Exhibit 10.2

EXECUTION COPY

PURCHASE AND SALE AGREEMENT

by and among

DUKE ENERGY AMERICAS, LLC

as Seller,

and

LSP BAY II HARBOR HOLDING, LLC,

as Buyer

dated as of January 8, 2006

 

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TABLE OF CONTENTS

 

  

ARTICLE I

DEFINITIONS AND CONSTRUCTION

  

1.1

  

Definitions

   1

1.2

   Rules of Construction    18   

ARTICLE II

PURCHASE AND SALE AND CLOSING

  

2.1

   Purchase and Sale    18

2.2

   Purchase Price    19

2.3

   Closing    19

2.4

   Closing Deliveries by Seller to Buyer    19

2.5

   Closing Deliveries by Buyer to Seller    20

2.6

   Post-Closing Adjustment    21

2.7

   Allocation of Purchase Price    21   

ARTICLE III

REPRESENTATIONS AND WARRANTIES REGARDING SELLER

  

3.1

   Organization    22

3.2

   Authority    22

3.3

   No Conflicts; Consents and Approvals    23

3.4

   Capitalization    23

3.5

   Legal Proceedings    23

3.6

   Brokers    24   

ARTICLE IV

REPRESENTATIONS AND WARRANTIES REGARDING

THE PROJECT COMPANIES

  

4.1

   Organization    24

4.2

   No Conflicts; Consents and Approvals    24

4.3

   Capitalization    25

4.4

   Business    25

4.5

   Bank Accounts    25

4.6

   Subsidiaries    25

4.7

   Legal Proceedings    25

4.8

   Compliance with Laws and Orders    25

4.9

   Liabilities    25

4.10

   Absence of Certain Changes    26

4.11

   Taxes    26

4.12

   Regulatory Status    26

4.13

   Contracts    26

4.14

   Real Property    28

4.15

   Permits    28

4.16

   Environmental Matters    29

4.17

   Insurance    29

4.18

   Intellectual Property    30

4.19

   Brokers    30

4.20

   Employees and Labor Matters    30

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4.21

   Employee Benefits    30     

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF BUYER

    

5.1

   Organization    31

5.2

   Authority    31

5.3

   No Conflicts    31

5.4

   Legal Proceedings    32

5.5

   Compliance with Laws and Orders    32

5.6

   Brokers    32

5.7

   Acquisition as Investment    32

5.8

   Financial Resources    32

5.9

   No Conflicting Contracts    33

5.10

   Opportunity for Independent Investigation    33

5.11

   Bridgeport and Griffith Purchase Price    33   

ARTICLE VI

COVENANTS

  

6.1

   Regulatory and Other Approvals    33

6.2

   Access of Buyer and Seller    34

6.3

   Certain Restrictions    35

6.4

   Use of Certain Names    37

6.5

   Support Obligations    37

6.6

   Excluded Items    41

6.7

   Employee and Benefit Matters    41

6.8

   Termination of Certain Services and Contracts    44

6.9

   Indebtedness; Spare Parts; Distributions    45

6.10

   Insurance    45

6.11

   Casualty    45

6.12

   Condemnation    46

6.13

   Transfer Taxes    46

6.14

   Transition Services Arrangements    47

6.15

   Morro Bay Lease Consent    48

6.16

   Bridgeport Dispute    49

6.17

   Connecticut Transfer Act    49

6.18

   Long Term Services Agreements    49

6.19

   Tax Matters    50

6.20

   Affiliate Contracts    53

6.21

   Further Assurances    53

6.22

   Moss Landing Toll    54

6.23

   Monthly Operating Report    55

6.24

   Griffith Tag Along Offer    55

6.25

   DEGM Restructuring    55

6.26

   DENA Restructuring    55

6.27

   Seller Creditworthiness    56

6.28

   Letter of Credit    56

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ARTICLE VII

BUYER’S CONDITIONS TO CLOSING

    

7.1

   Representations and Warranties    56

7.2

   Performance    56

7.3

   Officer’s Certificate    56

7.4

   Orders and Laws    56

7.5

   Consents and Approvals    56

7.6

   Resignation of Members, Managers, Officers and Directors    57

7.7

   Release of Intercompany Indebtedness; Release of Liens    57   

ARTICLE VIII

SELLER’S CONDITIONS TO CLOSING

  

8.1

   Representations and Warranties    57

8.2

   Performance    57

8.3

   Officer’s Certificate    57

8.4

   Orders and Laws    57

8.5

   Consents and Approvals    57   

ARTICLE IX

TERMINATION

  

9.1

   Termination    58

9.2

   Effect of Termination    58

9.3

   Break-up Fee    58   

ARTICLE X

INDEMNIFICATION, LIMITATIONS OF LIABILITY, WAIVERS AND

ARBITRATION

  

10.1

   Indemnification    59

10.2

   Limitations of Liability    60

10.3

   Indirect Claims    62

10.4

   Waiver of Other Representations    62

10.5

   Waiver of Remedies    62

10.6

   Arbitration    63

10.7

   Procedure with Respect to Third-Party Claims    65

10.8

   Access to Information    66   

ARTICLE XI

MISCELLANEOUS

  

11.1

   Notices    66

11.2

   Entire Agreement    67

11.3

   Expenses    67

11.4

   Disclosure    67

11.5

   Waiver    67

11.6

   Amendment    67

11.7

   No Third Party Beneficiary    68

11.8

   Assignment; Binding Effect    68

11.9

   Headings    68

11.10

   Invalid Provisions    68

11.11

   Counterparts; Facsimile    68

11.12

   Governing Law; Venue; and Jurisdiction    68

11.13

   Attorneys’ Fees    69

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EXHIBITS      

Exhibit A

   -    Form of Company Assignment Instrument

Exhibit B

   -    Form of Assignment and Assumption Agreement SCHEDULES      

1.1–A

      June 30, 2005 Adjusted Net Working Capital Calculation

1.1–AC

      Affiliate Contracts

1.1–K

      Knowledge

1.1–MCLSA

      Certain Settlement Agreement Obligations

1.1–MLTPPA

      Moss Landing Toll Base Purchase Price Adjustment

1.1–PL

      Permitted Liens

2.2(c)

      Spring 2006 Maintenance Plan

2.7

      Purchase Price Allocation

3.3(c)

      Seller Approvals

3.4

      Capitalization

4.2

      Company Consents

4.4

      Sufficiency of Assets

4.5

      Bank Accounts

4.7

      Legal Proceedings

4.9

      Liabilities

4.10

      Certain Changes

4.11

      Taxes

4.13

      Material Contracts

4.14

      Real Property

4.15

      Permits

4.16(b)

      Environmental Matters

4.16(c)

      Emission Reduction Credits

4.17

      Insurance

4.20

      Labor Matters

5.3

      Buyer Approvals

5.8

      Debt and Equity Commitment Letters

5.9

      Conflicts

6.3

      Exceptions to Conduct of Business

6.5(a)

      Support Obligations

6.6

      Excluded Items

6.7(a)

      Available Employees

6.8

      Terminated Contracts

6.14(a)

      Transition Services

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PURCHASE AND SALE AGREEMENT

This Purchase and Sale Agreement dated as of January 8, 2006 (this “Agreement”)
is made and entered into by and between Duke Energy Americas, LLC, a Delaware
limited liability company (“Seller”), and LSP Bay II Harbor Holding, LLC, a
Delaware limited liability company (“Buyer”).

RECITALS

Seller desires to cause its affiliates to sell to Buyer, and Buyer desires to
purchase from Seller’s affiliates, 100% of the membership interests in the
owners of eight power plants located in the northeastern and western regions of
the United States, all on the terms and subject to the conditions set forth
herein.

STATEMENT OF AGREEMENT

Now, therefore, in consideration of the premises and the mutual representations,
warranties, covenants and agreements in this Agreement, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Parties agree as follows:

ARTICLE I

DEFINITIONS AND CONSTRUCTION

1.1 Definitions. As used in this Agreement, the following capitalized terms have
the meanings set forth below:

“1933 Act” has the meaning given to it in Section 5.7.

“AAA” has the meaning given to it in Section 10.6(a).

“Adjusted Net Working Capital” means (without duplication) the sum of (a) Net
Working Capital of the Project Companies (other than the Jointly Owned Project
Companies) plus (b) fifty percent (50%) of the Net Working Capital of Southwest
Power Partners, Griffith Energy, and ED Services, plus (c) (i) if the Bridgeport
Dispute has been resolved such that Duke Bridgeport Energy owns record title to
the UBE Interests as of the Closing, one-hundred percent (100%) of the Net
Working Capital of Bridgeport Energy and NC Development or (ii) if the
Bridgeport Dispute has not been so resolved, sixty-six and two-thirds percent
(66 2/3%) of the Net Working Capital of Bridgeport Energy and NC Development,
all as determined in accordance with the methodology used in the preparation of
Schedule 1.1-A (a sample of the Adjusted Net Working Capital calculation as of
June 30, 2005 without regard to clause (ii) of the definition of Net Working
Capital).

“Affiliate” means any Person that directly, or indirectly through one or more
intermediaries, controls, 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 through ownership of voting securities or
ownership interests, by contract or otherwise, and specifically with respect

 

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to a corporation, partnership or limited liability company, means direct or
indirect ownership of more than 50% of the voting securities in such corporation
or of the voting interest in a partnership or limited liability company;
provided however, that, for purposes of this Agreement, the Jointly Owned
Project Companies shall be deemed to be Affiliates of Seller.

“Affiliate Contracts” means, collectively, those contracts listed on Schedule
1.1 AC.

“Agreement” has the meaning given to it in the introduction to this Agreement.

“ANWC Estimate” has the meaning given to it in Section 2.5(a)

“Arbitrable Dispute” has the meaning given to it in Section 10.6(b).

