a form of memorandum of
this Lease for the purposes of recording, setting forth a description of the
Premises, the term of this Lease and any other provisions hereof (except the
rent provisions) as either party may request.
 
ARTICLE 19

 
Consent of Landlord and Tenant
 
Section 19.01.        Whenever the consent or approval of Landlord or Tenant is
required under this Lease, Landlord and Tenant agree that such consent or
approval shall not be unreasonably withheld, delayed or conditioned.  In any
event, failure of Landlord or Tenant to notify the other of its consent or
approval, or the withholding thereof, within twenty (20) days after written
request therefor has been received (except where some other period of time is
expressly provided for in this Lease) shall constitute Landlord’s or Tenant’s
consent or approval, as the case may be.  If either party shall withhold its
approval of or consent to any proposed action, person or thing, such party shall
specify its reasons therefor.  If unreasonable in withholding any such consent
or approval, the question shall be resolved in the manner provided in Article 11
hereof.
 
ARTICLE 20

 
End of Term; Surrender
 
Section 20.01.        Upon the Expiration Date or the date of earlier
termination of this Lease (collectively, the “Termination Date”) Tenant shall
peaceably surrender and yield up unto Landlord all and singular the
Premises.  Landlord reserves the right, unless a First Leasehold Mortgagee is
then entitled to receive a new lease pursuant to Section 9.03, to require that
Tenant remove all of Tenant’s equipment and facilities which may then be located
on the Premises and/or Landlord Property and demolish any and all Buildings and
improvements on the Premises and restore the Premises to its natural state, all
in full compliance with environmental laws and
 

 
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other Legal Requirements applicable to closing a facility. Upon the Termination
Date, Landlord may without further notice enter upon, reenter, possess and
repossess itself of the Premises, by force, summary proceedings, ejectment or
otherwise, and may dispossess and remove Tenant and all other persons and
property from the Premises, subject to the rights, if any, of a Leasehold
Mortgagee as provided in Section 9.03 and of any Subtenant as provided in
Section 9.03 and may have, hold and enjoy the Premises and the right to receive
all rental and other income of and from the same.
 
Section 20.02.         Subject to the rights, if any, of Subtenants, any
removable property (except money, securities and other like valuables) of Tenant
or any Subtenant which shall remain on the Premises after the Termination Date
and the removal of Tenant from the Premises may, at the option of Landlord,
unless a First Leasehold Mortgagee is then entitled to receive a new lease
pursuant to Section 9.03, be deemed to have been abandoned by Tenant and may
either be retained by Landlord as its property or be disposed of, without
accountability, in such manner as Landlord may seem fit.  If such property or
any part thereof be sold, Landlord may receive and retain the proceeds of such
sale and apply the same, at its option, against the expenses of the sale, the
cost of moving and storage, any arrears of basic rent or additional rent or
other charges payable hereunder and any damages to which Landlord may be
entitled pursuant to law.  From and after the Termination Date, Landlord shall
not be responsible for any loss or damage occurring to any property owned by
Tenant, unless caused by the gross negligence or willful misconduct of Landlord,
its agents or employees.
 
Section 20.03.        The provisions of this Article 20 shall survive the
Termination Date.
 
ARTICLE 21

 
True Lease
 
Section 21.01.        It is the intention of the parties hereto that the
obligations of Tenant hereunder shall be separate and independent covenants and
agreements, and that rent, additional rent and other sums payable by Tenant
hereunder shall continue to be payable in all events, and that the obligations
of Tenant hereunder shall continue unaffected, unless the requirement to pay or
perform the same shall have been terminated pursuant to an express provision of
this Lease.  Rent, additional rent and all other sums payable hereunder by
Tenant shall be paid without notice or demand, and without setoff, counterclaim,
recoupment, abatement, suspension, deferment, diminution, deduction, reduction
or defense, except as otherwise specifically set forth herein.  This Lease shall
not terminate and Tenant shall not have any right to terminate this Lease,
during the term (except as otherwise expressly provided herein).  Tenant agrees
that, except as otherwise expressly provided herein, it shall not take any
action to terminate, reject, rescind or avoid this Lease, notwithstanding (i)
the bankruptcy, insolvency, reorganization, composition, readjustment,
liquidation, dissolution, winding-up or other proceeding affecting Landlord,
Tenant or any assignee or Subtenant of Tenant, (ii) the exercise of any remedy
including foreclosure, under any documents securing any construction financing,
or (iii) any action with respect to this Lease (including the disaffirmance
hereof) which may be taken by Landlord under the Federal Bankruptcy Code or by
any trustee, receiver or liquidator of Landlord or by any court under the
Federal Bankruptcy Code or otherwise, or (iv) the conditions of the leased
Premises.  Tenant waives all rights which are not expressly stated herein but
which may now or hereafter
 

 
23

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

 

otherwise be conferred by law to quit, terminate or surrender this Lease or any
of the leased Premises; to any setoff, counterclaim, recoupment, abatement,
suspension, deferment, diminution, deduction, reduction or defense of or to
rent, additional rent or any other sums payable under this Lease, except as
otherwise expressly provided herein; and for any statutory lien or offset right
against Landlord or its property.
 
ARTICLE 22

 
Reservation of Use; Removal of Equipment
 
Section 22.01.        Landlord reserves unto itself, its affiliates, successors
and assigns the right to own, operate, maintain, repair, upgrade, install,
alter, remove, inspect, construct, modify, restore, rebuild, replace and expand
the Utility Facilities located now or in the future in, under, through, upon,
over and across the Land, including the right of access thereto, for the
purposes of conducting the business of providing utility service to its
customers.  Such existing Utility Facilities are delineated on Exhibit “B”
attached hereto and incorporated herein (“Landlord Property”).  Landlord shall
utilize its future reserved rights only in a manner which does not unreasonably
interfere with Tenant’s business or Tenant’s use of the Buildings or the
Premises.
 
Section 22.02.        (a) Subject to Landlord’s rights pursuant to Section 22.01
above, to the extent that any Landlord-owned Joint Use Facilities or
Landlord-owned Designated Equipment are not, or are no longer, used for
generation operations and such Landlord-owned Joint Use Facilities or
Landlord-owned Designated Equipment either interfere with Tenant’s remaining
generation operations or subject Tenant to increased regulatory or compliance
requirements, Tenant shall have the right to request that such Landlord-owned
Joint Use Facilities or Landlord-owned  Designated Equipment be relocated within
the Premises, or, if necessary to preserve Tenant’s generation operations, to
request that such Landlord-owned Joint Use Facilities or Landlord-owned
Designated Equipment be removed from the portions of the Premises outside the
Landlord Property.  Landlord agrees that, upon receipt of such request, it will
relocate or move such Landlord-owned Joint Use Facilities or Landlord-owned
Designated Equipment at Tenant’s sole cost and expense, as promptly as
practicable, but in any event so that such Landlord-owned  Joint Use Facilities
or Landlord-owned Designated Equipment is disconnected and disabled within
twelve (12) months and removed or relocated within twenty-four (24) months, in
each case measured from the date of such request. Tenant agrees to cooperate in
any such relocation or removal.
 
                                (b) To the extent that any Tenant-owned Joint
Use Facilities or Tenant-owned Designated Equipment located on Landlord Property
are not, or are no longer, used for generation operations and such Tenant-owned
Joint Use Facilities or Tenant-owned Designated Equipment interfere with
Landlord’s operations, Landlord shall have the right to request that such
Tenant-owned Joint Use Facilities or Tenant-owned Designated Equipment be
relocated outside the Landlord Property.  Tenant agrees that, upon receipt of
such request, it will relocate or remove such Tenant-owned Joint Use Facilities
or Tenant-owned Designated Equipment, at Landlord’s sole cost and expense, as
promptly as practicable, but in any event so that such Tenant-owned Joint Use
Facilities or Tenant-owned Designated Equipment is disconnected and disabled
within twelve (12) months and removed or relocated within twenty-four (24)
months, in
 

 
24

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each case measured from the date of such request. Landlord agrees to cooperate
in any such relocation or removal.
 
ARTICLE 23

 
Purchase Option
 
Section 23.01.        Landlord hereby grants to Tenant an option (the “Option”)
to purchase all, but not less than all, of Landlord’s full right, title and
interest in and to the Premises, but excluding Landlord Property (the “Optioned
Property”), for a cash payment of one Dollar ($1.00). and the execution and
delivery by Tenant, as owner of the Premises (exclusive of the Landlord
Property) following exercise of the Option, of an easement reasonably
satisfactory to Landlord which provides access and use rights substantially
similar to the rights provided in Section 22.01 (the “Utility Facilities
Easement”).  Such option may be exercised at any time upon notice to Landlord by
Tenant, or by a First Leasehold Mortgagee (or its designee) which holds or is
entitled to receive a new lease pursuant to Section 9.03 hereof, and closing
(the “Closing”) shall occur thereafter in accordance with the provisions of this
Section 23.01.
 
    (a)           Condition of Title.
 
 
(i)
At the time of Closing, title to the Optioned Property shall be (a) good and
marketable and free and clear of all liens, encumbrances, leases and tenancies,
but subject to the Permitted Exceptions (as hereinafter defined), and (b)
insurable as aforesaid by any reputable title insurance company selected by
Tenant, at standard rates.

 
 
(ii)
The term “Permitted Exceptions” means (a) liens for real estate taxes, water and
sewer rents that are apportioned hereunder, including special assessments; (b)
an exception for any state of facts or other matters shown on the survey by
____, dated ____; (c) any and all present and future laws, ordinances,
restrictions, requirements, resolutions, orders, rules and regulations of any
governmental authority, as now or hereafter existing or enforced (including,
without limitation, those related to zoning and land use); (d) easements of
roads; (f) all liens, encumbrances, leases and tenancies existing at the time of
the execution of this Agreement; (e) easements, restrictions, agreements and
like matters of record that do not materially interfere with Tenant’s use of the
Optioned Property; and (g) the Utility Facilities Easement.

 
Notice of Objection.  Within twenty (20) days after Tenant exercises the Option,
Tenant shall obtain a title report and deliver to Landlord written notice of any
liens, encumbrances or other matters which render the condition of title to the
Property other than as required in this Section 23.01.  Any such objections of
which Landlord is not notified within such period (except such liens,
encumbrances or other matters as may arise after the date of the title report
obtained by Tenant), shall thereafter be deemed a Permitted Exception and shall
not be raised by Tenant as objections to the condition of title.
 

 
25

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    (b)           Subdivision Contingencies.
 
 
(i)
As promptly as practicable after Tenant obtains a survey of the Optioned
Property to be acquired, Tenant shall make application to the applicable
jurisdiction to obtain subdivision of the Optioned Property, which the parties
understand and agree may include a determination of non-conforming use status
from the applicable jurisdiction to enable Tenant to continue to use the
Optioned Property for an electric generating facility and accessory uses, and
the Tenant shall make application for all other  permits, variances and other
subdivision approvals including any zoning variances or approvals  which are
required from the applicable jurisdiction to enable Tenant to acquire in fee
simple ,  the Optioned Property, as soon thereafter as is commercially
reasonable (“Tenant Approvals”). Tenant shall be responsible for making
application for the Tenant Approvals and for all fees, costs and expenses
associated therewith, and Tenant shall use commercially reasonable diligence in
filing and processing its applications for Tenant Approvals.  Tenant shall
provide Landlord with copies of all filings and applications, and all plans and
studies related to the filings and applications. Landlord shall cooperate with
Tenant (at Tenant’s expense) by executing such plans, applications, and
submissions, of whatever kind and/or nature that may be required in connection
with the Tenant Approvals, affirmatively support Tenant in securing the Tenant
Approvals, and if requested by Tenant, a knowledgeable representative of the
Landlord shall attend all meetings with public officials and all public hearings
in connection with the Tenant Approvals.   Tenant’s obligation to complete
Closing on the exercise of the Option is contingent upon Tenant obtaining all of
the Tenant Approvals, and upon all of the Tenant Approvals, as well as any
necessary Required Landlord Regulatory Approvals (as defined below), being final
and not appealable or subject to challenge under applicable Legal Requirements.

 
 
(ii)
If Landlord determines in its sole discretion that the transfer to Tenant of
Landlord’s full right, title and interest in the Optioned Property (the
“Property Transfer”) requires the consent or approval of or any notice to or
filing with (each a “Required Landlord Regulatory Approval”), any government,
quasi-governmental authority, court, tribunal, arbitrator, authority, regulatory
body, agency, commission, official or other instrumentality or any city or other
political subdivision exercising executive, legislative or judicial authority (a
“Governmental or Regulatory Authority”), Landlord shall, as soon a reasonably
practicable following the receipt of Tenant’s notice of exercise of the Option,
prepare and submit to each relevant Governmental or Regulatory Authority all
such notices and filings as are required to obtain the Required Landlord
Regulatory Approvals, and thereafter shall use reasonably diligent efforts to
obtain each Required Landlord Regulatory Approval.  Tenant agrees to reimburse
Landlord for all of its costs and expenses incurred in obtaining the Required
Landlord Regulatory Approvals (including, without limitation,

 

 
26

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the fees and disbursements of legal counsel and consultants retained in
connection therewith (“Regulatory Approval Costs”).  Notwithstanding any other
provision of Agreement, the obligation of Landlord to effect the Property
Transfer is conditioned on the receipt by Landlord of each Required Landlord
Regulatory Approval, that in each case (i) does not impose on the Landlord, or
its businesses, operations or activities, any conditions or limitations that
Landlord (in its reasonable discretion) considers unreasonably burdensome and
(ii) except with respect to the environmental indemnifies, if any, required by
Section 6.07, does not impose any costs or financial restrictions (other than of
a de minimis amount) on Landlord for which Landlord is not reimbursed or
indemnified in full by Tenant to the reasonable satisfaction of Landlord.
 
 
(iii)
Tenant may nullify the exercise of this Option at any time before Closing by
providing written notice of same to Landlord, in which event this Lease shall
remain in full force and effect, and neither party shall have any further
liability to the other based upon Tenant’s exercise of this Option, except for
the obligation of Tenant to reimburse Landlord’s costs, including, without
limitation, all of the Regulatory Approval Costs incurred in connection with
such exercise.  For avoidance of doubt, Tenant’s nullification shall neither
impair its right to exercise the Option again, nor its right to nullify the
same.

 
 
(iv)
The parties agree to close on the purchase of the Optioned Property on a
mutually agreed date that is no earlier than sixty (60) days after the receipt
by Landlord of Tenant’s notice of exercise or, if later, twenty (20) days after
the Tenant Approvals and the Required Landlord Regulatory Approvals have been
obtained.

 
 
(v)
Landlord shall further enter into such appurtenant easements and agreements as
may be reasonably necessary to enable Tenant to continue to utilize Landlord’s
adjacent property in the manner contemplated hereby (including the continued use
of any Joint Use Facilities), it being the intention of the parties that such
rights not merge with the deed to the fee and that any rights granted hereunder
should continue in full force and effect so as to enable Tenant the full
continued use and enjoyment of the Landlord’s adjacent property for access,
utilities, and the like as provided herein.  One agreed form of Appurtenant
Easement is attached hereto and made part hereof as Schedule “E”.

 
 
(vi)
Tenant shall further enter into such appurtenant easements and agreements
(including, without limitation, in the form attached as Schedule “E”) as may be
reasonably necessary to enable Landlord to continue to utilize the Landlord
Property in the manner contemplated hereby, it being the intention of the
parties that such rights not merge with the deed to the fee, and that any rights
granted hereunder should continue in full force and effect so as to enable
Tenant the full continued use and enjoyment of the

 

 
27

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Landlord’s adjacent property for access, utilities, and the like as provided
therein.
 
 
(c)
Provisions with Respect to Closing.  At Closing:

 
(i)           Landlord shall deliver a special warranty deed for the Optioned
Property and associated appurtenant easements as contemplated hereby, duly
executed and acknowledged and in proper form for recording; and such additional
documentation (including affidavits) as may be reasonably requested by Tenant or
Tenant’s title company to issue and deliver its title policy.

(ii)           Tenant shall execute and deliver the Utility Facilities Easement
and shall pay Landlord the purchase price (i.e., one Dollar ($1.00)). All realty
transfer taxes shall be paid by Tenant.
 
     (iii)          Costs of recording and notary fees shall be paid by Tenant.
 
     (iv)          Except as otherwise provided in Section 23.01(b), Landlord
and Tenant shall be responsible for the fees of their respective legal counsel.
 
     (v)   Tender of an executed deed and purchase money is hereby waived.
 
 
(d)
Rule Against Perpetuities Savings Clause.

 
If the Rule Against Perpetuities or any similar rule of law would invalidate all
or any portion of the option rights granted under this Agreement, or would limit
the time during which the rights granted in this Agreement shall be effective
due to the potential failure of any interest in property created in this
Agreement to vest within a particular time, then each such interest in property
created in this Agreement shall be effective only from the date hereof until the
passing of twenty (20) years after the death of the last survivor of the
grandchildren of current Vice President Joseph R. Biden, Jr., but each such
interest in property shall be extinguished after such time, and all other
interests in property created in this Lease and all other provisions hereof
shall remain valid and effective without modification.
 
ARTICLE 24

 
Miscellaneous Provisions
 
Section 24.01.        If any provision of this Lease or the application thereof
to any person or circumstances shall, to any extent, be invalid of
unenforceable, the remainder of this Lease, or the application of such provision
to persons or circumstances other than those to which it is held invalid or
unenforceable, shall not be affected thereby, and each provision of this Lease
shall be valid and be enforceable to the fullest extent permitted by law.
 
Section 24.02.        Tenant hereby waives any right to interpose any
counterclaim in any proceeding commenced by Landlord for nonpayment of the rent
or additional rent hereunder.
 

 
28

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Section 24.03.        The failure of Landlord or Tenant to complain of any act
or omission on the part of the other party or to take any action in response to
such act or omission, no matter how long the same may continue, shall not be
deemed to be a waiver by said party of any of its rights hereunder.  No waiver
by Landlord or Tenant at any time, express or implied, of any breach of any
provision of this Lease shall be deemed a waiver of a subsequent similar breach
or a different breach of any provision of this Lease or a consent to any
subsequent breach of the same or any other provision.
 
Section 24.04.        This Lease constitutes the entire agreement of the parties
hereto and may not be changed orally but only by an agreement in writing signed
by the party against whom enforcement of any waiver, change, modification or
discharge is sought.
 
Section 24.05.        The covenants, agreements, provisions and conditions of
this Lease shall be binding upon and inure to the benefit of the successors and
assigns of Landlord and Tenant.
 
Section 24.06.        There shall be no merger of this Lease or of the leasehold
estate hereby created with the fee estate in the Premises by reason of the fact
that the same person acquires or holds, directly or indirectly, this Lease or
the leasehold estate hereby created or any interest herein or in such leasehold
estate, as well as the fee estate in the Premises or any interest in such fee
estate.
 
Section 24.07.        This Lease shall be governed by and construed and enforced
in accordance with the laws of the State of New Jersey.
 

 
29

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IN WITNESS WHEREOF, the parties hereto have duly executed this Lease as of the
day and year first above written.
 
SIGNED, SEALED AND DELIVERED IN THE PRESENCE OF:
 
     
  ATLANTIC CITY ELECTRIC COMPANY, A
  CORPORATION OF THE STATE OF NEW JERSEY
 
BY:
               
  CONECTIV ATLANTIC GENERATION, LLC, A DELAWARE LIMITED LIABILITY COMPANY
 
 
BY:
             

 
 
 
 
 
 
 
 
 

 
 
30

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Schedule A
 
Description of the Land
 
 
 
 
 
 
 
 
 
 

 
 
 

 
31

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

 

Schedule B
 
Description of Landlord Property (Landlord’s existing Utility Facilities within
the Land)
 
 
 
 
 
 
 
 
 
 

 
32

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

 

Schedule C
 
Title Exceptions
 
 
 
 
 
 
 
 
 
 
 
 

 
33

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

 

Schedule D
 
Joint Use Facilities; Designated Equipment
 
Part 1:  Joint Use Facilities
 
[______________]
 

 
Part 2: Designated Equipment
 
[______________]
 
 
 
 
 
 
 
 
 

 
34

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

 

Schedule E
 
Form of Appurtenant Easements
 
 
 
 
 
 
 
 
 
 
 
 
 
35

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

 

Tax Map [__] Parcel [__]
 

 
AMENDED AND RESTATED EASEMENT AND LICENSE AGREEMENT1
 
BETWEEN
 
[________]
 
GRANTOR
 
AND
 
[________]
 
GRANTEE
 

 
DATED: [________]
 
 
 

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

 
1 IN THE CASE OF THE BAYVIEW AND TASLEY PROPERTIES, AND WITH REFERENCE TO THE
PURCHASE AGREEMENT TO WHICH THIS FORM IS ATTACHED, THE PURCHASER RESERVES THE
RIGHT TO NOT AMEND AND RESTATE THE EASEMENTS CURRENTLY IN PLACE WITH RESPECT TO
SUCH PROPERTIES AND, IN LIEU THEREOF, TO REQUIRE THAT A SEPARATE PURCHASE OPTION
IN FAVOR OF THE GRANTEE, AND CONTAINING THE TERMS AND CONDITION AS PROVIDED IN
SECTION 8.17 HEREOF, BE EXECUTED AND DELIVERED BY THE PARTIES AS A CONDITION TO
THE PURCHASER’S OBLIGATIONS UNDER THE PURCHASE AGREEMENT.

 
 

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

 

TABLE OF CONTENTS
 
Page No.
 
ARTICLE 1 - Definitions
 
2
 
ARTICLE 2 - Easements
 
6
2.1
Grant of Easements to Grantee; Acknowledgement of Ownership of Generation
Facilities.
6
2.2
Reservation by Grantor of Certain Rights.
7
2.3
General Scope of Easements.
9
2.4
Interpretation.
10
2.5
Rules and Regulations.
12
2.6
No Obstruction
13
2.7
Removal of Equipment.
13
2.8
Interconnection License.
14
2.9
Priority of Easements
14
 
ARTICLE 3 - Taxes, Assessments, and Other Charges
 
14
3.1
Real Estate Taxes.
14
3.2
Personal Property Taxes.
15
3.3
Timing of Payment.
15
3.4
Cooperation with Respect to Tax Abatements.
16
3.5
Tax Contests.
16
3.6
Failure to Pay Taxes.
17
 
ARTICLE 4 - Mechanics’ Liens
 
17
4.1
Notice Regarding Labor and Material.
17
4.2
Disposition of Liens.
17
 
ARTICLE 5 - Condemnation
 
18
5.1
Right to Participate.
18
5.2
Total Taking.
18
5.3
Disposition of Award.
18
5.4
Notice of Taking.
18
 
ARTICLE 6 - Defaults
 
19
6.1
Event of Default.
19
6.2
Right of Self Help.
19
6.3
Interest.
19
6.4
Enforcement Rights.
19
6.5
No Extinguishment, Termination or Forfeiture.
20
6.6
Independent Covenants.
20
 
ARTICLE 7 - Indemnification
 
20
7.1
Grantor Indemnification.
20
7.2
Grantee Indemnification.
21

 
i

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7.3
Indemnification Procedures.
21
7.4
Survival.
21
 
ARTICLE 8 - Miscellaneous
 
22
8.1
Effective Date.
22
8.2
Exhibits.
22
8.3
Headings.
22
8.4
Interpretation.
22
8.5
Governing Law.
22
8.6
Entire Agreement.
22
8.7
Modifications, Waivers, Consent.
22
8.8
Binding Effect.
22
8.9
Assignment.
23
8.10
Mortgage of Grantee’s or Grantor’s Easement Interest.
23
8.11
Non-Disturbance in the Event of a Mortgage of the Grantor’s Property and/or the
Generation Facilities Easement Area; Foreclosure; Deed in Lieu of Foreclosure
and/or Monitions Sale.
23
8.12
Covenants not Conditions.
24
8.13
Severability of Void Provisions.
24
8.14
Estoppel Certificates.
24
8.15
Notices.
24
8.16
Recording.
25
8.17
Purchase Option.
25
8.18
Grantor Certification.
28

 
EXHIBITS
EXHIBIT A
Grantor’s Property
EXHIBIT A-1
Designated Access Roads
EXHIBIT B
Generation Facilities Easement Area and Plan
EXHIBIT C
Joint Use Facilities; Designated Equipment
EXHIBIT D
Construction and Work Rules
EXHIBIT E
Environmental Investigations & Remediation Work
EXHIBIT F
Form of ICA Easement

 

 
ii

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AMENDED AND RESTATED EASEMENT AND LICENSE AGREEMENT2
 
THIS AMENDED AND RESTATED EASEMENT AND LICENSE AGREEMENT  (this “Easement” or
this “Agreement”), originally dated as of [__], and amended and restated as of
____, 2010, is entered into by and between [__], a [corporation] organized and
existing under the laws of the State of [__] (“Grantor”) and having an office
for the transaction of business at [__], and [__], a [corporation] organized and
existing under the laws of the State of [__] (“Grantee”) and having an office
for the transaction of business at [__].  Grantor and Grantee are sometimes
referred to herein individually as a “Party” and collectively as “Parties”.
 
BACKGROUND
 
Grantor is the owner of that certain parcel of land described in Exhibit A
attached hereto and made a part hereof (“Grantor’s Property”).
 
Grantee is the owner of the Generation Facilities (as such term is hereinafter
defined) situated on Grantor’s Property.
 
Grantor and Grantee entered into an Easement and License Agreement on ______
(the “Original Easement”), and each of Grantor and Grantee now desires to hereby
amend and restate said agreement as set forth herein.
 
Grantor and Grantee entered into an Interconnection Agreement (the “ICA”) on
______, whereby Grantor agreed to provide certain interconnection services to
Grantee, and Grantee agreed to provide Grantor Access (as such term is
hereinafter defined) to the Generation Facilities for this purpose.
 
AGREEMENT
 
NOW THEREFORE, the Parties hereto, in consideration of the mutual covenants
contained herein and in the ICA, and for TEN DOLLARS ($10.00) and other good and
valuable consideration, the receipt whereof and sufficiency of which are hereby
acknowledged, each intending to be legally bound and to bind their respective
successors and assigns, hereby mutually agree as follows:
 

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

 
2 APPROPRIATE CONFORMING CHANGES SHOULD BE MADE TO EASEMENTS IN WHICH GRANTOR OF
EASEMENT IS COMPANY TO BE ACQUIRED (E.G., EDGE MOOR).

 
1

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

 

ARTICLE 1 - Definitions
 
Definitions in this Agreement.  As used in this Agreement in addition to terms
defined in the heading and Background sections of this Agreement:

 
(a)
“Access” shall mean, as to Grantee, subject to the conditions set forth in this
Agreement and Grantor’s right to impose reasonable security and safety
restrictions protecting its officers, employees, agents, consultants,
contractors, subcontractors, invitees, property, and confidential information,
full unimpeded access in common with Grantor, on, under, over,  and through
Grantor’s Property, including without limitation, existing roads, paths,
walkways, corridors, hallways, doorways, and other means of entry or exit, as
exist now and from time to time on Grantor’s Property or, where no means of
access exist, over and through those areas of Grantor’s Property which are (i)
reasonably necessary or convenient in order for Grantee to enjoy the benefits of
this Agreement in accordance with the terms hereof, and (ii) least likely, out
of the alternatives reasonably available, to impede or damage Grantor’s Property
or Grantor’s operations as conducted thereon in the manner contemplated
hereby.  Access shall also include access and right-of-way for Grantee’s
invitees, employees, agents, consultants, contractors, subcontractors, vehicles,
trucks, trailers, heavy machinery, equipment, materials, and all other items
reasonably necessary or convenient in order for Grantee to enjoy the benefits of
this Agreement in accordance with the terms hereof.  “Access” shall mean, as to
Grantor, subject to the conditions set forth in this Agreement and Grantee’s
right to impose reasonable security and safety restrictions protecting its
officers, employees, agents, consultants, contractors, subcontractors, invitees,
property, and confidential information, full unimpeded access in common with
Grantee, on, under, over,  and through the Generation Facilities Easement Area,
including without limitation, existing roads, paths, walkways, corridors,
hallways, doorways, and other means of entry or exit, as exist now and from time
to time on the Generation Facilities Easement Area or, where no means of access
exist, over and through those areas of the Generation Facilities Easement Area
which are (i) reasonably necessary or convenient in order for Grantor to enjoy
the benefits of this Agreement in accordance with the terms hereof, and (ii)
least likely, out of the alternatives reasonably available, to impede or damage
the Generation Facilities Easement Area or Grantee’s operations as conducted
thereon in the manner contemplated hereby.  Access shall also include access and
right-of-way for Grantor’s invitees, employees, agents, consultants,
contractors, subcontractors, vehicles, trucks, trailers, heavy machinery,
equipment, materials, and all other items reasonably necessary or convenient in
order for Grantor to enjoy the benefits of this Agreement in accordance with the
terms hereof.

 
 
(b)
“Affiliate” shall mean with respect to a corporation, partnership, or other
entity, each other corporation, partnership, or other entity that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, such corporation, partnership, or other entity.

 

 
2

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(c)
“Agreement” shall mean this Amended and Restated Easement and License Agreement.

 
 
(d)
“Closing” shall have the meaning assigned thereto in Section 8.17.

 
 
(e)
“Designated Access Roads” shall mean the roads indentified on Exhibit A-1.

 
 
(f)
“Designated Equipment” shall mean equipment identified as Designated Equipment
in Part 2 of Exhibit C, attached hereto and incorporated herein, as amended from
time to time, which do not constitute Joint Use Facilities, but which are owned
by Grantor or Grantee and, in the case of equipment owned by Grantor, are
located in the Generation Facilities Easement Area, and, in the case of
equipment owned by Grantee, are located on the Grantor’s Property outside the
Generation Facilities Easement Area.

 
 
(g)
“Easement” shall mean this Amended and Restated Easement and License Agreement.

 
 
(h)
“Environmental Laws”  shall mean all federal, state and local laws, regulations,
rules, ordinances, codes, principles of common law, decrees, judgments,
directives, or judicial or administrative orders relating to pollution or
protection of the environment, natural resources or human health and safety,
including laws relating to the Release or threatened Release of Hazardous
Substances (including to air, surface water, groundwater, land, surface and
subsurface strata) or otherwise relating to the manufacture, processing,
distribution, presence, use, treatment, storage, disposal, arrangement for
disposal, Release, transport, handling, removal or remediation of Hazardous
Substances, laws relating to record keeping, notification, disclosure and
reporting requirements respecting Hazardous Substances, and laws relating to the
management, use, restoration or compensation for use of or damage to natural
resources.

 
 
(i)
“Event of Default” shall have the meaning assigned thereto in Section 6.1.

 
 
(j)
“Federal Power Act” shall mean The Federal Power Act, as amended, 16 U.S.C. §§
791a, et seq.

 
 
(k)
“Generation Facilities” shall mean the electrical generating units and ancillary
equipment (including, by way of example and not by way of limitation, associated
fuel storage tanks) and lines now or in the future from time to time as may be
installed, added to, altered, removed, modified, restored,  rebuilt, replaced,
relocated, and/or expanded, on the Grantor’s Property, including any
improvements located in the Generation Facilities Easement Area.

 
 
(l)
“Generation Facilities Easement Area” shall mean the portion of Grantor’s
Property described and shown on the plan in Exhibit B attached hereto and

 

 
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incorporated herein, as such area may be expanded or relocated in accordance
with the terms of this Agreement3.
 
 
(m)
“Good Utility Practice” shall mean any of the practices, methods and acts
engaged in or approved by a significant portion of the electric utility industry
during the relevant time period, or any of the practices, methods and acts
which, in the exercise of reasonable judgment in light of the facts known at the
time the decision was made, could have been expected to accomplish the desired
result at a reasonable cost consistent with good business practices,
reliability, safety and expedition, Good Utility Practice is not intended to be
limited to the optimum practice, method, or act to the exclusion of all others,
but rather to the acceptable practices, methods, or acts generally accepted in
the region, including those practices required by Federal Power Act Section
215(a)(4).

 
 
(n)
“Governmental or Regulatory Authority” shall have the meaning assigned thereto
in Section 8.17(b)(ii).

 
 
(o)
“Grantee” shall mean the entity identified as such in the first paragraph of
this Agreement and its permitted successors and assigns hereunder.

 
 
(p)
“Grantee Approvals” shall have the meaning assigned thereto in Section
8.17(b)(i).

 
 
(q)
“Grantee’s Damages” shall have the meaning assigned thereto in Section 7.1.

 
 
(r)
“Grantor” shall mean the entity identified as such in the first paragraph of
this Agreement and its permitted successors and assigns hereunder.

 
 
(s)
“Grantor’s Damages” shall have the meaning assigned thereto in Section 7.2.

 
 
(t)
“Grantor’s Property” shall have the meaning assigned thereto in the first
recital of the Background section of this Agreement (and for purposes of
clarity, includes the Generation Facilities Easement Area).

 
 
(u)
“Hazardous Substances” shall mean (i) any petrochemical or petroleum products,
oil,  radioactive materials, radon gas, asbestos in any form that is or could
become friable, urea formaldehyde foam insulation and transformers or other
equipment that contain dielectric fluid which may contain levels of
polychlorinated biphenyls; (ii) for purposes of this Agreement, oil ash and coal
ash; (iii) any chemicals, materials or substances defined as or included in the
definition of “hazardous substances,” “hazardous wastes,” “hazardous materials,”
“restricted hazardous materials,” “extremely hazardous substances,” “toxic
substances,” “contaminants” or “pollutants” or words of similar meaning and
regulatory effect; or (iv) any other chemical, material or substance, which is
prohibited, limited,

 

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3 THE GENERATION FACILITIES EASEMENT AREA FOR THE WEST (WATERLINE), MIDDLE
(WATER TANK, BUILDING) AND CEDAR (FUEL UNLOADING BUILDING) FACILITIES NEEDS TO
BE EXPANDED OR ADJUSTED AS INDICATED ON THE NEW SURVEY PLAN.

 
4

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subject to regulation, investigation, control or remediation, or that could give
rise to liability, under any Environmental Law.
 
 
(v)
“ICA” shall mean the Interconnection Agreement dated ____ , between Grantor and
Grantee, as amended, restated, modified and replaced, or supplemented from time
to time.

 
 
(w)
“ICA Easement” shall have the meaning assigned thereto in Section 8.17.

 
 
(x)
“Including” shall mean including without limitation.

 
 
(y)
“Joint Use Facilities” shall mean equipment, identified as Joint Use Facilities
in Part 1 of Exhibit C, attached hereto and incorporated herein, as amended from
time to time, which are owned by Grantor or Grantee and which are Used both for
generation operations and transmission and/or distribution systems and are,
therefore, jointly-operated by Grantor and Grantee.4

 
 
(z)
“Mortgage” shall mean any mortgage or deed of trust constituting a lien upon
this Easement and the estate created hereby and/or Grantee’s interest in the
Generation Facilities and Generation Facilities Easement Area.

 
 
(aa)
“Option” shall have the meaning assigned thereto in Section 8.17.

 
 
(bb)
“Optioned Property” shall have the meaning assigned thereto in Section 8.17.

 
 
(cc)
“Original Easement” shall have the meaning assigned thereto in the third recital
of the Background section of this Agreement.

 
 
(dd)
“Party” or “Parties” shall have the meaning assigned thereto in the introductory
paragraph of this Agreement.

 
 
(ee)
“Permitted Exceptions” shall have the meaning assigned thereto in Section
8.17(a)(ii).

 
 
(ff)
“Personal Property Taxes” shall have the meaning assigned thereto in Section
3.2.

 
 
(gg)
“Property Transfer” shall have the meaning assigned thereto in Section
8.17(b)(ii).

 
 
(hh)
“Qualified Personnel” shall mean individuals trained for their positions by
Grantor or Grantee pursuant to the ICA or by Grantee for purposes of operating
and/or maintaining the Generation Facilities.

 
 
(ii)
“Real Estate Taxes” shall have the meaning assigned thereto in Section 3.1(a).

 

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4 LEASE BETWEEN ACE AND THERMAL ENERGY PARTNERSHIP RELATING TO MISSOURI AVENUE
PROPERTY MUST BE AMENDED TO EXCLUDE THE GENERATION FACILITIES EASEMENT AREA AND
ALLOW FOR ACCESS BY GRANTOR AND GRANTEE TO THE LEASED PROPERTY.

 
5

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(jj)
“Regulatory Approval Costs” shall have the meaning assigned thereto in Section
8.17(b)(ii).

 
 
(kk)
“Release” shall mean release, spill, leak, discharge, dispose of, pump, pour,
emit, empty, inject, leach, dump or allow to escape into or through the
environment.

 
 
(ll)
“Required Grantor Regulatory Approval” shall have the meaning assigned thereto
in Section 8.17(b)(ii).

 
 
(mm)
“Taking” or “Taken” shall have the meaning assigned thereto in Section 5.1, as
the context dictates.

 
 
(nn)
“Total Taking” shall have the meaning assigned thereto in Section 5.2.

 
 
(oo)
“Use” or “Used” shall have the meaning assigned thereto in Section 2.3(e).

 

 
ARTICLE 2 - Easements
 
2.1               Grant of Easements to Grantee; Acknowledgement of Ownership of
Generation Facilities.
 
Grantor does hereby grant and convey to Grantee the following easements,
privileges and licenses in and in respect of the Grantor’s Property:
 
 
(a)
Subject to the reservations and limitations of Section 2.2 hereof, an exclusive
easement permitting (i) the Generation Facilities located on the Generation
Facilities Easement Area to remain in their present locations and (ii) Grantee
to Use the Generation Facilities in the normal conduct of its business.

 
 
(b)
A non-exclusive easement to perform environmental investigation and re­mediation
work on Grantor’s Property relating to or resulting from Grantor’s prior use or
Grantee’s Use and operation of the Generation Facilities, provided that such
environmental investigation and remediation work does not un­reasonably
interfere with Grantor’s Use of and operations on Grantor’s Property as
permitted hereunder; provided, further, that no such investigation or
remediation shall be performed unless and until notice shall have first been
given to Grantor and the Parties shall have discussed (1) whether such
investigation or remediation is legally required and (2) the extent and duration
of the proposed activities.  No such investigation or remediation shall be
undertaken unless agreed to by Grantor or required by applicable law and, if so
required, unless performed in a manner which is least disruptive to Grantor’s
business, all at Grantee’s sole cost and expense.

 
 
(c)
An easement for all purposes deemed reasonably necessary or convenient by
Grantee to exercise any right or fulfill any obligation under and/or in
connection with the ICA, including the right to Use any improvements and
equipment

 

 
6

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constructed or to be constructed or installed in connection therewith, including
Grantee-owned Designated Equipment, whether located now or in the future on the
Generation Facilities Easement Area or (subject to the limitations of this
Agreement) on the balance of Grantor’s Property.
 
 
(d)
A non-exclusive easement to Use such portions of the parking facilities on
Grantor’s Property as are reasonably necessary for the purpose of parking of
cars, trucks, vehicles, transportation trailers and equipment, and for the
purpose of temporarily placing temporary office trailers for use in connection
with installa­tion, repair or maintenance operations, in connection with the
exercise of any easement, license, right or right-of-way under this Agreement,
and, during the period of such exercise, the right to temporarily store
materials reasonably necessary for the exercise thereof, provided, however, that
any such parking or storage shall be undertaken in such a manner as will
minimize disruption to Grantor’s business and operations and shall be in
accordance with reasonable security and safety rules established by Grantor; and
provided further, that it is understood and agreed that, except as provided in
Section 2.4(e)(3), Grantor and Grantee shall be jointly responsible for
maintenance, upkeep, repair, replacement, paving, repaving and/or snowplowing of
any of the parking facilities located outside of the Generation Facilities
Easement Area, such responsibilities and the costs associated therewith to be
shared by Grantor and Grantee in accordance with a reasonable allocation based
on the relative use of such facilities to be agreed by Grantor and Grantee from
time to time.

 
 
(e)
A non-exclusive easement of Access for the purposes of exercising any of the
rights, easements, privileges and licenses granted in this Section 2.1,
provided, however, that it is understood and agreed that, except as provided in
Section 2.4 (e)(3), Grantor and Grantee shall be jointly responsible for snow
removal, weed spraying, other groundskeeping tasks, lighting, fencing and the
maintenance, upkeep, repair, replacement, paving, repaving and/or snowplowing of
any roads and/or drives associated with access to the Generation Facilities
Easement Area that are located outside of the same, such responsibilities and
the costs associated therewith to be shared by Grantor and Grantee in accordance
with a reasonable allocation based on the relative use of such facilities to be
agreed by Grantor and Grantee from time to time.

 
Grantor hereby acknowledges that Grantee is the owner of the Generation
Facilities situated on Grantor’s Property.  Grantee hereby acknowledges that
Grantor is the owner of the assets relating to the operation of its transmission
and distribution system situated within the Generation Facilities Easement Area
(and identified in Exhibit C as being owned by Grantor).
 
2.2               Reservation by Grantor of Certain Rights.
 
Grantor reserves to itself, from the exclusive easement granted to Grantee
pursuant to Section 2.1 (a) hereof with respect to the Generation Facilities
Easement Area, the following rights subject, however, to the provisions of the
final paragraph of Section 2.7:
 

 
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(a)
the rights to (i) keep and maintain on the Grantor’s Property in their present
locations the Joint Use Facilities and Grantor-owned Designated Equipment, (ii)
Use such Grantor’s Property and Joint Use Facilities and Designated Equipment in
the manner described in the ICA or as required for Grantor’s reasonable business
purposes, and (iii) keep, operate and maintain Grantor’s transmission,
distribution, gas, electric, utility and communication equipment and facilities
located now or in the future on, over, under or across the Grantor’s Property;
provided, however, that Grantor shall utilize its future reserved rights only in
a manner which does not unreasonably interfere with Grantee’s business or
Grantee’s use of the Generation Facilities Easement Area;

 
 
(b)
the right to have Access to the Grantor’s Property for all purposes deemed
reasonably necessary or convenient by Grantor for Grantor’s reasonable business
purposes, including without limitation, to perform any act permitted by, or to
fulfill any obligation of, Grantor under this Easement or the ICA, including
maintenance of the aforesaid property in the manner described in the ICA;
provided, however, that it is understood and agreed that Grantee shall be solely
responsible for maintenance, upkeep, repair, replacement, paving, repaving
and/or snowplowing of any roads and/or drives associated with access to the
Generation Facilities Easement Area or other portions of Grantor’s Property that
are located within the Generation Facilities Easement Area; and

 
 
(c)
the right to perform any required environmental remediation and/or investigation
relating to or arising out of Grantor’s Property; provided, however, that no
such investigation or remediation shall be performed unless and until notice
shall have first been given to Grantee and the Parties shall have discussed (1)
whether such investigation or remediation is legally required and (2) the extent
and duration of the proposed activities.  No such investigation or remediation
shall be undertaken unless agreed to by Grantee or required by applicable law
and, if so required, unless performed in a manner which is least disruptive to
Grantee’s business, all at Grantor’s sole cost and expense.

 
 
(d)
A non-exclusive easement to Use such portions of the parking facilities on the
Generation Facilities Easement Area as are reasonably necessary for the purpose
of temporary parking of cars, trucks, vehicles, transportation trailers and
equipment, and for the purpose of temporarily placing temporary office trailers
for use in connection with installation, repair or maintenance operations, in
connection with the operation and maintenance of the Joint Use Facilities and
the Designated Equipment located on the Generation Facilities Easement Area,
and, during the period of such exercise, the right to temporarily store
materials reasonably necessary for the exercise thereof, provided, however, that
any such parking or storage shall be undertaken in such a manner as will
minimize disruption to Grantee’s business and operations and shall be in
accordance with reasonable security and safety rules established by Grantee; and
provided further, that it is understood and agreed that, except as provided in
Section 2.4(e)(3), Grantee and Grantor shall be jointly responsible for
maintenance, upkeep, repair, replacement, paving, repaving and/or snowplowing of
any of the parking facilities

 

 
8

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located within the Generation Facilities Easement Area, such responsibilities
and the costs associated therewith to be shared by the Grantee and Grantor in
accordance with a reasonable allocation based on the relative use of such
facilities to be agreed by Grantee and Grantor from time to time, it being
understood that such relative use may be 100% by Grantee in certain periods.
 
2.3               General Scope of Easements.
 
 
(a)
Except as otherwise provided in Sections 2.2 and 2.3(b), each easement and each
right, privilege and license granted hereby is and shall be a grant, transfer,
conveyance, and right of Use (subject to the terms of this Agreement) to Grantee
thereof and to any successor or assign of Grantee under this Agreement and in
and to the Generation Facilities. All easements granted and/or reserved herein
are granted and/or rights reserved in perpetuity, are irrevocable and
non-terminable to the fullest extent permitted by applicable law, and shall be
covenants running with the land and Grantor’s Property, binding upon and
benefiting in accordance herewith, the Parties, their successors and assigns.

 
 
(b)
Any easement or right, privilege or license granted hereunder for purposes of
enabling a Party to exercise any right or reservation or to fulfill any
obligation set forth in the ICA will last for the term of the ICA, and will
continue thereafter only if the right or obligation (i) shall by its express
terms survive the termination or expiration of the ICA or (ii) is necessary for
the conduct of the business of generating, transmitting and/or distributing
electric power by Grantee or Grantor.

 
 
(c)
All Grantee equipment and facilities currently located in the Generation
Facilities Easement Area, or hereafter installed and maintained therein pursuant
to an easement or right, privilege or license granted hereunder shall be
maintained by Grantee in a good and safe manner and Grantee shall make all
repairs and replacements reasonably necessary to keep such equipment and
facilities in good condition. If Grantee has made a decision to permanently shut
down the Generation Facilities with no intention to use the Generation
Facilities Easement Area for purposes of operating an electrical generation
facility, Grantee shall be obligated to remove any of its equipment or
facilities located on the Generation Facilities Easement Area, all in full
compliance with environmental laws applicable to closing a facility.  Nothing
herein is intended to relieve Grantee of any environmental or other liabilities
or obligations associated with the Generation Facilities.

 
 
(d)
Grantee may not enter upon or Use or permit others to enter upon or Use
Grantor’s Property in any manner or for any purpose other than as expressly
permitted by Section 2.1 hereof.

 
 
(e)
“Use” or “Used”, as the context dictates, shall mean, with respect to all
easements, rights, privileges and licenses granted or reserved hereunder, to
operate, maintain, repair, upgrade, clean, test, install, add to, alter, remove,
inspect, construct, modify, restore, rebuild, replace, relocate and expand;
provided

 

 
9

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that in connection with any Use by Grantee hereunder, at Grantee’s expense and
only if such adding to, relocation or expansion would not, as determined by
Grantor in its reasonable discretion, unreasonably or materially burden
Grantor’s Property or otherwise materially damage Grantor’s Property or
materially impede the Grantor’s performance of its obligation under the ICA or
the operation of its business affected by the easements, licenses and rights
created hereby and in connection with any Use by Grantor hereunder,at Grantor’s
expense and only if such adding to, relocation or expansion would not, as
determined by Grantee in its reasonable discretion, unreasonably or materially
burden the Generation Facilities Easement Area or otherwise materially damage
the Generation Facilities Easement Area or materially impede the Grantee’s
performance of its obligation under the ICA or the operation of its business
affected by the reservations, easements, licenses and rights created hereby.  If
Grantor determines that a proposed Use by Grantee which constitutes an addition,
relocation or expansion would unreasonably or materially burden Grantor’s
Property or otherwise materially impede the exercise by Grantor of any right
granted or reserved hereunder and/or operations of Grantor, both in the
then-present or in the future, then Grantor shall promptly so notify Grantee and
the Parties shall cooperate in good faith to find and implement an acceptable
alternative for such proposed Use.  If Grantee determines that a proposed Use by
Grantor which constitutes an addition, relocation or expansion would
unreasonably or materially burden the Generation Facilities Easement Area or
otherwise materially impede the exercise by Grantee of any right granted or
reserved hereunder and/or operations of Grantee, both in the then-present or in
the future, then Grantee shall promptly so notify Grantor and the Parties shall
cooperate in good faith to find and implement an acceptable alternative for such
proposed Use.  In no event shall the Use by either Party impair the future Use
by the other Party of such other Party’s property in a manner permitted by
applicable zoning and other land use regulations without obtaining any
additional variances, special exceptions, or other form of special use permits,
nor impede such other Party’s ability to freely transfer its interest in and to
such property.  Without limitation of the foregoing, any such use by a Party
shall include its right to install its interconnection equipment within or
outside the Generation Facilities Easement Area as reasonably required to
implement the interconnection contemplated under the ICA, including without
limitation, the right to “connect to” or “mount upon” the other Party’s
equipment or facilities.
 
2.4               Interpretation.
 
The following shall apply in interpreting any easement and any right, privilege
or license granted pursuant to this Agreement:
 
 
(a)
Each easement and each reservation, right, privilege and license granted or
reserved herein is and shall be irrevocable.

 
 
(b)
With respect to any easement or reservation created by this Agreement, the words
“in,” “upon,” “to”, “on,” “over,” “above,” “through,” and/or “under” shall be
interpreted to include all of such terms.

 

 
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(c)
Each easement and each right, privilege and license granted herein to Grantee
has been purchased and fully paid for by Grantee on the date hereof, is not
terminable and shall be enjoyed without additional cost to Grantee, except as
otherwise provided herein.

 
 
(d)
Each easement and each reservation, right, privilege and license granted or
reserved herein is also a grant of the additional right of Access over Grantor’s
Property, including the Generation Facilities Easement Area, to accomplish the
purpose of such easement or reservation, right, privilege and license, to
perform any obligations hereunder or in the ICA, and to comply with any legal
requirements affecting Grantee or Grantor or their respective property and/or
improvements, and neither Party will exercise its rights hereunder so as to
cause the other Party to be in violation of any applicable legal requirements.

 
 
(e)
Exercise of any easement or any reservation, right, privilege or license granted
or reserved hereunder permitting or requiring maintenance, repairs, alterations,
restoration, rebuilding, construction, upgrading, cleaning, installation,
removal, modification, replacement, expansion, remediation or other work by
Grantee upon Grantor’s Property or by Grantor upon the Generation Facilities
Easement Area shall be subject to the following conditions:

 
 
(1)
Access shall be permitted only to, and work shall be performed only by,
Qualified Personnel of Grantee or Grantor, as applicable, and such consultants,
agents, contractors, subcontractors, and invitees as Grantee or Grantor,
respectively, may select; provided, however, that any consultant, agent,
contractor, subcontractor or invitee shall agree to comply with all reasonable
rules and regulations applicable to the workplace imposed by Grantor or Grantee,
as applicable, and applicable provisions of this Agreement and, to the extent
applicable, the ICA; provided, further, however, that each Party shall retain
the right to exclude any such personnel, employees or contractors reasonably
deemed by such Party to present a danger of harm to the Generation Facilities or
the operation and maintenance thereof by Grantee, or to the balance of the
Grantor’s Property or the operation and maintenance thereof by Grantor;

 
 
(2)
Work shall be performed using reasonable precautions and shall be performed at
such times and upon such notice as may be necessary to avoid unreasonable
interference with the Use and enjoyment by Grantor of Grantor’s Property and
Grantee of the Generation Facilities Easement Area, to the extent permitted
hereby;

 
 
(3)
Following completion of work by Grantee, Grantee shall restore Grantor’s
Property (other than the Generation Facilities Easement Area) to the same or as
good a condition as existed before the commencement of the work; and following
completion of work by Grantor, Grantor shall restore the Generation Facilities
Easement Area to the same or as good a condition as existed before the
commencement of the work

 

 
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(4)
Any easement and any reservation,  right, privilege or license granted herein
which permits Grantee to maintain its property, equipment, facilities, and
appurtenances on Grantor’s Property or which permits Grantor to maintain its
property, equipment, facilities, and appurtenances on the Generation Facilities
Easement Area also includes the right to maintain in place on such property any
and all wires and cables connecting such property, equipment, facilities, and
appurtenances to (i) the devices, machinery, and equipment which they measure,
regulate, and/or control, and (ii) power sources now existing or as may be
commercially necessary  from time to time in the future; provided that any
future installations shall be subject to approval by Grantor, with respect to
installations on Grantor’s Property other than the Generation Facilities
Easement Area, and Grantee, with respect to installations in the Generation
Facilities Easement Area.

 
 
(f)
Each easement of Grantee includes (i) the right, to the extent permitted by
applicable law, to trim, cut, burn, treat and/or remove, by manual, mechanical,
or chemical means, any and all trees, brush, structures, and other obstructions
within the easement, as well as such trees, brush, structures and vegetation
outside of the easement area deemed reasonably necessary or desirable by Grantee
for the safe and secure operation of the Generation Facilities, and (ii) a right
of Access to Grantor’s Property for the purpose of performing the aforementioned
acts.  Each reservation by Grantor includes (i) the right, to the extent
permitted by applicable law, to trim, cut, burn, treat and/or remove, by manual,
mechanical, or chemical means, any and all trees, brush, structures, and other
obstructions within the Generation Facilities Easement Area deemed reasonably
necessary or desirable by Grantor for the safe and secure operation of Grantor’s
Property, and (ii) a right of Access to the Generation Facilities Easement Area
for the purpose of performing the aforementioned acts.

 
2.5               Rules and Regulations.
 
 
(a)
Grantee will comply with the rules set forth in Exhibit D attached hereto and
incorporated herein when performing any construction or other work, as well as
with any other applicable conditions, rules, and regulations set forth in this
Agreement or in the ICA.

 
 
(b)
Grantee and Grantor will comply with the rules set forth in Exhibit E attached
hereto and incorporated herein in the conduct of any environmental investigation
and remediation work on Grantor’s Property or in the Generation Facilities
Easement Area. The cost of all environmental investigation and remediation work
shall be the responsibility of the Party performing the work.

 
 
(c)
Grantor may promulgate additional reasonable rules regulating the conduct of
Grantee insofar as the same relate to health and safety concerns and to the
operation of the transmission and distribution assets pursuant to the ICA,
provided

 

 
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such rules and regulations do not unreasonably interfere with, or impede,
Grantee’s rights and easements as set forth herein or in the ICA.
 
2.6               No Obstruction
 

 
(a)
Neither Party shall obstruct the easements or the reservations, rights,
privileges, and licenses granted, created, or reserved pursuant to this
Agreement or render them impassable or unusable in any way or otherwise in any
way interfere with the right to the Use and enjoyment of the easements,
reservations, rights, privileges, and licenses granted, created or reserved
pursuant to this Agreement.

 

 
(b)
Neither Party shall make any changes to the topography or means of access on or
to its property, including grading or drainage that could reasonably be expected
to materially adversely affect the other Party’s rights in respect of the
Designated Access Roads, or the exercise of any right or fulfillment of any
obligation in this Agreement or in the ICA, without the prior written consent of
the other Party, which consent will not be unreasonably withheld or delayed;
provided, that nothing herein shall preclude Grantor’s right to relocate the
Designated Access Roads, subject to Grantee’s prior consent, not to be
unreasonably withheld, so long as such relocation does not interrupt Grantee’s
continuous access to the Generation Facilities Easement Area nor materially
adversely affect Grantee’s rights in respect of the Designated Access Roads.

 
2.7              Removal of Equipment.
 

 
(a)
Subject to Grantor’s rights pursuant to Section 2.2(a)(iii) above, to the extent
that any Grantor-owned Joint Use Facilities or Grantor-owned Designated
Equipment located within the Generation Facilities Easement Area are not, or are
no longer, Used for generation operations and such Grantor-owned Joint Use
Facilities or Grantor-owned Designated Equipment either interfere with Grantee’s
remaining generation operations or subject Grantee to increased regulatory or
compliance requirements, Grantee shall have the right to request that such
Grantor-owned Joint Use Facilities or Grantor-owned Designated Equipment be
relocated within the Generation Facilities Easement Area, or, if necessary to
preserve Grantee’s generation operations, to request that such Grantor-owned
Joint Use Facilities or Grantor-owned Designated Equipment be removed from the
Generation Facilities Easement Area.  Grantor agrees that, upon receipt of such
request, it will relocate or remove such Grantor-owned Joint Use Facilities or
Grantor-owned Designated Equipment, at Grantee’s sole cost and expense, as
promptly as practicable, but in any event so that such Joint Use Facilities or
Designated Equipment is disconnected and disabled within twelve (12) months and
removed or relocated within twenty-four (24) months, in each case measured from
the date of such request.  Grantee agrees to cooperate in any such relocation or
removal.

 

 
(b)
To the extent that any Grantee-owned Joint Use Facilities or Grantee-owned
Designated Equipment located outside the Generation Facilities Easement Area are
not, or are no longer, Used for generation operations and such Grantee-owned
Joint Use Facilities or Grantee-owned Designated Equipment either interfere with
Grantor’s operations or subject Grantor to increased regulatory or compliance

 

 
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requirements, Grantor shall have the right to request that such Grantee-owned
Joint Use Facilities or Grantee-owned Designated Equipment be relocated either
to the Generation Facilities Easement Area or to another location on Grantor’s
Property outside the Generation Facilities Easement Area.  Grantee agrees that,
upon receipt of such request, it will relocate or remove such Grantee-owned
Joint Use Facilities or Grantee-owned Designated Equipment, at Grantor’s sole
cost and expense, as promptly as practicable, but in any event so that such
Joint Use Facilities or Designated Equipment is disconnected and disabled within
twelve (12) months and removed or relocated within twenty-four (24) months, in
each case measured from the date of such request.  Grantor agrees to cooperate
in any such relocation or removal.
 
2.8               Interconnection License.
 

 
(a)
Grantor grants to Grantee a license to connect, install, mount or otherwise join
Grantee’s equipment to Grantor’s equipment for the purpose of exercising any
right or fulfilling any obligation under and/or in connection with the ICA,
regardless of the location of such equipment, provided that any actions to be
undertaken pursuant to this license shall be consistent with Good Utility
Practice and subject to Grantor’s prior consent, not to be unreasonably
withheld.

 
 

 
(b)
Grantee grants to Grantor a license to connect, install, mount or otherwise join
Grantor’s equipment to Grantee’s equipment for the purpose of exercising any
right or fulfilling any obligation under and/or in connection with the ICA,
regardless of the location of such equipment, provided that any actions to be
undertaken pursuant to this license shall be consistent with Good Utility
Practice and subject to Grantee’s prior consent, not to be unreasonably
withheld.

 
2.9               Priority of Easements
 
.  Notwithstanding anything to the contrary contained herein, the priority of
the easements granted in Section 2.1 and of the rights reserved in Section 2.2
shall date to the date of the Original Easement.
 
ARTICLE 3 - Taxes, Assessments, and Other Charges
 
3.1               Real Estate Taxes.
 
 
(a)
Grantor, with respect to Grantor’s Property outside of the Generation Facilities
Easement Area, and Grantee, with respect to the Generation Facilities and the
Generation Facilities Easement Area, shall pay and discharge all of the
following (“Real Estate Taxes”) whether or not now within the contemplation of
the Parties hereto:  (i) all real estate taxes, assessments, and, except for
water and sewer charges and assessments, other governmental impositions and
charges, taxes, rents, levies, and sums of every kind or nature whatsoever,
extraordinary as well as ordinary, as shall at any time be imposed by any
governmental or public authority on, or become a lien in respect of, the
Grantor’s Property or the Generation Facilities or any part thereof, or which
may become due and payable

 

 
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with respect thereto, and any and all taxes, assessments, and charges levied,
assessed or imposed upon Grantor’s Property or the Generation Facilities in lieu
of, or in addition to, the foregoing, under or by virtue of any present or
future laws, rules, requirements, orders, directives, ordinances, or regulations
of the United States of America, or of the State of ________ or of any
subdivision thereof, or of any lawful governmental authority whatsoever, and any
interest or penalties thereon, and (ii) all other taxes (excluding gains, sales,
and income taxes but including occupancy taxes which are measured by income)
measured by ownership of Grantor’s Property or the Generation
Facilities.  Grantee shall pay and discharge all levies and assessments for
water, water meter (including any expenses incident to the installation, repair,
or replacement of any water meter) and sewer and all rents with respect to water
and sewer which provide service to the Generation Facilities.
 
 
(b)
Grantee shall reimburse Grantor for such portion of the Real Estate Taxes
payable with respect to Grantor’s Property as are equitably allocable to the
Generation Facilities and Generation Facilities Easement Area.  Grantee shall
reimburse Grantor for such allocable portion of such Real Estate Taxes within 30
days of Grantee’s receipt of a demand for payment thereof from Grantor, but not
earlier than 30 days after payment of such Real Estate Taxes by
Grantor.  Grantor and Grantee shall negotiate in good faith to establish a fair
and equitable allocation of Real Estate Taxes to the Generation Facilities
Easement Area, based on the value of the Generation Facilities Easement Area,
relative to the value of Grantor’s Property; provided, however, that if the
Parties cannot agree on a fair and equitable allocation following good faith
negotiations, then the allocation of Real Estate Taxes to the Generation
Facilities Easement Area shall be consistent with past practice.

 
 
(c)
Grantee may request to receive copies of any tax bills issued to Grantor by any
applicable governmental authority.

 
3.2               Personal Property Taxes.
 
Grantor shall pay and discharge all personal property taxes (the “Personal
Property Taxes”) whether or not now within the contemplation of the Parties
hereto, including all taxes and assessments which shall or may be charged,
levied, assessed, or imposed upon, or become a lien upon, Grantee’s personal
property used in the operation of or in connection with the business conducted
on the Grantor’s Property other than the Generation Facilities Easement
Area.  Grantee shall reimburse Grantor for any Personal Property Taxes paid by
Grantor but attributable to personal property owned by Grantee and located on
Grantor’s Property.  Grantee shall pay and discharge all Personal Property Taxes
attributable to personal property owned by Grantee and located in the Generation
Facilities Easement Area and, to the extent the subject of a separate
assessment, located on the Grantor’s Property but not in the Generation
Facilities Easement Area. Grantor shall pay and discharge all Personal Property
Taxes attributable to personal property owned by Grantor and located in the
Generation Facilities Easement Area.
 
3.3               Timing of Payment.
 

 
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Subject to the provisions of Section 3.5, Grantee and Grantor shall each comply
with its covenant to pay and discharge all Real Estate Taxes and Personal
Property Taxes by paying all such taxes directly to the appropriate taxing
authorities prior to the expiration of the period within which payment is
permitted without penalty or interest.  Grantee and Grantor shall deliver to the
other Party promptly following receipt copies of the most recent official
receipts from the appropriate taxing authorities evidencing such payment.
 
3.4               Cooperation with Respect to Tax Abatements.
 
Grantee and Grantor will cooperate with each other in obtaining and/or retaining
any tax abatement for which Grantor’s Property or the Generation Facilities may
be eligible.  Upon written request of the Party seeking an abatement, the other
Party hereto will execute and file any and all documents and instruments
reasonably necessary to obtain and retain such abatement, without the assumption
of any liabilities or obligations, provided that the Party seeking such
abatement shall reimburse the cooperating Party for any reasonable expense that
such cooperating Party may incur in connection therewith.
 
3.5               Tax Contests.
 

 
(a)
Grantor, with respect to Grantor’s Property, and Grantee, with respect to the
Generation Facilities and/or the Grantee’s property to the extent payable by
Grantee with respect to the Generation Facilities Easement Area:

 
 
(1)
May contest in good faith, by appropriate proceedings diligently and
continuously conducted, at its or their sole cost and expense, any Real Estate
Tax or charge or Personal Property Tax or charge, or similar tax or charge and,
where permitted by law, pay the same under protest. Each Party agrees to
cooperate with the Party contesting any tax or charge, provided that the
contesting Party shall reimburse the cooperating Party for any reasonable
expense that such cooperating Party may incur in connection therewith.

 
 
(2)
Shall pay and discharge such contested items as finally adjudicated or settled,
with interest and penalties, and all other charges directed to be paid in or by
any such adjudication or settlement.

 
 
(3)
May, in its sole discretion, consolidate any proceeding to obtain a reduction in
the assessed valuation with any similar proceeding or proceedings brought by it
relating to any one or more other tax years.

 
 
(4)
Subject to the provisions of Section 3.5(b), shall indemnify and hold the
non-contesting Party harmless from and against all liability, loss, cost or
expense arising out of the contest.

 
Any refunds from any such contest shall belong wholly to the Party or Parties
that paid the tax.
 
(b)           Any refund from a contest described in Section 3.5(a) shall be
applied in the following order:
 

 
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(1) First, to discharge all liabilities that arose out of the contest;
 
 
(2) Second, to reimburse the Parties for any liability, loss, cost or expense
that   arose out of the contest; and

 
 
(3) Third, to Grantor and Grantee in proportions in which the taxes or charges
to which any refund received are attributable to payments made by the Parties.

 
3.6               Failure to Pay Taxes.
 
If Grantor or Grantee, as the case may be, shall fail to pay when due any Real
Estate Tax or portion thereof which it is obligated to pay hereunder within ten
(10) days of receipt of notice from the other Party that it is believed in good
faith that such obligation has not been timely paid, the non-defaulting Party
may pay the amount of such tax on behalf of the defaulting Party, and the amount
so paid, with interest at the rate provided for defaults in Section 6.3 hereof,
shall be paid by the defaulting Party upon demand to the non-defaulting Party
effecting such cure.
 
ARTICLE 4 - Mechanics’ Liens
 
4.1               Notice Regarding Labor and Material.
 
Notice is hereby given that no Party hereto shall be liable for any labor or
materials furnished or to be furnished to or for the other Party hereto or to
any other persons or entities claiming under such other Party, and that no
mechanics’ or other lien for any such labor or material furnished to a Party or
such other persons or entities shall attach to or affect any property interest
of any other Party.
 
4.2               Disposition of Liens.
 
 
(a)
Grantee shall forthwith take such action as is necessary to discharge, remove,
or satisfy any lien filed against Grantor’s Property or any portion thereof for
any labor or materials furnished or to be furnished for or on behalf of Grantee,
or any person or entity acting for or on behalf of Grantee.

 
 
(b)
Grantor shall forthwith take such action as is necessary to discharge, remove,
or satisfy any lien filed against the Generation Facilities for any labor or
materials furnished or to be furnished for or on behalf of Grantor, or any
person or entity acting for or on behalf of Grantor.

 
 
(c)
If Grantor or Grantee, as the case may be, shall fail to discharge, remove, or
satisfy any such lien which it is obligated to discharge, remove, or satisfy
hereunder within ten (10) days after notice of the existence of the lien has
been given to such defaulting Party, the non-defaulting Party may pay the amount
of such lien, or discharge the same by deposit or bonding, and the amount so
paid or deposited, or the premium paid for such bond, with interest at the rate
provided for defaults in Section 6.3 hereof, shall be paid by the defaulting
Party upon demand to the non-defaulting Party who effected such cure.