“Arlington Valley Project” means the approximately 570 megawatt (nominal)
natural gas-fired combined cycle electric generating plant located on a site in
Maricopa County, Arizona, together with all auxiliary equipment, ancillary and
associated facilities and equipment, electrical transformers, pipeline and
electrical interconnection and metering facilities (whether owned or leased by
Duke Arlington Valley) used for the receipt of fuel and water and the delivery
of the electrical and potential steam output of said generating plant, and all
other improvements related to the ownership, operation and maintenance of said
generating plant and associated equipment.

“Assets” of any Person means all assets and properties of every kind, nature,
character and description (whether real, personal or mixed, whether tangible or
intangible and wherever situated), including the goodwill related thereto,
operated, owned or leased by such Person.

“Assigned Contracts” means, collectively, each Affiliate Contract, other than a
Terminated Contract, the Counterparty to which has consented to (or for which no
consent is required for) the assignment thereof by the Assignor to the Assignee
as contemplated by Section 2.4(b).

“Assignee” has the meaning given to it in Section 2.4(b).

“Assignment and Assumption Agreement” has the meaning given to it in
Section 2.4(b).

“Assignor” has the meaning given to it in Section 2.4(b).

“Available Employees” has the meaning given to it in Section 6.7(a).

“Base Purchase Price” has the meaning given to it in Section 2.2(a).

“Benefit Plan” means (a) each “employee benefit plan,” as such term is defined
in Section 3(3) of ERISA, (b) each plan that would be an “employee benefit
plan”, as such term is defined in Section 3(3) of ERISA, if it was subject to
ERISA, such as foreign plans and plans for directors, (c) each stock bonus,
stock ownership, stock option, stock purchase, stock appreciation rights,
phantom stock, or other stock plan (whether qualified or nonqualified), and
(d) each bonus or incentive compensation plan.

 

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“Bridgeport 33 1/3% Purchase Price” shall be an amount equal to $60,000,000.

“Bridgeport Dispute” means the appraisal proceedings between Duke Bridgeport
Energy and UBE to determine the Fair Market Value (as defined in the Bridgeport
LLC Agreement) of the UBE Interests put to Duke Bridgeport Energy by UBE
pursuant to Section 8.3(b) of the Bridgeport LLC Agreement.

“Bridgeport Energy” means Bridgeport Energy LLC, a Delaware limited liability
company.

“Bridgeport LLC Agreement” means that certain Amended and Restated Limited
Liability Company Agreement of Bridgeport Energy LLC, dated as of September 17,
1997 between Duke Bridgeport Energy and UBE as amended prior to the date hereof.

“Bridgeport Project” means the approximately 490 megawatt (nominal) natural
gas-fired combined cycle electric generating plant located on a site in the City
of Bridgeport, Fairfield County, Connecticut, together with all auxiliary
equipment, ancillary and associated facilities and equipment, electrical
transformers, pipeline and electrical interconnection and metering facilities
(whether owned or leased by Bridgeport Energy or NC Development) used for the
receipt of fuel and water and the delivery of the electrical and potential steam
output of said generating plant, and all other improvements related to the
ownership, operation and maintenance of said generating plant and associated
equipment.

“Bridgeport Resolution Amount” has the meaning given to it in Section 6.16.

“Bridgeport RMR Agreement” means the Cost-of-Service Agreement by and between
Bridgeport Energy, DEMA and New England ISO, filed with FERC in Docket No.
ER05-611.

“Bridgeport RMR Refund Amount” means any amounts received by any party on behalf
of Bridgeport Energy pursuant to the Bridgeport RMR Agreement on or prior to the
Closing Date that Bridgeport Energy is required by FERC to refund to New England
ISO-NE or any participants in the markets administered by New England ISO.

“Business” as to any Project Company, means the ownership and operation of the
respective Project, including the generation and sale of electricity and
capacity by such Project Company at or from the Project, the receipt by such
Project Company of natural gas and the conduct of other activities by such
Project Company related or incidental to the foregoing.

“Business Day” means a day other than Saturday, Sunday or any day on which banks
located in the State of New York or the State of Texas are authorized or
obligated to close.

“Buyer” has the meaning given to it in the introduction to this Agreement.

“Buyer Approvals” has the meaning given to it in Section 5.3(c).

“Buyer Indemnified Parties” has the meaning given to in Section 10.1 (a).

 

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“California Litigation” means any proceeding or litigation relating to the sale
of electric energy, capacity, and/or ancillary services made by Duke South Bay,
Duke Morro Bay, Duke Moss Landing and/or DE Oakland from the period from
January 1, 2000 through June 20, 2001.

“Casco Bay” means Casco Bay Energy Company, LLC, a Delaware limited liability
company.

“Casco Bay Project” means the approximately 520 megawatt (nominal) natural
gas-fired combined cycle electric generating plant located on a site in
Penobscot County, Maine, together with all auxiliary equipment, ancillary and
associated facilities and equipment, electrical transformers, pipeline and
electrical interconnection and metering facilities (whether owned or leased by
Casco Bay) used for the receipt of fuel and water and the delivery of the
electrical and potential steam output of said generating plant, and all other
improvements related to the ownership, operation and maintenance of said
generating plant and associated equipment.

“Capital Stock” means capital stock, partnership or membership interests or
units (whether general or limited), and any other interest or participation that
confers on a person the right to receive a share of the profits and losses of,
or distribution of assets of, the issuing entity.

“C.G.S.” means the Connecticut General Statutes, as in effect on the date
hereof.

“Charter Documents” means with respect to any Person, the articles of
incorporation or organization and by-laws, the limited partnership agreement,
the partnership agreement or the limited liability company agreement, or such
other organizational documents of such Person, including those that are required
to be registered or kept in the place of incorporation, organization or
formation of such Person and which establish the legal personality of such
Person.

“Claim” means any demand, claim, action, investigation, legal proceeding
(whether at law or in equity) or arbitration.

“Claimant” has the meaning given to it in Section 10.6(b).

“Claiming Party” has the meaning given to it in Section 10.7(a).

“Closing” means the closing of the transactions contemplated by this Agreement,
as provided for in Section 2.3. For purposes of clarification, the term
“Closing” shall, if applicable, be deemed modified as set forth in Section 6.15.

“Closing Date” means the date on which Closing occurs. For purposes of
clarification, the term “Closing Date” shall, if applicable, be deemed modified
as set forth in Section 6.15.

“Code” means the Internal Revenue Code of 1986.

“Companies” means, collectively, Duke Arlington Valley, Duke Moss Landing, Duke
South Bay, Duke Morro Bay, DE Oakland, Casco Bay and (a) prior to the date of
the DEGM Restructuring, Duke Bridgeport Energy, DE Mohave and DE Mulberry and
(b) from and after the date of the DEGM Restructuring, DEGM Holding Subsidiary.
For purposes of clarification,

 

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Duke Bridgeport Energy, DE Mohave and DE Mulberry shall not be “Companies” from
and after the date of the DEGM Restructuring.

“Company Assignment Agreement” has the meaning given to it in Section 2.4(a).

“Company Consents” has the meaning given to it in Section 4.2(b).

“Company Interests” means 100% of the membership interests in each of Duke
Arlington Valley, Duke Moss Landing, Duke South Bay, Duke Morro Bay, DE Oakland,
Casco Bay, and (a) prior to the date of the DEGM Restructuring, Duke Bridgeport
Energy, DE Mohave and DE Mulberry and (b) from and after the date of the DEGM
Restructuring, DEGM Holding Subsidiary. For purposes of clarification, Company
Interests shall not include the membership interests of Duke Bridgeport Energy,
DE Mohave and DE Mulberry from and after the date of the DEGM Restructuring.

“Confidentiality Agreement” means that certain Confidentiality Agreement between
Buyer and Duke Capital LLC dated September 20, 2005.

“Connecticut Transfer Act” means C.G.S. § 22a-134 et seq.

“Continued Employee” has the meaning set forth in Section 6.7(b).

“Continuing Support Obligation” has the meaning given to it in Section 6.5(e).

“Contract” means any written contract, lease, license, evidence of Indebtedness,
mortgage, indenture, purchase order, binding bid, letter of credit, security
agreement or other written and legally binding arrangement.

“Counterparty” has the meaning given to it in Section 6.20.

“Credit Rating” means, with respect to any Person, each rating given to such
Person’s long-term unsecured debt obligations by Standard & Poor’s Ratings Group
(a division of McGraw Hill, Inc.) or Moody’s Investors Services, Inc., as
applicable, and any successors thereto.

“DE Mohave” means Duke Energy Mohave, LLC, a Delaware limited liability company.

“DE Mulberry” means Duke Energy Mulberry LLC, a Delaware limited liability
company.

“DE Oakland” means Duke Energy Oakland LLC, a Delaware limited liability
company.

“DE Power” means DE Power Generating, LLC, a Delaware limited liability company.

“Deductible Amount” has the meaning given to it in Section 10.2(c).

“DEGM” means Duke Energy Global Markets, Inc., a Nevada corporation.

 

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“DEGM Holding Subsidiary” means a Delaware limited liability company that, prior
to Closing, is a direct wholly-owned subsidiary of DEGM and is formed after the
date of this Agreement and on or prior to Closing.

“DEGM Restructuring” means the transfer of the Capital Stock of DE Mulberry, DE
Mohave and Duke Energy Bridgeport from DEGM to DEGM Holding Subsidiary.

“DEMA” means Duke Energy Marketing America, LLC, a Delaware limited liability
company.

“DENA” means Duke Energy North America, LLC, a Delaware limited liability
company.

“DENA Restructuring” means the dissolution or liquidation of certain
subsidiaries of Seller (other than any Project Company or any Parent Company) on
or prior to Closing. For purposes of clarification, the Project Companies and
the Parent Companies shall remain direct or indirect wholly-owned subsidiaries
of the Seller after giving effect to the DENA Restructuring.

“DETM Agreement” means that certain Agreement, dated as of November 17, 1997,
between Bridgeport Energy and Duke Energy Trading and Marketing, LLC, as amended
and restated by that certain First Amended and Restated Agreement, dated as of
March 1, 2001, between Bridgeport Energy and Duke Energy Trading and Marketing,
LLC, and as further amended, restated, supplemented or otherwise modified from
time to time.