 

 
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(d)
The defaulting Party shall defend, indemnify and save harmless the
non-defaulting Party from and against all liability, loss, cost or expense
(including reasonable attorneys’ fees) arising out of any liens which the
defaulting Party is obligated to discharge, remove or satisfy.

 
ARTICLE 5 - Condemnation
 
5.1               Right to Participate.
 
In the event Grantor’s Property or the Generation Facilities, or a part thereof,
shall be taken in condemnation proceedings or by exercise of any right of
eminent domain or any agreement or deed in lieu of condemnation (any such matter
being hereinafter referred to as a “Taking” or property “Taken”), whether such
Taking be a permanent Taking or a temporary Taking, any person or entity having
an interest in the award or awards shall have the right to participate in any
such condemnation proceedings or agreement for the purpose of protecting its
interest hereunder.  Each Party so participating shall pay its own expenses.
 
5.2               Total Taking.
 
A “Total Taking” shall be deemed to have occurred as to the property of any
Party when the entire property of such Party shall be Taken or a substantial
part of such property shall be Taken and the untaken portion of the property
would, following the completion of restoration, be unsuitable for the operation
and the Use thereof in the manner so operated and Used prior to the
Taking.  Upon a Total Taking, this Agreement shall terminate except with respect
to the disposition of the award.  In such event, Grantee (as to the Generation
Facilities Easement Area, including any and all improvements thereto and
equipment thereon owned by the Grantee) and Grantor (as to the balance of
Grantor's Property) shall remove all improvements and equipment in accordance
with applicable law, prior to the date of such taking, provided that Grantor
shall be responsible for removing its equipment located in the Generation
Facilities Easement Area and Grantee shall be responsible for removing its
equipment located on Grantor’s Property outside the Generation Facilities
Easement Area.
 
5.3               Disposition of Award.
 
In the event of a Taking each Party shall be entitled to share in the awards (i)
to the extent of its interest in the property Taken; provided, however, that in
the event that either Party has assigned any part of its interest under this
Easement, the assignee of such interest shall be entitled to receive the entire
amount of said awards allocated to such Party, (ii) consequential damages
incurred by it as a consequence of such Taking and (iii) any diminution of the
value of its property not so Taken, but in each case only to the extent such
damages are included in the award.
 
5.4               Notice of Taking.
 
In the event Grantor’s Property or the Generation Facilities, or a part of
either thereof, shall be the subject of any condemnation proceedings or the
subject of any eminent domain proceedings, and if any Party shall receive actual
notice of such proceedings, the Party receiving
 

 
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such notice shall notify the other Party of the existence of such
proceedings.  Such notification shall occur within thirty (30) days after the
receipt of such notice.
 
ARTICLE 6 - Defaults
 
6.1               Event of Default.
 
Each and every one of the following events shall constitute an “Event of
Default” under this Agreement, (a) if the defaulting Party fails to make any
payment due from such defaulting Party to the non-defaulting Party within twenty
(20) days after written demand for such payment, (b) if the defaulting Party
fails, within twenty (20) days after written notice from the non-defaulting
Party, to make any payment due from such defaulting Party to any person or
entity other than the non-defaulting Party and such failure results in the
imposition of a lien on the property or improvements of the non-defaulting
Party, and (c) if the defaulting Party fails to perform any non-monetary
obligations hereunder, and said defaulting Party fails to cure such default
within thirty (30) days after receipt of written notice from the non-defaulting
Party stating with particularity the nature of the default; provided however, if
such default is of such a nature that it cannot be cured within thirty (30) days
following receipt of such notice, an Event of Default shall not have occurred if
the defaulting Party shall within such thirty (30) day period commence the
necessary cure and shall at all times thereafter diligently and continuously
prosecute such cure to completion.
 
6.2               Right of Self Help.
 
The non-defaulting Party may at its election, following the occurrence of a
non-monetary Event of Default and the thirtieth (30th) day after the receipt of
the written notice specified in clause 6.1 (c) hereof, undertake the cure of
such default on behalf of the defaulting Party.  The non-defaulting Party is
granted a license to enter upon, through, or under the property or improve­ments
of the defaulting Party to effect such cure.  Following occurrence of an Event
of Default involving the non-payment of money to a person or entity not a Party
to this Agreement, the non-defaulting Party may make such payment on behalf of
the defaulting Party.  All monies paid by the non-defaulting Party and all
reasonable costs and expenses (including reasonable attorneys’ fees) incurred by
it in effecting such cure or payment as provided for in this Section 6.2, shall
be paid by the defaulting Party upon written demand, together with interest from
the date of such demand to the date of payment at the rate set forth in Section
6.3.
 
6.3               Interest.
 
Following the occurrence of an Event of Default involving the nonpayment of
money by the defaulting Party, all monies owed to the non-defaulting Party shall
bear interest at the “Prime” rate or the “base” rate announced by Citibank, N.A.
from time to time for commercial loans.  Such interest shall be calculated
retroactively from the due date to and including the actual date of payment.
 
6.4               Enforcement Rights.
 
In addition to any other rights set forth in this Agreement, but without
limitation, enforcement of this Agreement may be had by legal or equitable
proceedings against the
 

 
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defaulting Party either to specifically enforce, restrain, or enjoin the
violation of any restriction, covenant, condition, agreement, term,
representation, or warranty herein contained or to recover
damages.  Notwithstanding any other provision of this Agreement, it is
understood and agreed that the remedies permitted pursuant to this Agreement
other than equitable remedies may be inadequate in the case of any breach by
either Party of its obligations contained herein.  Accordingly, each Party
agrees that in such instances, the affected Party shall be entitled to
preliminary injunctive relief from a court of competent jurisdiction.
 
6.5               No Extinguishment, Termination or Forfeiture.
 
Nothing contained in this Agreement shall create any reversion, condition, or
right of re-entry or other provisions for extinguishment, termination or
forfeiture under which either Party can be cut off, subordinated, or otherwise
disturbed in the possession of its property. Grantor’s remedies for default by
Grantee hereunder shall not include termination, extinguishment or forfeiture of
this Agreement or Grantee’s rights hereunder.
 
6.6               Independent Covenants.
 
None of the rights and easements granted by this Agreement and none of the
per­formances required by this Agreement shall be dependent on the performance
of any other term, promise, or condition of this Agreement or any documents
executed concurrently or in connection with this Agreement, and such rights,
easements and requirements of performance shall continue in effect irrespective
of whether anything else in this Agreement or such other documents has been
breached or has been terminated.  The separateness and independent survival of
the rights, easements, and requirements of performance under this Agreement are
essential terms hereof without which this Agreement would not have been made.
 
ARTICLE 7 - Indemnification
 
7.1               Grantor Indemnification.
 
 Grantor shall indemnify, hold harmless, and defend Grantee, its parent, and
Affiliates, and their respective officers, directors, employees, agents,
contractors, subcontractors, invitees, and successors, as the case may be, from
and against any and all claims, liabilities, costs, damages, and expenses
(including reasonable attorney and expert fees, and disbursements incurred by
any of them in any action or proceeding brought by any third party or Grantor)
(collectively, “Grantee’s Damages”) (i) for damages to property, injury to or
death of any person, including Grantee’s employees or any third parties, to the
extent caused wholly or in part by any act or omission, negligent or otherwise,
by Grantor and/or its officers, directors, employees, agents, contractors,
subcontractors or invitees arising out of or connected with this Agreement,
including a failure by Grantor to perform its obligations hereunder, or (ii) on
account of the presence, alleged presence, Release or threatened Release of
any  Hazardous Substances on, under or migrating from any Grantor Property
(other than the Generation Facilities Easement Area, except where attributable
to Grantor’s operation and maintenance of its Transmission and Distribution
Facilities) or the facilities (other than any Generation Facilities) located
thereon or otherwise attributable to Grantor’s operation and maintenance of its
Transmission and Distribution Facilities on the Grantor’s Property.  Grantee
shall not be entitled to indemnity
 

 
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under the preceding sentence to the extent that a court of competent
jurisdiction determines that its gross negligence or willful misconduct caused
such damages.
 
7.2               Grantee Indemnification.
 
 Grantee shall indemnify, hold harmless, and defend Grantor, its parent, and
Affiliates, and their respective officers, directors, employees, agents,
contractors, subcontractors, invitees, and successors, as the case may be, from
and against any and all claims, liabilities, costs, damages and expenses
(including reasonable attorney and expert fees, and disbursements incurred by
any of them in any action or proceeding brought by any third party or Grantee)
(collectively, “Grantor’s Damages”) (i) for damages to property, injury to or
death of any person, including Grantor’s employees or any third parties, to the
extent caused wholly or in part by any act or omission, negligent or otherwise,
by Grantee and/or its officers, directors, employees, agents contractors,
subcontractors and invitees arising out of or connected with this Agreement,
including a failure by Grantee to perform its obligations hereunder, or (ii) on
account of the presence, alleged presence, Release or threatened Release of
any  Hazardous Substances on, under or migrating from the Generation Facilities
Easement Area or the Generation Facilities located thereon or otherwise
attributable to Grantee’s operation and maintenance of its Generation Facilities
on the Grantor’s Property .  Grantor shall not be entitled to indemnity under
the preceding sentence to the extent that a court of competent jurisdiction
determines that its gross negligence or willful misconduct caused such damages.
 
7.3               Indemnification Procedures.
 
If a Party intends to seek indemnification under this Article 7 from the other
Party, the Party seeking indemnification shall give the other Party notice of
such claim promptly but in no event later than sixty (60) days after the later
of (a) the commencement of, or (b) the Party’s actual knowledge of, such
claim.  Such notice shall describe the claim in reasonable detail, and shall
indicate the amount (estimated if necessary) of the claim that has been, or may
be, sustained by said Party.  To the extent that the other Party is actually and
materially prejudiced as a result of failure to provide such notice, such notice
shall be a condition precedent to any liability of such other Party under the
provisions for indemnification contained in this Agreement.  Neither Party may
settle or compromise any claim which is the subject of indemnification hereunder
without the prior consent of the other Party; provided, however, that said
consent shall not be unreasonably withheld, delayed or conditioned.
 
7.4               Survival.
 
The indemnification obligations of each Party under this Article 7 shall
continue in full force and effect regardless of whether this Agreement has
either expired or been terminated or canceled.
 

 
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ARTICLE 8 - Miscellaneous
 
8.1               Effective Date.
 
This Agreement is effective from and including _______, the original date
hereof.
 
8.2               Exhibits.
 
All exhibits attached to this Agreement are part of this Agreement and the
material contained in such exhibits shall be construed and interpreted as if
contained within the text of the Agreement.
 
8.3               Headings.
 
The Article and Section headings of this Agreement and the Table of Contents
preceding this Agreement are for convenience and reference only and in no way
define, limit, or describe the scope and intent of this Agreement, nor in any
way affect this Agreement.
 
8.4               Interpretation.
 
Words of any gender in this Agreement shall be held to include any other gender
and words in the singular number shall be held to include the plural when the
sense requires.
 
8.5               Governing Law.
 
This Agreement shall be governed by and construed in accordance with the law of
the State of _______, exclusive of its choice of law rules.
 
8.6               Entire Agreement.
 
This Agreement, together with the ICA, constitutes the entire agreement between
the Parties hereto and supersedes all prior agreements and undertakings relating
to the subject matter hereof.
 
8.7               Modifications, Waivers, Consent.
 
This Agreement may not be modified, amended or discharged except by an
instrument in writing signed by all of the record owners of Grantor’s Property
and the Generation Facilities.  No waiver or consent may be enforced unless such
waiver or consent shall be in writing and signed by the Party against whom
enforcement thereof is sought.
 
8.8               Binding Effect.
 
The covenants, conditions, restrictions, encumbrances, and easements set forth
in this Agreement shall in accordance with their respective terms, attach to,
burden, and run with Grantor’s Property, including the Generation Facilities
Easement Area and shall in accordance with their respective terms, be
appurtenant to Grantor’s Property and shall be binding upon the Parties hereto
and their respective successors, assigns, grantees, transferees, and tenants
and, shall inure to the benefit and use of the Parties hereto and their
respective heirs, successors,
 

 
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assigns, grantees, transferees, and tenants.  Each grantee of any portion of or
interest in the property and each mortgagee (or designee hereof) which succeeds
to the fee simple ownership of any portion of the property, shall be deemed, by
the acceptance of a deed, to have agreed to perform each and every undertaking
created hereunder attributable to the portion of the property in which such
grantee or mortgagee has acquired an interest.
 
8.9               Assignment.
 
The Parties hereto may not assign all or any part of their rights hereunder
without the consent of the other Party hereto, which consent shall not be
unreasonably withheld or delayed; provided, however, no such consent shall be
required if (a) such assignment is made together with an assignment by the
assignor, to the same assignee, of all of its rights and obligations under the
ICA; and (b) the assignee executes and delivers to each of the Parties an
agreement, in writing, to be bound by all of the obligations of the assignor
hereunder with respect to the assigned rights.  The provisions of clause (a) in
the immediately preceding sentence shall fall out of this Agreement when the ICA
has expired or been terminated.
 
Any conveyance of and any encumbrance of or security interest in all or part of
Grantor’s interest in the Land or in Grantor’s Property shall be subject and
subordinate to and shall be subject to the terms and conditions of this
Agreement and to Grantee’s (or Grantee’s mortgagee’s, pursuant to Section 8.10)
rights hereunder.
 
8.10               Mortgage of Grantee’s or Grantor’s Easement Interest.
 
Notwithstanding Section 8.9, Grantee may freely mortgage, assign and/or
otherwise encumber all or any portion of Grantee’s right title and interest in
this Easement to a lender or lenders (or trustee or agent thereof) under one or
more Mortgages.
 

8.11  Non-Disturbance in the Event of a Mortgage of the Grantor’s Property
and/or the Generation Facilities Easement Area; Foreclosure; Deed in Lieu of
Foreclosure and/or Monitions Sale.

 

 
(a)
In the event of foreclosure of any mortgage granted by Grantor (both judicial
and non-judicial), or upon conveyance of the Generating Facilities Easement Area
in lieu of foreclosure and/or through a monitions sale, then this Easement shall
continue in full force and effect undisturbed by such foreclosure, deed in lieu
of foreclosure and/or monitions sale.  Grantee hereby agrees to accept any such
successor owner as Grantor under this Easement, and to be bound by and perform
all of the obligations imposed by the Easement, and any such successor owner of
Grantor’s Property shall be subject and subordinate to this Easement and to
Grantee’s interests hereunder and shall not disturb possession of Grantee, and
will be bound by all of the obligations imposed on the Grantor by this Easement,
including, without limitation, Section 8.17 hereof.

 

 
(b)
In the event of foreclosure of any mortgage granted by Grantee (both judicial
and non-judicial), or upon assignment or transfer of Grantee’s interest in the
Generation Facilities Easement Area in lieu of foreclosure and/or through a
monitions sale, then this Easement shall continue in full force and effect
undisturbed by such foreclosure, deed in lieu of foreclosure

 

 
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and/or monitions sale.  Grantor hereby agrees to accept any such transferee as
Grantee under this Easement, and to be bound by and perform all of the
obligations imposed by the Easement, and any such transferee shall be subject to
this Easement and to Grantor’s interests hereunder and will be bound by all of
the obligations imposed on the Grantee by this Easement.
 
8.12               Covenants not Conditions.
 
The provisions of this Agreement shall be construed as covenants and not as
conditions.
 
8.13               Severability of Void Provisions.
 
In the event that any of the provisions of this Agreement are held to be
unenforceable or invalid by any court or regulatory authority of competent
jurisdiction, the Parties shall, to the extent possible, negotiate an equitable
adjustment to the provisions of this Agreement, with a view toward effecting the
purpose of this Agreement, and the validity and enforceability of the remaining
provisions hereof shall not be affected by such holding.
 
8.14               Estoppel Certificates.
 
Grantor and Grantee shall, upon not less than thirty (30) days prior written
notice from the other Party, deliver a statement in writing certifying (a) that
this Agreement is unmodified and in full force and effect (or if there have been
modifications that the Agreement is in full force and effect as modified, and
identifying the modifications), and (b) whether or not the other Party is known
to be in default under any provision under this Agreement, and if such a default
is known, the nature of such default.
 
8.15               Notices.
 
 
(a)
On or prior to the effective date of this Agreement, each Party shall indicate
to the other Party, by notice, the name, address and phone number of the
appropriate person to contact during each eight-hour work shift in the event of
an emergency, a scheduled or forced interruption, or reduction in services.  The
notice last received by a Party shall be effective until modified by another
notice received by that Party.

 
 
(b)
All notices, requests, claims, demands, invoices, and other communications
hereunder shall be in writing and shall be given (and except as otherwise
expressly provided herein, will be deemed to have been duly given if so given)
by hand delivery, by telecopy (confirmed in writing), by mail (registered or
certified, postage prepaid), or by nationally recognized overnight delivery
service (prepaid or billed to sender) to the respective Parties as follows:

 
FOR GRANTOR
 
[____]
 
FOR GRANTEE
 
[____]

 
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(c)
or to such other address or telecopier number as is furnished by notice received
from the addressee and any such communication shall be deemed to have been given
as of the date so delivered, telecopied or mailed (except as otherwise expressly
provided herein).

 
8.16               Recording.
 
The Parties agree to execute and record this Agreement or instead, at the
request of either Party, a short-form memorandum thereof in the office of the
Recorder of Deeds for [____].  The Grantee shall pay the recording costs.
 
8.17               Purchase Option.
 
Grantor hereby grants to Grantee an option (the “Option”) to purchase all, but
not less than all, of Grantor’s full right, title and interest in the Generation
Facilities Easement Area (the “Optioned Property”) for a cash payment of one
Dollar ($1.00) and the execution and delivery by Grantee, as owner of the
property constituting the Generation Facilities Easement Area following exercise
of the Option, of an easement to Grantor substantially in the form attached as
Exhibit F hereto (the “ICA Easement”).  Such option may be exercised at any time
upon notice to Grantor.  The closing (the “Closing”) shall occur thereafter in
accordance with the provisions of this Section 8.17.
 
(a)           Condition of Title.
 
 
(i)
At the time of Closing, title to the Optioned Property shall be (a) good and
marketable and free and clear of all liens, encumbrances, leases and tenancies,
but subject to the Permitted Exceptions (as hereinafter defined), and (b)
insurable as aforesaid by any reputable title insurance company selected by
Grantee, at standard rates.

 
 
(ii)
The term “Permitted Exceptions” means (a) liens for real estate taxes, water and
sewer rents that are apportioned hereunder, including special assessments; (b)
an exception for any state of facts or other matters shown on the survey by
____, dated ____; (c) any and all present and future laws, ordinances,
restrictions, requirements, resolutions, orders, rules and regulations of any
governmental authority, as now or hereafter existing or enforced (including,
without limitation, those related to zoning and land use); (d) easements of
roads; (e) all liens, encumbrances, leases and tenancies existing at the time of
the execution of this Agreement; (f) easements, restrictions, agreements and
like matters of record that do not materially interfere with Grantee’s use of
the Optioned Property and (g) the easement identified in the introductory
paragraph of this Section 8.17.

 
Notice of Objection.  Within twenty (20) days after Grantee exercises the
Option, Grantee shall obtain a title report and deliver to Grantor written
notice of any liens, encum­brances or other matters which render the condition
of title to the Property other than as required
 

 
25

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

 

in this Section 8.17.  Any such objections of which Grantor is not notified
within such period (except such liens, encumbrances or other matters as may
arise after the date of the title report obtained by Grantee), shall thereafter
be deemed a Permitted Exception and shall not be raised by Grantee as objections
to the condition of title.
 
(b)           Subdivision Contingencies.
 
 
(i)
As promptly as practicable after Grantee obtains a survey of the Optioned
Property, Grantee shall make application to the applicable jurisdiction to
obtain subdivision of the Optioned Property, which the parties understand and
agree may include a determination of non-conforming use status from the
applicable jurisdiction to enable Grantee to continue to use the Optioned
Property for an electric generating facility and accessory uses, and the Grantee
shall make application for all other  permits, variances and other subdivision
approvals including any zoning variances or approvals,  that are required to be
obtained from the applicable jurisdiction to enable Grantee to acquire in fee
simple the Generating Facilities Easement Area as soon thereafter as is
commercially reasonable (the “Grantee Approvals”). Grantee shall be responsible
for making application for the Grantee Approvals and for all fees, costs and
expenses associated therewith, and Grantee shall use commercially reasonable
diligence in filing and processing its applications for Grantee
Approvals.  Grantee shall provide Grantor with copies of all filings and
applications, and all plans and studies related to the filings and applications.
Grantor shall cooperate with Grantee (at Grantee’s expense) by executing such
plans, applications, and submissions, of whatever kind and/or nature that may be
required in connection with the Grantee Approvals, affirmatively support Grantee
in securing the Grantee Approvals, and if requested by Grantee, a knowledgeable
representative of the Grantor shall attend all meetings with public officials
and all public hearings in connection with the Grantee Approvals.  Grantee’s
obligation to complete Closing on the exercise of the Option is contingent upon
Grantee obtaining all of the Grantee Approvals and upon all of the Grantee
Approvals, as well as any necessary Required Grantor Regulatory Approvals (as
defined below) , being final and not appealable or subject to challenge under
applicable law.

 
 
(ii)
If Grantor determines in its sole discretion that the transfer to Grantee of
Grantor’s full right, title and interest in the Optioned Property (the “Property
Transfer”) requires the consent or approval of or any notice to or filing with
(each a “Required Grantor Regulatory Approval”), any government,
quasi-governmental authority, court, tribunal, arbitrator, authority, regulatory
body, agency, commission, official or other instrumentality or any city or other
political subdivision exercising executive, legislative or judicial authority (a
“Governmental or Regulatory Authority”), Grantor shall, as soon as reasonably
practicable following the receipt of Grantee’s notice of exercise of the Option,
prepare and submit to each relevant Governmental or Regulatory Authority all
such notices

 

 
26

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

 

and filings as are required to obtain the Required Grantor Regulatory Approvals,
and thereafter shall use reasonably diligent efforts to obtain each Required
Grantor Regulatory Approval.  Grantee agrees to reimburse Grantor for all of its
costs and expenses incurred in obtaining the Required Grantor Regulatory
Approvals (including, without limitation, the fees and disbursements of legal
counsel and consultants retained in connection therewith (“Regulatory Approval
Costs”).  Notwithstanding any other provision of Agreement, the obligation of
Grantor to effect the Property Transfer is conditioned on the receipt by Grantor
of each Required Grantor Regulatory Approval, which in each case (i) does not
impose on the Grantor, or its businesses, operations or activities, any
conditions or limitations that Grantor (in the exercise of its reasonable
discretion) considers unreasonably burdensome and (ii) except with respect to
the environmental indemnities, if any, required by Section 7.1, does not impose
any costs or financial restrictions (other than of a de mininus amount) on
Grantor for which Grantor is not reimbursed or indemnified in full by Grantee to
the reasonable satisfaction of Grantor.
 
 
(iii)
Grantee may nullify the exercise of this Option at any time before Closing by
providing written notice of same to Grantor, in which event this Easement shall
remain in full force and effect, and neither party shall have any further
liability to the other based upon Grantee’s exercise of this Option, except for
the obligation of Grantee to reimburse Grantor’s costs, including, without
limitation, all of the Regulatory Approval Costs incurred in connection with
such exercise. For avoidance of doubt, Grantee’s nullification shall neither
impair its right to exercise the Option again, nor its right to nullify the
same.

 
 
(iv)
The parties agree to close on the purchase of the Optioned Property on a
mutually agreed date that is no earlier than sixty (60) days after the receipt
by the Grantor of Grantee’s notice of exercise or, if later, twenty (20) days
after the receipt of the last to be obtained of the Grantee Approvals and the
Required Grantor Regulatory Approvals.

 
 
(v)
Grantor shall further enter into such appurtenant easements and agree­ments as
may be reasonably necessary to enable Grantee to continue to utilize Grantor’s
adjacent property in the manner contemplated hereby (including the continued use
of any Joint Facilities), it being the intention of the parties that such rights
not merge with the deed to the fee, and that any rights granted hereunder should
continue in full force and effect so as to enable Grantee the full continued use
and enjoyment of the Grantor’s adjacent property for access, utilities, and the
like as provided herein.  One agreed form of Appurtenant Easement is attached
hereto and made a part hereof as Exhibit F.

 
 
(vi)
Grantee shall further enter into such appurtenant easements and agree­ments as
may be reasonably necessary to enable Grantor to continue to

 

 
27

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

 

utilize the Optioned Property in the manner contemplated hereby (including the
continued use of any Joint Facilities), it being the intention of the parties
that such rights not merge with the deed to the fee, and that any rights granted
hereunder should continue in full force and effect so as to enable Grantor the
full continued use and enjoyment of the Optioned Property for access, utilities,
and the like as provided herein.
 
(c)           Provisions with Respect to Closing.  At Closing:
 

 
(i)
Grantor shall deliver a  special warranty deed for the Optioned Property and
associated appurtenant easements as contemplated hereby, duly executed and
acknowledged and in proper form for recording; and such additional documentation
(including affidavits) as may be reasonably requested by Grantee or Grantee’s
title company to issue and deliver its title policy.

 

 
(ii)
Grantee shall execute and deliver the ICA Easement, if required, and shall pay
Grantor the purchase price (i.e., one Dollar ($1.00)).  This Easement shall be
amended to delete the provisions hereof relating to the exclusive easement in
favor of Grantee with respect to the Generation Facilities Easement Area, but
retaining the other Access and Use rights granted to Grantee hereunder  All
realty transfer taxes shall be paid by Grantee.

 
 
(iii)
Costs of recording and notary fees shall be paid by Grantee.

 

 
(iv)
Except as otherwise provided in Section 8.17(b), Grantor and Grantee shall be
responsible for the fees of their respective legal counsel.

 
 
(v)
Tender of an executed deed and purchase money is hereby waived.

 
 
(d)
Rule Against Perpetuities Savings Clause.

 
 
If the Rule Against Perpetuities or any similar rule of law would invalidate all
or any portion of the option rights granted under this Agreement, or would limit
the time during which the rights granted in this Agreement shall be effective
due to the potential failure of any interest in property created in this
Agreement to vest within a particular time, then each such interest in property
created in this Agreement shall be effective only from the date hereof until the
passing of twenty (20) years after the death of the last survivor of the
grandchildren of current Vice President Joseph R. Biden, Jr., but each such
interest in property shall be extinguished after such time, and all other
interests in property created in this Easement and all other provisions hereof
shall remain valid and effective without modification.

 
8.18               Grantor Certification.
 
Grantor hereby certifies that the actual monetary consideration paid for this
Agreement is ten Dollars ($10.00).
 

 
28

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

 

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

 
GRANTOR
         
[____]
ATTEST
           
BY:
               
TITLE:
                     
GRANTEE
     
ATTEST
 
[____]
             
BY:
               
TITLE:
 

 
29

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

 

STATE OF _____________
 
COUNTY OF ____________
 
BE IT REMEMBERED, that on this 1st day of July, 2000, personally came before me,
the Subscriber, a Notary Public for the State of ________, [_____], [_____] of
________, party to this Indenture, known to me personally to be such, and
acknowledged the said Indenture to be the act and deed of the said Corporation;
that the seal thereto affixed is its common and corporate seal; that his
signature as [_____] of _______________, thereto appended is his own proper
handwriting; and that this acknowledging, executing, and delivering the same was
duly authorized by the Board of Directors of the said Corporation.
 
GIVEN under my Hand and Seal of Office the day and year aforesaid.
 
Print Name:
 
[_____]
 
     
Notary Public
 
My Commission Expires:
 
[_____]
 

STATE OF __________
 
COUNTY OF _________
 
BE IT REMEMBERED, that on this [_____] day of [_____], personally came before
me, the Subscriber, a Notary Public for the State of ____________, [_____],
[_____], of _____________, party to this Indenture, known to me personally to be
such, and acknowledged the said Indenture to be the act and deed of the said
Corporation; that the seal thereto affixed is its common and corporate seal;
that his signature as [_____] of ________________, thereto appended is his own
proper handwriting; and that this acknowledging, executing, and delivering the
same was duly authorized by the Board of Directors of the said Corporation.
 
GIVEN under my Hand and Seal of Office the day and year aforesaid.
 
Print Name:
 
[_____]
 
     
Notary Public
 
My Commission Expires:
 
[_____]
 

 
 
 
 
 
 

 
 

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

 

EXHIBIT A
 
GRANTOR’S PROPERTY
 
[_____]
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 

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

 

EXHIBIT A-1
 
DESIGNATED ACCESS ROADS5
 
[To be provided.]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

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

 
5 ACCESS ROADS TO BE INDENTIFIED BY CROSS-HATCHING OR OTHER MEANS ON A SURVEY.

 
 

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

 

EXHIBIT B
 
SITE OF GENERATION FACILITIES
 

 
[Descriptions provided in Disclosure Schedules]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 

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

 

EXHIBIT C
 
JOINT USE FACILITIES; DESIGNATED EQUIPMENT6
 
Part 1.                      Joint Use Facilities
 
[               ]
 
Part 2.                      Designated Equipment
 
[               ]
 

 

 
]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

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

 
6 TO BE SPECIFIED PRIOR TO CLOSING.

 
 

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

 

EXHIBIT D
 
CONSTRUCTION AND WORK RULES
 
Each Party shall comply with the following rules and conditions with respect to
any construction or other work carried out (i) within any easement area, (ii)
pursuant to any reservation, (iii) in exercise of any right, privilege or
license, or (iv) with respect to any activities including blasting, regardless
of where such activities are carried out, that are reasonably capable of
damaging the property of the other Party hereto.
 
1.           A Party undertaking any such construction or other work shall be
fully liable to the other Party for any damage done to the property of such
other Party.
 
2.           All equipment Used in connection with any such construction or
other work shall maintain a minimum clearance from electrical wires as specified
by the Occupational Safety and Health Act of 1970 (“OSHA”), 29 U.S.C. 651 et
seq., and its implementing regulations, as amended.  Each Party must comply with
the clearance requirements of the National Electric Safety Code (ANSI C2), as
amended.
 
3.           Each Party acknowledges that induced voltage may occur during
construction, operation, or maintenance due to the proximity to electric
facilities.  Each Party shall install appropriate grounding to protect its
equipment and facilities.
 
4.           Except in case of an emergency, a Party shall prior to:
 
 
(a)
conducting any excavation that is reasonably capable of damaging the property of
the other Party hereto provide at least ten (10) days advance written notice to
such Party to permit such Party, if it so elects, to have a representative
present during such work;

 
 
(b)
performing any blasting, or other activity (other than excavation), that is
reasonably capable of damaging the property of the other Party, provide to such
other Party a detailed proposal setting forth the extent of the blasting, or
such other activity, and the measures to be taken to protect the facilities of
such other Party.  No blasting or other activity contemplated by the preceding
sentence shall occur until the other Party shall have reviewed and provided its
written approval for such blasting or other activity, which approval shall not
be unreasonably withheld, delayed or conditioned.

 
5.           Each Party, at its sole expense, shall provide the other Party with
an as-built survey of any facilities installed by it pursuant to these
Construction and Work Rules within thirty (30) days following completion of the
installation of the facilities.
 
6.           Any underground facilities installed on an area reserved or an
easement, granted and conveyed by this Agreement, shall be designed to support
heavy equipment with an axle load of 22,000 lbs.  Neither Party shall be liable
to the other Party for damage to underground
 

 
 

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

 

installations due to movement of heavy equipment with an axle load of 22,000
lbs. or less on any easement or reservation area.
 
7.           Underground facilities to be installed by a Party shall (unless
approved in writing by the other Party) be located no nearer than twenty-five
(25) feet from structures, buildings, poles, towers or H-frame structures,
anchors, and guy wires of the other Party.  No grading shall occur within fifty
(50) feet of an H-frame structure or anchor installation, or within twenty-five
(25) feet of a single pole or anchor installation.  Any grading up to the 50/25
foot limitation shall be accessible to vehicle traffic for maintenance
purposes.  A slope of 3H:1V of flatter is required.  All grading shall be
stabilized to prevent erosion.
 
8.           Any facilities built by a Party within a reservation or easement
area shall be of standard construction and shall conform to all applicable codes
and regulations.  Such Party agrees to maintain such facilities in reasonably
good repair and condition.
 
9.           During construction any equipment used on an easement area shall
drag chains or grounding straps to avoid sparks or shocks while handling
metallic objects.
 
10.           Each Party shall place personnel grounding protection systems
around any of its aboveground appurtenances (e.g., valve site) on any
reservation or easement area.
 
11.           A static electric charge may exist on underground metallic objects
located in the vicinity of electric transmission lines.  Until installation,
each Party shall ground its metal objects stored on any reservation or easement
area to avoid sparks and shocks.
 
12.           Prior to welding on any reservation or easement area, the Party
shall bond and ground all materials to be welded.
 
13.           If a Party intend to install an underground pipeline with cathodic
protection on any easement area, such Party shall first perform tests to insure
that no cathodic protection current is being picked up by the grounding system
of any electric transmission or distribution line.  This testing shall be
planned and performed in conjunction with the other Party.  The anode beds of
any cathodic protection shall be placed on the opposite side of the pipeline
from the transmission line.
 
14.           If either Party installs any underground pipelines or facilities
pursuant to this Agreement, it shall install markers identifying the location of
the underground lines or facilities and shall furnish the other Party with a
sketch (with as much detail as the other Party may reasonably request.
 

 
 

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

 

EXHIBIT E
 
ENVIRONMENTAL INVESTIGATIONS & REMEDIATION WORK
 
Grantor and Grantee’s rights and easements set forth in this Agreement shall
include the rights and be subject to the conditions set forth in this Exhibit
E.  Notwithstanding any other provision of this Agreement, Exhibit E shall
govern all Remedial Activities (as that term is defined below) conducted by
either Grantor and or the Grantee within the Grantee’s Easement Areas, and any
Remedial Activities conducted by the Grantee on any other Grantor Property
pursuant to Section 2.5 (b) (such affected portions of the Grantee’s Easement
Areas and the Grantor’s Property being hereinafter collectively referred to as
the “Remedial Easement Areas”), but otherwise shall not apply to Remedial
Activities at the Grantor’s Property.
 
(a)           All rights and easements granted to the Grantee or reserved by
Grantor under this Agreement shall include the right to enter upon, utilize,
excavate, travel over, alter, improve, and occupy the Remedial Easement Areas
for the sole purpose of conducting (i) soil sampling, groundwater sampling, and
other investigations, assessments, and tests related to the environmental
condition of such Remedial Easement Areas, including invasive testing, and the
construction of test wells and monitoring devices (temporary or permanent), and
(ii) necessary, related, or resulting excavation, construction, removal work,
remedial work, corrective actions and response actions and other ancillary
activities and work, including the construction and installation of temporary
and permanent remedial devices ((i) and (ii) hereinafter collectively referred
to as “Remedial Activities”).  Except to the extent required by Environmental
Laws such Remedial Activities shall not unreasonably interfere with Grantor’s or
the Grantee’s use of the Remedial Easement Areas.  These rights and easements
are granted for the accommodation of the applicable Party’s officers, employees,
agents, consultants, contractors, subcontractors and invitees as well as
construction and other equipment, vehicles, materials, excavated earth, tools,
accessories, and other necessary items required for the proper performance of
such Remedial Activities at the Remedial Easement Areas.
 
(b)           The Grantee and Grantor each shall provide the other Party with
split samples of all sampled media within Remedial Easement Areas if the other
Party agrees to bear any additional cost of providing such split samples.
 
(c)           Except as provided in the following sentence, prior to conducting
any Remedial Activities within the Remedial Easement Areas, a Party shall (i)
first furnish the other Party with a work plan which, among other things,
identifies the number and general location of any planned borings, wells,
piezometers or other monitoring or remedial devices and the analysis which the
Party plans to perform, and/or the anticipated scope and timing of any Remedial
Activities; and (ii) provide the other Party at least ten (10) days advance
written notice, but once a Party provides to the other Party a schedule of
investigative activities, no further notice will be required so long as the
schedule is adhered to.  Each Party waives these requirements for any spills,
leaks, or other exposures which, in the other Party’s reasonable judgment,
requires immediate action, but such other Party shall nevertheless provide the
other Party with reasonable notice and written work plan as available.
 

 
 

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

 

(d)           Unless required by Environmental Laws, the Grantee agrees that it
will not disclose the results of any testing or analysis Grantee performs on
soil, groundwater, and air samples taken from the Grantee’s Easement Areas,
without first disclosing the results to the Grantor and giving the Grantor a
reasonable opportunity to disclose the results itself or jointly with the
Grantee.  Unless required by Environmental Laws, the Grantee agrees that it will
not disclose the results of any testing or analysis performed by or for it on
soil, groundwater, and air samples taken from Remedial Easement Areas that are
not within a Grantee’s Easement Area.  Unless required by Environmental Laws,
the Grantor shall not disclose the results of any testing or analysis Grantor
performs on soil, groundwater, and air samples taken from the Grantee’s Easement
Areas without first disclosing the results to the Grantee and giving the Grantee
a reasonable opportunity to disclose the results itself or jointly with the
Grantor.
 
(e)           Each Party agrees to promptly furnish the other Party with a copy
of any and all data and reports resulting from any environmental testing or
analysis performed by such Party on soil, groundwater, and air samples from the
Remedial Easement Areas.
 
(f)           Each Party shall promptly remove, or cause to be removed, from the
Remedial Easement Areas, all debris, surplus material, waste or waste
containers, devices and equipment placed thereon by such Party when no longer
actually needed for the conduct of the Remedial Activities permitted hereunder,
and shall restore the affected portions of the Remedial Easement Areas to
substantially their condition before the conduct of such Remedial
Activities.  Notwithstanding the foregoing, either Party shall be permitted to
leave in place any monitoring, testing, or remedial devices which it installed
and which it is required to maintain in order to comply with any Environmental
Laws, or to achieve the goals of the Remedial Activities.
 
(g)           Except as required by Environmental Laws or as otherwise provided
herein, any fencing, equipment, and other materials to be utilized, operated,
installed, or situated within the Remedial Easement Areas shall be situated such
that they do not unreasonably interfere with the Grantee’s or the Grantor’s
operations, and only after notice to the other Party.  Any obstruction required
for the performance of work on Remedial Easement Areas shall be temporary only
and shall be removed by the installing Party, as soon as practicable following
the completion of the activity requiring such obstruction.
 

 

 
 

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

 

EXHIBIT F
 
FORM OF ICA EASEMENT

Tax Map [__] Parcel [__]
 

 
EASEMENT AND LICENSE AGREEMENT
 
BETWEEN
 
[________]
 
GRANTOR
 
AND
 
[________]
 
GRANTEE
 

 
DATED: [________]
 

 
 

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

 

TABLE OF CONTENTS
 
Page No.
 
ARTICLE 1 - Definitions
 
2
 
ARTICLE 2 - Easements
 
5
2.1
Grant of Easements to Grantee; Acknowledgement of Ownership of Designated
Grantee Equipment.
5
2.2
[Intentionally omitted].
6
2.3
General Scope of Easements.
6
2.4
Interpretation.
7
2.5
Rules and Regulations.
8
2.6
No Obstruction.
9
2.7
Removal of Equipment.
9
2.8
Interconnection License.
10
 
ARTICLE 3 - Taxes, Assessments, and Other Charges
 
10
3.1
[Intentionally omitted].
10
3.2
Personal Property Taxes.
10
3.3
Timing of Payment.
10
3.4
Cooperation with Respect to Tax Abatements.
10
3.5
Tax Contests.
11
 
ARTICLE 4 - Mechanics’ Liens
 
12
4.1
Notice Regarding Labor and Material.
12
4.2
Disposition of Liens.
12
 
ARTICLE 5 - Condemnation
 
12
5.1
[Intentionally omitted].
12
5.2
Total Taking.
12
5.3
Disposition of Award.
13
5.4
Notice of Taking.
13
 
ARTICLE 6 - Defaults
 
13
6.1
Event of Default.
13
6.2
Right of Self Help.
13
6.3
Interest.
14
6.4
Enforcement Rights.
14
6.5
No Extinguishment, Termination or Forfeiture.
14
6.6
Independent Covenants.
14
 
ARTICLE 7 - Indemnification
 
15
7.1
Grantor Indemnification.
15
7.2
Grantee Indemnification.
15
7.3
Indemnification Procedures.
15
7.4
Survival.
16

 
i

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ARTICLE 8 - Miscellaneous
 
16
8.1
Effective Date.
16
8.2
Exhibits.
16
8.3
Headings.
16
8.4
Interpretation.
16
8.5
Governing Law.
16
8.6
Entire Agreement.
16
8.7
Modifications, Waivers, Consent.
16
8.8
Binding Effect.
17
8.9
Assignment.
17
8.10
[Intentionally omitted].
17
8.11
Non-Disturbance in the Event of a Mortgage of the Grantor’s Property;
Foreclosure; Deed in Lieu of Foreclosure and/or Monitions Sale. .
17
8.12
Covenants not Conditions.
18
8.13
Severability of Void Provisions.
18
8.14
Estoppel Certificates.
18
8.15
Notices.
18
8.16
Recording.
19
8.17
Grantor Certification.
19

 
EXHIBITS
EXHIBIT A
Grantor’s Property
EXHIBIT B
Joint Use Facilities; Designated Grantee Equipment
EXHIBIT C
Construction and Work Rules
EXHIBIT D
Environmental Investigations & Remediation Work
   

 

 
ii

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EASEMENT AND LICENSE AGREEMENT
 
THIS EASEMENT AND LICENSE AGREEMENT  (this “Easement” or this “Agreement”),
originally dated as of [__], and amended and restated as of ____, ____, is
entered into by and between [__], a [corporation] organized and existing under
the laws of the State of [__] (“Grantor”) and having an office for the
transaction of business at [__], and [__], a [corporation] organized and
existing under the laws of the State of [__] (“Grantee”) and having an office
for the transaction of business at [__].  Grantor and Grantee are sometimes
referred to herein individually as a “Party” and collectively as “Parties”.
 
BACKGROUND
 
Grantor is the owner of that certain parcel of land described in Exhibit A
attached hereto and made a part hereof (“Grantor’s Property”).
 
Grantee is the owner of the Designated Grantee Equipment and certain Joint Use
Facilities (as such terms are hereinafter defined) situated on Grantor’s
Property.
 
Grantor and Grantee entered into an Amended and Restated Easement and License
Agreement on ______, 2010 (the “Amended Easement”), wherein Grantee provided
Grantor an option to purchase Grantor’s Property (the “Option”).
 
Grantor exercised the Option on ______, ____, and, pursuant to Section 8.17 of
the Amended Easement, Grantor now desires to hereby grant an easement to Grantee
subject to the terms and conditions as set forth herein.
 
AGREEMENT
 
NOW THEREFORE, the Parties hereto, in consideration of the mutual covenants
contained herein and in the ICA, and for TEN DOLLARS ($10.00) and other good and
valuable consideration, the receipt whereof and sufficiency of which are hereby
acknowledged, each intending to be legally bound and to bind their respective
successors and assigns, hereby mutually agree as follows:
 

 
1

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ARTICLE 9 - Definitions
 
Definitions in this Agreement.  As used in this Agreement in addition to terms
defined in the heading and Background sections of this Agreement:

 
(a)
“Access” shall mean, as to Grantee, subject to the conditions set forth in this
Agreement and Grantor’s right to impose reasonable security and safety
restrictions protecting its officers, employees, agents, consultants,
contractors, subcontractors, invitees, property, and confidential information,
full unimpeded access in common with Grantor, on, under, over,  and through
Grantor’s Property, including without limitation, existing roads, paths,
walkways, corridors, hallways, doorways, and other means of entry or exit, as
exist now and from time to time on Grantor’s Property or, where no means of
access exist, over and through those areas of Grantor’s Property which are (i)
reasonably necessary or convenient in order for Grantee to enjoy the benefits of
this Agreement in accordance with the terms hereof, and (ii) least likely, out
of the alternatives reasonably available, to impede or damage Grantor’s Property
or Grantor’s operations as conducted thereon in the manner contemplated
hereby.  Access shall also include access and right-of-way for Grantee’s
invitees, employees, agents, consultants, contractors, subcontractors, vehicles,
trucks, trailers, heavy machinery, equipment, materials, and all other items
reasonably necessary or convenient in order for Grantee to enjoy the benefits of
this Agreement in accordance with the terms hereof.

 
 
(b)
“Affiliate” shall mean with respect to a corporation, partnership, or other
entity, each other corporation, partnership, or other entity that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, such corporation, partnership, or other entity.

 
 
(c)
“Agreement” shall mean this Easement and License Agreement.

 
 
(d)
“Amended Easement” shall have the meaning assigned thereto in the third recital
of the Background section of this Agreement.

 
 
(e)
“Designated Grantee Equipment” shall mean equipment identified as Designated
Grantee Equipment in Part 2 of Exhibit B, attached hereto and incorporated
herein, as amended from time to time, which do not constitute Joint Use
Facilities, but which are owned by Grantee and are located on the Grantor’s
Property.

 
 
(f)
“Easement” shall mean this Easement and License Agreement.

 
 
(g)
“Environmental Laws”  shall mean all federal, state and local laws, regulations,
rules, ordinances, codes, principles of common law, decrees, judgments,
directives, or judicial or administrative orders relating to pollution or
protection of the environment, natural resources or human health and safety,
including laws relating to the Release or threatened Release of Hazardous
Substances (including to air, surface water, groundwater, land, surface and
subsurface strata) or otherwise relating to the manufacture, processing,
distribution, presence, use,

 

 
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treatment, storage, disposal, arrangement for disposal, Release, transport,
handling, removal or remediation of Hazardous Substances, laws relating to
record keeping, notification, disclosure and reporting requirements respecting
Hazardous Substances, and laws relating to the management, use, restoration or
compensation for use of or damage to natural resources.
 
 
(h)
“Event of Default” shall have the meaning assigned thereto in Section 6.1.

 
 
(i)
“Federal Power Act” shall mean The Federal Power Act, as amended, 16 U.S.C. §§
791a, et seq.

 
 
(j)
“Generation Facilities” shall mean the electrical generating units and ancillary
equipment (including, by way of example and not by way of limitation, associated
fuel storage tanks) and lines now or in the future from time to time as may be
installed, added to, altered, removed, modified, restored, rebuilt, replaced,
relocated, and/or expanded, on the Grantor’s Property, including any
improvements.

 
 
(k)
“Good Utility Practice” shall mean any of the practices, methods and acts
engaged in or approved by a significant portion of the electric utility industry
during the relevant time period, or any of the practices, methods and acts
which, in the exercise of reasonable judgment in light of the facts known at the
time the decision was made, could have been expected to accomplish the desired
result at a reasonable cost consistent with good business practices,
reliability, safety and expedition, Good Utility Practice is not intended to be
limited to the optimum practice, method, or act to the exclusion of all others,
but rather to the acceptable practices, methods, or acts generally accepted in
the region, including those practices required by Federal Power Act Section
215(a)(4).

 
 
(l)
“Grantee” shall mean the entity identified as such in the first paragraph of
this Agreement and its permitted successors and assigns hereunder.

 
 
(m)
“Grantee’s Damages” shall have the meaning assigned thereto in Section 7.1.

 
 
(n)
“Grantor” shall mean the entity identified as such in the first paragraph of
this Agreement and its permitted successors and assigns hereunder.

 
 
(o)
“Grantor’s Damages” shall have the meaning assigned thereto in Section 7.2.

 
 
(p)
“Grantor’s Property” shall have the meaning assigned thereto in the first
recital of the Background section of this Agreement.

 
 
(q)
“Hazardous Substances” shall mean (i) any petrochemical or petroleum products,
oil,  radioactive materials, radon gas, asbestos in any form that is or could
become friable, urea formaldehyde foam insulation and transformers or other
equipment that contain dielectric fluid which may contain levels of
polychlorinated biphenyls; (ii) for purposes of this Agreement, oil ash and coal
ash; (iii) any chemicals, materials or substances defined as or included in the
definition of

 

 
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“hazardous substances,” “hazardous wastes,” “hazardous materials,” “restricted
hazardous materials,” “extremely hazardous substances,” “toxic substances,”
“contaminants” or “pollutants” or words of similar meaning and regulatory
effect; or (iv) any other chemical, material or substance, which is prohibited,
limited, subject to regulation, investigation, control or remediation, or that
could give rise to liability, under any Environmental Law.
 
 
(r)
“ICA” shall mean the Interconnection Agreement dated ____ , between Grantor and
Grantee, as amended, restated, modified and replaced, or supplemented from time
to time.

 
 
(s)
“Including” shall mean including without limitation.

 
 
(t)
“Joint Use Facilities” shall mean equipment, identified as Joint Use Facilities
in Part 1 of Exhibit B, attached hereto and incorporated herein, as amended from
time to time, which are owned by Grantor or Grantee and which are Used both for
generation operations and transmission and/or distribution systems and are,
therefore, jointly-operated by Grantor and Grantee.

 
 
(u)
“Mortgage” shall mean any mortgage or deed of trust constituting a lien upon
Grantor’s interest in the Grantor’s Property.

 
 
(v)
“Option” shall have the meaning assigned thereto in the third recital of the
Background section of this Agreement.

 
 
(w)
“Party” or “Parties” shall have the meaning assigned thereto in the introductory
paragraph of this Agreement.

 
 
(x)
“Personal Property Taxes” shall have the meaning assigned thereto in Section
3.2.

 
 
(y)
“Qualified Personnel” shall mean individuals trained for their positions by
Grantee pursuant to the ICA or by Grantee for purposes of operating and/or
maintaining the Designated Grantee Equipment.

 
 
(z)
“Release” shall mean release, spill, leak, discharge, dispose of, pump, pour,
emit, empty, inject, leach, dump or allow to escape into or through the
environment.

 
 
(aa)
“Taking” or “Taken” shall have the meaning assigned thereto in Section 5.1, as
the context dictates.

 
 
(bb)
“Total Taking” shall have the meaning assigned thereto in Section 5.2.

 
(cc)           “Use” or “Used” shall have the meaning assigned thereto in
Section 2.3(e).
 

 

 
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ARTICLE 10 - Easements
 
10.1             Grant of Easements to Grantee; Acknowledgement of Ownership of
Designated Grantee Equipment.
 
Grantor does hereby grant and convey to Grantee the following easements,
privileges and licenses in and in respect of the Grantor’s Property:
 
 
(a)
the rights to (i) keep and maintain on the Grantor’s Property in their present
locations the Joint Use Facilities and the Designated Grantee Equipment, (ii)
Use such Grantor’s Property and Joint Use Facilities and Designated Grantee
Equipment in the manner described in the ICA or as required for Grantee’s
reasonable business purposes and (iii) keep, operate and maintain Grantee’s
transmission and distribution equipment and facilities located now or in the
future on, over, under or across the Grantor’s Property; provided, however, that
Grantee shall utilize its future reserved rights only in a manner which does not
unreasonably interfere with Grantor’s use of the Grantor’s Property;

 
 
(b)
the right to have Access to the Grantor’s Property for all purposes deemed
reasonably necessary or convenient by Grantee for Grantee’s reasonable business
purposes, including without limitation, to perform any act permitted by, or to
fulfill any obligation of, Grantee under the ICA, including maintenance of the
property described in paragraph (a) in the manner described in the ICA;

 
 
(c)
the right to perform any required environmental remediation and/or investigation
relating to or arising out of Grantor’s Property and which may be Grantee’s
responsibility; provided, however, that no such investigation or remediation
shall be performed unless and until notice shall have first been given to
Grantor and the Parties shall have discussed (1) whether such investigation or
remediation is legally required and (2) the extent and duration of the proposed
activities.  No such investigation or remediation shall be undertaken unless
performed in a manner which is least disruptive to Grantor’s business, all at
Grantee’s sole cost and expense; and

 
 
(d)
A non-exclusive easement to Use such portions of the parking facilities on the
Grantor’s Property as are reasonably necessary for the purpose of temporary
parking of cars, trucks, vehicles, transportation trailers and equipment, and
for the purpose of temporarily placing temporary office trailers for use in
connection with installation, repair or maintenance operations, in connection
with the operation and maintenance of the Grantee-owned Joint Use Facilities and
the Designated Grantee Facilities located on the Grantor’s Property, and, during
the period of such exercise, the right to temporarily store materials reasonably
necessary for the exercise thereof, provided, however, that any such parking or
storage shall be undertaken in such a manner as will minimize disruption to
Grantor’s business and operations and shall be in accordance with reasonable
security and safety rules established by Grantor;  provided, further, that it is
understood and agreed that, except as provided in Section 2.4(e)(3), Grantee and

 

 
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Grantor shall be jointly responsible for maintenance, upkeep, repair,
replacement, paving, repaving and/or snowplowing of any of the parking
facilities located within the Grantor’s Property, such responsibilities and the
costs associated therewith to be shared by the Grantee and Grantor in accordance
with a reasonable allocation based on the relative use of such facilities to be
agreed by Grantee and Grantor from time to time, it being understood that such
relative use may be 100% by Grantor in certain periods.
 
Grantor hereby acknowledges that Grantee is the owner of the Designated Grantee
Equipment situated on Grantor’s Property (and identified in Exhibit B as being
owned by Grantee). Grantee hereby acknowledges that Grantor is the owner of the
assets relating to the Generation Facilities.
 
10.2             [Intentionally omitted].
 

 
10.3             General Scope of Easements.                                 
 

 
(a)
Except as otherwise provided in Section 2.3(b), each easement and each right,
privilege and license granted hereby is and shall be a grant, transfer,
conveyance, and right of Use (subject to the terms of this Agreement) to Grantee
thereof and to any successor or assign of Grantee under this Agreement and in
and to the Designated Grantee Equipment. All easements granted herein are
granted in perpetuity, are irrevocable and non-terminable to the fullest extent
permitted by applicable law, and shall be covenants running with the land and
Grantor’s Property, binding upon and benefiting in accordance herewith, the
Parties, their successors and assigns.

 
 
(b)
Any easement or right, privilege or license granted hereunder for purposes of
enabling Grantee to exercise any right or fulfill any obligation set forth in
the ICA will last for the term of the ICA, and will continue thereafter only if
the right or obligation (i) shall by its express terms survive the termination
or expiration of the ICA or (ii) is necessary for the conduct of the business of
transmitting and/or distributing electric power by Grantee.

 
 
(c)
All Grantee equipment and facilities currently located on the Grantor’s
Property, or hereafter installed and maintained therein pursuant to an easement
or right, privilege or license granted hereunder shall be maintained by Grantee
in a good and safe manner and Grantee shall make all repairs and replacements
reasonably necessary to keep such equipment and facilities in good condition.

 
 
(d)
Grantee may not enter upon or Use or permit others to enter upon or Use
Grantor’s Property in any manner or for any purpose other than as expressly
permitted by Section 2.1 hereof.

 
 
(e)
“Use” or “Used”, as the context dictates, shall mean, with respect to all
easements, rights, privileges and licenses granted or reserved hereunder, to

 

 
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operate, maintain, repair, upgrade, clean, test, install, add to, alter, remove,
inspect, construct, modify, restore, rebuild, replace, relocate and expand;
provided,   that in connection with any Use by Grantee hereunder, at Grantee’s
expense and only if such adding to, relocation or expansion would not, as
determined by Grantor in its reasonable discretion, unreasonably or materially
burden Grantor’s Property or otherwise materially damage Grantor’s Property or
materially impede the Grantor’s performance of its obligations under the ICA or
the operation of its generation business and rights created hereby. If Grantor
determines that a proposed Use by Grantee which constitutes an addition,
relocation or expansion would unreasonably or materially burden Grantor’s
Property or otherwise materially impede the exercise by Grantor of any right
granted or reserved hereunder and/or operations of Grantor, both in the
then-present or in the future, then Grantor shall promptly so notify Grantee and
the Parties shall cooperate in good faith to find and implement an acceptable
alternative for such proposed Use.  In no event shall the Use by Grantee impair
the future Use by Grantor of Grantor’s property in a manner permitted by
applicable zoning and other land use regulations without obtaining any
additional variances, special exceptions, or other form of special use permits,
nor impede Grantor’s ability to freely transfer its interest in and to such
property.  Without limitation of the foregoing, any such use by Grantee shall
include its right to install its interconnection equipment as reasonably
required to implement the interconnection contemplated under the ICA, including
without limitation, the right to “connect to” or “mount upon” the Grantor’s
equipment or facilities.
 
10.4             Interpretation.
 
The following shall apply in interpreting any easement and any right, privilege
or license granted pursuant to this Agreement:
 
 
(a)
Each easement and each reservation, right, privilege and license granted or
reserved herein is and shall be irrevocable.

 
 
(b)
With respect to any easement or reservation created by this Agreement, the words
“in,” “upon,” “to”, “on,” “over,” “above,” “through,” and/or “under” shall be
interpreted to include all of such terms.

 
 
(c)
Each easement and each right, privilege and license granted herein to Grantee
has been purchased and fully paid for by Grantee on the date hereof, is not
terminable and shall be enjoyed without additional cost to Grantee, except as
otherwise provided herein.

 
 
(d)
Each easement and each reservation, right, privilege and license granted or
reserved herein is also a grant of the additional right of Access over Grantor’s
Property to accomplish the purpose of such easement or reservation, right,
privilege and license, to perform any obligations hereunder or in the ICA, and
to comply with any legal requirements affecting Grantee or Grantor or their
respective property and/or improvements, and neither Party will exercise its
rights

 

 
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hereunder so as to cause the other Party to be in violation of any applicable
legal requirements.
 
 
(e)
Exercise of any easement or any reservation, right, privilege or license granted
or reserved hereunder permitting or requiring maintenance, repairs, alterations,
restoration, rebuilding, construction, upgrading, cleaning, installation,
removal, modification, replacement, expansion, remediation or other work by
Grantee upon Grantor’s Property shall be subject to the following conditions:

 
 
(1)
Access shall be permitted only to, and work shall be performed only by,
Qualified Personnel of Grantee and such consultants, agents, contractors,
subcontractors, and invitees as Grantee may select; provided, however, that any
consultant, agent, contractor, subcontractor or invitee shall agree to comply
with reasonable rules and regulations applicable to the workplace imposed by
Grantor, all applicable provisions of this Agreement and, to the extent
applicable, the ICA;

 
 
(2)
Work shall be performed using reasonable precautions and shall be performed at
such times and upon such notice as may be necessary to avoid unreasonable
interference with the Use and enjoyment by Grantor of Grantor’s Property, to the
extent permitted hereby;

 
 
(3)
Following completion of work by Grantee, Grantee shall restore Grantor’s
Property to the same or as good a condition as existed before the commencement
of the work; and

 
 
(4)
Any easement and any reservation, right, privilege or license granted herein
which permits Grantee to maintain its property, equipment, facilities, and
appurtenances on Grantor’s Property also includes the right to maintain in place
on such property any and all wires and cables connecting such property,
equipment, facilities, and appurtenances to (i) the devices, machinery, and
equipment which they measure, regulate, and/or control and (ii) power sources
now existing or as may be commercially necessary  from time to time in the
future; provided, that any future installations shall be subject to approval by
Grantor, with respect to installations on Grantor’s Property.

 
 
(f)
Each easement of Grantee includes (i) the right, to the extent permitted by
applicable law, to trim, cut, burn, treat and/or remove, by manual, mechanical,
or chemical means, any and all trees, brush, structures, and other obstructions
within the Grantor’s Property deemed reasonably necessary or desirable by
Grantee for the safe and secure operation of the Designated Grantee Equipment
and (ii) a right of Access to Grantor’s Property for the purpose of performing
the aforementioned acts.

 
10.5             Rules and Regulations.
 

 
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(a)
Grantee will comply with the rules set forth in Exhibit C attached hereto and
incorporated herein when performing any construction or other work, as well as
with any other applicable conditions, rules and regulations set forth in this
Agreement or in the ICA.

 
 
(b)
Grantee and Grantor will comply with the rules set forth in Exhibit D attached
hereto and incorporated herein in the conduct of any environmental investigation
and remediation work on Grantor’s Property. The cost of all environmental
investigation and remediation work shall be the responsibility of the Party
performing the work.

 
 
(c)
Grantor may promulgate additional reasonable rules regulating the conduct of
Grantee insofar as the same relate to health and safety concerns and to the
operation of the Generation Facilities pursuant to the ICA, provided such rules
and regulations do not unreasonably interfere with, or impede, Grantee’s rights
and easements as set forth herein or in the ICA.

 
 
(d)
Grantee may exclude any of Grantor’s personnel, employees or contractors
reasonably deemed by Grantee to present a danger of harm to the Designated
Grantee Facilities or the operation and maintenance thereof by Grantee.

 
10.6             No Obstruction.
 
 
(a)
Neither Party shall obstruct the easements or the reservations, rights,
privileges, and licenses granted, created, or reserved pursuant to this
Agreement or render them impassable or unusable in any way or otherwise in any
way interfere with the right to the Use and enjoyment of the easements,
reservations, rights, privileges, and licenses granted, created or reserved
pursuant to this Agreement.

 
 
(b)
Neither Party shall make any changes to the topography or means of access on or
to its property, including grading or drainage that could reasonably be expected
to materially adversely affect the other Party’s rights, or the exercise of any
right or fulfillment of any obligation in this Agreement or in the ICA, without
the prior written consent of the other Party, which consent will not be
unreasonably withheld or delayed.

 
10.7           Removal of Equipment.  Subject to Grantee’s rights pursuant to
Section 2.1(a)(iii) above, to the extent that any Grantee owned Joint Use
Facilities or Designated Grantee Equipment are not, or are no longer, Used for
transmission and distribution operations and such Grantee owned Joint Use
Facilities or Designated Grantee Equipment either interfere with Grantor’s
remaining generation operations or subject Grantor to increased regulatory or
compliance requirements, Grantor shall have the right to request that such
Grantee owned Joint Use Facilities or Designated Grantee Equipment be relocated
within the Grantor’s Property, or, if necessary to preserve Grantor’s generation
operations, to request that such Grantee owned Joint Use Facilities or
Designated Grantee Equipment be removed from the Grantor’s Property.  Grantee
agrees that, upon receipt of such request, it will relocate or remove such
facilities, at
 

 
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Grantor’s sole cost and expense, as promptly as practicable, but in any event so
that such Grantee owned Joint Use Facilities or Designated Grantee Equipment is
disconnected and disabled within twelve (12) months and removed or relocated
within twenty-four (24) months, in each case measured from the date of such
request. Grantor agrees to cooperate in any such relocation or removal.
 
10.8             Interconnection License.
 

 
(a)
Grantor grants to Grantee a license to connect, install, mount or otherwise join
Grantee’s equipment to Grantor’s equipment for the purpose of exercising any
right or fulfilling any obligation under and/or in connection with the ICA,
regardless of the location of such equipment, provided that any actions to be
undertaken pursuant to this license shall be consistent with Good Utility
Practice and subject to Grantor’s prior consent, not to be unreasonably
withheld.

 
 
(b)
Grantee grants to Grantor a license to connect, install, mount or otherwise join
Grantor’s equipment to Grantee’s equipment for the purpose of exercising any
right or fulfilling any obligation under and/or in connection with the ICA,
regardless of the location of such equipment, provided that any actions to be
undertaken pursuant to this license shall be consistent with Good Utility
Practice and subject to Grantee’s prior consent, not to be unreasonably
withheld.

 
ARTICLE 11 - Taxes, Assessments, and Other Charges
 
11.1             [Intentionally omitted].
 
 
(d)

 
11.2             Personal Property Taxes.
 
Grantee shall reimburse Grantor for any Personal Property Taxes paid by Grantor
but attributable to personal property owned by Grantee and located on Grantor’s
Property.  Grantee shall pay and discharge all Personal Property Taxes
attributable to personal property owned by Grantee and located on the Grantor’s
Property. Grantor shall pay and discharge all Personal Property Taxes
attributable to personal property owned by Grantor and located on the Grantor’s
Property.
 
11.3             Timing of Payment.
 
Subject to the provisions of Section 3.5, Grantee and Grantor shall each comply
with its covenant to pay and discharge all Personal Property Taxes by paying all
such taxes directly to the appropriate taxing authorities prior to the
expiration of the period within which payment is permitted without penalty or
interest.  Grantee and Grantor shall deliver to the other Party promptly
following receipt copies of the most recent official receipts from the
appropriate taxing authorities evidencing such payment.
 
11.4             Cooperation with Respect to Tax Abatements.
 

 
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Grantee and Grantor will cooperate with each other in obtaining and/or retaining
any tax abatement for which Grantor’s Property or the Designated Grantee
Equipment may be eligible.  Upon written request of the Party seeking an
abatement, the other Party hereto will execute and file any and all documents
and instruments reasonably necessary to obtain and retain such abatement,
without the assumption of any liabilities or obligations, provided that the
Party seeking such abatement shall reimburse the cooperating Party for any
reasonable expense that such cooperating Party may incur in connection
therewith.
 
11.5             Tax Contests.
 

 
(a)
Grantor, with respect to Grantor’s Property, and Grantee, with respect to the
Designated Grantee Equipment and/or Grantee’s property to the extent payable by
Grantee with respect to the Grantor’s Property:

 
 
(5)
May contest in good faith, by appropriate proceedings diligently and
continuously conducted, at its or their sole cost and expense, any Personal
Property Tax or charge, or similar tax or charge and, where permitted by law,
pay the same under protest. Each Party agrees to cooperate with the Party
contesting any tax or charge, provided that the contesting Party shall reimburse
the cooperating Party for any reasonable expense that such cooperating Party may
incur in connection therewith.

 
 
(6)
Shall pay and discharge such contested items as finally adjudicated or settled,
with interest and penalties, and all other charges directed to be paid in or by
any such adjudication or settlement.

 
 
(7)
May, in its sole discretion, consolidate any proceeding to obtain a reduction in
the assessed valuation with any similar proceeding or proceedings brought by it
relating to any one or more other tax years.

 
 
(8)
Subject to the provisions of Section 3.5(b), shall indemnify and hold the
non-contesting Party harmless from and against all liability, loss, cost or
expense arising out of the contest.

 
Any refunds from any such contest shall belong wholly to the Party or Parties
that paid the tax.
 

 
(b)
Any refund from a contest described in Section 3.5(a) shall be applied in the
following order:

 
(1) First, to discharge all liabilities that arose out of the contest;
 
 
(2) Second, to reimburse the Parties for any liability, loss, cost or expense
that   arose out of the contest; and

 
 
(3) Third, to Grantor and Grantee in proportions in which the taxes or charges
to which any refund received are attributable to payments made by the Parties.

 

 
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ARTICLE 12 - Mechanics’ Liens
 
12.1             Notice Regarding Labor and Material.
 
Notice is hereby given that no Party hereto shall be liable for any labor or
materials furnished or to be furnished to or for the other Party hereto or to
any other persons or entities claiming under such other Party, and that no
mechanics’ or other lien for any such labor or material furnished to a Party or
such other persons or entities shall attach to or affect any property interest
of any other Party.
 