“Direct Costs” has the meaning given to it in Section 6.14(b).

“Dispute” has the meaning given to it in Section 10.6(a).

“DTSC” has the meaning given to it in Section 6.10.

“Duke Arlington Valley” means Duke Energy Arlington Valley, LLC, a Delaware
limited liability company.

“Duke Bridgeport Energy” means Duke Bridgeport Energy, LLC, a Delaware limited
liability company.

“Duke Morro Bay” means Duke Energy Morro Bay LLC, a Delaware limited liability
company.

“Duke Moss Landing” means Duke Energy Moss Landing LLC, a Delaware limited
liability company.

“Duke South Bay” means Duke Energy South Bay LLC, a Delaware limited liability
company.

“ED Services” means ED Services, LLC, a Delaware limited liability company.

 

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“Environmental Claim” means any Claim or Loss arising out of or related to any
violation of Environmental Law.

“Environmental Condition Assessment Form” shall have the meaning provided to it
in C.G.S. § 22a-134(17).

“Environmental Law” means the Comprehensive Environmental Response, Compensation
and Liability Act, 42 U.S.C. § 9601 et seq.; the Resource Conservation and
Recovery Act, 42 U.S.C. § 6901 et seq.; the Federal Water Pollution Control Act,
33 U.S.C. § 1251 et seq.; the Clean Air Act, 42 U.S.C. § 7401 et seq.; the Toxic
Substances Control Act, 15 U.S.C. §§ 2601 through 2629; the Oil Pollution Act,
33 U.S.C. § 2701 et seq.; the Emergency Planning and Community Right-to-Know
Act, 42 U.S.C. § 11001 et seq.; the Safe Drinking Water Act, 42 U.S.C. §§ 300f
through 300j; and all similar Laws (including implementing regulations) of any
Governmental Authority having jurisdiction over the assets in question
addressing pollution or protection of the environment, each as amended on or
prior to the Closing Date.

“Equity Securities” means (i) Capital Stock, (ii) subscriptions, calls,
warrants, options or commitments of any kind or character relating to, or
entitling any person or entity to acquire, any Capital Stock and
(iii) securities convertible into or exercisable or exchangeable for shares of
Capital Stock.

“ERCs” has the meaning given to it in Section 4.16(c).

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

“ERISA Affiliate” means any entity, trade or business that is a member of a
group described in Section 414(b), (c), (m) or (o) of the Code or
Section 400l(b)(l) of ERISA that includes Seller, or that is a member of the
same “controlled group” as Seller pursuant to Section 4001 (a)(14) of ERISA;
provided, however, that the Project Companies shall not be considered to be
ERISA Affiliates from and after the Closing Date.

“Excluded Items” has the meaning given to it in Section 6.6.

“Excluded Liabilities” shall mean all Claims, Losses, and obligations of each
Project Company, the Seller or any of its Affiliates arising out of: (i) all
Excluded Items, including any Non-Transferred Excluded Items and any actions
taken by or on behalf of Seller, any of its Affiliates or any Project Company in
connection therewith, (ii) subject to clause (vi) below, all Terminated
Contracts, (iii) the California Litigation, other than those obligations of Duke
South Bay, Duke Morro Bay, Duke Moss Landing and/or DE Oakland listed on
Schedule 1.1-MCLSA (iv) any Benefit Plan of Seller or any Affiliate and any
other matter related to any Available Employee, including, without limitation,
any obligations resulting from the transactions contemplated hereby, except to
the extent specifically assumed or indemnified by Buyer pursuant to Section 6.7,
(v) the Bridgeport RMR Refund Amount, to the extent such amount exceeds $10.0
million, (vi) the GE LTSAs, but only to the extent any such GE LTSA is
terminated on or prior to the Closing Date and excluding the costs of any
capital spares, inventory or other current assets that are purchased from GE by
or on behalf of a Project Company in connection with or after such termination
that are not owned by a Project Company

 

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as of the Closing Date, (vii) the Assigned Contracts, to the extent relating to
the periods prior to the Closing Date and not included in the calculation of
Adjusted Net Working Capital, (viii) liabilities arising under the Charter
Documents of any Project Company in connection with the DEGM Restructuring
caused solely by the DEGM Restructuring or the sale of the Company Interests
pursuant to Sections 2.1 and 2.4, (ix) liabilities caused solely by the DENA
Restructuring, (x) liabilities under Section 12.5 of the Siemens Contract to the
extent caused solely by the sale of the Company Interests, and (xi) fees payable
to any broker, finder, financial advisor or agent by or on behalf of Seller with
respect to the transactions contemplated by this Agreement.

“FERC” means the Federal Energy Regulatory Commission.

“Form III” shall have that meaning provided in C.G.S. § 22a-134(12).

“FPA” means the Federal Power Act.

“Funds” means, collectively, LS Power Equity Partners, L.P. and LS Power Equity
Partners PIE I, L.P.

“GAAP” means generally accepted accounting principles in the United States of
America, applied on a consistent basis.

“GE LTSA” means each Long Term Service Agreement between General Electric
International, Inc. and a Project Company identified on Schedule 4.12.

“Governmental Authority” means any court, tribunal, arbitrator, authority,
agency, commission, official or other instrumentality of the United States or
any state, county, city or other political subdivision or similar governing
entity, and including any governmental, quasigovernmental or non-governmental
body administering, regulating or having general oversight over gas,
electricity, power or other markets.

“Griffith 50% Purchase Price” shall be an amount equal to $100,000,000.

“Griffith Energy” means Griffith Energy LLC, a Delaware limited liability
company.

“Griffith Project” means the approximately 600 megawatt (nominal) natural
gas-fired combined cycle electric generating plant located on a site in Mohave
County, Arizona, together with all auxiliary equipment, ancillary and associated
facilities and equipment, electrical transformers, pipeline and electrical
interconnection and metering facilities (whether owned or leased by Griffith
Energy, Southwest Power Partners, or ED Services) used for the receipt of fuel
and water and the delivery of the electrical and potential steam output of said
generating plant, and all other improvements related to the ownership, operation
and maintenance of said generating plant and associated equipment.

“Hazardous Material” means and includes each substance designated as a hazardous
waste, hazardous substance, hazardous material, pollutant, contaminant or toxic
substance under any Environmental Law and any petroleum or petroleum products
that have been released into

 

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the environment in concentrations or locations for which remedial action is
required under any applicable Environmental Law.

“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976.

“Indebtedness” means any of the following: (a) any indebtedness for borrowed
money; (b) any obligations evidenced by bonds, debentures, notes or other
similar instruments; (c) any obligations to pay the deferred purchase price of
property or services, except trade accounts payable and other current
liabilities arising in the ordinary course of business consistent with past
practices; (d) any obligations as lessee under capitalized leases; (e) any
indebtedness created or arising under any conditional sale or other title
retention agreement with respect to acquired property; (f) any obligations,
contingent or otherwise, under acceptance, letters of credit or similar
facilities; and (g) any guaranty of any of the foregoing; provided that
Indebtedness shall not include any claim for subrogation by Seller or any of its
Affiliates against a Project Company with respect to any credit support provided
on behalf of Seller or such Affiliate for the benefit of such Project Company.

“Indemnified Parties” has the meaning given to it in Section 10.1(b).

“Initial Closing” has the meaning given to it in Section 6.15(a).

“Initial Closing Date” has the meaning given to it in Section 6.15(a).

“Initial Company Interest” has the meaning given to it in Section 6.15(a).

“Intellectual Property” means the following intellectual property rights, both
statutory and common law rights, if applicable: (a) copyrights, registrations
and applications for registration thereof, (b) trademarks, service marks, trade
names, slogans, domain names, logos, trade dress, and registrations and
applications for registrations thereof, (c) patents, as well as any reissued and
reexamined patents and extensions corresponding to the patents, and any patent
applications, as well as any related continuation, continuation in part and
divisional applications and patents issuing therefrom and (d) trade secrets and
confidential information, including ideas, designs, concepts, compilations of
information, methods, techniques, procedures, processes and other know-how,
whether or not patentable.

“Interest Rate” means 5% per annum.

“Interim Period” has the meaning given to it in Section 6.1.

“Investment Grade” means a Credit Rating of at least “BBB-” from Standard &
Poor’s Ratings Group (a division of McGraw Hill, Inc.) and at least “Baa3” from
Moody’s Investors Services, Inc.

“Jointly Owned Project Companies” means, collectively, Southwest Power Partners,
Griffith Energy, ED Services, Bridgeport Energy, and NC Development.

 

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“Knowledge” when used in a particular representation in this Agreement with
respect to Seller, means the actual knowledge (as opposed to any constructive or
imputed knowledge) of the individuals listed on Schedule 1.1 -K.

“Laws” means all laws, statutes, rules, regulations, ordinances, orders,
decrees, court decisions, and other pronouncements having the effect of law of
any Governmental Authority.

“Lease Guaranty” means the Lease Guaranty dated April 1, 1999, by Duke Capital
Corporation in favor of the San Diego Unified Port District, the California
Maritime Infrastructure Authority and BNY Western Trust Company.

“Letter of Credit” means an irrevocable, standby letter of credit issued by a
commercial bank with ratings of at least “A-” by Standard & Poor’s Ratings Group
(a division of McGraw Hill, Inc.) and at least “A3” by Moody’s Investor
Services, Inc., which shall (a) include customary terms and conditions
(including terms and conditions substantially similar to or more favorable than
those in the Support Obligation which is being replaced or backstopped by such
Letter of Credit), (b) contain customary rights permitting the beneficiary of
such Letter of Credit to draw upon such Letter of Credit upon any event or
omission that would have allowed the Support Obligation being replaced by such
Letter of Credit to be drawn or called upon, including upon certification of any
breach of the underlying contract if applicable, and (c) contain the right for
the beneficiary thereof to draw on such Letter of Credit if such Letter of
Credit has not been renewed or replaced at least 30 days prior to the expiration
thereof (or such lesser period as may be specified in the underlying contract to
which such Letter of Credit relates).