12.2             Disposition of Liens.
 
 
(e)
Grantee shall forthwith take such action as is necessary to discharge, remove,
or satisfy any lien filed against Grantor’s Property or any portion thereof for
any labor or materials furnished or to be furnished for or on behalf of Grantee,
or any person or entity acting for or on behalf of Grantee.

 
 
(f)
Grantor shall forthwith take such action as is necessary to discharge, remove,
or satisfy any lien filed against the Designated Grantee Equipment for any labor
or materials furnished or to be furnished for or on behalf of Grantor, or any
person or entity acting for or on behalf of Grantor.

 
 
(g)
If Grantor or Grantee, as the case may be, shall fail to discharge, remove, or
satisfy any such lien which it is obligated to discharge, remove, or satisfy
hereunder within ten (10) days after notice of the existence of the lien has
been given to such defaulting Party, the non-defaulting Party may pay the amount
of such lien, or discharge the same by deposit or bonding, and the amount so
paid or deposited, or the premium paid for such bond, with interest at the rate
provided for defaults in Section 6.3 hereof, shall be paid by the defaulting
Party upon demand to the non-defaulting Party who effected such cure.

 
 
(h)
The defaulting Party shall defend, indemnify and save harmless the
non-defaulting Party from and against all liability, loss, cost or expense
(including reasonable attorneys’ fees) arising out of any liens which the
defaulting Party is obligated to discharge, remove or satisfy.

 
ARTICLE 13 - Condemnation
 
13.1             [Intentionally omitted].
 

 
13.2             Total Taking.
 
A “Total Taking” shall be deemed to have occurred as to the Grantor’s Property
when the entire property of the Grantor shall be Taken or a substantial part of
such property shall be Taken and the untaken portion of the property would,
following the completion of restoration, be unsuitable for the operation and the
Use thereof in the manner so operated and Used prior to the
 

 
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Taking.  Upon a Total Taking, this Agreement shall terminate except with respect
to the disposition of the award.  In such event, Grantee (as to any and all
Designated Grantee Equipment) and Grantor (as to the balance of
Grantor's Property) shall remove all improvements and equipment in accordance
with applicable law, prior to the date of such taking.
 
13.3             Disposition of
Award.                                           
 
In the event of a Taking each Party shall be entitled to share in the awards (i)
to the extent of its interest in the property Taken; provided, however, that in
the event that either Party has assigned any part of its interest under this
Easement, the assignee of such interest shall be entitled to receive the entire
amount of said awards allocated to such Party, (ii) consequential damages
incurred by it as a consequence of such Taking and (iii) any diminution of the
value of its property not so Taken, but in each case only to the extent such
damages are included in the award.
 
13.4             Notice of Taking.
 
In the event Grantor’s Property, or a part of either thereof, shall be the
subject of any condemnation proceedings or the subject of any eminent domain
proceedings, and if any Party shall receive actual notice of such proceedings,
the Party receiving such notice shall notify the other Party of the existence of
such proceedings.  Such notification shall occur within thirty (30) days after
the receipt of such notice.
 
ARTICLE 14 - Defaults
 
14.1             Event of Default.
 
Each and every one of the following events shall constitute an “Event of
Default” under this Agreement, (a) if the defaulting Party fails to make any
payment due from such defaulting Party to the non-defaulting Party within twenty
(20) days after written demand for such payment, (b) if the defaulting Party
fails, within twenty (20) days after written notice from the non-defaulting
Party, to make any payment due from such defaulting Party to any person or
entity other than the non-defaulting Party and such failure results in the
imposition of a lien on the property or improvements of the non-defaulting
Party, and (c) if the defaulting Party fails to perform any non-monetary
obligations hereunder, and said defaulting Party fails to cure such default
within thirty (30) days after receipt of written notice from the non-defaulting
Party stating with particularity the nature of the default; provided however, if
such default is of such a nature that it cannot be cured within thirty (30) days
following receipt of such notice, an Event of Default shall not have occurred if
the defaulting Party shall within such thirty (30) day period commence the
necessary cure and shall at all times thereafter diligently and continuously
prosecute such cure to completion.
 
14.2             Right of Self Help.
 
The non-defaulting Party may at its election, following the occurrence of a
non-monetary Event of Default and the thirtieth (30th) day after the receipt of
the written notice specified in clause 6.1 (c) hereof, undertake the cure of
such default on behalf of the defaulting Party.  The non-defaulting Party is
granted a license to enter upon, through, or under the property or
 

 
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improve­ments of the defaulting Party to effect such cure.  Following occurrence
of an Event of Default involving the non-payment of money to a person or entity
not a Party to this Agreement, the non-defaulting Party may make such payment on
behalf of the defaulting Party.  All monies paid by the non-defaulting Party and
all reasonable costs and expenses (including reasonable attorneys’ fees)
incurred by it in effecting such cure or payment as provided for in this Section
6.2, shall be paid by the defaulting Party upon written demand, together with
interest from the date of such demand to the date of payment at the rate set
forth in Section 6.3.
 
14.3             Interest.
 
Following the occurrence of an Event of Default involving the nonpayment of
money by the defaulting Party, all monies owed to the non-defaulting Party shall
bear interest at the “Prime” rate or the “base” rate announced by Citibank, N.A.
from time to time for commercial loans.  Such interest shall be calculated
retroactively from the due date to and including the actual date of payment.
 
14.4             Enforcement Rights.
 
In addition to any other rights set forth in this Agreement, but without
limitation, enforcement of this Agreement may be had by legal or equitable
proceedings against the defaulting Party either to specifically enforce,
restrain, or enjoin the violation of any restriction, covenant, condition,
agreement, term, representation, or warranty herein contained or to recover
damages.  Notwithstanding any other provision of this Agreement, it is
understood and agreed that the remedies permitted pursuant to this Agreement
other than equitable remedies may be inadequate in the case of any breach by
either Party of its obligations contained herein.  Accordingly, each Party
agrees that in such instances, the affected Party shall be entitled to
preliminary injunctive relief from a court of competent jurisdiction.
 
14.5             No Extinguishment, Termination or Forfeiture.
 
Nothing contained in this Agreement shall create any reversion, condition, or
right of re-entry or other provisions for extinguishment, termination or
forfeiture under which either Party can be cut off, subordinated, or otherwise
disturbed in the possession of its property. Grantor’s remedies for default by
Grantee hereunder shall not include termination, extinguishment or forfeiture of
this Agreement or Grantee’s rights hereunder.
 
14.6             Independent Covenants.
 
None of the rights and easements granted by this Agreement and none of the
per­formances required by this Agreement shall be dependent on the performance
of any other term, promise, or condition of this Agreement or any documents
executed concurrently or in connection with this Agreement, and such rights,
easements and requirements of performance shall continue in effect irrespective
of whether anything else in this Agreement or such other documents has been
breached or has been terminated.  The separateness and independent survival of
the rights, easements, and requirements of performance under this Agreement are
essential terms hereof without which this Agreement would not have been made.
 

 
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ARTICLE 15 - Indemnification
 
15.1             Grantor Indemnification.
 
 Grantor shall indemnify, hold harmless, and defend Grantee, its parent, and
Affiliates, and their respective officers, directors, employees, agents,
contractors, subcontractors, invitees, and successors, as the case may be, from
and against any and all claims, liabilities, costs, damages, and expenses
(including reasonable attorney and expert fees, and disbursements incurred by
any of them in any action or proceeding brought by any third party or Grantor)
(collectively, “Grantee’s Damages”) (i) for damages to property, injury to or
death of any person, including Grantee’s employees or any third parties, to the
extent caused wholly or in part by any act or omission, negligent or otherwise,
by Grantor and/or its officers, directors, employees, agents, contractors,
subcontractors or invitees arising out of or connected with this Agreement,
including a failure by Grantor to perform its obligations hereunder or (ii) on
account of the presence, alleged presence, Release or threatened Release of
any  Hazardous Substances on, under or migrating from any Grantor Property
(other than where attributable to Grantee’s operation and maintenance of its
transmission and distribution facilities) or the facilities (other than any
Designated Grantee Equipment) located thereon or otherwise attributable to
Grantor’s operation and maintenance of its Generation Facilities on the
Grantor’s Property.  Grantee shall not be entitled to indemnity under the
preceding sentence to the extent that a court of competent jurisdiction
determines that its gross negligence or willful misconduct caused such damages.
 
15.2             Grantee Indemnification.
 
 Grantee shall indemnify, hold harmless, and defend Grantor, its parent, and
Affiliates, and their respective officers, directors, employees, agents,
contractors, subcontractors, invitees, and successors, as the case may be, from
and against any and all claims, liabilities, costs, damages and expenses
(including reasonable attorney and expert fees, and disbursements incurred by
any of them in any action or proceeding brought by any third party or Grantee)
(collectively, “Grantor’s Damages”) (i) for damages to property, injury to or
death of any person, including Grantor’s employees or any third parties, to the
extent caused wholly or in part by any act or omission, negligent or otherwise,
by Grantee and/or its officers, directors, employees, agents contractors,
subcontractors and invitees arising out of or connected with this Agreement,
including a failure by Grantee to perform its obligations hereunder or (ii) on
account of the presence, alleged presence, Release or threatened Release of
any  Hazardous Substances on, under or migrating from the Designated Grantee
Equipment located on the Grantor’s Property or otherwise attributable to
Grantee’s operation and maintenance of its transmission and distribution
facilities on or adjacent to the Grantor’s Property. Grantor shall not be
entitled to indemnity under the preceding sentence to the extent that a court of
competent jurisdiction determines that its gross negligence or willful
misconduct caused such damages.
 
15.3             Indemnification Procedures.
 
If a Party intends to seek indemnification under this Article 7 from the other
Party, the Party seeking indemnification shall give the other Party notice of
such claim promptly but in no event later than sixty (60) days after the later
of (a) the commencement of, or (b) the Party’s actual knowledge of, such
claim.  Such notice shall describe the claim in reasonable detail, and
 

 
15

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shall indicate the amount (estimated if necessary) of the claim that has been,
or may be, sustained by said Party.  To the extent that the other Party is
actually and materially prejudiced as a result of failure to provide such
notice, such notice shall be a condition precedent to any liability of such
other Party under the provisions for indemnification contained in this
Agreement.  Neither Party may settle or compromise any claim which is the
subject of indemnification hereunder without the prior consent of the other
Party; provided, however, that said consent shall not be unreasonably withheld,
delayed or conditioned.
 
15.4             Survival.
 
The indemnification obligations of each Party under this Article 7 shall
continue in full force and effect regardless of whether this Agreement has
either expired or been terminated or canceled.
 
ARTICLE 16 - Miscellaneous
 
16.1             Effective Date.
 
This Agreement is effective from and including _______, the original date
hereof.
 
16.2             Exhibits.
 
All exhibits attached to this Agreement are part of this Agreement and the
material contained in such exhibits shall be construed and interpreted as if
contained within the text of the Agreement.
 
16.3             Headings.
 
The Article and Section headings of this Agreement and the Table of Contents
preceding this Agreement are for convenience and reference only and in no way
define, limit, or describe the scope and intent of this Agreement, nor in any
way affect this Agreement.
 
16.4             Interpretation.
 
Words of any gender in this Agreement shall be held to include any other gender
and words in the singular number shall be held to include the plural when the
sense requires.
 
16.5             Governing Law.
 
This Agreement shall be governed by and construed in accordance with the law of
the State of _______, exclusive of its choice of law rules.
 
16.6             Entire Agreement.
 
This Agreement, together with the ICA, constitutes the entire agreement between
the Parties hereto and supersedes all prior agreements and undertakings relating
to the subject matter hereof.
 
16.7             Modifications, Waivers, Consent.
 

 
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This Agreement may not be modified, amended or discharged except by an
instrument in writing signed by all of the record owners of Grantor’s Property
and the Designated Grantee Equipment.  No waiver or consent may be enforced
unless such waiver or consent shall be in writing and signed by the Party
against whom enforcement thereof is sought.
 
16.8             Binding Effect.
 
The covenants, conditions, restrictions, encumbrances, and easements set forth
in this Agreement shall in accordance with their respective terms, attach to,
burden, and run with Grantor’s Property, and shall in accordance with their
respective terms, be appurtenant to Grantor’s Property and shall be binding upon
the Parties hereto and their respective successors, assigns, grantees,
transferees, and tenants and, shall inure to the benefit and use of the Parties
hereto and their respective heirs, successors, assigns, grantees, transferees,
and tenants.  Each grantee of any portion of or interest in the property and
each mortgagee (or designee hereof) which succeeds to the fee simple ownership
of any portion of the property, shall be deemed, by the acceptance of a deed, to
have agreed to perform each and every undertaking created hereunder attributable
to the portion of the property in which such grantee or mortgagee has acquired
an interest.
 
16.9             Assignment.
 
The Parties hereto may not assign all or any part of their rights hereunder
without the consent of the other Party hereto, which consent shall not be
unreasonably withheld or delayed; provided, however, no such consent shall be
required if (a) such assignment is made together with an assignment by the
assignor, to the same assignee, of all of its rights and obligations under the
ICA; and (b) the assignee executes and delivers to each of the Parties an
agreement, in writing, to be bound by all of the obligations of the assignor
hereunder with respect to the assigned rights.  The provisions of clause (a) in
the immediately preceding sentence shall fall out of this Agreement when the ICA
has expired or been terminated.
 
Any conveyance of and any encumbrance of or security interest in all or part of
Grantor’s Property shall be subject and subordinate to and shall be subject to
the terms and conditions of this Agreement and to Grantee’s rights hereunder.
 
16.10             [Intentionally omitted].
 

16.11             Non-Disturbance in the Event of a Mortgage of the Grantor’s
Property; Foreclosure; Deed in Lieu of Foreclosure and/or Monitions Sale.
 
In the event of foreclosure of any mortgage granted by Grantor (both judicial
and non-judicial), or upon conveyance of the Grantor’s Property in lieu of
foreclosure and/or through a monitions sale, then this Easement shall continue
in full force and effect undisturbed by such foreclosure, deed in lieu of
foreclosure and/or monitions sale.  Grantee hereby agrees to accept any such
successor owner as Grantor under this Easement, and to be bound by and perform
all of the obligations imposed by the Easement, and any such successor owner of
Grantor’s Property shall be subject and subordinate to this Easement and to
Grantee’s interests hereunder and shall not disturb possession of Grantee, and
will be bound by all of the obligations imposed on the Grantor by this Easement.
 

 
17

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16.12             Covenants not Conditions.
 
The provisions of this Agreement shall be construed as covenants and not as
conditions.
 
16.13             Severability of Void Provisions.
 
In the event that any of the provisions of this Agreement are held to be
unenforceable or invalid by any court or regulatory authority of competent
jurisdiction, the Parties shall, to the extent possible, negotiate an equitable
adjustment to the provisions of this Agreement, with a view toward effecting the
purpose of this Agreement, and the validity and enforceability of the remaining
provisions hereof shall not be affected by such holding.
 
16.14             Estoppel Certificates.
 
Grantor and Grantee shall, upon not less than thirty (30) days prior written
notice from the other Party, deliver a statement in writing certifying (a) that
this Agreement is unmodified and in full force and effect (or if there have been
modifications that the Agreement is in full force and effect as modified, and
identifying the modifications), and (b) whether or not the other Party is known
to be in default under any provision under this Agreement, and if such a default
is known, the nature of such default.
 
16.15             Notices.
 
 
(d)
On or prior to the effective date of this Agreement, each Party shall indicate
to the other Party, by notice, the name, address and phone number of the
appropriate person to contact during each eight-hour work shift in the event of
an emergency, a scheduled or forced interruption, or reduction in services.  The
notice last received by a Party shall be effective until modified by another
notice received by that Party.

 
 
(e)
All notices, requests, claims, demands, invoices, and other communications
hereunder shall be in writing and shall be given (and except as otherwise
expressly provided herein, will be deemed to have been duly given if so given)
by hand delivery, by telecopy (confirmed in writing), by mail (registered or
certified, postage prepaid), or by nationally recognized overnight delivery
service (prepaid or billed to sender) to the respective Parties as follows:

 
FOR GRANTOR
 
[____]
 
FOR GRANTEE
 
[____]
 

 
18

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(f)
or to such other address or telecopier number as is furnished by notice received
from the addressee and any such communication shall be deemed to have been given
as of the date so delivered, telecopied or mailed (except as otherwise expressly
provided herein).

 
16.16             Recording.
 
The Parties agree to execute and record this Agreement or instead, at the
request of either Party, a short-form memorandum thereof in the office of the
Recorder of Deeds for [____].  The Grantee shall pay the recording costs.
 
16.17             Grantor Certification.
 
Grantor hereby certifies that the actual monetary consideration paid for this
Agreement is ten Dollars ($10.00).
 

 
19

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

 
GRANTOR
         
[____]
ATTEST
           
BY:
               
TITLE:
                     
GRANTEE
     
ATTEST
 
[____]
             
BY:
               
TITLE:
 

 

 
 
 

 
20

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STATE OF _____________
 
COUNTY OF ____________
 
BE IT REMEMBERED, that on this __ day of _____, _____, personally came before
me, the Subscriber, a Notary Public for the State of ________, [_____], [_____]
of ________, party to this Indenture, known to me personally to be such, and
acknowledged the said Indenture to be the act and deed of the said Corporation;
that the seal thereto affixed is its common and corporate seal; that his
signature as [_____] of _______________, thereto appended is his own proper
handwriting; and that this acknowledging, executing, and delivering the same was
duly authorized by the Board of Directors of the said Corporation.
 
GIVEN under my Hand and Seal of Office the day and year aforesaid.
 
Print Name:
 
[_____]
 
     
Notary Public
 
My Commission Expires:
 
[_____]
 

STATE OF __________
 
COUNTY OF _________
 
BE IT REMEMBERED, that on this [_____] day of [_____], personally came before
me, the Subscriber, a Notary Public for the State of ____________, [_____],
[_____], of _____________, party to this Indenture, known to me personally to be
such, and acknowledged the said Indenture to be the act and deed of the said
Corporation; that the seal thereto affixed is its common and corporate seal;
that his signature as [_____] of ________________, thereto appended is his own
proper handwriting; and that this acknowledging, executing, and delivering the
same was duly authorized by the Board of Directors of the said Corporation.
 
GIVEN under my Hand and Seal of Office the day and year aforesaid.
 
Print Name:
 
[_____]
 
     
Notary Public
 
My Commission Expires:
 
[_____]
 

 
 

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EXHIBIT A TO EASEMENT AND LICENSE AGREEMENT
 
GRANTOR’S PROPERTY
 
[_____]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 

 
 

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EXHIBIT B TO EASEMENT AND LICENSE AGREEMENT
 
JOINT USE FACILITIES; DESIGNATED GRANTEE EQUIPMENT7
 
Part 1.                      Joint Use Facilities
 
[               ]
 
Part 2.                      Designated Grantee Equipment
 
[               ]
 

 

 
]
 

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7 TO BE SPECIFIED PRIOR TO CLOSING.

 
 

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EXHIBIT C TO EASEMENT AND LICENSE AGREEMENT
 
CONSTRUCTION AND WORK RULES
 
Each Party shall comply with the following rules and conditions with respect to
any construction or other work carried out (i) within any easement area, (ii)
pursuant to any reservation, (iii) in exercise of any right, privilege or
license, or (iv) with respect to any activities including blasting, regardless
of where such activities are carried out, that are reasonably capable of
damaging the property of the other Party hereto.
 
1.           A Party undertaking any such construction or other work shall be
fully liable to the other Party for any damage done to the property of such
other Party.
 
2.           All equipment Used in connection with any such construction or
other work shall maintain a minimum clearance from electrical wires as specified
by the Occupational Safety and Health Act of 1970 (“OSHA”), 29 U.S.C. 651 et
seq., and its implementing regulations, as amended.  Each Party must comply with
the clearance requirements of the National Electric Safety Code (ANSI C2), as
amended.
 
3.           Each Party acknowledges that induced voltage may occur during
construction, operation, or maintenance due to the proximity to electric
facilities.  Each Party shall install appropriate grounding to protect its
equipment and facilities.
 
4.           Except in case of an emergency, a Party shall prior to:
 
 
(a)
conducting any excavation that is reasonably capable of damaging the property of
the other Party hereto provide at least ten (10) days advance written notice to
such Party to permit such Party, if it so elects, to have a representative
present during such work;

 
 
(b)
performing any blasting, or other activity (other than excavation), that is
reasonably capable of damaging the property of the other Party, provide to such
other Party a detailed proposal setting forth the extent of the blasting, or
such other activity, and the measures to be taken to protect the facilities of
such other Party.  No blasting or other activity contemplated by the preceding
sentence shall occur until the other Party shall have reviewed and provided its
written approval for such blasting or other activity, which approval shall not
be unreasonably withheld, delayed or conditioned.

 
5.           Each Party, at its sole expense, shall provide the other Party with
an as-built survey of any facilities installed by it pursuant to these
Construction and Work Rules within thirty (30) days following completion of the
installation of the facilities.
 
6.           Any underground facilities installed on an area reserved or an
easement, granted and conveyed by this Agreement, shall be designed to support
heavy equipment with an axle load of 22,000 lbs.  Neither Party shall be liable
to the other Party for damage to underground
 

 
 

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installations due to movement of heavy equipment with an axle load of 22,000
lbs. or less on any easement or reservation area.
 
7.           Underground facilities to be installed by a Party shall (unless
approved in writing by the other Party) be located no nearer than twenty-five
(25) feet from structures, buildings, poles, towers or H-frame structures,
anchors, and guy wires of the other Party.  No grading shall occur within fifty
(50) feet of an H-frame structure or anchor installation, or within twenty-five
(25) feet of a single pole or anchor installation.  Any grading up to the 50/25
foot limitation shall be accessible to vehicle traffic for maintenance
purposes.  A slope of 3H:1V of flatter is required.  All grading shall be
stabilized to prevent erosion.
 
8.           Any facilities built by a Party within a reservation or easement
area shall be of standard construction and shall conform to all applicable codes
and regulations.  Such Party agrees to maintain such facilities in reasonably
good repair and condition.
 
9.           During construction any equipment used on an easement area shall
drag chains or grounding straps to avoid sparks or shocks while handling
metallic objects.
 
10.           Each Party shall place personnel grounding protection systems
around any of its aboveground appurtenances (e.g., valve site) on any
reservation or easement area.
 
11.           A static electric charge may exist on underground metallic objects
located in the vicinity of electric transmission lines.  Until installation,
each Party shall ground its metal objects stored on any reservation or easement
area to avoid sparks and shocks.
 
12.           Prior to welding on any reservation or easement area, the Party
shall bond and ground all materials to be welded.
 
13.           If a Party intend to install an underground pipeline with cathodic
protection on any easement area, such Party shall first perform tests to insure
that no cathodic protection current is being picked up by the grounding system
of any electric transmission or distribution line.  This testing shall be
planned and performed in conjunction with the other Party.  The anode beds of
any cathodic protection shall be placed on the opposite side of the pipeline
from the transmission line.
 
14.           If either Party installs any underground pipelines or facilities
pursuant to this Agreement, it shall install markers identifying the location of
the underground lines or facilities and shall furnish the other Party with a
sketch (with as much detail as the other Party may reasonably request.
 

 
 

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EXHIBIT D TO EASEMENT AND LICENSE AGREEMENT
 
ENVIRONMENTAL INVESTIGATIONS & REMEDIATION WORK
 
Grantor and Grantee’s rights and easements set forth in this Agreement shall
include the rights and be subject to the conditions set forth in this Exhibit
E.  Notwithstanding any other provision of this Agreement, Exhibit E shall
govern all Remedial Activities (as that term is defined below) conducted by
either Grantor and or the Grantee within the Grantee’s Easement Areas, and any
Remedial Activities conducted by the Grantee on any other Grantor Property
pursuant to Section 2.5 (b) (such affected portions of the Grantee’s Easement
Areas and the Grantor’s Property being hereinafter collectively referred to as
the “Remedial Easement Areas”), but otherwise shall not apply to Remedial
Activities at the Grantor’s Property.
 
(a)           All rights and easements granted to the Grantee or reserved by
Grantor under this Agreement shall include the right to enter upon, utilize,
excavate, travel over, alter, improve, and occupy the Remedial Easement Areas
for the sole purpose of conducting (i) soil sampling, groundwater sampling, and
other investigations, assessments, and tests related to the environmental
condition of such Remedial Easement Areas, including invasive testing, and the
construction of test wells and monitoring devices (temporary or permanent), and
(ii) necessary, related, or resulting excavation, construction, removal work,
remedial work, corrective actions and response actions and other ancillary
activities and work, including the construction and installation of temporary
and permanent remedial devices ((i) and (ii) hereinafter collectively referred
to as “Remedial Activities”).  Except to the extent required by Environmental
Laws such Remedial Activities shall not unreasonably interfere with Grantor’s or
the Grantee’s use of the Remedial Easement Areas.  These rights and easements
are granted for the accommodation of the applicable Party’s officers, employees,
agents, consultants, contractors, subcontractors and invitees as well as
construction and other equipment, vehicles, materials, excavated earth, tools,
accessories, and other necessary items required for the proper performance of
such Remedial Activities at the Remedial Easement Areas.
 
(b)           The Grantee and Grantor each shall provide the other Party with
split samples of all sampled media within Remedial Easement Areas if the other
Party agrees to bear any additional cost of providing such split samples.
 
(c)           Except as provided in the following sentence, prior to conducting
any Remedial Activities within the Remedial Easement Areas, a Party shall (i)
first furnish the other Party with a work plan which, among other things,
identifies the number and general location of any planned borings, wells,
piezometers or other monitoring or remedial devices and the analysis which the
Party plans to perform, and/or the anticipated scope and timing of any Remedial
Activities; and (ii) provide the other Party at least ten (10) days advance
written notice, but once a Party provides to the other Party a schedule of
investigative activities, no further notice will be required so long as the
schedule is adhered to.  Each Party waives these requirements for any spills,
leaks, or other exposures which, in the other Party’s reasonable judgment,
requires immediate action, but such other Party shall nevertheless provide the
other Party with reasonable notice and written work plan as available.
 

 
 

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(d)           Unless required by Environmental Laws, the Grantee agrees that it
will not disclose the results of any testing or analysis Grantee performs on
soil, groundwater, and air samples taken from the Grantee’s Easement Areas,
without first disclosing the results to the Grantor and giving the Grantor a
reasonable opportunity to disclose the results itself or jointly with the
Grantee.  Unless required by Environmental Laws, the Grantee agrees that it will
not disclose the results of any testing or analysis performed by or for it on
soil, groundwater, and air samples taken from Remedial Easement Areas that are
not within a Grantee’s Easement Area.  Unless required by Environmental Laws,
the Grantor shall not disclose the results of any testing or analysis Grantor
performs on soil, groundwater, and air samples taken from the Grantee’s Easement
Areas without first disclosing the results to the Grantee and giving the Grantee
a reasonable opportunity to disclose the results itself or jointly with the
Grantor.
 
(e)           Each Party agrees to promptly furnish the other Party with a copy
of any and all data and reports resulting from any environmental testing or
analysis performed by such Party on soil, groundwater, and air samples from the
Remedial Easement Areas.
 
(f)           Each Party shall promptly remove, or cause to be removed, from the
Remedial Easement Areas, all debris, surplus material, waste or waste
containers, devices and equipment placed thereon by such Party when no longer
actually needed for the conduct of the Remedial Activities permitted hereunder,
and shall restore the affected portions of the Remedial Easement Areas to
substantially their condition before the conduct of such Remedial
Activities.  Notwithstanding the foregoing, either Party shall be permitted to
leave in place any monitoring, testing, or remedial devices which it installed
and which it is required to maintain in order to comply with any Environmental
Laws, or to achieve the goals of the Remedial Activities.
 
(g)           Except as required by Environmental Laws or as otherwise provided
herein, any fencing, equipment, and other materials to be utilized, operated,
installed, or situated within the Remedial Easement Areas shall be situated such
that they do not unreasonably interfere with the Grantee’s or the Grantor’s
operations, and only after notice to the other Party.  Any obstruction required
for the performance of work on Remedial Easement Areas shall be temporary only
and shall be removed by the installing Party, as soon as practicable following
the completion of the activity requiring such obstruction.
 

 
 
 
 
 
 
 

 
 

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EXHIBIT D
 
FIRST AMENDMENT
 

 
TO
 

 
CLAYMONT TO HAY ROAD PIPELINE OWNERS’ AGREEMENT
 
FIRST AMENDMENT TO CLAYMONT TO HAY ROAD PIPELINE OWNERS’ AGREEMENT (this
“Amendment”), dated as of [•], 2010, by and between Delmarva Power & Light
Company, a Delaware and Virginia corporation (“Delmarva”) and Conectiv Delmarva
Generation, LLC, a Delaware limited liability company (formerly Conectiv
Delmarva Generation, Inc.) (“CDG”). Delmarva and CDG are each referred to herein
as an “Owner” or a “Party” and collectively as the “Owners” or the “Parties”.
 
 
W I T N E S S E T H :
 
WHEREAS, on July 1, 2000, CDG and Delmarva entered into that certain Claymont to
Hay Road Pipeline Owners’ Agreement (the “Owners’ Agreement”);
 
WHEREAS, CDG is a wholly owned subsidiary of Conectiv Energy Holdings Company,
LLC, a Delaware limited liability company (“CEH”), and CEH is a wholly owned
subsidiary of Conectiv, LLC, a Delaware limited liability company (“Conectiv”);
 
WHEREAS, Conectiv proposes to sell all of its direct membership interest in CEH,
and its indirect interest in CDG, to New Development Holdings, LLC, a Delaware
limited liability company and wholly owned subsidiary of Calpine Corporation
(the “Proposed Transaction”);
 
WHEREAS, in connection with the Proposed Transaction, CDG and Delmarva wish to
evidence their agreement with respect to certain matters as set forth herein.
 
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Parties hereby agree as follows.
 
 
1.           Definitions.  Capitalized terms used herein without definition
shall have the meanings ascribed to such terms in the Owners’ Agreement.
 
 
2.           Waivers.  Delmarva hereby irrevocably and unconditionally: (i)
agrees that the Owners’ Agreement shall not terminate as the result of the
Proposed Transaction and Delmarva hereby waives any right it may have to
terminate the Owners’ Agreement, or the effect of any provision of the Owners’
Agreement that would purport to cause the Owners’ Agreement to terminate, as a
result of the Proposed Transaction; (ii) agrees that no “Change of Control”
shall be deemed to have occurred under the Owners’ Agreement as a result of the
Proposed Transaction and Delmarva hereby waives its Call Rights pursuant to
Section 6.5 of the Owners’ Agreement as they might arise in connection with the
Proposed Transaction; and (iii) confirms that the Owners’ Agreement shall be in
full force and effect following the closing of the Proposed Transaction.
 

 
 

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3.           Amendments to the Owners’ Agreement.
 
 
(a)          Section 3.5 is hereby amended to read in its entirety as follows:
 
“Section 3.5.  Curtailment.  Notwithstanding any other provision of this
Agreement to the contrary and the fact that neither CDG, nor its rights or
interests in the Pipeline Facilities are subject to regulation by the Delaware
Public Service Commission, in the event of a curtailment of gas service or other
adverse operating condition that may reasonably be expected to impact the flow
of gas to Delmarva’s firm customers occurs (a “Curtailment”), the Delmarva Gas
Tariff as approved by the Delaware Public Service Commission, or any successor
thereto, in effect at the time of such Curtailment shall govern the priorities
and procedures of the Owners, including Delmarva’s rights to its capacity usage,
in connection with the operation of the Pipeline Facilities during such
Curtailment such that in a Curtailment Delmarva’s gas shall be the “first
through the meter” up to its share of the capacity of the Pipeline Facilities as
then in effect.  The Parties shall cooperate in good faith using commercially
reasonable efforts to minimize the impact of a Curtailment on either of them.”
 
 
(b)          The following is hereby added as a new Section 3.7 to the Owners’
Agreement:
 
 
“Section 3.7.  Capacity Expansion.  It is the intent of the Owners to work
cooperatively and in good faith to agree on expansions to the Pipeline
Facilities that meet the objectives of both parties.  Wherever the consent or
the cooperation of either Owner is necessary or desirable in connection with a
capacity expansion, that consent or cooperation shall not be unreasonably
withheld, conditioned, or delayed.  In the event an Owner (the “Expansion
Owner”) wishes to expand the capacity of the Pipeline Facilities pursuant to
this Section 3.7, the Expansion Owner shall give notice to the other Owner no
less than one hundred twenty (120) days prior to the date on which the Expansion
Owner reasonably anticipates the start of construction for such expansion.  Such
notice shall provide to the other Owner detailed information and an opportunity
to review and comment regarding the proposed expansion in advance of undertaking
any construction activity.   The Parties shall negotiate in good faith the scope
and components of the capacity expansion, the proportionate allocation of any
capacity expansion, and the related allocation of costs.  If the other Owner
does not elect to participate in funding its proportionate share of the cost of
any such expansion, the Expansion Owner shall be entitled to usage of all of the
incremental transportation capacity resulting from such expansion of the
Pipeline Facilities, but subject to the terms of this Agreement.  Provided that
the Expansion Owner complies with the terms of this Section 3.7 and Section 4.8,
and notwithstanding anything in this Agreement to the contrary, the Expansion
Owner may from time to time and at any time expand the capacity of the Pipeline
Facilities.   With respect to any expansion, (a) no such expansion shall
materially impair the other Owner’s rights or interests with respect to the
Pipeline Facilities or the services of the Operator; (b) the Expansion Owner
shall keep the other Owner and the Operator informed regarding all material
activities related to such expansion; (c) the Expansion Owner shall provide to
the other Owner and the Operator in advance all design and
 

 
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engineering documents for the other Owner’s and the Operator’s review and
comment; (d) the Expansion Owner shall coordinate all construction schedules and
outages with the other Owner and the Operator; (d) the Expansion Owner shall
perform or cause its contractors and vendors to perform all work and provide all
services in accordance with applicable Federal, state, and local law, code, and
regulation; and (e) the Expansion Owner shall adhere to the other Owner’s and
the Operator’s reasonable requirements with respect to any construction
activities associated with a capacity expansion pursuant to this Section 3.7.
 