“Lien” means any mortgage, pledge, deed of trust, assessment, security interest,
charge, lien, option, warranty, purchase right, lease or other similar property
interest or encumbrance.

“Loss” means any and all judgments, losses, liabilities, amounts paid in
settlement, damages, fines, penalties, deficiencies, costs, charges, Taxes,
obligations, demands, fees, losses and expenses (including interest, court
costs, reasonable fees of attorneys, accountants and other experts or other
reasonable expenses of investigation, litigation or other proceedings or of any
claim, dispute, default or assessment). For all purposes in this Agreement the
term “Losses” does not include any Non-reimbursable Damages.

“Major Maintenance Amount” has the meaning given it in Section 2.2(c).

“Material Adverse Effect” means a material adverse effect on the assets,
properties, businesses, financial condition or results of operations of the
Project Companies, taken as a whole; provided, however, that the following shall
not be considered when determining whether a Material Adverse Effect has
occurred: any effect resulting from (a) any change in economic conditions
generally or in the industry in which a Project Company operates, (b) any change
in general regulatory or political conditions, including any acts of war or
terrorist activities, (c) any continuation of an adverse trend or condition,
(d) any change in any Laws (including Environmental Laws), (e) the
implementation or non-implementation of a market based locational capacity
mechanism in the New England ISO by FERC, (f) the failure of Seller or any
Non-Company Affiliate to effect the assignment of any Contract to Buyer, any
Project Company, or any Affiliate of Buyer (g) any increases in the costs of
commodities or supplies, including

 

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fuel, or decreases in the price of electricity, (h) any change in the financial
condition or results of operation of a Project Company caused by the pending
sale of such Project Company to Buyer, including changes due to the Credit
Rating of Buyer, (i) any actions to be taken pursuant to or in accordance with
this Agreement, and (j) the announcement or pendency of the transactions
contemplated hereby.

“Material Contracts” has the meaning given to it in Section 4.13(a).

“Minimum Net Worth” means, with respect to any Person, the difference between
(a) the total assets of such Person and its subsidiaries and (b) the total
liabilities of such Person and its subsidiaries, in each case on a consolidated
basis in accordance with GAAP.

“ML Fixed Terms” means the following terms from the Moss Landing RFP:
(i) Service Level (“Excusable Event”) definition (except that Force Majeure is
no longer considered an “Excusable Event” and is or may be treated differently
(the lack of availability during a force majeure event is not excused in
calculating availability) under the Moss Landing Toll than under the Moss
Landing RFP ), (ii) the Dispatch Rights definition, (iii) the Ancillary Services
definition, (iv) the Gas Transportation Charge definition, (v) the Guaranteed
Availability Factor to the extent that the percentage should not be made any
higher in the Moss Landing Toll than is set forth in the Moss Landing RFP,
(vi) Scheduled Maintenance, to the extent that the hours should not be made any
lower under the Moss Landing Toll than those set forth in the Moss Landing RFP,
(vii) Operational and Environmental Limitations (and Attachment A) (except that
no scheduled outages shall be permitted in May (in addition to the other months
provided for the in the Moss Landing RFP), (viii) Schedule 2 , (ix) the Power
delivery point, and (x) the Gas delivery point (except that the gas delivery
point may be at the Moss Landing Project as opposed to the PGE City Gate).

“ML Other Terms” has the meaning given to it in the definition of Moss Landing
Toll Purchase Price Adjustment.

“MM Estimate” has the meaning given to it in Section 2.5(a).

“Morro Bay Project” means the approximately 1,002 megawatt (nominal) natural
gas-fired conventional steam electric generating plant located on a site in San
Luis Obispo County, California, together with all auxiliary equipment, ancillary
and associated facilities and equipment, electrical transformers, pipeline and
electrical interconnection and metering facilities (whether owned or leased by
Duke Morro Bay) used for the receipt of fuel and water and the delivery of the
electrical and potential steam output of said generating plant, and all other
improvements related to the ownership, operation and maintenance of said
generating plant and associated equipment.

“Morro Bay Purchase Price” shall be an amount equal to $50,000,000.

“Moss Landing Project” means the approximately 2,529 megawatt (nominal) natural
gas-fired combined cycle/conventional steam electric generating plant located on
a site in Monterey County, California, together with all auxiliary equipment,
ancillary and associated facilities and equipment, electrical transformers,
pipeline and electrical interconnection and metering facilities (whether owned
or leased by Duke Moss Landing) used for the receipt of fuel

 

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and water and the delivery of the electrical and potential steam output of said
generating plant, and all other improvements related to the ownership, operation
and maintenance of said generating plant and associated equipment.

“Moss Landing RFF’ has the meaning given to it in the definition of Moss Landing
Toll Purchase Price Adjustment.

“Moss Landing Toll” shall mean one or more agreements between a counterparty and
an Affiliate of Seller (or at Seller’s request, Buyer or a Project Company
designated by Buyer) for the sale of all or a portion of the capacity, energy,
and/or ancillary services with respect to Units 6 and 7 at the Moss Landing
Project.

“Moss Landing Toll Purchase Price” shall be an amount equal to $60,000,000 in
the aggregate for the Moss Landing Toll.

“Moss Landing Toll Purchase Price Adjustment” means, with respect to a Moss
Landing Toll, the MLTPPA for such Moss Landing Toll calculated as of the earlier
of (a) the date such Moss Landing Toll is approved by the Counterparty for
transfer to Buyer or its designee and (b) November 30, 2006, all in accordance
with the following formula:

If CP for such Moss Landing Toll is equal to or greater than $5.25,

MLTPPA = [(MW /1509) * (Term / 60) * ((CP-$3.22)/$2.03) * $72,600,000]
-$60,000,000

If CP for such Moss Landing Toll is less than $5.25 and greater than $4.85,

MLTPPA = [(MW / 1509) * (Term / 60) * ((CP-$2.95)/$1.90) * $60,000,000]
-$60,000,000

If CP for such Moss Landing Toll is equal to or less than $4.85,

MLTPPA = [(MW /1509) * (Term / 60) * ((CP-$3.25)/$1.60) * $60,000,000]
-$60,000,000

Where:

1. MW = the total average megawatts of capacity (net of parasitic load) per
month for 100% of the output of Unit 6, Unit 7 or both Units 6 and 7, as set
forth in such Moss Landing Toll. The MW shall be deemed to be 0 if such Moss
Landing Toll has not been (i) entered into within 90 days following the Closing
Date and (ii) approved by the Counterparty for transfer to Buyer or its designee
by November 30, 2006;

2. CP = the average Capacity Price in dollars per kilowatt month under such Moss
Landing Toll; provided, however, that the CP will be increased by $0.08 if only
Unit 6 is covered by the Moss Landing Toll and will be decreased by $0.08 if
only Unit 7 is covered by the Moss landing Toll; and provided further, however,
that in no event shall the CP be greater than $7.00 or less than $3.25; and

 

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3. Term = the remaining number of months (from the effective date of the
commencement of CP payments of such Moss Landing Toll (which shall be a date in
2006) through the end of the term of such Moss Landing Toll) covered by such
Moss Landing Toll (but in no event greater than 60 months or less than 36
months, which, if there are two Moss Landing Tolls with back-to-back terms,
shall be measured from the earliest such effective date through the end of the
latest term for the two Moss Landing Tolls collectively); provided, however,
that the Term (after taking into account all of the foregoing) shall be reduced
by the number of months (stated in fractions of months if necessary), if any, by
which the Closing is after the effective date of the commencement of CP
payments;

provided, however, that (a) the MLTPPA shall be decreased (but not to less than
a negative $60,000,000) by the present value cost throughout the term of the
Moss Landing Toll (using the lower of actual cost or 3%, a discount rate of 9%
on after-tax costs, and a tax rate of 40%) of required Letters of Credit in
excess of $50 million and (b) if (i) the terms of such Moss Landing Toll other
than the items described above in items 1 through 3 of this definition (“ML
Other Terms”} are materially different than the corresponding terms described in
the ML Term Sheet attached as Schedule 1.1 - MLTPPA (“Moss Landing RFP”),
(ii) the capacity covered by such Moss Landing Toll is less than 100% of the
capacity of each of Unit 6 or Unit 7 (or both) of the Moss Landing Project, as
applicable, or (iii) the Term is not a multiple of 12 months (unless the Term
commences in April, May or June of one year and ends in October, November or
December of a succeeding year); then the Parties shall adjust the MLTPPA
reasonably and in good faith by the present value effect on such Moss Landing
Toll (using a discount rate of 9% on after-tax cash flows and using a tax rate
of 40%) of the difference between the ML Other Terms and the corresponding terms
described in the ML RFP.

“NC Development” means NC Development & Design Company, LLC, a Delaware limited
liability company.

“Net Working Capital” means (without duplication), with respect to each Project
Company, the amount (expressed as a positive or negative number) equal to
(a) the total current assets of such Project Company, plus (b)(l) the total book
value of capital spares of such Project Company that are not included in the
current assets of such Project Company and (2) with respect to any capital
spares of such Project Company delivered to or being refurbished for the benefit
of such Project Company pursuant to a GE LTSA but that are not reflected on the
balance sheet of such Project Company, the actual costs of such capital spares
(or in the case of refurbished capital spares, the cost based on the remaining
useful life of such spares) pursuant to such GE LTSA, minus (c) the total
current liabilities of such Project Company, minus (d) any liabilities due (or
which in the future could become due) pursuant to the GE LTSA for capital spares
described in clause (b)(2) above of such Project Company; and in each case in
clauses (a) through (d) above, (i) excluding (A) any Excluded Items, (B) Taxes,
(C) the portion of current liabilities of Duke South Bay consisting of principal
and interest under the South Bay Lease Facility, (D) the portion of current
liabilities of Bridgeport Energy relating to any obligation (or potential
obligation) of Bridgeport Energy to refund to New England ISO and/or any
participants in the markets administered by New England ISO amounts with respect
to the Bridgeport RMR Agreement, (E) prepaid insurance to the extent such
insurance is cancelled with respect to

 

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periods from and after the Closing and prepaid Taxes, (F) mark to market
accounting impacts, if any, (G) emission allowances and emission reduction
credits and (H) any assets (excluding spare parts removed from a Project and
refurbished (at Seller’s or its Affiliate’s expense) for the benefit of a
Project pursuant to Schedule 2.2(c)) and/or liabilities relating to the items on
Schedule 2.2(c). (ii) measured as of the time immediately prior to the
consummation of, and without giving effect to, the transactions contemplated
hereby and (iii) determined in accordance with the methodology used in the
preparation of Schedule 1.1-A, and otherwise in accordance with GAAP.

“Non-Company Affiliate” means any Affiliate of Seller, except for the Project
Companies.

“Non-reimbursable Damages” has the meaning given to it in Section 10.5(b).

“Non-Transferred Excluded Item” has the meaning given to it in Section 6.6.

“Oakland Project” means the approximately 165 megawatt (nominal) light fuel
oil-fired simple cycle generating plant located on a site in Alameda County,
California, together with all auxiliary equipment, ancillary and associated
facilities and equipment, electrical transformers, pipeline and electrical
interconnection and metering facilities (whether owned or leased by DE Oakland)
used for the receipt of fuel and water and the delivery of the electrical and
potential steam output of said generating plant, and all other improvements
related to the ownership, operation and maintenance of said generating plant and
associated equipment.

“Operating Companies” means, collectively, Duke Moss Landing, Duke South Bay,
Duke Morro Bay, Casco Bay, DE Oakland, Duke Arlington Valley, Bridgeport Energy
and Griffith Energy.

“Outstanding Consent” has the meaning given to it in Section 6.15(a).

“Parent Companies” means, collectively, DENA, DE Power Generating Holdings, LLC,
DEGM and DE Power; provided that from and after the DENA Restructuring, DE Power
Generating Holdings, LLC shall not be a Parent Company; and provided further
that from and after the DEGM Restructuring, DEGM Holding Subsidiary shall be a
Parent Company and DEGM shall cease to be a Parent Company.

“Parties” means each of Buyer and Seller.

“Permits” means all licenses, permits, certificates of authority,
authorizations, approvals, registrations, franchises and similar consents and
orders issued or granted by a Governmental Authority.

“Permitted Lien” means (a) any Lien for Taxes not yet due or delinquent or being
contested in good faith by appropriate proceedings, (b) any Lien arising in the
ordinary course of business consistent with past practices by operation of Law
with respect to a liability that is not yet due or delinquent or which is being
contested in good faith by Seller or a Project Company, (c) all matters that are
disclosed (whether or not subsequently deleted or endorsed over) on any survey,
in the title policies insuring a Property or any commitments therefor, or in any
title

 

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reports, in each case that have been made available to Buyer, (d) imperfections
or irregularities of title and other Liens that would not, in the aggregate,
reasonably be expected to materially detract from the value of the affected
property, (e) zoning, planning, and other similar limitations and restrictions,
and all rights of any Governmental Authority to regulate a Property, (f) all
matters of record, that would not, in the aggregate, reasonably be expected to
materially detract from the value of the affected property, (g) the terms and
conditions of the Material Contracts or the Contracts listed on Schedule 4.13,
(h) any Lien that is released on or prior to Closing and (i) the matters
identified on Schedule 1.1-PL.

“Person” means any natural person, corporation, general partnership, limited
partnership, limited liability company, proprietorship, other business
organization, trust, union, association or Governmental Authority.

“PG&E Guaranties” means, collectively, the Guaranty (Oakland), the Guaranty
(Morro Bay), and the Guaranty (Moss Landing), each dated November 18, 1997, in
favor of Pacific Gas and Electric Company by Duke Capital Corporation.

“PPL” means PPL Southwest Generation Holdings, LLC, a Delaware limited liability
company and any successor to or assignee of its membership interest in Southwest
Power Partners.

“Pre-Closing Taxable Period” has the meaning given to it in Section 6.19(a).

“Project” or “Projects” means one or more of the Bridgeport Project, the Casco
Bay Project, the Arlington Valley Project, the Griffith Project, the South Bay
Project, the Morro Bay Project, the Moss Landing Project and the Oakland
Project.

“Project Company” means each Company and each Subsidiary.

“Property” means the real property on which a Project is located, including
easements and rights-of-way appertaining thereto.

“Property Taxes” has the meaning given to it in Section 6.19(b).

“PUHCA of 1935” means the Public Utility Holding Company Act of 1935.

“Purchase Price” has the meaning given to it in Section 2.2.

“Purchase Price Allocation Schedule” has the meaning given to it in Section 2.7.

“Purchased Assets” means all of the Assets of the Project Companies excluding
the Excluded Items and the Excluded Liabilities.

“Release” means any release, spill, emission, migration, leaking, pumping,
injection, deposit, disposal or discharge of any Hazardous Materials into the
environment, to the extent prohibited under applicable Environmental Laws.

 

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“Representatives” means, as to any Person, its officers, directors, partners,
members, employees, counsel, accountants, financial advisers and consultants.

“Respondent” has the meaning given to it in Section 10.6(b).

“Responding Party” has the meaning given to it in Section 10.7(a).

“Schedules” means the disclosure schedules prepared by Seller and attached to
this Agreement.

“SDG&E Guaranty” means that certain Guaranty, dated as of December 11, 1998, in
favor of San Diego Gas & Electric Company by Duke Capital Corporation.

“SDUPD Guaranties” means, collectively, the Environmental Remediation Agreement
Guaranty and the Guaranty of Contract and Permit Rights Assignment and Property
Escrow Agreement, each dated April 22, 1999, in favor of the San Diego Unified
Port District by Duke Capital Corporation.

“Seller” has the meaning given to it in the introduction to this Agreement.

“Seller Approvals” has the meaning given to it in Section 3.3(c).

“Seller Marks” has the meaning given to it in Section 6.4.

“Seller Plans” has the meaning given to it in Section 6.7(d).

“Seller Indemnified Parties” has the meaning given to it in Section 10.1 (b).

“Seller’s Determination” has the meaning given to it in Section 2.6(a).

“Severance Plan” means the DENA Asset Partners, L.P. 2005-2008 Severance
Benefits Plan as in effect on the date of this Agreement.

“Siemens Contract” means that certain CT Operational Support and Scheduled
Maintenance Services Contract dated August 1, 2001 between Bridgeport Energy LLC
and Siemens Westinghouse Operating Services Co.

“Siemens Guaranty” means that certain Guaranty dated September 17, 1997, by Duke
Capital Corporation in favor of Siemens Power Corporation, as amended pursuant
to that certain letter agreement dated October 9, 1998, between Duke Capital
Corporation and Siemens Power Corporation.

“South Bay Indenture” means the Indenture of Trust dated March 1, 1999, between
the California Maritime Infrastructure Authority and BNY Western Trust Company,
as Trustee.

“South Bay Lease Facility” means the lease of the South Bay Project pursuant to
the Lease Agreement between San Diego Unified Port District, as Lessor, and Duke
Energy South Bay, LLC, as Lessee, dated as of April 1, 1999.

 

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“South Bay Project” means the approximately 700 megawatt (nominal) natural
gas-fired conventional steam electric generating plant located on a site in San
Diego County, California, together with all auxiliary equipment, ancillary and
associated facilities and equipment, electrical transformers, pipeline and
electrical interconnection and metering facilities (whether owned or leased by
Duke South Bay) used for the receipt of fuel and water and the delivery of the
electrical and potential steam output of said generating plant, and all other
improvements related to the lease, operation and maintenance of said generating
plant and associated equipment.

“Southwest Power Partners” means Southwest Power Partners, LLC, a Delaware
limited liability company.

“Specified Guaranties” has the meaning given to it in Section 6.5(c)(ii).

“Specified Guaranty Amount” ” has the meaning given to it in
Section 6.5(e)(iv)(A).

“Straddle Taxable Period” has the meaning given to it in Section 6.19(a).

“Subsequent Closing” has the meaning given to it in Section 6.15(b).

“Subsequent Closing Date” has the meaning given to it in Section 6.15(b).

“Subsidiaries” means, collectively, Southwest Power Partners, Bridgeport Energy,
Griffith Energy, ED Services, NC Development and, from and after the DEGM
Restructuring, Duke Bridgeport Energy, DE Mohave and DE Mulberry.

“Support Obligations” has the meaning given to it in Section 6.5(a).

“Tax” or “Taxes” means (i) any federal, state, local or foreign income, gross
receipts, ad valorem, sales and use, employment, social security, disability,
occupation, property, severance, value added, transfer, capital stock, excise,
withholding, premium, occupation or other taxes, levies or other like
assessments, customs, duties, imposts, charges surcharges or fees imposed by or
on behalf of any Governmental Authority, including any interest, penalty or
addition thereto and (ii) any liability for amounts described in clause (i) as a
result of transferee liability, by Contract or otherwise.

“Taxing Authority” means, with respect to any Tax, the governmental entity or
political subdivision thereof that imposes such Tax, and the agency (if any)
charged with the collection of such Tax for such entity or subdivision.

“Terminated Contracts” has the meaning given to it in Section 6.8.

“Transfer Taxes” means all transfer, sales, use, goods and services, value
added, documentary, stamp duty, gross receipts, excise, transfer and conveyance
Taxes and other similar Taxes, duties, fees or charges.

“Transition Services” has the meaning given to it in Section 6.14(a).

“UBE” means United Bridgeport Energy, Inc., a Connecticut corporation.

 

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“USE Interests” means the membership interests owned by UBE in Bridgeport Energy
as of the date hereof.

“Union Employees” has the meaning given to it in Section 6.7(a).

“Welfare Benefits” has the meaning given to it in Section 6.7(f).