 
(c)          The following is hereby added as a new Section 4.8 to the Owners’
Agreement:
 
 
“Section 4.8.  Capital Additions; Operating Costs; Incremental Capacity for
Capacity Expansion.  In the event that an Owner does not elect to bear a
proportionate share of the cost of any expansion undertaken by the Expansion
Owner pursuant to Section 3.7, (a) the expansion shall be at the Expansion
Owner’s sole cost and expense; (b) the Expansion Owner shall be responsible for
reasonable incremental costs to the extent reasonably necessary to improve the
other Owner’s facilities to accommodate the expansion and the operation of the
Pipeline Facilities as so expanded, (c) the Expansion Owner shall be responsible
for all reasonable incremental operating costs resulting from the expansion, and
(d) the Expansion Owner’s Ownership interest, expressed in Section 3.1, shall
increase in proportion to the increased reliable capacity of the Pipeline
Facilities added by the expansion, and the other Owner’s right to capacity shall
decrease in a corresponding proportion but to a level not less than that prior
to giving effect to the expansion.   In connection with the application of
Clause (d) above, the Committee, subject to the unanimous approval of the
Owners, shall determine the allocation of ownership interests in the Pipeline
Facilities following the expansion in light of the conditions and requirements
contained in Section 3.7 and this Section 4.8 and the operating characteristics
of the Pipeline Facilities after giving effect to the capacity expansion.  Any
deadlock of the Committee resulting by reason of the requirement to obtain the
unanimous approval of the Owners pursuant to this Section 4.8 shall be resolved
pursuant to the Dispute Resolution provisions set forth in Article VII hereof,
provided however, that the failure of the Owners to agree upon the allocation of
ownership interests in the Pipeline Facilities as described above shall not
delay the right of Expansion Owner to commence the pipeline expansion under
Section 3.7 of this Agreement if it otherwise satisfies the requirements of
Section 3.7 and this Section 4.8.”
 
 
(d)          Section 6.2 shall be amended to read in its entirety as follows:
 
 
“Section 6.2.  Utility, Purchasing Party and Transfer of Interest.  As used in
Sections 6.3 and 6.4, the term “Utility” shall mean a person that performs the
function of a local gas distribution company; “Purchasing Party” shall mean a
Utility that acquires a Party’s interest as an Owner; and “Transfer of Interest”
shall mean the transfer to a Utility by a Party of its interest as an Owner in
accordance with this Agreement.”
 
 
(e)          Section 6.5(a) of the Owners’ Agreement is hereby amended as
follows:
 

 
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(i)
by deleting the words “a Change of Control (as defined below) of Delmarva or” in
Section 6.5(a)(i);

 
 
(ii)
by deleting the words “a Change of Control of CDG or” in Section 6.5(a)(ii); and

 
 
(iii)
by deleting the last sentence of Section 6.5(a) in its entirety.

 
 
(f)           Section 6.5(b) of the Owners’ Agreement is hereby amended by
deleting such section in its entirety and replacing it with the following:
 
 
    “(b)           Within ten (10) business days after the occurrence of an
Insolvency Event, such owner that is subject to such Insolvency Event
(“Insolvent Party”) shall notify the other such Owner (“Notified Party”) in
writing of the occurrence of the Insolvency Event (the “Insolvency
Notice”).  Any Notified Party electing to exercise its rights pursuant to this
Section 6.5 shall have thirty (30) days after receiving an Insolvency Notice
within which to notify the Insolvent Party in writing of its exercise of such
rights (“Exercise Notice”).  Within thirty (30) days after receipt by the
Insolvent Party of the Exercise Notice, the Insolvent Party shall determine the
fair market value of its ownership interest in the Pipeline Facilities and give
the Notified Party written notice setting forth in reasonable detail the value
determined and the methods used in making such determination.”
 
 
(g)          Sections 6.5(c), (d), (e) and (f) of the Owners’ Agreement are
hereby amended by replacing all references to the phrase “Change of Control
Party” with the phrase “Insolvent Party”.
 
 
(h)          Section 7.1 is hereby amended as follows:  (i) in Section 7.1(a),
by deleting the words “sixty (60)” from the second sentence, and replacing them
with the words “forty-five (45)”; (ii) in Section 7.1(b), by deleting the words
“sixty (60)” from the first sentence and replacing them with the words
“forty-five (45)”; and (iii) in Section 7.1(c), by deleting the words “sixty
(60)” from the second sentence and replacing them with the words “thirty (30)”.
 
 
(i)           Section 7.1(c) is hereby further amended by adding the following
after the end of the last sentence to that section:
 
 
“In the event the Parties are unable to agree to the appointment of the
arbitrator, each Party shall nominate an arbitrator, and the two Party-appointed
arbitrators jointly, shall promptly nominate a third arbitrator (who shall be
the chairperson).  Any arbitration commenced hereunder shall be completed within
seventy-five (75) days of the appointment of the arbitral tribunal.
 
 
(j)           Section 8.1 is hereby amended by deleting the remainder of the
first sentence beginning with the words “and (b)” and replacing with the
following text:
 
    “and (b) with respect to a Party that has Transferred all of its ownership
interest in the Pipeline Facilities to a Permitted Transferee (other than any
lender as collateral security for providing financing), as to such transferring
Party only.”
 

 
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(k)          Section 8.10 (a) and (b) are hereby deleted in their entirety and
replaced with the following:
 
 

 
 
“(a)             if to Delmarva, to:
 
Delmarva Power & Light Company
630 Martin Luther King, Jr. Blvd.
Wilmington, DE 19899
Attention: Director Gas Delivery
Facsimile: (302) 429-3207
 
 
(b)           if to CDG, to:
 
Conectiv Delmarva Generation, LLC
[In care of Calpine Corporation
717 Texas Avenue, Suite 1000
Houston, TX  77002]
Attention:  [Chief Legal Officer]
Facsimile:  [(713) 830-2001]”
 
 
(l)           Section 8.11(b) is hereby deleted in its entirety and replaced
with the following:
 
 
    “(b)           Notwithstanding Section 8.11(a), any Party may assign all or
any portion of its rights, interest, obligations and remedies hereunder without
the consent of the other Party (i) to any wholly owned subsidiary of such Party;
(ii) to any person who has acquired all or substantially all of the assets of
that Party, provided however, that such Person to whom such assignment is made
under sub-Clause (i) or this sub-Clause (ii) has, on or prior to the date of
such assignment, executed and delivered any and all documents and instruments as
may reasonably be required by the non-assigning Party to cause such Person to
become a Party to this Agreement, and the Operations and Maintenance Agreement;
or (iii) to any lender as collateral security for providing financing (each a
“Permitted Transferee”); provided, however, that no such assignment shall
relieve or discharge the assigning Party from any of its obligations hereunder.
 
 
    (c)           The non-assigning Party hereby further agrees that in
connection with any transfers to any lenders as collateral security, upon
request of the assigning Party, the non-assigning Party shall execute and
deliver consents to assignment reasonably satisfactory to the non-assigning
Party and such lenders, such execution and delivery not to be unreasonably
withheld, conditioned, or delayed.”
 
 
4.           Effect of Amendment.  Except as amended and set forth above the
Owners’ Agreement shall continue in full force and effect.
 
 
5.           Entire Agreement.  This Amendment and the Owners’ Agreement,
collectively contain the entire understanding of the Parties hereto with respect
to the subject
 

 
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matter contained herein and therein and supersede all prior agreements and
understandings between the Parties with respect to such subject matter.  There
are no representations, warranties, covenants or agreements between or among the
Parties with respect to the subject matter set forth herein other than those
expressly set forth herein.
 
 
6.           Counterparts.  This Amendment may be executed in several
counterparts and all such executed counterparts shall constitute one and the
same agreement, binding on all of the parties hereto, their successors and their
assigns, notwithstanding that all of the Parties hereto are not signatories to
the original or to the same counterpart.
 
 
7.           Governing Law.  This Amendment, including its existence, validity,
construction and operating effect, and the rights of each of the Parties hereto,
shall be governed by and construed in accordance with the laws of the State of
Delaware (without giving effect to conflicts of law principles).
 
 
8.           Further Assurances.  Each of the Parties agrees to execute and
deliver any and all additional instruments and documents and do any and all acts
and things as may be reasonably requested by any party hereto to effectuate more
fully or clarify this Amendment or any provision hereof.
 

 
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IN WITNESS WHEREOF, the Parties have executed this Amendment as of the date
first written above.
 

 

   
DELMARVA POWER & LIGHT CO.
   
a Delaware and Virginia corporation
           
By:
        Name:
 
      Title:
 
                           
CONECTIV DELMARVA GENERATION, LLC
   
a Delaware limited liability company
           
By:
        Name:
 
      Title:
 

 
 
 

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

 
EXHIBIT E
 
 
AMENDMENT NO. 2
 
TO
 
CLAYMONT TO HAY ROAD PIPELINE OPERATION & MAINTENANCE
 
AGREEMENT BETWEEN
 
CONECTIV DELMARVA GENERATION, LLC
 
AND
 
DELMARVA POWER & LIGHT COMPANY
 
THIS AMENDMENT TO CLAYMONT TO HAY ROAD PIPELINE OPERATION & MAINTENANCE
AGREEMENT (this “Amendment”), dated as of [•], 2010, is made by and between
Delmarva Power & Light Company, a Delaware and Virginia corporation (“Delmarva”)
and Conectiv Delmarva Generation, LLC, a Delaware limited liability company
(formerly Conectiv Delmarva Generation, Inc.) (“CDG”). Delmarva and CDG are each
referred to herein as a “Party” and collectively as the “Parties”.
 
W I T N E S S E T H :
 
WHEREAS, on July 1, 2000, CDG and Delmarva entered into that certain Claymont to
Hay Road Pipeline Operation and Maintenance Agreement (as amended by Amendment
Number 1 dated August 24, 2000, the “O&M Agreement”);
 
WHEREAS, CDG is a wholly owned subsidiary of Conectiv Energy Holdings Company,
LLC, a Delaware limited liability company (“CEH”), and CEH is a wholly owned
subsidiary of Conectiv, LLC, a Delaware limited liability company (“Conectiv”);
 
WHEREAS, Conectiv proposes to sell all of its direct membership interest in CEH,
and its indirect interest in CDG to New Development Holdings, LLC, a Delaware
limited liability company and wholly owned subsidiary of Calpine Corporation
(the “Proposed Transaction”);
 
WHEREAS, in connection with the Proposed Transaction, CDG and Delmarva wish to
evidence their agreement with respect to certain matters as set forth herein.
 
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Parties hereby agree as follows.
 
1.           Definitions.  Capitalized terms used herein without definition
shall have the meanings ascribed to such terms in the O&M Agreement.
 
2.           Waivers.  Delmarva hereby irrevocably and unconditionally: (i)
agrees that the O&M Agreement shall not terminate as the result of the Proposed
Transaction and Delmarva hereby waives any right it may have to terminate the
O&M Agreement, or the effect of any provision of the O&M Agreement that would
purport to cause the O&M Agreement to terminate, as a result of the Proposed
Transaction; (ii) agrees that no “Change of Control” shall
 
 
 

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

 

 
be deemed to have occurred under the O&M Agreement as a result of the Proposed
Transaction; and (iii) confirms that the O&M Agreement shall be in full force
and effect following the closing of the Proposed Transaction.
 
3.           Amendments to the O&M Agreement.
 
(a)           The last sentence of the Preamble shall be deleted and replaced
with the following:
 
“The Party serving as Operator from time to time under this Agreement (including
any Party that becomes the Replacement Operator pursuant to Section 3.9 of this
Agreement) may be referred to as the Operator.  As of the date hereof, Delmarva
shall be the Operator and shall continue in the role as Operator unless and
until replaced by CDG in accordance with Section 3.9 hereof.”
 
(b)           Section 3.8 shall be amended to read as follows:
 
“Section 3.8  Coordination of Operations and Maintenance Activities.  The
contact information for the coordination of operations and maintenance
activities to be performed pursuant to this Agreement shall be the same
information as set forth in Section 11.10 for notices, except that either Party
may from time to time designate a separate contact for operations and
maintenance activities by providing written notice to the other Party.”
 
 (c)           A new Section 3.9 shall be added as follows:
 
“3.9  Other Qualifications of Operator; Default of Operator; Replacement of
Operator.
 
(a)           In the event the Operator defaults in the performance of any of
its material obligations as Operator under this Agreement, or upon the
occurrence of an Insolvency Event of the Operator, in addition to all other
rights and remedies available to Owner not then acting as Operator (the
“Replacement Operator”), upon not less than thirty days’ prior written notice,
the Replacement Operator shall have the right to succeed to the Operator’s
interests as the Operator under this Agreement.
 
(b)           The Operator shall have thirty days following receipt of notice to
cure any default (or such longer period as may be reasonably required to cure
the default, provided that the Operator has promptly commenced and is diligently
acting to cure the default.).  Notwithstanding the pendency of any cure period,
the Operator must take all reasonable efforts to ensure that gas may be received
and delivered on the Pipeline Facilities pursuant to this Agreement pending the
completion of any cure.  In the event Operator fails to take all reasonable
efforts to ensure that gas is received and delivered under the previous
sentence, notwithstanding any other provision in this Agreement, the Party that
is not the Operator shall have the immediate right, upon giving advance notice
that is reasonable under the circumstances, to undertake the rights and
obligations of Operator on an interim basis during the pendency of any cure
period to the extent necessary or prudent to ensure reliable gas flow on the
Pipeline Facilities.
 
(c)           As a condition to being the Operator, Delmarva as of the date of
the Agreement and any Replacement Operator as of the date of replacement (and at
all

 
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times as any such Party is acting as Operator), (i) must execute and deliver any
and all agreements and other instruments as may be reasonably required by the
Owners in order to perform the services of the Operator hereunder, (ii) must be
competent to perform all the services and other obligations of the Operator as
provided in this Agreement and in a manner consistent with Industry Practice and
applicable law; and (iii) must hold all necessary permits, licenses and
approvals to perform the work.
 
(d)           The Replacement Operator shall promptly review the Budget and
shall provide any proposed revisions thereto for review in accordance with
Section 3.5.
 
(e)           The Operator (including a Replacement Operator) may retain or
contract with another person (such party the “O&M Service Provider”) designated
by it to undertake the rights and obligations as the Operator, provided that (i)
the requirements of Section 4.3 as applicable are satisfied, (ii) the O&M
Service Provider meets the requirements set forth in (c) above with respect to
the services it is providing; (iii) the Operator shall be liable to the Owners
for all acts and omissions of the O&M Service Provider; and (iv) the Operator
shall provide written notice that it has designated an O&M Service Provider, the
O&M Service Provider’s duties and qualifications, the names and contact
information for its  responsible representatives, and such other information as
an Owner may reasonably request.
 
(f)           An Operator that is being replaced from time to time pursuant to
this Section 3.9 shall promptly take, or cause to be taken, all actions, and do,
or cause to be done, all things necessary, proper or advisable under applicable
laws, and consistent with Industry Practice, (i) to consummate and make
effective the assumption of the duties of Operator by the Replacement Operator,
including undertaking the actions and obligations set forth in Section 11.7 of
this Agreement; (ii) to assign agreements associated with the duties as the
Operator hereunder to the extent permitted in any such agreement; and (iii) to
provide to the Replacement Operator any information or other assistance that the
Replacement Operator reasonably deems necessary to satisfy all applicable
regulatory requirements.
 
(g)           Upon satisfaction of the terms of this Section 3.9, the
Replacement Operator shall be deemed to be the Operator for all purposes under
this Agreement and shall have the rights and obligations of the Operator
hereunder.  Nothing herein shall act to alter the rights and obligations of the
Parties hereto in their respective capacities as Owners.
 
(h)           The Owners shall pay to the Operator all amounts due and payable
by the Owners for costs incurred and services performed in accordance with this
Agreement prior to the assumption by the Replacement Operator of the duties of
the Operator.”
 
(d)           Section 3.7 is hereby amended by inserting the phrase “and in any
case subject to Section 3(c) of the First Amendment to the Owners’ Agreement,”
in the first sentence, immediately following the words “Solely Owned
Facilities”.
 

 
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(e)           Section 10.1 is hereby amended as follows:  (i) in Section
10.1(a), by deleting the words “sixty (60)” from the second sentence, and
replacing them with the words “forty-five (45)”; (ii) in Section 10.1(b), by
deleting the words “sixty (60)” from the first sentence and replacing them with
the words “forty-five (45)”; and (iii) in Section 10.1(c), by deleting the words
“sixty (60)” from the second sentence and replacing them with the words “thirty
(30)”.
 
(f)           Section 10.1(c) is hereby further amended by adding the following
after the end of the last sentence to that section:
 
“Each Party shall nominate an arbitrator, and the two Party-appointed
arbitrators jointly, shall promptly nominate a third arbitrator (who shall be
the chairperson).  Any arbitration commenced hereunder shall be completed within
seventy-five (75) days of the appointment of the arbitral tribunal.”
 
(g)           Section 11.1(a) is hereby amended by deleting the remainder of the
first sentence beginning with the words “or (ii)” and replacing with the
following text:
 
“or (ii) with respect to a Party that has Transferred all of its ownership
interest in the Pipeline Facilities to a Permitted Transferee (other than any
lender as collateral security for providing financing), as to such transferring
Party only.”
 
(h)           Section 11.1(b) is hereby amended by inserting the phrase “(each
an “Insolvency Event”)” immediately after the last word of the sentence and
before the period (.).
 
(i)           Section 11.1(c), (d) and (e) are each hereby deleted in their
entirety.
 
(j)           The addresses for notices set forth in Section 11.10 (a) and (b)
are hereby deleted in their entirety and replaced with the following:
 
“(a)           If to Delmarva, to:
 
Delmarva Power & Light Company
630 Martin Luther King, Jr. Blvd.
P.O. Box 231
Wilmington, DE 19899
Attention: Director Gas Delivery
Facsimile:  (302) 429-3207
 
 
(b)           if to CDG, to:
 
Conectiv Delmarva Generation, LLC
[In care of Calpine Corporation
717 Texas Avenue, Suite 1000
Houston, TX  77002]
Attention:  [Chief Legal Officer]
Facsimile:  [(713) 830-2001]”
 

 
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(k)           Section 11.11(b) is hereby deleted in its entirety and replaced
with the following:
 
“(b)           Notwithstanding Section 11.11(a), any Party may assign all or any
portion of its rights, interest, obligations and remedies hereunder without the
consent of the other Party (i) to any wholly owned subsidiary of such Party,
(ii) to any person who has acquired all or substantially all of the assets of
that Party, provided however, that such Person to whom such assignment is made
under sub-Clause (i) or this sub-Clause (ii) has, on or prior to the date of
such assignment, executed and delivered any and all documents and instruments as
may reasonably be required by the non-assigning Party to cause such Person to
become a Party to this Agreement and the Owners’ Agreement prior to the
effectiveness of such assignment; or (iii) to any lender as collateral security
for providing financing (each a “Permitted Transferee”); provided, however, that
no such assignment shall relieve or discharge the assigning Party from any of
its obligations hereunder.
 
(l)           The non-assigning Party hereby further agrees that in connection
with any transfers to any lenders as collateral security, upon request of the
assigning Party, the non-assigning Party shall execute and deliver consents to
assignment reasonably satisfactory to the non-assigning Party and such lenders,
such execution and delivery not to be unreasonably withheld, conditioned, or
delayed.”
 
4.           Effect of Amendment.  Except as amended and set forth above the O&M
Agreement shall continue in full force and effect.
 
5.           Entire Agreement.  This Amendment and the O&M Agreement,
collectively contain the entire understanding of the Parties hereto with respect
to the subject matter contained herein and therein and supersede all prior
agreements and understandings between the Parties with respect to such subject
matter.  There are no representations, warranties, covenants or agreements
between or among the Parties with respect to the subject matter set forth herein
other than those expressly set forth herein.
 
6.           Counterparts.  This Amendment may be executed in several
counterparts and all such executed counterparts shall constitute one and the
same agreement, binding on all of the parties hereto, their successors and their
assigns, notwithstanding that all of the Parties hereto are not signatories to
the original or to the same counterpart.
 
7.           Governing Law.  This Amendment, including its existence, validity,
construction and operating effect, and the rights of each of the Parties hereto,
shall be governed by and construed in accordance with the laws of the State of
Delaware (without giving effect to conflicts of law principles).
 
8.           Further Assurances.  Each of the Parties agrees to execute and
deliver any and all additional instruments and documents and do any and all acts
and things as may be reasonably requested by any Party hereto to effectuate more
fully or clarify this Amendment or any provision hereof.
 
[remainder of page left blank]
 

 
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IN WITNESS WHEREOF, the Parties have executed this Amendment as of the date
first written above.
 
 

   
DELMARVA POWER & LIGHT CO.
   
a Delaware and Virginia corporation
           
By:
        Name:
 
      Title:
 
                           
CONECTIV DELMARVA GENERATION, LLC
   
a Delaware limited liability company
           
By:
        Name:
 
      Title:
 

 
 

 

 
 

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

 
EXHIBIT G
 

 

[______], 2010
 
Potomac Electric Power Company
70 Ninth Street N.W.
Washington, DC  2068-0001
Attn: Michael W. Maxwell, Vice President

Re:   
Proposed Lease of PEPCO Property

 
Dear Sirs:
 
 
           This letter (this “Letter Agreement”) is intended to (a) replace that
certain Letter of Intent, dated as of March 16, 2007, by and between Potomac
Electric Power Company (“PEPCO”) and Conectiv Energy Supply, Inc. or its
designated affiliate, which Letter of Intent has expired, and (b) to confirm the
agreement by and between PEPCO and [entity to be designated by Purchaser]
(“Optionee”) to grant to Optionee the exclusive right, for an agreed period, to
lease approximately 10+- acres of property owned by PEPCO located at PEPCO’s
Talbert Substation #166, being located off the southerly side of Cross Road,
Brandywine District 11/1175900, Prince Georges County, Maryland, as more
particularly described on Exhibit A hereto (the “Property”). The lease would be
an integral component of the development by Optionee of an electric power
generation facility on the Property (the “Project”). Optionee will be submitting
this Letter Agreement to PJM Interconnection, LLC (“PJM”), along with its
request that PJM conduct an analysis of the feasibility of interconnection of
the Project to the regional electric transmission grid.  In this Letter
Agreement, Optionee and PEPCO are sometimes referred to individually as a
“Party” and are sometimes referred to jointly as the “Parties”.
 
 
           In furtherance of the above-stated intentions, the Parties hereby
agree as follows:
 
1.           Exercise of Option: Optionee shall have the exclusive right to
enter into a lease agreement with PEPCO in respect of the Property (the
“Option”). Optionee may elect to exercise the Option by providing PEPCO written
notice at any time (a) from the date hereof through and including December 31,
2012 (the “Initial Option Term”) and (b) thereafter, until the expiration of the
Extended Option Term (as hereinafter defined). Upon the expiration of the
Initial Option Term, the term of this Letter Agreement shall be automatically
extended for two additional six (6) month periods, unless the Optionee provides
written notice of its desire to
 

 
 

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terminate this Letter Agreement (the “Extended Option Term”). If the Option has
been exercised prior to the expiration of the Extended Option Term, the Parties
agree to execute and deliver a lease agreement, substantially in the form of the
lease attached as Exhibit B hereto (the “Definitive Agreement”)1, as promptly as
possible, which Definitive Agreement shall include, but shall not be limited to
the following terms and conditions:
 
                      a.           The annual lease payment for the Property
shall be based on the fair market rental value of the Property and shall be
determined by an independent rental appraisal by a local MAI appraiser, which
appraiser will be chosen by mutual agreement between the Parties.
  
                      b.           Optionee shall use the Property solely for
the Project and reasonably related activities.
 
                      c.           PEPCO shall reserve unto itself, its
affiliates, successors and assigns the right to own, operate, maintain, repair,
upgrade, install, alter, remove, inspect, construct, modify, restore, rebuild,
replace and expand any present or future substation, transmission, distribution
and communication equipment and lines, and communication towers located now or
in the future in, under, through, upon, over and across the Property, including
the right of access thereto, for the purposes of conducting the business of
providing transmission and distribution service.  PEPCO shall utilize its future
reserved rights only in a manner which does not unreasonably interfere with
Optionee’s business or Optionee’s use of the Property.
 
The leasehold interest in the Property will be conveyed free and clear of all
liens, encumbrances and easements, EXCEPTING HOWEVER, existing and
future building restrictions, ordinances, easements of roads, easements visible
upon the ground, privileges or rights of public service companies, if any, other
than any such restrictions, easements, privileges or rights hereinafter created
by PEPCO, otherwise the title to the leasehold interest in the Property shall be
good and marketable and will be insured at regular rates by a reputable title
insurance company. PEPCO shall, at its cost, promptly obtain and provide
reasonable evidence to Optionee of the complete release of any liens or
encumbrances against the Property in favor of PEPCO’s bondholders before or
contemporaneously with the execution and delivery of the Definitive Agreement.
Such obligation to execute and deliver the Definitive Agreement shall continue
to the date which is the later of (i) sixty (60) days after the date on which
the Option has been exercised, (ii) the end of the Initial Option Term and
(iii)the end of the Extended Option Term, if any (the period from the date
hereof to such later date being herein called the “Term”).
 
2.           Term: If Optionee has failed to exercise the Option on or before
the last day of the Extended Option Term or if the Parties fail to execute and
deliver the Definitive Agreement by the end of the Term, this Letter Agreement
shall terminate.
 

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

 
1 NOTE: THE FORM OF LEASE WILL BE BASED ON THE AMENDED AND RESTATED CUMBERLAND
LEASE, AS MODIFIED AS APPROPRIATE TO INCLUDE LEASE PAYMENTS AT MARKET RATES AND
TERMS AND TO DELETE THE PURCHASE OPTION.

 
-2-

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3.           Exclusivity: During the Term, PEPCO shall not offer to lease or
sell the Property to any other party or entertain any offer to lease or purchase
the Property from any other party.
 
4.           Subdivision: If Optionee exercises the Option and any portion of
the Property to be leased is not a legally subdivided parcel, then either
Party may, at its option, prepare a subdivision plan with respect thereto and
shall apply for and obtain all necessary approvals of the final subdivision plan
from the municipality in which the Property is located.  PEPCO or Optionee, as
the case may be, shall cooperate with the other Party, in either case at
Optionee’s sole cost and expense, in connection with preparing the subdivision
plan and obtaining municipal approval thereof (including, without limitation,
execution of the plat).  After the subdivision plan has been finally approved by
applicable municipal authorities, the Party that receives such approval shall
cause the subdivision plan to be recorded so that the Property can be leased by
PEPCO to Optionee as a legally subdivided lot or lots.
 
5.           Optionee’s Right to Access the Property & Indemnification: During
the Term, PEPCO grants to Optionee, upon reasonable notice to PEPCO, full and
free access to the Property at all reasonable times during normal business hours
to conduct whatever analysis and studies Optionee deems necessary for
determining the suitability of the Property for construction and operation of
the Project. For avoidance of doubt, nothing in this Letter Agreement shall be
construed as imposing any obligation upon Optionee to make any investigation or
perform any due diligence regarding the Property. Optionee agrees to indemnify
and hold PEPCO harmless from and against any and all liability, claims, damages,
costs and expenses (including without limitation reasonable attorney’s fees and
the cost of litigation) arising from or related to the conduct of any analysis,
studies or investigations by Optionee, its employees, consultants or contractors
on or about the Property; provided, however, that in no event shall Optionee be
liable for any loss, cost, damage or expense arising out of the existing
condition (whether discovered or undiscovered) of the Property, Optionee’s
discovery or investigation of any environmental condition on the Property or the
negligence or willful misconduct of PEPCO,  its employees, consultants or
contractors.
 
6.           Maintenance and Risk of Loss: From the date of the acceptance of
this Letter Agreement until the earlier of (i) the end of the Term or (ii) the
execution and delivery of the Definitive Agreement:
 
 
 
(a)
PEPCO shall maintain the Property in good condition and repair and in accordance
with prudent utility practices; and

 
(b)                           PEPCO shall bear risk of loss from fire or other
casualties.
 
7.           Costs and Expenses: Except as may be explicitly set forth
herein, in the Definitive Agreement or otherwise agreed, Optionee and PEPCO
shall each be responsible for their own costs and expenses incurred at any time
in connection with this Letter Agreement, the execution and delivery of the
Definitive Agreement and any due diligence performed by Optionee.
 

 
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8.           Revocation of Option: Following Optionee’s delivery of notice of
exercise of the Option pursuant to paragraph 1, above, but before execution and
delivery of the Definitive Agreement, Optionee reserves the right to revoke its
notice to exercise the Option (with or without cause) by written notice to
PEPCO for up to 90 days following the date of such exercise; provided, however,
that in the event of any such revocation, Optionee shall reimburse PEPCO for all
reasonable costs and expenses incurred by PEPCO in connection with the exercise
of the Option by Optionee, the preparation and negotiation of the Definitive
Agreement and obtaining any approvals required in connection
therewith.  Immediately following any revocation under this paragraph 8, this
Letter Agreement shall automatically terminate.
 
9.           Assignment: This Letter Agreement shall be binding upon the Parties
and their respective heirs, successors, and assigns.  For avoidance of doubt,
Optionee may assign its interests in this Letter Agreement to any affiliate
succeeding substantially as a whole to Optionee’s interests in the Project
without PEPCO’s consent but upon not less than five days advance written notice.
Moreover, Optionee may freely assign and/or otherwise encumber all or any
portion of Optionee’s right title and interest in this Letter Agreement to a
lender or lenders (or trustee or agent thereof) as collateral security.
 
Any conveyance of and any encumbrance of or security interest in all or part of
PEPCO’s interest in the Property arising after the date of this Letter Agreement
shall be subject and subordinate to and shall be subject to the terms and
conditions of this Letter Agreement and to Optionee’s rights hereunder.
 
10.           Recording: The Parties agree to execute and record this Letter
Agreement or instead, at the request of either Party, a short-form memorandum
thereof substantially identical to Exhibit C hereof, in the office of the
Recorder of Deeds for [____].  Each of PEPCO and Optionee shall pay one-half of
the recording costs.
 
11.           Additional Documents: Except to the extent inconsistent with the
terms of this Agreement, each Party, at its sole cost and expense, shall
promptly execute such additional documents and instruments and take such actions
as are necessary or desirable or as shall be reasonably requested by the other
Party to effect the matters contemplated by this Letter Agreement.
 
12.           Termination; Survival: Either Party shall be entitled to terminate
this Letter Agreement prior to the expiration of the Term, and to seek any
damages that may be available at law or in equity, if the other Party is in
material breach of its obligations, covenants, representations or warranties
under this Letter Agreement and fails to cure such breach within thirty days
after written notice thereof by such non-breaching Party.  Paragraphs 5, 8 and
12 shall survive any expiration or termination of this Letter Agreement.
 
13.           Acceptance: Written acceptance by PEPCO of this Letter Agreement
must be obtained on or before [____], 2010.
 
*           *           *
 

 
-4-

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If you are in agreement with the foregoing, please sign and return one copy of
this Letter Agreement, which thereupon will constitute our understanding with
respect to its subject matter.
 

 

 
Very truly yours,
       
[entity to be designated by Purchaser]
       
By:
     
Name:
   
Title:

 
Agreed to on _________, 2010.
 
POTOMAC ELECTRIC POWER COMPANY
                 
By:
     
Name:
   
Title:
 

 

 

 
-5-

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EXHIBIT A
 
DESCRIPTION OF PROPERTY
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 

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

 

EXHIBIT B
 
FORM OF LEASE AGREEMENT
 
[To insert a form substantially identical to the Cumberland lease.3]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

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

 
3 SEE FOOTNOTE NO. 1, ABOVE.

 
 

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

 

EXHIBIT C
 
FORM OF MEMORANDUM OF OPTION AGREEMENT
 

 
AFTER RECORDING, RETURN TO:
 
[___________]
 

 

 
MEMORANDUM OF OPTION AGREEMENT
 
           This Memorandum of Option Agreement (this “Memorandum”) is executed
by and between Potomac Electric Power Company (“PEPCO”) and [entity to be
designated by Purchaser] (“Optionee”) as of _____, 2010 (the “Effective Date”).
 

 
RECITALS:
 
           A.           PEPCO and Optionee have entered into that certain option
letter agreement dated of even date herewith (the “Letter Agreement”) whereby
Optionee has been granted certain rights to lease from PEPCO those certain
tracts of land more particularly described on Exhibit A attached hereto and made
a part hereof for all purposes, for the consideration and upon the terms and
conditions set forth in the Letter Agreement.
 
           B.           PEPCO and Optionee have entered into this Memorandum for
the purpose of giving notice of the existence of the Letter Agreement.
 