1.2 Rules of Construction.

(a) All article, section, subsection, schedules and exhibit references used in
this Agreement are to articles, sections, subsections, schedules and exhibits to
this Agreement unless otherwise specified. The exhibits and schedules attached
to this Agreement constitute a part of this Agreement and are incorporated
herein for all purposes.

(b) If a term is defined as one part of speech (such as a noun), it shall have a
corresponding meaning when used as another part of speech (such as a verb).
Unless the context of this Agreement clearly requires otherwise words importing
the masculine gender shall include the feminine and neutral genders and vice
versa. The words “includes” or “including” shall mean “including without
limitation,” the words “hereof,” “hereby,” “herein,” “hereunder” and similar
terms in this Agreement shall refer to this Agreement as a whole and not any
particular section or article in which such words appear and any reference to a
Law shall include any amendment thereof or any successor thereto and any rules
and regulations promulgated thereunder. Currency amounts referenced herein are
in U.S. Dollars.

(c) Time is of the essence in this Agreement. Whenever this Agreement refers to
a number of days, such number shall refer to calendar days unless Business Days
are specified. Whenever any action must be taken hereunder on or by a day that
is not a Business Day, then such action may be validly taken on or by the next
day that is a Business Day.

(d) All accounting terms used herein and not expressly defined herein shall have
the meanings given to them under GAAP.

(e) Each Party acknowledges that it and its attorneys have been given an equal
opportunity to negotiate the terms and conditions of this Agreement and that any
rule of construction to the effect that ambiguities are to be resolved against
the drafting Party or any similar rule operating against the drafter of an
agreement shall not be applicable to the construction or interpretation of this
Agreement.

ARTICLE II

PURCHASE AND SALE AND CLOSING

2.1 Purchase and Sale. On the terms and subject to the conditions set forth in
this Agreement, at the Closing:

(a) Buyer agrees to purchase from DENA, and Seller agrees to cause DENA to
convey to Buyer, 100% of the membership interests in each of (i) Duke Arlington
Valley, (ii) Duke Moss Landing, (iii) Duke South Bay, (iv) Duke Morro Bay, and
(v) DE Oakland.

 

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(b) Buyer agrees to purchase from DE Power, and Seller agrees to cause DE Power
to convey to Buyer, 100% of the membership interests in Casco Bay.

(c) Buyer agrees to purchase from DEGM, and DEGM agrees to convey to Buyer 100%
of the membership interests of the DEGM Holding Subsidiary.

(d) Buyer agrees to assume (or cause one of the Project Companies, as set forth
in Schedule 1.1-AC, to assume), at Closing from each of the Non-Company
Affiliates who are party to an Assigned Contract, and Seller agrees to cause
such Non-Company Affiliates to assign to Buyer (or such Project Company), all of
the rights and obligations of such Non- Company Affiliates, as applicable,
relating to periods from and after Closing under the Assigned Contracts,
provided, however that, for Assigned Contracts relating to natural gas
transportation on a pipeline regulated by the FERC, Seller’s obligations under
this subsection (d) are conditioned upon the Non-Company Affiliate successfully
releasing its capacity permanently to Buyer (or such Project Company) and being
relieved of all payment obligations under each such Assigned Contract pursuant
to the terms of the applicable FERC Gas Tariff. Both Seller and Buyer shall use
commercially reasonable efforts to achieve such permanent releases of capacity.

2.2 Purchase Price. The purchase price (the “Purchase Price”) for the purchase
and sale described in Section 2.1 is equal to the sum of:

(a) $1,631,000,000 (the “Base Purchase Price”),

(b) plus, the Adjusted Net Working Capital as of the Closing,

(c) minus, to the extent that any of the matters listed on Schedule 2.2(c) have
not been paid for on or prior to the Closing Date by the applicable Project
Company or its Affiliates, an amount (the “Major Maintenance Amount”) equal to
the difference between the dollar amount set forth for such matter on Schedule
2.2(c) and the amount that has been paid with respect to such matter on or prior
to the Closing Date by such Project Company or its Affiliates, and

(d) plus, the amount of the Moss Landing Toll Purchase Price Adjustment (which
may positive, negative or zero).

2.3 Closing. The Closing shall take place at the offices of Vinson & Elkins
L.L.P., 1001 Fannin, Houston, Texas 77002 at 10:00 A.M. local time, on the third
Business Day after the conditions to Closing set forth in Articles VII and VIII
(other than actions to be taken or items to be delivered at Closing) have been
satisfied or waived, or on such other date and at such other time and place as
Buyer and Seller mutually agree in writing. All actions listed in Section 2.4 or
2.5 that occur on the Closing Date shall be deemed to occur simultaneously at
the Closing.

2.4 Closing Deliveries by Seller to Buyer. At the Closing, Seller shall deliver,
or shall cause to be delivered, to Buyer the following:

(a) an executed counterpart by each of the Parent Companies of an assignment of
Capital Stock (each a “Company Assignment Agreement”) in the form attached
hereto as Exhibit A evidencing the assignment and transfer to Buyer of (i) the
Company Interests

 

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owned by such Parent Company and (ii) all rights of such Parent Company under
the Charter Documents of the Companies to which such Parent Company is a party;

(b) an executed counterpart of one or more assignment and assumption agreements
each substantially in the form attached as Exhibit B (each an “Assignment and
Assumption Agreement”) which shall effect the assignment to Buyer or one of the
Project Companies (as applicable, the “Assignee”) of each Assigned Contract by
the Non-Company Affiliate that is party thereto (the “Assignor”) subject to the
proviso in Section 2.1(d) of this Agreement, and the assumption by the Assignee
of all obligations of the Assignor under each Assigned Contract relating to the
periods from and after the Closing Date;

(c) a certification of non-foreign status in the form prescribed by Treasury
Regulation Section 1.1445-2(c) with respect to each Parent Company (or the owner
of each Parent Company that is treated as a disregarded entity for federal
income tax purposes) and a clearance certificate or other documents(s) that may
be required by any state taxing authority in order to relieve Buyer of any
obligation to withhold any portion of the Purchase Price; and

(d) the books and records of each Project Company not present at such Project
Company on the Closing Date and in the possession of Seller or a Non-Company
Affiliate (it being agreed that Seller may retain a copy thereof).

2.5 Closing Deliveries by Buyer to Seller. At the Closing, Buyer shall deliver
to Seller the following:

(a) a wire transfer of immediately available funds (to such account as Seller
shall have notified Buyer of at least three Business Days prior to the Closing
Date) in an amount equal to the result of (i) the sum of (A) the Base Purchase
Price, minus (B) the Bridgeport 33 1/3% Purchase Price if the Bridgeport Dispute
has not been resolved as of the Closing such that Duke Bridgeport Energy is not
the owner of record title to the UBE Interest, minus (C) the Moss Landing Toll
Purchase Price if the Moss Landing Toll has not been entered into on or prior to
Closing, and plus (D) the amount of the Moss Landing Toll Purchase Price
Adjustment (which may be positive, negative or zero), if the Moss Landing Toll
has been entered into on or prior to Closing, plus (ii) Seller’s good faith
estimate (the “ANWC Estimate”) of the Adjusted Net Working Capital as of the
Closing, minus (iii) Seller’s good faith estimate of the Major Maintenance
Amounts (the “MM Estimate”) as of Closing, showing in the case of clauses
(ii) and (iii) the calculation thereof in reasonable detail and delivered in
writing to Buyer at least three Business Days prior to the Closing Date;

(b) an executed counterpart of each Company Assignment Agreement;

(c) an executed counterpart of each Assignment and Assumption Agreement by each
Assignee referenced in Section 2.4(b);

(d) the Form III and Environmental Condition Assessment Form as required by
Section 6.17; and

(e) any guaranties, cash and/or letters of credit required to be delivered to
Seller at the Closing pursuant to Section 6.5(e)(iv).

 

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2.6 Post-Closing Adjustment. (a) After the Closing Date, Seller and Buyer shall
cooperate and provide each other access to their respective books, records and
employees (and those of the Project Companies) as are reasonably requested in
connection with the matters addressed in this Section 2.6. Within 45 days after
the Closing Date, Seller shall determine the Adjusted Net Working Capital and
Major Maintenance Amount as of the Closing and shall provide Buyer with written
notice of such determination, along with reasonable supporting information and
calculations (the “Seller’s Determination”).

(b) If Buyer objects to Seller’s Determination, then it shall provide Seller
written notice thereof within 20 days after receiving Seller’s Determination. If
the Parties are unable to agree on the Adjusted Net Working Capital or Major
Maintenance Amount, in each case as of the Closing, within 90 days after the
Closing Date, the Parties shall refer such dispute to Ernst and Young LLP or, if
that firm declines to act as provided in this Section 2.6(b), another firm of
independent public accountants, mutually acceptable to Buyer and Seller, which
firm shall make a final and binding determination as to all matters in dispute
(and only such matters) on a timely basis and promptly shall notify the Parties
in writing of its resolution. Such firm shall not have the power to modify or
amend any term or provision of this Agreement. Each Party shall bear and pay
one-half of the fees and other costs charged by such accounting firm. If Buyer
does not object to Seller’s Determination within the time period and in the
manner set forth in the first sentence of clause (b) or if Buyer accepts
Seller’s Determination, the Adjusted Net Working Capital as set forth in
Seller’s Determination shall become final and binding upon the Parties for all
purposes hereunder.

(c) If the Adjusted Net Working Capital or the Major Maintenance Amount, in each
case as of the Closing (as agreed between the Parties or as determined by the
above-referenced accounting firm or otherwise) is greater than or less than the
ANWC Estimate or the MM Estimate, as applicable, then Buyer shall pay Seller, or
Seller shall pay Buyer, respectively, within 10 Business Days after such amounts
are agreed or determined, by wire transfer of immediately available funds to an
account designated by the payee, the difference between such amounts plus
interest thereon at the Interest Rate from the Closing Date through and
including the date of such payment.

2.7 Allocation of Purchase Price

(a) Seller and Buyer agree that the Base Purchase Price shall be allocated among
the Project Companies for Tax purposes in accordance with the allocation set
forth on Schedule 2.7 (the “Base Purchase Price Allocation Schedule”).

(b) Within 30 Business Days after the determination of the Adjusted Net Working
Capital and Major Maintenance Amount, in each case as of the Closing, and the
determination of the Moss Landing Toll Purchase Price Adjustment, Buyer shall
provide to Seller Buyer’s proposal for an allocation (consistent with the Base
Purchase Price Allocation Schedule) of the Purchase Price among the Purchased
Assets, grouped by the seven asset classes referred to in Treasury Regulation
section 1.1060-1(c) and described in Treasury Regulation section 1.338-6(b) (the
“Purchase Price Allocation Schedule”). Within 30 Business Days after its receipt
of Buyer’s proposed Purchase Price Allocation Schedule, Seller shall propose to
Buyer any changes thereto or otherwise shall be deemed to have agreed thereto.
In the event that Seller

 

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proposes changes to Buyer’s proposed Purchase Price Allocation Schedule within
the 30 Business Day period described above, Seller and Buyer shall cooperate in
good faith to mutually agree upon a Purchase Price Allocation Schedule as soon
as practicable.

(c) Seller and Buyer each shall prepare an IRS Form 8594, “Asset Acquisition
Statement Under Section 1060”, consistent with the Base Purchase Price
Allocation Schedule and any Purchase Price Allocation Schedule mutually agreed
upon pursuant to Section 2.7(b), which the Parties shall use to report the
transactions contemplated by this Agreement to the applicable Taxing
Authorities. Each of Seller and Buyer agrees to provide the other promptly with
any other information required to complete Form 8594. The Base Purchase Price
Allocation Schedule and any Purchase Price Allocation Schedule shall be revised
to take into account subsequent adjustments to the Purchase Price, including any
indemnification payments (which shall be treated for Tax purposes as adjustments
to the Purchase Price), in accordance with the provisions of section 1060 of the
Code and the Treasury Regulations thereunder.

ARTICLE III

REPRESENTATIONS AND WARRANTIES REGARDING SELLER

Seller hereby represents and warrants to Buyer that except as disclosed in the
Schedules to the extent provided in Section 11.4:

3.1 Organization. Each of Seller and each Parent Company is a limited liability
company or a corporation, as applicable, duly formed, validly existing and in
good standing under the Laws of its jurisdiction of formation or incorporation,
as applicable. Each of Seller and each Parent Company is duly qualified or
licensed to do business in each other jurisdiction where the actions to be
performed by it hereunder makes such qualification or licensing necessary,
except in those jurisdictions where the failure to be so qualified or licensed
would not reasonably be expected to result in a material adverse effect on
Seller’s or such Parent Company’s ability to perform such actions hereunder.

3.2 Authority.

(a) Seller has all requisite limited liability company power and authority to
execute and deliver this Agreement, to perform its obligations hereunder and to
consummate the transactions contemplated hereby. The execution and delivery by
Seller of this Agreement, and the performance by Seller of its obligations
hereunder, have been duly and validly authorized by all necessary limited
liability company action. This Agreement has been duly and validly executed and
delivered by Seller and constitutes the legal, valid and binding obligation of
Seller enforceable against Seller in accordance with its terms, except as the
same may be limited by bankruptcy, insolvency, reorganization, fraudulent
conveyance, arrangement, moratorium or other similar Laws relating to or
affecting the rights of creditors generally, or by general equitable principles.

(b) Each Parent Company has all requisite limited liability company or corporate
power and authority, as applicable, to consummate the transactions contemplated
hereby to be consummated by it. The performance by each Parent Company of the
actions

 

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contemplated to be performed by it hereunder has been duly and validly
authorized by all necessary limited liability company or corporate action.

3.3 No Conflicts; Consents and Approvals. The execution and delivery by Seller
of this Agreement do not, and the performance by Seller of its obligations under
this Agreement and the taking of any action contemplated to be taken by any
Parent Company hereunder will not:

(a) conflict with or result in a violation or breach of any of the terms,
conditions or provisions of the Charter Documents of Seller or such Parent
Company;

(b) assuming all of the Company Consents have been obtained, be in violation of
or result in a breach of or default (or give rise to any right of termination,
cancellation or acceleration) under (with or without the giving of notice, the
lapse of time, or both) any material Contract to which Seller, any Non-Company
Affiliate or any Parent Company is a party (including, without limitation, the
Affiliate Contracts), except for any such violations or defaults (or rights of
termination, cancellation or acceleration) which would not, in the aggregate,
reasonably be expected to result in a material adverse effect on Seller’s
ability to perform its obligations hereunder or on any Parent Company’s ability
to take the actions contemplated to be taken by such Parent Company hereunder;
and

(c) assuming all required filings, waivers, approvals, consents, authorizations
and notices set forth on Schedule 3.3(c) (collectively, the “Seller Approvals”),
the Company Consents and other notifications provided in the ordinary course of
business consistent with past practice have been made, obtained or given,
(i) conflict with, violate or breach any material term or provision of any Law
applicable to Seller, the Parent Companies or any of its or their material
Assets or (ii) require any material consent or approval of any Governmental
Authority, or notice to, or declaration, filing or registration with, any
Governmental Authority, under any applicable Law.

3.4 Capitalization. Schedule 3.4 (as the same may be modified pursuant to
Section 6.26) accurately sets forth the ownership structure of Seller, the
Parent Companies and the Project Companies. Each of Seller, the Parent Companies
and the Project Companies owns, holds of record and is the beneficial owner of
the ownership interests shown as being owned by it on Schedule 3.4 (as the same
may be modified pursuant to Section 6.26) free and clear of all Liens,
restrictions on transfer or other encumbrances other than those (a) arising
pursuant to this Agreement, the limited liability company agreements of the
Project Companies or applicable securities Laws or (b) for Taxes not yet due or
delinquent and, without limiting the generality of the foregoing, none of the
Company Interests are subject to any voting trust, shareholder agreement or
voting agreement or other agreement, right, instrument or understanding with
respect to any purchase, sale, issuance, transfer, repurchase, redemption or
voting of any Equity Securities of any Project Company, other than the limited
liability company agreements of the Companies. Except as set forth on Schedule
3.4 (as the same may be modified pursuant to Section 6.26), there are no
outstanding Equity Security of any Project Company.

3.5 Legal Proceedings. None of Seller or any Project Company or Parent Company
has been served with notice of any Claim, no Claim is pending and to Seller’s
Knowledge none

 

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is threatened against Seller or any Project Company or Parent Company, which
seeks a writ, judgment, order, injunction or decree restraining, enjoining or
otherwise prohibiting or making illegal any of the transactions contemplated by
this Agreement.

3.6 Brokers. None of Seller or any Project Company or Parent Company has any
liability or obligation to pay fees or commissions to any broker, finder or
agent with respect to the transactions contemplated by this Agreement for which
Buyer could become liable or obligated.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES REGARDING

THE PROJECT COMPANIES

Seller hereby represents and warrants to Buyer that except as disclosed in the
Schedules to the extent provided in Section 11.4:

4.1 Organization. Each Project Company is a limited liability company duly
formed, validly existing and in good standing under the Laws of its jurisdiction
of formation, and has all requisite limited liability company power and
authority to conduct its business as it is now being conducted and to own, lease
and operate its Assets. Each Project Company is duly qualified or licensed to do
business in each jurisdiction in which the ownership or operation of its Assets
make such qualification or licensing necessary, except in those jurisdictions
where the failure to be so duly qualified or licensed would not reasonably be
expected to result in a Material Adverse Effect.

4.2 No Conflicts; Consents and Approvals. The execution and delivery by Seller
of this Agreement do not, the performance by Seller of its obligations hereunder
do not and the consummation of the transactions contemplated hereby and the
taking of any action contemplated to be taken by any Parent Company or Project
Company hereunder or pursuant to the Company Assignment Agreements or the
Assignment and Assumption Agreements, as applicable, will not:

(a) conflict with or result in a violation or breach of any of the terms,
conditions or provisions of the Charter Documents of any Project Company;

(b) assuming all of the consents set forth on Schedule 4.2 (the “Company
Consents”) have been obtained, be in material violation of or result in a
material breach of or default (or give rise to any material right of
termination, cancellation or acceleration) (with or without the giving of
notice, lapse of time, or both) under any Material Contract or any Affiliate
Contract;

(c) assuming the Seller Approvals, the Company Consents and other notifications
provided in the ordinary course of business consistent with past practice have
been made, obtained or given, (i) conflict with or result in a violation or
breach of any material term or provision of any Law applicable to any Project
Company or any of its material Purchased Assets or (ii) require the consent or
approval of any Governmental Authority, or notice to, or declaration, filing or
registration with, any Governmental Entity, under any applicable Law; or

 

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(d) result in the imposition or creation of any Lien on any material Purchased
Assets, other than Permitted Liens, or on any Company Interests.

4.3 Capitalization. No Project Company is a party to any written or oral
agreement, and no Project Company has granted to any Person any option or any
right or privilege capable of becoming an agreement or option, for the purchase,
subscription, allotment or issue of any unissued interests, units or other
securities (including convertible securities, warrants or convertible
obligations of any nature) of any Project Company other than those arising
pursuant to the Material Contracts (including the limited liability company
agreements of the Project Companies).

4.4 Business. The Business of each Project Company is the only business
operation carried on by each such Project Company. Except as disclosed in
Schedule 4.4. the Purchased Assets owned, leased, licensed or contracted by each
Project Company constitute all of the tangible Assets that are sufficient to
operate its Business as currently operated, except for (a) the Excluded Items
and (b) matters that would not, in the aggregate, reasonably be expected to
result in a Material Adverse Effect.

4.5 Bank Accounts. Schedule 4.5 sets forth an accurate and complete list of the
names and locations of banks, trust companies and other financial institutions
at which each Project Company maintains accounts of any nature or safe deposit
boxes and the names of all Persons authorized to draw thereon, make withdrawals
therefrom or have access thereto.