           C.           Reference should be made to the Letter Agreement (and
any amendments thereto that may be entered into) for the full description of the
rights and obligations of PEPCO and Optionee, and this Memorandum shall in no
way affect the terms and conditions of the Letter Agreement or the
interpretation of the right and duties of PEPCO and Optionee thereunder.
 

 
[SIGNATURES ON FOLLOWING PAGES]
 

 
 

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

 

IN WITNESS WHEREOF, PEPCO and Optionee have caused this Memorandum of Option
Agreement to be executed this ___ day of  ______, 2010.4
 

 

           
[entity to be designated by Purchaser]
       
By:
     
Name:
   
Title:

 

 
POTOMAC ELECTRIC POWER COMPANY
             
By:
     
Name:
   
Title:

 

 
 
 
 

 

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

 
4 APPROPRIATE ACKNOWLEDGEMENT TO BE INSERTED.

 
 

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

 

EXHIBIT A TO MEMORANDUM OF OPTION AGREEMENT
 
[____________]
 

 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 

 
 
 

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

 
 
 

 
EXHIBIT H

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

 
TRANSITION SERVICES AGREEMENT
 
 
BETWEEN
 
PHI SERVICE COMPANY
 
AND
 
NEW DEVELOPMENT HOLDINGS, LLC
 
 
 
Dated as of [●], 2010
 
 
 

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

 

 
 

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

 

Table of Contents
 
Page
 
ARTICLE 1
 
 
Definitions
 
 
1
 
 
ARTICLE 2
 
 
Transition Services Schedule
 
 
2
 
 
ARTICLE 3
 
 
Services
 
 
3
 
Section 3.1
Services Generally
3
Section 3.2
Service Parameters
3
Section 3.3
Impediments to Performance
3
Section 3.4
Additional Resources
3
Section 3.5
Additional Services
3
Section 3.6
Transition Project Managers and Service Representatives
4
Section 3.7
 
Personnel
 
4
 
 
ARTICLE 4
 
 
Term
 
 
4
 
 
ARTICLE 5
 
 
Compensation
 
 
4
 
Section 5.1
Charges for Services
4
Section 5.2
Payment Terms
4
Section 5.3
 
Audit Right
 
5
 
 
ARTICLE 6
 
 
General Obligations; Standard of Care
 
 
5
 
Section 6.1
Service Provider
5
Section 6.2
Service Recipient
5
Section 6.3
DISCLAIMER OF WARRANTIES
5
Section 6.4
Transitional Nature of Services; Changes
6
Section 6.5
Responsibility for Errors; Delays
6
Section 6.6
 
Good Faith Cooperation; Consents
 
6
 
 
ARTICLE 7
 
 
Early Termination
 
 
7
 
Section 7.1
Early Termination
7
Section 7.2
Rights and Duties of Parties Upon Termination.
7
Section 7.3
 
Survival
 
7
 
 
ARTICLE 8
 
 
Relationship Between the Parties
 
 
7
 
 
ARTICLE 9
 
 
Subcontractors
 
 
8
 
 
ARTICLE 10
 
 
Confidentiality
 
 
8
 
 
ARTICLE 11
 
 
Limitation of Liability
 
 
8
 

 
(i)
 

 
 

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Table of Contents
(continued)
Page
 
 
ARTICLE 12
 
 
Force Majeure
 
 
8
 
 
ARTICLE 13
 
 
Dispute Resolution
 
 
9
 
 
ARTICLE 14
 
 
Miscellaneous
 
 
9
 
Section 14.1
Entire Agreement
9
Section 14.2
Governing Law; Jurisdiction
9
Section 14.3
Interpretations
10
Section 14.4
Notices
10
Section 14.5
Assignability; Third-Party Beneficiaries
11
Section 14.6
Severability
11
Section 14.7
Waiver; Remedies Cumulative
11
Section 14.8
Amendment
11
Section 14.9
Counterparts; Facsimile Transmission of Signatures.
11

 
(ii)
 

 
 

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

 

TRANSITION SERVICES AGREEMENT
 
TRANSITION SERVICES AGREEMENT (the “Agreement”), dated as of [______], 2010, by
and among PHI Service Company, a Delaware corporation (the “Service Provider”),
and New Development Holdings, LLC(“Purchaser”).  The Service Provider and
Purchaser are each referred to herein individually as a “Party,” and
collectively as the “Parties”.
 
RECITALS
 
WHEREAS, Pepco Holdings, Inc., a Delaware corporation (“Parent”), Conectiv, LLC,
a Delaware limited liability company (“Holdings”), Conectiv Energy Holding
Company, LLC, a Delaware limited liability company (the “Company”), and
Purchaser have entered into that certain Purchase Agreement (the “Purchase
Agreement”), dated as of [●], 2010, pursuant to which Holdings has agreed to
sell to Purchaser, and Purchaser has agreed to purchase from Holdings, in
accordance with and subject to the terms and conditions of the Purchase
Agreement, 100% of the membership interests of the Company (the “Acquisition”);
 
WHEREAS, the Service Provider is a wholly-owned subsidiary of Parent; and
 
WHEREAS, in connection with the Acquisition, the Parties desire to enter into
this Agreement for the Service Provider to continue to provide, or cause to be
provided, certain services to the Company and its Subsidiaries following the
closing of the Acquisition upon the terms and subject to the conditions set
forth in this Agreement.
 
NOW, THEREFORE, in consideration of the mutual promises of the Parties, and for
other good and valuable consideration, the receipt of which is hereby
acknowledged, it is agreed by and between the Parties as follows:
 
ARTICLE 1
 
 
 
Definitions
 
For purposes of this Agreement, the following capitalized terms shall have the
meanings specified herein.  Capitalized terms used in this Agreement and not
otherwise defined shall have the meanings for such terms set forth in the
Purchase Agreement:
 
“Acquisition” has the meaning set forth in the Recitals.
 
“Additional Services” has the meaning set forth in Section 3.5.
 
“Company” has the meaning set forth in the Recitals.
 
“Confidentiality Agreement” means the Confidentiality Agreement, dated as of
November 10, 2009, between Parent and Calpine Corporation.
 
“Expiration Date” has the meaning set forth in Article 4.
 
“Force Majeure” has the meaning set forth in Article 12.
 

 
 

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

 

“Holdings” has the meaning set forth in the Recitals.
 
“LIBOR” means the London Interbank Offered Rate, as quoted in The Wall Street
Journal.
 
“Parent” has the meaning set forth in the Recitals.
 
“Party” and “Parties” has the meaning set forth in the first paragraph of this
Agreement.
 
“Purchase Agreement” has the meaning set forth in the Recitals.
 
“Sales Tax” has the meaning set forth in Section 5.1.
 
“Service(s)” has the meaning set forth in Section 3.1.
 
“Service Charge” has the meaning set forth in Section 5.1.
 
“Service Provider” has the meaning set forth in the first paragraph of this
Agreement.
 
“Service Recipient” means, with respect to any particular Service, Purchaser or
one of the Companies, as Purchaser may identify to receive such Service.
 
“Service Representative” has the meaning set forth in Section 3.7.
 
“Subcontractor” has the meaning set forth in Article 9.
 
“Subsidiary” or “Subsidiaries” means any corporation, limited liability company,
partnership, joint venture or any other entity of which the Company (either
alone or through or together with any other Subsidiary) owns, directly or
indirectly, securities or other interests entitling the Company (either alone or
through or together with any other Subsidiary) to elect or appoint at least 50%
of the members of the board of directors or other similar governing body of such
corporation or other legal entity or otherwise conferring on the Company (either
alone or through or together with any other Subsidiary) the power to direct the
business and policies of such corporation or other legal entity.
 
“Transition Period” has the meaning set forth in Article 4.
 
“Transition Services Schedule” has the meaning set forth in Article 2.
 
ARTICLE 2
 
 
 
Transition Services Schedule
 
This Agreement will govern individual transition services to be provided to the
Service Recipients by the Service Provider, as set forth on Annex A attached to
this Agreement, which may be supplemented in accordance with Section 3.5 hereof
(the “Transition Services Schedule”).
 

 
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The Transition Services Schedule shall set forth a description of each Service
to be provided, the term for each Service and any other terms applicable
thereto.  Obligations under the Transition Services Schedule shall be effective
upon the later of the execution of this Agreement or, with respect to Additional
Services, according to the mutual agreement of the Parties in accordance with
Section 3.5 of this Agreement.  Any reference to this Agreement shall be deemed
to include the Transition Services Schedule.
 
ARTICLE 3
 
 
 
Services
 
Section 3.1  Services Generally.  Except as otherwise provided herein, for the
term determined pursuant to Article 4 hereof, the Service Provider shall provide
or cause to be provided the service(s) described in the Transition Services
Schedule attached hereto, beginning on the Closing Date.  Each service described
on the Transition Services Schedule (including any Additional Services) shall be
referred to herein as a “Service.”   Collectively, all the services described on
the Transition Services Schedule shall be referred to herein as “Services.”
 
Section 3.2  Service Parameters.  The Service Provider shall provide or cause to
be provided the Services to the extent, and only to the extent, to which such
Services were being provided to the Companies immediately prior to the Closing
Date unless otherwise mutually agreed and set forth on the Transition Services
Schedule.
 
Section 3.3  Impediments to Performance.  The Service Provider shall not be
required to provide any Service to the extent the performance of such Service is
prevented by an act of Force Majeure and the Service Provider is in compliance
with its obligations under Article 12 hereof, or to the extent the performance
of such Service would require the Service Provider to violate any applicable
laws, rules or regulations.  In the event that personnel performing the Services
are no longer employed by the Service Provider, the Service Provider shall use
commercially reasonable efforts to perform the Services, but in no event shall
Service Provider be required (a) to maintain the employment of any specific
employee or (b) to employ personnel with specific skills.
 
Section 3.4  Additional Resources.  In providing the Services, the Service
Provider shall not be obligated to:  (i) increase its work force beyond the
level of such work force immediately prior to the Closing Date; (ii) purchase,
lease or license any additional equipment or materials; or (iii) pay any costs
related to the transfer or conversion of data to the Service Recipient following
the Closing Date, or to any alternate supplier of Services.
 
Section 3.5  Additional Services.  The Parties agree to cooperate and negotiate
in good faith regarding any other services reasonably requested by the Service
Recipient to be performed by the Service Provider during the Transition Period,
to the extent such services were provided by the Service Provider to the
Companies prior to Closing and the Service Provider has the necessary resources
to satisfy such requests (the “Additional Services”). The Parties agree to
negotiate in good faith the applicable term, Service Charges and other rights
and obligations with respect to any Additional Services. In such event, the
Transition Services Schedule shall be amended or supplemented to reflect such
Additional Services.
 

 
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Section 3.6  Transition Project Managers and Service Representatives.  The
Parties shall each appoint a representative with respect to each category of
Services (each, a “Service Representative”). The Service Representatives shall
coordinate the requesting, scheduling and delivery of Services, and shall
coordinate any requests for changes in the scope of such Services, or for the
provision of any Additional Services, with such Service Representative’s
counterpart with the other Party. Either Party may nominate a substitute Service
Representative for itself with respect to a Service at any time upon reasonable
notice to the other Party.
 
Section 3.7  Personnel.  All personnel used by the Service Provider to perform
the Services shall be under the supervision and control of the Service
Provider.  The Service Provider shall continue to pay to its personnel all wages
and benefits pursuant to its wages and benefits policies. Nothing in this
Agreement shall be construed as an employment contract, as creating any
contractual obligation to any employee of the Service Provider, or
preventing the Service Provider from making decisions regarding the continued
employment of its employees.
 
ARTICLE 4
 
 
 
Term
 
The term of this Agreement shall commence on the Closing Date and shall remain
in effect until six (6) months after the Closing Date (the “Transition Period”),
unless earlier terminated under Article 7.  The term with respect to each
Service shall be as set forth in the Transition Services Schedule, unless
earlier terminated under Article 7.   All obligations of the Service Provider to
provide to the Service Recipient any Services under this Agreement shall cease
at the end of the Transition Period.
 
ARTICLE 5
 
 
 
Compensation
 
Section 5.1  Charges for Services.   Charges for Services shall be based upon
the fully-loaded cost of providing each Service (each charge, a “Service
Charge”), including direct costs and indirect costs (such as overhead and the
Service Provider’s internal billing rates) but excluding meals, except to the
extent agreed in writing by the Service Recipient, but without any element of
profit.   The Service Charge shall be exclusive of any value added taxes, sales
taxes or similar taxes, charges, duties, fees, levies or other assessments
(collectively, “Sales Tax”) required by Law to be chargeable in respect of the
transactions hereunder, and an amount equal to such legally required charges,
costs and Sales Tax shall be paid by Purchaser to the Service Provider in
addition to the Service Charge.
 
Section 5.2  Payment Terms.  Not later than thirty (30) days after each calendar
month, the Service Provider shall deliver to Purchaser a written statement of
amounts reflecting the Service Charge and legally required Sales Tax for any
Services provided during such month by the Service Provider pursuant to this
Agreement.  Each such invoice shall be accompanied by reasonable documentation
or other reasonable calculation supporting such Service Charges.  Purchaser
shall pay such invoices within thirty (30) days after the date upon which each
such
 

 
-4-

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

 

invoice hereunder is received by Purchaser.  If Purchaser fails to pay any such
invoice within such 30-day period, then Purchaser shall pay interest on such
invoiced amount from and after the thirty-first day after the date Purchaser
received such invoice at a rate equal to 30-day LIBOR plus 1%.
 
Section 5.3  Audit Right.  The Service Provider shall maintain complete and
accurate books and records relating to Service Charges to the Service Recipients
under this Agreement. Purchaser shall be entitled from time to time upon
reasonable request and at its own cost to audit the books and records of the
Service Provider related to the Services, using its own personnel or personnel
from its independent auditing firm.  Discrepancies identified as a result of any
audit shall be promptly reconciled between the Parties in accordance with the
provisions of this Agreement.
 
ARTICLE 6
 
 
 
General Obligations; Standard of Care
 
Section 6.1  Service Provider.  The Service Provider shall provide, and cause
its Affiliates, employees and agents to provide, the Services with the same
degree of care utilized by the Service Provider in rendering such services for
the operations of the Companies immediately prior to the Closing Date.  Under no
circumstances shall the Service Provider, its Affiliates or any of their
respective employees or agents be held accountable to a greater standard of care
or skill.
 
Section 6.2  Service Recipient.   A Service Recipient shall, in connection with
receiving Services, (i) follow the policies, procedures and practices in effect
at the Companies in the period immediately before the Closing Date, (ii) provide
information and documentation sufficient for the Service Provider to perform the
Services as they were performed immediately before the Closing Date and (iii)
make available, as reasonably requested by the Service Provider, sufficient
resources.  A Service Recipient shall, further, make timely decisions and
provide approvals and acceptances in order that the Service Provider is not
impeded in the timely performance of its obligations hereunder.  A Service
Recipient shall grant the Service Provider, its Affiliates and their respective
employees and agents access to sites, systems, personnel and information
(subject to the provisions of confidentiality in the Confidentiality Agreement
and in the Purchase Agreement) during regular business hours or as otherwise
reasonably requested to facilitate the Service Provider’s performance of its
obligations hereunder.  A Service Recipient shall inform the Service Provider’s
personnel of, and the Service Provider shall cause its personnel to obey, any
and all security regulations and other published policies of the Service
Recipient.
 
Section 6.3  DISCLAIMER OF WARRANTIES.  EXCEPT AS OTHERWISE EXPRESSLY SET FORTH
HEREIN, THE PARTIES MAKE NO WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, INCLUDING
BUT NOT LIMITED TO THE IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE, WITH RESPECT TO THE SERVICES OR OTHER DELIVERABLES PROVIDED
BY IT HEREUNDER.
 

 
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Section 6.4  Transitional Nature of Services; Changes.  The Parties acknowledge
the transitional nature of the Services and that the Services are being
furnished by the Service Provider solely for the purpose of accommodating
Purchaser in connection with the transactions contemplated by the Purchase
Agreement.  The Parties agree that the Service Provider may make changes from
time to time in the manner of performing the Services if it is making similar
changes in performing similar services for itself and its Affiliates and if the
Service Provider furnishes to the Service Recipient not less than fifteen (15)
days prior written notice regarding such changes. Purchaser acknowledges its
responsibility, at the end of the Transition Period, to determine which Services
it wishes to maintain and to perform such Services, without the involvement of
the Service Provider, its Affiliates or any of their respective employees or
agents.
 
Section 6.5  Responsibility for Errors; Delays.  The Service Provider’s sole
responsibility to a Service Recipient:
 
(a)           for errors or omissions in Services shall be to furnish correct
information, payment and/or adjustment in the Services, at no additional cost or
expense to the Service Recipient; provided, the Service Recipient must promptly
advise the Service Provider of any such error or omission of which it becomes
aware after having used reasonable efforts to detect any such errors or
omissions in accordance with the standard of care set forth in Section 6.2; and
 
(b)           for failure to deliver any Service for the reasons stated in
Section 3.3, shall be to use reasonable efforts, subject to Sections 3.2, 3.3
and 3.4, to make such Service available and/or to resume performing such Service
to the extent, and as soon as, reasonably practicable.
 
Section 6.6  Good Faith Cooperation; Consents.  The Parties will use good faith
efforts to cooperate with each other in all matters relating to the provision
and receipt of Services.  Such cooperation shall include exchanging information,
performing adjustments, and obtaining all third party consents, licenses,
sublicenses or approvals necessary to permit each Party to perform its
obligations hereunder (including by way of example, not by way of limitation,
rights to use third party software needed for the performance of Services). The
costs of obtaining such third party consents, licenses, sublicenses or approvals
shall be borne by the Service Recipient; provided, that, the Service Provider
shall not incur any such costs without the prior written consent of Purchaser.
Notwithstanding the foregoing, under no circumstances shall the Service Provider
be obligated to provide a Service if (A) the Service Provider is unable to
obtain necessary consents, licenses, sublicenses or approvals relating to such
Service on commercially reasonable terms, despite its commercially reasonable
efforts to do so, which efforts shall be at the Service Recipient’s sole cost
and expense, and is unable to make alternative arrangements to continue
providing the applicable Service that are commercially reasonable, or (B) in
order to provide such Service, the Service Provider will have an obligation to
make any payments to any third party or incur any obligations, or seek broader
rights or more favorable terms, in respect of any such consents, licenses,
sublicenses or approvals, provided it has notified Purchaser of such payments or
other obligations and Purchaser elects not to assume them.   Each Party will
maintain, in accordance with its standard document retention procedures,
documentation supporting the information relevant to cost calculations and
cooperate with the other Party in making such information available as needed in
the event of a tax audit.
 

 
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ARTICLE 7
 
 
 
Early Termination
 
Section 7.1  Early Termination.   Purchaser may terminate this Agreement, either
with respect to all or with respect to any one or more of the Services provided
hereunder at any time and from time to time, for any reason or for no reason,
upon fifteen (15) days prior written notice to the Service Provider. If
Purchaser terminates this Agreement with respect to less than all of the
Services, this Agreement will continue with respect to the remaining Services in
accordance with its terms. The Service Provider may terminate this Agreement if
the Service Recipient fails to pay any amount which is due and payable in
respect of any Service in accordance with the provisions of Section 5.2 hereof,
and the Service Recipient does not cure such breach within thirty (30) days
after being given written notice of such breach.  If the Service Recipient in
good faith disputes any part or all of an invoice, the Service Recipient (a)
shall  pay any undisputed portion of the invoice when due and (b) shall provide
to Service Provider, on or before the date that the invoice was due, a written
explanation in reasonable detail setting forth the basis for the dispute.  The
Parties shall thereafter negotiate in good faith to resolve the dispute, and
Service Provider shall continue to perform the Services pending a resolution of
the dispute for a period not to exceed thirty days from the end of the
applicable cure period.  In addition, either Party may terminate this Agreement
with respect to a specific Service if the other Party materially breaches a
material provision with regard to that particular Service (other than for
nonpayment) and does not cure such breach (or does not take reasonable steps
required under the circumstances to cure such breach going forward) within
thirty (30) days after being given notice of the breach.  This Agreement may be
terminated upon the mutual written agreement of Purchaser and the Service
Provider at any time.
 
Section 7.2  Rights and Duties of Parties Upon Termination.  Upon the expiration
of the Transition Period or the termination of this Agreement or any Service for
any reason in accordance with the terms hereof, the Parties shall cooperate in
the orderly termination of the Services hereunder. From and after the date of
termination of any Service for any reason, the Service Provider’s obligation to
provide such Service(s) to the Service Recipient shall cease and Purchaser shall
have no obligation to pay the Service Charge for such Service(s) (other than
those performed prior to termination).
 
Section 7.3  Survival.  In the event of any termination with respect to one or
more, but less than all Services, this Agreement shall continue in full force
and effect with respect to any Services that have not been terminated.  Articles
5, 6, 10, 11, 12, 13 and 14 shall in any event survive any termination of this
Agreement in accordance with their terms.
 
ARTICLE 8
 
 
 
Relationship Between the Parties
 
The relationship between the Parties established under this Agreement is that of
independent contractors and neither Party is an employee, agent, partner, or
joint venturer of or
 

 
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with the other.  The Service Provider will be solely responsible for the payment
of any employment-related taxes, insurance premiums or other employment benefits
in respect of the performance of Services by the Service Provider’s personnel
under this Agreement.
 
ARTICLE 9
 
 
 
Subcontractors
 
The Service Provider may engage a Subcontractor to perform all or any portion of
its duties under this Agreement, provided that any such Subcontractor agrees in
writing to be bound by customary confidentiality obligations, and provided
further that the Service Provider remains responsible for the performance of
such Subcontractor.  As used in this Agreement, “Subcontractor” will mean any
individual, partnership, corporation, firm, association, unincorporated
organization, joint venture, trust or other entity engaged to perform any
Service hereunder, other than the Parties and their Affiliates.
 
ARTICLE 10
 
 
 
Confidentiality
 
The terms of the Confidentiality Agreement and the provisions of confidentiality
in the Purchase Agreement shall apply to any Confidential Property (as defined
therein) which is the subject matter of this Agreement.
 
ARTICLE 11
 
 
 
Limitation of Liability
 
NEITHER PARTY WILL BE LIABLE TO THE OTHER FOR ANY LOST PROFITS, LOSS OF DATA,
LOSS OF USE, COST OF COVER, BUSINESS INTERRUPTION OR OTHER SPECIAL, INCIDENTAL,
INDIRECT, PUNITIVE OR CONSEQUENTIAL DAMAGES, HOWEVER CAUSED, UNDER ANY THEORY OF
LIABILITY, ARISING FROM THE PERFORMANCE OF, OR RELATING TO, THIS
AGREEMENT.    WITHOUT LIMITING THE FOREGOING, IN NO EVENT WILL THE SERVICE
PROVIDER BE LIABLE TO THE SERVICE RECIPIENT OR ANY PARTY CLAIMING THROUGH THE
SERVICE RECIPIENT FOR ANY AMOUNT EXCEEDING THE AMOUNT PAID OR PAYABLE BY
PURCHASER TO THE SERVICE PROVIDER UNDER THIS AGREEMENT.
 
ARTICLE 12
 
 
 
Force Majeure
 
Each Party will be excused for any failure or delay in performing any of its
obligations under this Agreement, other than the obligations of the Service
Recipient to make payments to the performing Party pursuant to Article 5 hereof
for Services rendered, if such failure or delay is caused solely by Force
Majeure. “Force Majeure” includes, without limitation, any act of God or the
public enemy;  any accident, explosion, fire, ice, earthquake, lightning,
 

 
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tornado, hurricane, or other severe weather condition or calamity;  any civil
disturbance, labor dispute, or labor or material shortage;  any sabotage or acts
of terrorism;  any acts of a public enemy, uprising, insurrection, civil unrest,
war or rebellion;  any action or restraint by court order or public or
governmental authority or lawfully established civilian authorities, or any
other circumstance or event beyond the reasonable control of the Party relying
upon such circumstance or event.  Performance shall be excused only to the
extent of and during the reasonable continuance of a Force Majeure.  Any
deadline or time for performance which falls due during or subsequent to the
occurrence of a Force Majeure shall be automatically extended for a period of
time equal to the period of such Force Majeure.  The Service Provider shall
promptly notify Purchaser if, by reason of Force Majeure, the Service Provider
is unable to meet any deadline or time for performance.  In the event that any
part of the Services required under this Agreement is rendered invalid as a
result of such Force Majeure, the Service Provider shall, upon written request
from Purchaser, and at Purchaser’s expense, repeat that part of the Services
affected by the Force Majeure. Notwithstanding the foregoing, the Party claiming
Force Majeure shall use reasonable efforts to avoid or mitigate the delay or
other impact caused by any event that has resulted in a Force Majeure and shall
proceed diligently to perform the Services which are not affected by such event
and shall resume the affected Services as soon as the effects of such event have
ceased or been mitigated.
 
ARTICLE 13
 
 
 
Dispute Resolution
 
Any dispute or claim arising out of or related to this Agreement shall be
resolved in accordance with the dispute resolutions procedures set forth in
Section 12.04 of the Purchase Agreement.
 
ARTICLE 14
 
 
 
Miscellaneous
 
Section 14.1  Entire Agreement.  This Agreement and the Annex hereto and the
Purchase Agreement and the Exhibits and Schedules referenced or attached thereto
constitute the entire agreement and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof and thereof; provided, however, that the Confidentiality
Agreement shall not be superseded and shall remain in full force and effect in
accordance with its terms.
 
Section 14.2  Governing Law; Jurisdiction.  This Agreement shall be governed by,
and construed in accordance with, the laws of the State of New York regardless
of the laws that might otherwise govern under applicable principles of conflicts
of laws thereof. Each of the Parties hereby (i) consents to submit itself to the
exclusive jurisdiction of any state or federal court located within the borough
of Manhattan in the State of New York in the event any dispute arises out of
this Agreement or any of the transactions contemplated hereby, (ii) agrees that
it will not attempt to deny or defeat such personal jurisdiction by motion or
other request for leave from any such court, and (iii) agrees that it will not
bring, and will not permit any of its Affiliates to bring, any action relating
to this Agreement or any of the transactions contemplated hereby in
 

 
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any court other than a state or federal court located in located within New York
County in the State of New York.  Each of the Parties hereby irrevocably waives
any and all right to trial by jury in any legal proceeding arising out of or
relating to this Agreement
 
Section 14.3  Interpretations.  When a reference is made in this Agreement to
Articles, Sections or Annexes, such reference shall be to an Article, Section or
Annex to this Agreement unless otherwise indicated.  The words “include,”
“includes” and “including” when used herein shall be deemed in each case to be
followed by the words “without limitation.”  Any references in this Agreement to
“the date hereof” refers to the date of execution of this Agreement.  The word
“or” shall not be exclusive.  The table of contents and headings contained in
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement.  This Agreement shall be
construed without regard to any presumption or rule requiring construction or
interpretation against the party drafting or causing any instrument to be
drafted.
 
Section 14.4  Notices.  All notices and other communications hereunder shall be
in writing and shall be deemed to have been duly given if delivered personally,
mailed by certified mail (return receipt requested) or sent by overnight courier
or by facsimile (upon confirmation of receipt) to the parties at the following
addresses or at such other addresses as shall be specified by the Parties by
like notice:
 
(a)           if to Purchaser or a Service Recipient, to:
 
Calpine Corporation
717 Texas Avenue, Suite 1000
Houston, TX  77002
Attention:  Chief Legal Officer
Fax:  (713) 830-2001
 
with a copy to:
 
White & Case, LLP
1155 Avenue of the Americas
New York, NY  10036
Attention:      Gregory Pryor, Esq.
Michael S. Shenberg, Esq
Fax:  (212) 354-8113
 
(b)           if to the Service Provider, to:
 
Pepco Holdings, Inc.
701 Ninth Street, N.W.
Washington, DC 20068
Attention: General Counsel
Fax:  (202) 872-3281
 
with a copy to:
 

 
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Covington & Burling LLP
1201 Pennsylvania Avenue, N.W.
Washington, DC  20004
Attention:  D. Michael Lefever
Fax:  (202) 778-5276
 
Notice so given shall be deemed to be given when received.
 
Section 14.5  Assignability; Third-Party Beneficiaries.  Except as specifically
permitted under Article 9 above, neither this Agreement nor any Party’s rights
or obligations hereunder may be assigned or delegated by such party without the
prior written consent of the other Party, and any attempted assignment or
delegation of this Agreement or any of such rights or obligations by any party
without the prior written consent of the other parties shall be void and of no
effect; provided, however, that the Service Provider or Purchaser may assign or
transfer this Agreement to one or more of its respective Affiliates, but any
such assignment shall not, without the express written consent of the other
parties, release the assignor from its obligations hereunder.  Without limiting
the foregoing, this Agreement will be binding upon and inure to the benefit of
the Parties and their permitted successors and assigns.  This Agreement,
including the Transition Services Schedule and the other documents referred to
herein, shall be binding upon and inure solely to the benefit of each Party
hereto and their legal representatives and successors, and nothing in this
Agreement, express or implied, is intended to confer upon any other Person any
rights or remedies of any nature whatsoever under or by reason of this
Agreement.
 
Section 14.6  Severability.  If any provision of this Agreement shall be held to
be illegal, invalid or unenforceable under any applicable Law, then such
contravention or invalidity shall not invalidate the entire Agreement.  Such
provision shall be deemed to be modified to the extent necessary to render it
legal, valid and enforceable, and if no such modification shall render it legal,
valid and enforceable, then this Agreement shall be construed as if not
containing the provision held to be invalid, and the rights and obligations of
the parties shall be construed and enforced accordingly.
 
Section 14.7  Waiver; Remedies Cumulative.   No failure on the part of any Party
to exercise any power, right, privilege or remedy under this Agreement, and no
delay on the part of any Party in exercising any power, right, privilege or
remedy under this Agreement, shall operate as a waiver of such power, right,
privilege or remedy; and no single or partial exercise of any such power, right,
privilege or remedy shall preclude any other or further exercise thereof or of
any other power, right, privilege or remedy.  All rights and remedies existing
under this Agreement are cumulative to, and not exclusive of, any rights or
remedies otherwise available.
 
Section 14.8  Amendment.  Except to the extent otherwise permitted with respect
to Service and Additional Services as set forth herein, this Agreement may not
be modified, amended, altered or supplemented except upon the execution and
delivery of a written agreement executed by both Parties hereto.
 
Section 14.9  Counterparts; Facsimile Transmission of Signatures.  This
Agreement may be executed in any number of counterparts and by different parties
hereto in separate counterparts, and delivered by means of facsimile
transmission or otherwise, each of
 

 
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which when so executed and delivered shall be deemed to be an original and all
of which when taken together shall constitute one and the same agreement.
 
*     *     *
 
 
 

 
-12-

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

   
PHI SERVICE COMPANY
                   
By:
       
Name:
     
Title:
                           
NEW DEVELOPMENT HOLDINGS, INC.
                   
By:
       
Name:
     
Title:

 
 
 
 
 

 
-13-

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ANNEX A
 
TRANSITION SERVICES SCHEDULE
 
 
 
[To be negotiated]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
-14-

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Exhibit I-1

Form of Release from Lien of ACE Mortgage

     
Prepared By:
       
Philip Passanante
   
Assistant General Counsel
   
Atlantic City Electric
   
Company
   
800 King Street, P.O. Box 231
   
Wilmington, DE  19899

INDENTURE and RELEASE
from the
LIEN OF THE MORTGAGE
 
THIS INDENTURE made this [___] day of [___], 2010 between THE BANK OF NEW YORK
MELLON, a corporation existing under and by virtue of the laws of the State of
New York, as Trustee (formerly IRVING TRUST COMPANY) (hereinafter called the
“Trustee”), party of the first part, and ATLANTIC CITY ELECTRIC COMPANY, a
corporation existing under and by virtue of the laws of the State of New Jersey
(hereinafter called the “Company”), party of the second part:
 
WHEREAS, the Company by a certain Mortgage and Deed of Trust dated January 15,
1937 and recorded in the Office of the Clerk of Gloucester County in the City of
Woodbury, State of New Jersey in Book of Mortgages 197, Pages 440 & c (the
“Original Mortgage”), mortgaged all of its properties (except as therein
otherwise stated) including after-acquired property, unto the Trustee; and
 
WHEREAS, the Original Mortgage was amended and supplemented by certain
Supplemental Indentures between the Company and the Trustee dated as of June 1,
1949, July 1, 1950, November 1, 1950, March 1, 1952, January 1, 1953, March 1,
1954, March 1, 1955, January 1, 1957, April 1, 1958, April 1, 1959, March 1,
1961, July 1, 1962, March 1, 1963, February 1, 1966, April 1, 1970, September 1,
1970, May 1, 1971, April 1, 1972, June 1, 1973, January 1, 1975, May 1, 1975,
December 1, 1976, January 1, 1980, May 1, 1981, November 1, 1983, April 15,
1984, July 15, 1984, October 1, 1985, May 1, 1986, July 15, 1987, October 1,
1989, March 1, 1991, May 1, 1992, January 1, 1993, August 1, 1993, September 1,
1993, November 1, 1993, June 1, 1994, October 1, 1994, November 1, 1994, March
1, 1997, April 1, 2004, August 10, 2004, March 8, 2006 and November 6, 2008
respectively, all duly recorded in said Recorder’s Office (the Original
Mortgage, as so amended and supplemented, the “Mortgage”); and
 
 

 
 

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

 
WHEREAS, the mortgaged property under the Mortgage includes certain parcels of
real estate, the description of such parcels being set forth on Exhibit A (each
a “Mortgaged Real Estate Parcel”); and

WHEREAS, in connection with the transfer to [__________] (the “Acquirer”) of the
generating facility assets (the “Generating Facility Assets”) located on each
Mortgaged Real Estate Parcel, the Company granted to the Acquirer pursuant to an
easement and license agreement, dated [__________] (the “Easement Agreement”),
an easement (the “Easement”) to the portion of the Mortgaged Real Estate Parcel
on which the generating facilities were located, the description of the Easement
being set forth on Exhibit B (in each case a “Generation Facilities Easement
Area,” with the portion of the Mortgaged Real Estate Parcel not within the
Generation Facilities Easement Area being referred to herein as the
“Transmission and Distribution Area”); and

WHEREAS, in connection with the transfer of the Generating Facility Assets to
the Acquirer, the Generating Facility Assets, along with the Easement, was
released from the lien of the Mortgage pursuant to [insert reference to release
document] (the “Prior Release”); and

WHEREAS, the Company and the Acquirer wish to amend the Easement Agreement to
convey to the Acquirer additional rights with respect to the Generation
Facilities Easement Area and the Transmission and Distribution Area pursuant to
that certain Amended and Restated Easement and License Agreement between
Acquirer and DPL, dated as of [_____], 2010, recorded concurrently herewith (the
“Amended and Restated Easement Agreement”); and

WHEREAS, in order to give effect to the terms of the Amended and Restated
Easement Agreement, the Company has requested the Trustee to release from the
lien of the Mortgage the property herein described; and
 
WHEREAS, the Company has complied with all the terms and conditions of the
Mortgage with respect to obtaining the release of the property described herein
from the lien of the Mortgage.
 
NOW, THEREFORE, this Indenture witnesseth:
 
That the Trustee, in consideration of ONE DOLLAR ($1.00) to it duly paid, at the
time of ensealing and delivery of these presents, the receipt of which is hereby
acknowledged, has released, quit-claimed and set over, and by these presents
does hereby release, quit-claim and set over, unto the Company, its successors
or assigns, all its right, title and interest as Trustee as aforesaid in and to
the following described properties (collectively, the “Release Property”):
 
1.           The improvements, fixtures and personal property described on
Exhibit C attached hereto. [Note: To include only such personal property, if
any, identified by the Acquirer that was acquired by the Acquirer from the
Company and not previously released from the lien of the Mortgage]

2.           With respect to each Mortgaged Real Estate Parcel, a purchase
option granted by the Company to the Acquirer to purchase from the Company a fee
simple interest in the

 
-2-

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 Generation Facilities Easement Area as provided in the Amended and Restated
Easement Agreement.

3.           The fee simple interest in the Generation Facilities Easement Area.
[Note:  The Company may elect on a case-by-case basis to release the fee simple
interest in the Generation Facilities Easement Area from the lien of the
Mortgage prior to the exercise of a purchase option]

4.           To the extent not previously released by the Prior Release, all
easements, rights, licenses and privileges on, over, across and under the
Mortgaged Real Estate Parcel as set forth in the Amended and Restated Easement
Agreement.

TO HAVE AND TO HOLD the Release Property hereby released to the Company, its
successors and assigns, to its and their own proper use, benefit and behoof
forever, clear, free and discharged of and from any and all liens and claims
under or by virtue of the Mortgage as aforesaid.
 
It is expressly understood that no part of the properties covered by and subject
to the Mortgage is hereby discharged or released therefrom other than the
Release Property; and that nothing herein does in any way affect or impair the
rights of said Trustee to hold the Mortgage for security as therein provided on
the remainder of the property thereby conveyed or intended so to be conveyed and
not otherwise heretofore released from the lien of the Mortgage.
 
The recitals herein contained are made on representation of the Company and the
Trustee assumes no responsibility in respect thereof.  This release is executed
by the Trustee without any covenant or warranty of title, or any other covenant,
warranty or representation, either express or implied, and shall be without
recourse against the Trustee in any event whatsoever.
 

 
-3-

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IN WITNESS WHEREOF and as Trustee under the Mortgage, The Bank of New York
Mellon has caused this writing to be signed by one of its [_________] and its
corporate seal to be hereunto affixed, and duly attested by one of its
[_________], under authority duly given, the day and year first above written.
 

   
THE BANK OF NEW YORK MELLON, as
   
Trustee
(SEAL)
         
BY:
 
     
[____________]
       
ATTEST:
                     
[____________]
     

 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
-4-

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STATE OF NEW YORK :     : ss. COUNTY OF NEW YORK :  

 
 
BE IT REMEMBERED, that on this [___] day of [___], 2010, before me, a Notary
Public in and for the State and County aforesaid, personally appeared [________]
who, being by me duly sworn, upon his oath says that he is an [_________] of The
Bank of New York Mellon, a corporation of the State of New York, the corporation
described in and which executed the foregoing instrument; and that [________] is
a [________]; that deponent knows the common or corporate seal of said
corporation and that the seal affixed to the instrument is such common or
corporate seal; and that the said instrument was signed by the said [_________]
and the seal of said corporation affixed thereto in the presence of deponent;
that said instrument was signed, sealed and delivered as and for the voluntary
act and deed of said corporation for the uses and purposes therein expressed,
pursuant to a Resolution of the Board of Directors of said corporation; and that
at the execution thereof this deponent subscribed his name thereto as
subscribing witness.
 

                       
[____________]
     
SWORN and subscribed to
   
before me this [___] day of
   
[____], 2010.
                     
Notary Public, State of New York
   
Commission Expires [________]
   

 
 

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

 

EXHIBIT A

Mortgaged Real Estate Parcel
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 

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

 

EXHIBIT B

Generation Facilities Easement Area
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 

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

 

EXHIBIT C

Personal Property
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 

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

 

Exhibit I-2

Form of Release from Lien of DPL Mortgage

RELEASE

WHEREAS, as of October 1, 1943, Delmarva Power & Light Company (formerly
Delaware Power & Light Company), a corporation duly organized and existing under
the laws of the State of Delaware and the Commonwealth of Virginia (“DPL”),
made, executed and delivered to The New York Trust Company, a corporation duly
organized and then existing under the laws of the State of New York, as trustee,
to which The Bank of New York Mellon is the successor trustee (the “Trustee”), a
certain Mortgage and Deed of Trust, as amended and supplemented (the
“Mortgage”), to secure its First Mortgage and Collateral Trust Bonds, which
Mortgage is recorded in the Office for the Recording of Deeds, etc., at
Wilmington, in and for New Castle County, State of Delaware, in Mortgage Record
Z, Volume 30, Page 86, as by reference thereto will more fully appear; [Add
recorded amendments if applicable]

WHEREAS, the mortgaged property under the Mortgage includes certain parcels of
real estate, the description of such parcels being set forth on Exhibit A (each
a “Mortgaged Real Estate Parcel”); and

WHEREAS, in connection with the transfer to [__________] (the “Acquirer”) of the
generating facility assets (the “Generating Facility Assets”) located on each
Mortgaged Real Estate Parcel, DPL granted to the Acquirer pursuant to an
easement and license agreement, dated [_________] (the “Easement Agreement”), an
easement (the “Easement”) to the portion of the Mortgaged Real Estate Parcel on
which the generating facilities were located, the description of the Easement
being set forth on Exhibit B (in each case a “Generation Facilities Easement
Area,” with the portion of the Mortgaged Real Estate Parcel not within the
Generation Facilities Easement Area being referred to herein as the
“Transmission and Distribution Area”); and

WHEREAS, in connection with the transfer of the Generating Facility Assets to
the Acquirer, the Generating Facility Assets, along with the Easement, was
released from the lien and operation of the Mortgage pursuant to [insert
reference to release document] (the “Prior Release”); and

WHEREAS, DPL and the Acquirer wish to amend the Easement Agreement to convey to
the Acquirer additional rights with respect to the Generation Facilities
Easement Area and the Transmission and Distribution Area pursuant to that
certain Amended and Restated Easement and License Agreement between Acquirer and
DPL, dated as of _____2010, recorded concurrently herewith (the “Amended and
Restated Easement Agreement”); and
 
WHEREAS, in order to give effect to the terms of the Amended and Restated
Easement Agreement, DPL has requested the Trustee to release from the lien and
operation of the Mortgage the property hereunder described, being a part of the
mortgaged property, and has taken all action required by the terms and
conditions of the Mortgage to secure such release;

 
 

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

 

NOW, THEREFORE, KNOW ALL MEN BY THESE PRESENTS, that in consideration of [the
value of bondable property additions] [the principal amount of bonds
authenticated and delivered under the Mortgage which might be the basis for the
authentication and delivery of bonds thereunder], $[______] which DPL elects to
make the basis of the release of assets and other valuable consideration to it
in hand paid, the receipt whereof is hereby acknowledged,  the Trustee has
remised, released, quitclaimed, exonerated and discharged, and by these presents
does hereby remise, release, quitclaim, exonerate and discharge from the lien,
operation and effect of the Mortgage and any supplemental indenture thereto unto
DPL, its successors and assigns, all the right, title, interest, claim and
demand whatsoever of the Trustee in or to the following described properties:

1.           The improvements, fixtures and personal property described on
Exhibit C attached hereto. [Note: To include only such personal property, if
any, identified by the Acquirer that was acquired by the Acquirer from DPL and
not previously released from the lien of the Mortgage]

2.           With respect to each Mortgaged Real Estate Parcel, a purchase
option granted by DPL to the Acquirer to purchase from DPL a fee simple interest
in the Generation Facilities Easement Area as provided in the Amended and
Restated Easement Agreement.

3.           The fee simple interest in the Generation Facilities Easement Area.
[Note:  DPL may elect on a case-by-case basis to release the fee simple interest
in the Generation Facilities Easement Area from the lien of the Mortgage prior
to the exercise of a purchase option]

4.           To the extent not previously released by the Prior Release, all
easements, rights, licenses and privileges on, over, across and under the
Mortgaged Real Estate Parcel as set forth in the Amended and Restated Easement
Agreement.

TO HAVE AND TO HOLD the above-described property unto DPL, its successors and
assigns, forever freed, exonerated and discharged of and from the lien or liens
of the Mortgage. It is hereby expressly understood that neither this release nor
anything herein contained shall in any way affect, alter or impair the lien or
encumbrance of the Mortgage upon any portion of the facilities conveyed by the
Mortgage except the facilities hereinabove particularly described.

The recitals of fact contained in this release are made by DPL and not by the
Trustee, as aforesaid, and the Trustee assumes no responsibility therefor. This
release is executed by the Trustee without any covenant or warranty of title, or
any other covenant, warranty or representation, either express or implied, and
shall be without recourse against the Trustee in any event whatsoever.

 
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IN WITNESS WHEREOF, the parties hereto have caused this instrument to be signed
by their duly authorized officers and their corporate seals to be hereto
affixed, attested by their respective [Secretaries] or [Assistant Secretaries]
as of the ___ day of ___________, 2010.

Signed and Delivered in
 
The Bank of New York Mellon, Trustee
the presence of:
                 
By:
 (Seal)
           
Attest:
                 
Signed and Delivered in
 
Delmarva Power & Light Company
the presence of:
                 
By:
 (Seal)
           
Attest:
 

 
 
 
 
 
 
 

 
-3-

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

 

STATE OF ______________
:
   
:
SS.
COUNTY OF ____________
:
 

BE IT REMEMBERED that on this ___ day of _____________, 2010, personally came
before me, the subscriber, a Notary Public for the State and County
aforesaid, ______________, ______________ of The Bank of New York Mellon, a New
York banking corporation, Trustee, party to this Instrument of Writing, known to
me personally to be such, and acknowledged this Instrument of Writing to be his
act and deed and the act and deed of said corporation; that the signature of the
_______________________ is in his own proper handwriting; that the seal affixed
bearing the name of the corporation is the common or corporate seal of said
corporation; and that his act of signing, sealing, executing, acknowledging and
delivering said Instrument of Writing was duly authorized by a resolution of the
Board of Directors of said corporation.

GIVEN under my Hand and Seal of Office the day and year aforesaid.

     
Notary Public

STATE OF DELAWARE
:
   
:
SS.
COUNTY OF NEW CASTLE
:
 

BE IT REMEMBERED that on this ___ day of _____________, 2010, personally came
before me, the subscriber, a Notary Public for the State and County
aforesaid, ______________, ______________ of Delmarva Power & Light Company, a
corporation existing under the laws of the State of Delaware and the
Commonwealth of Virginia, party to this Instrument of Writing, known to me
personally to be such, and acknowledged this Instrument of Writing to be his act
and deed and the act and deed of said corporation; that the signature of the
_______________________ is in his own proper handwriting; that the seal affixed
bearing the name of the corporation is the common or corporate seal of said
corporation; and that his act of signing, sealing, executing, acknowledging and
delivering said Instrument of Writing was duly authorized by a resolution of the
Board of Directors of said corporation.

GIVEN under my Hand and Seal of Office the day and year aforesaid.

     
Notary Public

 
-4-

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

 

EXHIBIT A

Mortgaged Real Estate Parcel

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 

 
-5-

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

 

EXHIBIT B

Generation Facilities Easement Area

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 

 
-6-

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

 

EXHIBIT C

Personal Property

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 

 
-7-

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

 
EXHIBIT J-1

Agreement
 
Agreement, dated as of [______], 2010 (this “Agreement”), by and between
Atlantic City Electric Company, a New Jersey corporation (“ACE”), and Conectiv
Atlantic Generation, L.L.C., a Delaware limited liability company (“CAG”).
 
Whereas, pursuant to that certain Asset Transfer Agreement, dated as of February
29, 2004 (the “Asset Transfer Agreement”), by and between ACE and CAG, ACE
transferred to CAG certain properties and assets relating to the generation of
electricity, including the Deepwater generating station (the “Covered Generating
Station”);
 
Whereas, Schedule 6.7 to the Asset Transfer Agreement lists a series of
outstanding tax-exempt revenue bonds issued by The Pollution Control Financing
Authority of Salem County (together with any successor body, board, authority,
agency or other political subdivision or instrumentality of the State of New
Jersey or Salem County, the “Salem Authority”), the proceeds of which were used
by the Salem Authority to refinance a prior issuance of tax exempt bonds issued
by the Salem Authority, the proceeds of which were loaned to ACE by the Salem
Authority to finance the construction of certain pollution control facilities at
the Covered Generating Station;
 
Whereas, Section 6.7 of the Asset Transfer Agreement sets forth certain
acknowledgements, covenants and agreements of CAG relating to the pollution
control facilities and the continuing tax-exempt status of the listed series of
tax-exempt revenue bonds; and
 
Whereas, ACE and CAG wish to enter into certain further acknowledgements,
covenants and agreements concerning the pollution control facilities as related
to the continuing tax-exempt status of the listed series of tax-exempt revenue
bonds.
 
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein contained, the parties hereto agree as follows:
 
Section 1.01 Certain Acknowledgements and  Agreements.
 
(a)           CAG acknowledges (i) that the assets (the “Covered Assets”) listed
on Schedule A attached hereto (the “Exempt Facilities”) are being financed with
the proceeds of the pollution control revenue bonds listed in the adjacent
column on Schedule A (together with any tax-exempt revenue bonds issued in the
future to refinance the bonds listed on Schedule A, the “Tax-Exempt Bonds”) and
(ii) that CAG has been informed by ACE that the continuing tax-exempt status of
the Tax-Exempt Bonds depends on the continuing qualifying use of the Exempt
Facilities (“Qualifying Use”) in accordance with Section 103(b)(4)(F) of the
United States Internal Revenue Code of 1954 and the regulations promulgated
thereunder.
 
(b)           CAG hereby notifies ACE, and ACE hereby acknowledges, that (i) as
soon as practicable following the date of the closing of the sale and purchase
by New Development Holdings, LLC (a Delaware limited liability company) of the
membership interests of Conectiv Energy Holdings, LLC (a Delaware limited
liability company) from Conectiv, LLC (a Delaware limited liability company)
(the “PSA Closing Date”), CAG
 
 
 
 

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

 

intends to convert the Covered Generating Station from its current coal fired
generation to natural gas fired generation which will result in the temporary or
permanent suspension of the use of certain of the Exempt Facilities, and (ii)
after the PSA Closing Date, CAG may refrain from conducting any maintenance
activities with respect to such Exempt Facilities.
 
(c)           Except insofar as notice has been given under Section 1.01(b), CAG
agrees to use reasonable best efforts to notify ACE of (i) any material change
or modification to the Exempt Facilities, (ii) any material suspension or any
termination of the operation of the Exempt Facilities or (iii) any removal or
disassembly of the Exempt Facilities, or in each case, any significant component
thereof, with such notice to be given at least 90 days prior to such change in
use.

(d)           CAG agrees to use reasonable best efforts to provide ACE with
written notice of any sale or other disposition of the Covered Generating
Station or of the Exempt Facilities at least 30 days prior to such sale or
disposition or as soon as is reasonably practicable given the timing and
confidential nature of such sale or disposition.  CAG shall require, as a
condition to the effectiveness of such sale or disposition, that the subsequent
owner of the Covered Generating Station or of the Exempt Facilities covenant and
agree to comply with the provisions of this Section 1.01.
 
(e)           Upon 30 days written notice from ACE, CAG shall provide ACE with
an annual certification of the current status of the Exempt Facilities.
 
(f)           If ACE shall desire to refund, refinance, remarket, amend or
otherwise modify the terms of any Tax-Exempt Bonds, CAG shall cooperate with ACE
and with bond counsel, at ACE’s sole cost and expense, with respect to such bond
refunding, refinancing, remarketing, amendment or modification and shall provide
upon request any representations that are reasonably requested and that CAG can
reasonably provide concerning its use of the Exempt Facilities for a Qualifying
Use and its compliance to such date; provided, however, that CAG shall not be
required to assume any additional obligations with respect to the Exempt
Facilities in connection therewith.
 
(g)           The covenants and agreements of CAG contained in this Section 1.01
shall continue in effect so long as (i) any of the Tax-Exempt Bonds listed on
Schedule A shall remain outstanding and (ii) any Tax Exempt Bonds issued to
refinance or refund any Tax Exempt Bonds listed on Schedule A shall remain
outstanding, provided that ACE has notified CAG of the issuance of such bonds
prior to such refunding or reissuance.  ACE shall notify CAG promptly when there
shall be no Tax-Exempt Bonds outstanding with respect to any of the Exempt
Facilities.  Notwithstanding anything in this Section 1.01(g), the covenants and
agreements of CAG contained in this Section 1.01 shall cease with respect to any
of the Exempt Facilities or any part thereof upon the closing of a sale or other
disposition of such Exempt Facilities following notification by CDG in
accordance with Section 1.01(d); provided, that the subsequent owner of such
Exempt Facilities has covenanted and agreed to comply with the provisions
of  this Section 1.01.
 

 
2

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

 

(h)           Notwithstanding any other provision of this Agreement, CAG shall
not be liable for any action taken or any failure to act, unless such action or
inaction constitutes fraud, bad faith or willful misconduct.
 
Section 1.02 Further Assurance.  Except to the extent inconsistent with the
terms of this Agreement, each party hereto covenants and agrees to execute and
deliver such further and other releases, instruments, agreements and writings
and do and perform, and cause to be done and performed, such further and other
acts and things that may be necessary or desirable in order to give full effect
to this Agreement.
 
Section 1.03 Notices.  All notices and other communications hereunder shall be
in writing and shall be deemed given on the day when delivered personally or by
facsimile transmission (with confirmation), on the next Business Day when
delivered to a nationally recognized overnight courier or five Business Days
after deposited as registered or certified mail (return receipt requested), in
each case, postage prepaid, addressed to the recipient party at its address set
forth below (or at such other address or facsimile number for a party as shall
be specified by like notice; provided, however, that any notice of a change of
address or facsimile number shall be effective only upon receipt thereof):
 
If to ACE, to:

Atlantic City Electric Company
800 King Street
Wilmington, DE 19899
Attention: [________]
Telephone: [________]
Facsimile: [________]

If to CAG, to:

Conectiv Atlantic Generation, L.L.C.
 
800 King Street
 
Wilmington, DE 19899
 
Attention: [________]
 
Telephone: [________]
 
Facsimile: [________]
 
For purposes hereof, “Business Day” means any day other than a Saturday, Sunday
and any day on which banking institutions in the State of New York are
authorized or required by law or other governmental action to close.
 
Section 1.04 Asset Transfer Agreement. The provisions of this Agreement
supersede the covenants and agreements set forth in Section 6.7 of the Asset
Transfer Agreement, but otherwise the terms and conditions of the Asset Transfer
Agreement shall remain in full force and effect.
 
Section 1.05 Headings Not Descriptive. The headings of the several sections of
this Agreement are inserted for
 

 
3

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

 

convenience only and shall not in any way affect the meaning or construction of
any provision of this Agreement.
 
Section 1.06 Successors and Assigns.  The terms and provisions of this Agreement
shall be binding upon the parties hereto and their respective successors and
assigns and shall inure to the benefit of the parties hereto and their
respective successors and assigns.
 
Section 1.07 Governing Law.  This Agreement shall be governed by and construed
in accordance with the law of the State of New Jersey (without giving effect to
conflicts of law principles).
 
Section 1.08 Counterparts.  This Agreement may be executed in several
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
 
[Signature pages follow]
 

 
4

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

 

IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed
and delivered as of the date above.
 

   
Delmarva Power & Light Company
                   
By:
       
Name:
     
Title:
                           
Conectiv Atlantic Generation, L.L.C.
                   
By:
       
Name:
     
Title:

 

 

 
5

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

 

Schedule A
 
Tax Exempt Bonds
 

Station
Asset
Related Bond Issue
Deepwater
A fabric filter fly ash collection system and a vacuum ash disposal system along
with necessary duct work and hoppers, foundations, structural steel supports,
enclosures, electrical equipment instrumentation, and associated equipment; a
bottom ash collection and disposal system including a conveyor system storage
site and associated equipment.
$18,200,000 The Pollution Control Financing Authority of Salem County Pollution
Control Revenue Refunding Bonds 1997 Series A (Atlantic City Electric Company
Project); Due 4/15/14

 
6

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

 
EXHIBIT J-2

Agreement

Agreement, dated as of [______], 2010 (this “Agreement”), by and between
Delmarva Power & Light Company, a Delaware and Virginia corporation (“DPL”), and
Conectiv Delmarva Generation, L.L.C., a Delaware limited liability company
(“CDG”).

Whereas, pursuant to that certain Asset Transfer Agreement, dated as of July 1,
2000 (the “Asset Transfer Agreement”), by and between DPL and CDG, DPL
transferred to CDG certain properties and assets relating to the generation of
electricity, including the Edgemoor generating station and the Hay Road
generation station (the “Covered Generating Stations”);

Whereas, Schedule 6.9 to the Asset Transfer Agreement lists five series of
then-outstanding tax-exempt revenue bonds issued by The Delaware Economic
Development Authority (together with any successor body, board, authority,
agency or other political subdivision or instrumentality of the State of
Delaware, “DEDA”), the proceeds of which (i) were loaned by DEDA to DPL to
finance the construction of certain pollution control facilities at the Covered
Generating Stations or (ii) were used by DEDA to refinance a prior issuance of
tax exempt bonds issued by DEDA, the proceeds of which were loaned to DPL by
DEDA to finance the construction of certain pollution control facilities at the
Covered Generating Stations;

Whereas, Section 6.9 of the Asset Transfer Agreement sets forth certain
acknowledgements, covenants and agreements of CDG relating to the pollution
control facilities and the continuing tax-exempt status of the listed tax-exempt
revenue bonds;

Whereas, since the execution and delivery of the Asset Transfer Agreement, DEDA
has refinance several of the series of the tax-exempt revenue bonds listed on
Schedule 6.9 of the Asset Transfer Agreement through the issuance of new
tax-exempt bonds; and

Whereas, DPL and CDG wish to enter into certain further acknowledgements,
covenants and agreements concerning the pollution control facilities as related
to the continuing tax-exempt status of the corresponding tax-exempt revenue
bonds issued by DEDA.

NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein contained, the parties hereto agree as follows:

Section 1.01 Certain Acknowledgements  and  Agreements.

(a) CDG acknowledges (i) that the assets (the “Covered Assets”) listed on
Schedule A attached hereto (the “Exempt Facilities”) are being financed with the
proceeds of the pollution control revenue bonds listed in the adjacent column on
Schedule A (together with any tax-exempt revenue bonds issued in the future to
refinance the bonds listed on Schedule A, the “Tax-Exempt Bonds”) and (ii) that
CDG has been informed by DPL that the continuing tax-exempt status of the
Tax-Exempt Bonds depends on the continuing qualifying use of the Exempt
Facilities (“Qualifying Use”) in

 
 

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

 

accordance with Section 103(b)(4)(F) of the United States Internal Revenue Code
of 1954 and the regulations promulgated thereunder.

(b) CDG hereby notifies DPL, and DPL hereby acknowledges, that (i) as soon as
practicable following the date of the closing of the sale and purchase by New
Development Holdings, LLC (a Delaware limited liability company) of the
membership interests of Conectiv Energy Holdings, LLC (a Delaware limited
liability company) from Conectiv, LLC (a Delaware limited liability company)
(the “PSA Closing Date”), CDG intends to convert the Edgemoor generating station
from its current coal fired generation to natural gas fired generation which
will result in the temporary or permanent suspension of the use of certain of
the Exempt Facilities, and (ii) after the PSA Closing Date, CDG may refrain from
conducting any maintenance activities with respect to such Exempt Facilities.

(c) Except insofar as notice has been given under Section 1.01(b), CDG agrees to
use reasonable best efforts  to notify DPL of (i) any material change or
modification to the Exempt Facilities, (ii) any material suspension or any
termination of the operation of the Exempt Facilities or (iii) any removal or
disassembly of the Exempt Facilities, or in each case, any significant component
thereof, with such notice to be given at least 90 days prior to such change in
use.

(d) CDG agrees to use reasonable best efforts to provide DPL with written notice
of any sale or other disposition of either Covered Generating Station or of the
Exempt Facilities at least 30 days prior to such sale or disposition or as soon
as is reasonably practicable given the timing and confidential nature of any
such sale or disposition.  CDG shall require, as a condition to the
effectiveness of such sale or disposition, that the subsequent owner of either
Covered Generating Station or of the Exempt Facilities covenant and agree to
comply with the provisions of this Section 1.01.
 
(e) If DPL shall desire to refund, refinance, remarket, amend or otherwise
modify the terms of any Tax-Exempt Bonds, CDG shall cooperate with DPL and with
bond counsel, at DPL’s sole cost and expense, with respect to such bond
refunding, refinancing, remarketing, amendment or modification and shall provide
upon request any representations that are reasonably requested and that CDG can
reasonably provide concerning its use of the Exempt Facilities for a Qualifying
Use and its compliance to such date; provided, however, that CDG shall not be
required to assume any additional obligations with respect to the Exempt
Facilities in connection therewith.

(f) Upon 30 days written notice from DPL, CDG shall provide DPL with an annual
certification of the current status of the Exempt Facilities.

(g) CDG agrees that DEDA and the trustee for any holders of Tax-Exempt Bonds and
their duly authorized representatives shall have the right at all reasonable
times (but not more than once per year) to enter upon and examine and inspect
the Exempt Facilities, provided that such inspection (i) shall be at the sole
cost, risk and expense of DPL and (ii) shall be subject to such restrictions on
scope and schedule so as

 
2

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

 

not to unreasonably interfere with the normal conduct of the business of CDG or
with the operation of the Covered Generating Stations.

(h) CDG agrees to pay and discharge promptly all taxes, assessments and other
charges imposed upon it with respect to the Exempt Facilities property before
the same shall become in default, as well as all lawful claims which, if unpaid,
might become a lien or charge on the Exempt Facilities property or any part
thereof.  CDG may, at its own expense and in its own name in good faith contest
or appeal any such taxes, assessments or other charges, but shall not permit any
such taxes, assessments or charges to remain unpaid if such nonpayment shall
subject the Exempt Facilities or any part thereof to loss or forfeiture.

(i) The covenants and agreements of CDG contained in this Section 1.01 shall
continue in effect so long as (i) any of the Tax-Exempt Bonds listed on Schedule
A shall remain outstanding and (ii) any Tax Exempt Bonds issued to refinance or
refund any Tax Exempt Bonds listed on Schedule A shall remain outstanding,
provided that DPL has notified CDG of the issuance of such bonds prior to such
refunding or reissuance.  DPL shall notify CDG promptly when there shall be no
Tax-Exempt Bonds outstanding with respect to any of the Exempt
Facilities.  Notwithstanding anything in this Section 1.01(i), the covenants and
agreements of CDG contained in this Section 1.01 shall cease with respect to any
of the Exempt Facilities or any part thereof, upon the closing of a sale or
other disposition of such Exempt Facilities following notification by CDG  in
accordance with Section 1.01(d); provided that the subsequent owner of such
Exempt Facilities has covenanted and agreed to comply with the provisions of
this Section 1.01.

(j) Notwithstanding any other provision of this Agreement, CDG shall not be
liable for any action taken or any failure to act, unless such action or
inaction constitutes fraud, bad faith or willful misconduct.

Section 1.02 Further Assurance.  Except to the extent inconsistent with the
terms of this Agreement, each party hereto covenants and agrees to execute and
deliver such further and other releases, instruments, agreements and writings
and do and perform, and cause to be done and performed, such further and other
acts and things that may be necessary or desirable in order to give full effect
to this Agreement.

Section 1.03 Notices.  All notices and other communications hereunder shall be
in writing and shall be deemed given on the day when delivered personally or by
facsimile transmission (with confirmation), on the next Business Day when
delivered to a nationally recognized overnight courier or five Business Days
after deposited as registered or certified mail (return receipt requested), in
each case, postage prepaid, addressed to the recipient party at its address set
forth below (or at such other address or facsimile number for a party as shall
be specified by like notice; provided, however, that any notice of a change of
address or facsimile number shall be effective only upon receipt thereof):

If to DPL, to:

 
3

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

 

Delmarva Power & Light Company
800 King Street
Wilmington, DE 19899
Attention: [________]
Telephone: [________]
Facsimile: [________]

If to CDG, to:
 
Conectiv Delmarva Generation, L.L.C.
800 King Street
Wilmington, DE 19899
Attention: [________]
Telephone: [________]
Facsimile: [________]

For purposes hereof, “Business Day” means any day other than a Saturday, Sunday
and any day on which banking institutions in the State of New York are
authorized or required by law or other governmental action to close.

Section 1.04 Asset Transfer Agreement. The provisions of this Agreement
supersede the covenants and agreements set forth in Section 6.9 of the Asset
Transfer Agreement, but otherwise the terms and conditions of the Asset Transfer
Agreement shall remain in full force and effect.

Section 1.05 Headings Not Descriptive. The headings of the several sections of
this Agreement are inserted for convenience only and shall not in any way affect
the meaning or construction of any provision of this Agreement.

Section 1.06 Successors and Assigns.  The terms and provisions of this Agreement
shall be binding upon the parties hereto and their respective successors and
assigns and shall inure to the benefit of the parties hereto and their
respective successors and assigns.

Section 1.07 Governing Law.  This Agreement shall be governed by and construed
in accordance with the law of the State of Delaware (without giving effect to
conflicts of law principles).

Section 1.08 Counterparts.  This Agreement may be executed in several
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

[Signature pages follow]

 
4

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

 

IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed
and delivered as of the date above.
 

   
Delmarva Power & Light Company
                   
By:
       
Name:
     
Title:
                           
Conectiv Delmarva Generation, L.L.C.
                   
By:
       
Name:
     
Title:

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 

 
5

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

 

Schedule A

Tax Exempt Bonds

Station
Asset
Related Bond Issue(s)
Edgemoor
Edgemoor Unit No 3 Electrostatic Precipitator and Fly Ash System and Bottom Ash
Disposal System.  Edgemoor Unit No. 4 Electrostatic Precipitator and Fly Ash
System and Bottom Ash Disposal System
The Delaware Economic Development Authority $15,000,000 Pollution Control
Refunding Revenue Bonds (Delmarva Power & Light Company Project) Series 2000C;
Due 07/01/25
Edgemoor/Hay Road
Certain air and water pollution control facilities including (i) Hay Road Unit –
Closed Loop Cooling System and (ii) Hay Road Unit – Waste Water Effluent System
The Delaware Economic Development Authority $16,240,000 Pollution Control
Refunding Revenue Bonds (Delmarva Power & Light Company Project) Series 2000D;
Due 07/01/28
Edgemoor
Edgemoor Unit No. 3 Electrostatic Precipitator and Fly Ash System, Bottom Ash
Disposal System; Wastewater Treatment System.  Edgemoor Unit No. 4 Electrostatic
Precipitator and Fly Ash System, Bottom Ash Disposal System
The Delaware Economic Development Authority $34,500,000 Pollution Control
Refunding Revenue Bonds (Delmarva Power & Light Company Project) Series 2001C;
Due 05/01/26
Edgemoor
Edgemoor Unit No. 3 Electrostatic Precipitator and Fly Ash System, Bottom Ash
Disposal System and Wastewater Treatment System.  Edgemoor Unit No. 4
Electrostatic Precipitator and Fly Ash System and Bottom Ash Disposal System
The Delaware Economic Development Authority $22,330,000 Pollution Control
Variable-Rate Demand Refunding Revenue Bonds (Delmarva Power & Light Company
Project) Series 1999A; Due 7/01/24

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
6