4.6 Subsidiaries. None of the Project Companies has subsidiaries or owns Equity
Securities in any Person except as disclosed on Schedule 3.4 (as the same may be
modified pursuant to Section 6.26).

4.7 Legal Proceedings. Except as set forth on Schedule 4.7. no Project Company
has been served with notice of any Claim and no Claim is pending, and to
Seller’s Knowledge, none has been threatened against or relating to any Project
Company that (a) affects such Project Company or the Purchased Assets and would,
in the aggregate, reasonably be expected to result in a Material Adverse Effect
or (b) seeks a writ, judgment, order, injunction or decree restraining,
enjoining or otherwise prohibiting or making illegal any of the transactions
contemplated by this Agreement or any Parent Company from consummating the
transactions contemplated by the Company Assignment Agreements or the Assignment
and Assumption Agreements.

4.8 Compliance with Laws and Orders. Each Project Company is in compliance with
all Laws and orders applicable to it and its operations, properties or Assets
except where any such non-compliance would not, in the aggregate, reasonably be
expected to result in a Material Adverse Effect; provided, however, that this
Section 4.8 does not address Environmental Laws, which are exclusively addressed
by Sections 4.15 and 4.16.

4.9 Liabilities. Except for (a) current liabilities, (b) liabilities disclosed
in Schedule 4.9. (c) the South Bay Lease Facility, and (d) liabilities in an
aggregate amount up to 10% of the Base Purchase Price with respect to which
Seller, in its sole discretion, has indemnified Buyer, in form and substance
reasonably satisfactory to Buyer, no Project Company has any liability in

 

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excess of $500,000 individually (or $5,000,000 in the aggregate as to all
Project Companies) that would be required to be reflected on an unaudited
balance sheet of such Project Company prepared in accordance with GAAP.

4.10 Absence of Certain Changes. Except as set forth on Schedule 4.10. from
October 31, 2005 to the date of this Agreement, each Project Company has
operated in the ordinary course of business, consistent with past practices.
From October 31, 2005 to the date of this Agreement, there has not been any
(a) Material Adverse Effect or (b) event or condition that would reasonably be
expected to result in a Material Adverse Effect or prevent or delay Seller from
consummating the transactions contemplated by this Agreement or any Parent
Company from consummating the transactions contemplated by the Company
Assignment Agreements.

4.11 Taxes. Except as set forth on Schedule 4.11, (a) all Tax returns that are
required to be filed on or before the Closing Date by each Project Company have
been or will be duly and timely filed, (b) all material Taxes of each Project
Company that are due and payable have been or will be timely paid in full,
(c) all material withholding Tax requirements imposed on the Project Companies
have been satisfied in full in all respects, except for amounts that are being
contested in good faith, (d) no Project Company has in force any waiver of any
statute of limitations in respect of Taxes or any extension of time with respect
to a Tax assessment or deficiency, (e) there are no pending or active audits or
legal proceedings involving Tax matters or, to Seller’s Knowledge, threatened
audits or proposed deficiencies or other claims for unpaid Taxes of the Project
Companies, (f) each Project Company other than Bridgeport Energy, NC Development
and Southwest Power Partners is classified as an entity disregarded as separate
from its owner for federal income tax purposes and has been since inception,
(g) each of Bridgeport Energy, NC Development and Southwest Power Partners is
classified as a partnership for federal income tax purposes and has been since
inception, (h) all deficiencies asserted or assessments made as a result of any
examination of Tax returns of the Project Companies have been or will be paid in
full or are being timely and properly contested in good faith, (i) there are no
liens for Taxes (other than Permitted Liens) on any of the Purchased Assets, and
(j) none of the Purchased Assets directly or indirectly secures any indebtedness
the interest on which is tax exempt under Section 103(a) of the Code, is
property required to be treated as being owned by any other person pursuant to
the “safe harbor lease” provisions of former Section 168(f)(8) of the Code, or
is “tax-exempt use property” within the meaning of Section 168(h) of the Code.

4.12 Regulatory Status. (a) Each Operating Company meets the requirements for,
and has been determined by FERC to be, an “Exempt Wholesale Generator” within
the meaning of the PUHCA of 1935, as amended; (b) no Project Company other than
each Operating Company and DE Mohave is subject to regulation under the FPA as a
“public utility”; (c) each Operating Company and DE Mohave has been authorized
by FERC to make sales of energy, capacity and ancillary services at market-based
rates pursuant to Section 205 of the FPA; (d) each Operating Company and DE
Mohave has been granted blanket authorization by FERC to issue securities and
assume liabilities pursuant to Section 204 of the FPA; (e) as of the date of
this Agreement, no Project Company is a “holding company” or a “public utility
company” within the meaning of PUHCA of 1935.

4.13 Contracts. (a) Excluding Contracts for which neither a Project Company nor
any of the Purchased Assets will be bound or have liability after Closing and
excluding the

 

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Terminated Contracts and the Excluded Items, Schedule 4.13 (which schedule shall
be deemed (i) upon delivery of a copy of the Charter Documents of DEGM Holding
Subsidiary to Buyer, to be supplemented to include the Charter Documents of DEGM
Holding Subsidiary from and after the date of the DEGM Restructuring and
(ii) modified to the extent set forth in Section 6.26) sets forth a list as of
the date of this Agreement of the following Contracts to which a Project Company
is a party or by which the Purchased Assets may be bound (the Contracts listed
on Schedule 4.13 that meet the descriptions in this Section 4.13 being
collectively, the “Material Contracts”):

(i) Contracts for the future purchase, exchange or sale of gas;

(ii) Contracts for the future purchase, exchange or sale of electric power in
any form, including energy, capacity or any ancillary services;

(iii) Contracts for the future transportation of gas;

(iv) Contracts for the future transmission of electric power;

(v) interconnection Contracts;

(vi) other than Contracts of the nature addressed by Section 4.13(a)(i) - (iii),
Contracts (A) for the sale of any Asset or provision of any services or (B) that
grant a right or option to purchase any Asset or receive any services, other
than in each case Contracts entered into in the ordinary course of business
consistent with past practices relating to Assets or services with a value of
less than $300,000 individually or $3,000,000 in the aggregate;

(vii) other than Contracts of the nature addressed by Section 4.13(a)(i) -
(iii), Contracts for the future receipt of any Assets or services requiring
payments in excess of $300,000 for each individual Contract;

(viii) Contracts under which it has created, incurred, assumed or guaranteed any
outstanding Indebtedness, or under which it has imposed a security interest on
any of its Assets, tangible or intangible, which security interest secures
outstanding Indebtedness;

(ix) outstanding agreements of guaranty, surety or indemnification or similar
obligation, direct or indirect, by a Project Company;

(x) Contracts with Seller or any Non-Company Affiliate relating to the future
provision of goods or services;

(xi) Contracts for consulting services providing annual compensation in excess
of $100,000 and which are not cancelable by a Project Company on notice of 90
days or less;

(xii) any collective bargaining Contracts;

 

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(xiii) outstanding futures, swap, collar, put, call, floor, cap, option or other
Contracts that are intended to benefit from or reduce or eliminate the risk of
fluctuations in the price of commodities, including electric power, in any form,
including energy, capacity or any ancillary services, gas or securities;

(xiv) Contracts that purport to limit a Project Company’s freedom to compete in
any line of business or in any geographic area;

(xv) partnership, joint venture, or limited liability company agreements; and

(xvi) Contracts relating to any Equity Securities or other securities of any
Project Company or rights in connection therewith.

(b) Seller has provided Buyer with, or access to, copies of all Material
Contracts and all Affiliate Contracts, as amended.

(c) Each of the Material Contracts and the Affiliate Contracts is in full force
and effect in all material respects and constitutes a legal, valid and binding
obligation of the Project Company party thereto (or, as to the Affiliate
Contracts, the Non-Company Affiliate that is a party thereto) and, to Seller’s
Knowledge, of the other parties thereto except in each case where the failure to
be in full force and effect or constitute a binding obligation would not
reasonably be expected to result in a Material Adverse Effect.

(d) (i) No Project Company is in breach or default in any material respect under
any Material Contract, (ii) none of the Non-Company Affiliates that is a party
to an Affiliate Contract is in breach or default in any material respect under
such Affiliate Contract, and (iii) to Seller’s Knowledge, no other party to any
of the Material Contracts or Affiliate Contracts is in breach or default in any
material respect thereunder.

4.14 Real Property. Each Project Company owns or leases (and with respect to
each such (i) owned Property that is material to the Project Companies, has
good, valid and marketable fee simple title to, or (ii) lease that is material
to the Project Companies, has good and valid leasehold title to, and enjoys
peaceful and undisturbed possession of) all Property described in Schedule 4.14
as being owned or leased by such Project Company, in each case, free and clear
of all Liens (except for Permitted Liens), except pursuant to this Agreement and
the Contracts listed, and as otherwise noted, on Schedule 4.14.

4.15 Permits. (a) Schedule 4.15 sets forth all material Permits held by any of
the Project Companies that are required for the ownership and operation of the
Projects by the Project Companies in the manner in which they are currently
owned and operated, except any such Permits relating exclusively to the
construction (and not operation) of a Project and any such Permits, the absence
of which would not, in the aggregate, reasonably be expected to result in a
Material Adverse Effect. All such Permits are in full force and effect.

(b) Each Project Company is in compliance with all Permits set forth on Schedule
4.15 as being held by such Project Company, except where any such non-compliance
would not, in the aggregate, reasonably be expected to result in a Material
Adverse Effect, and

 

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no Project Company has received any written notification from any Governmental
Authority alleging that it is in material violation of any such Permits and, to
Seller’s Knowledge, there is no such material violation.

4.16 Environmental Matters. (a) Seller has made available to Buyer copies of all
material environmental site assessment reports in the possession of Seller or a
Project Company that are not subject to a claim of legal privilege by Seller or
a Project Company and that relate to environmental matters in connection with
operation of a Project or Property.

(b) Except as set forth on Schedule 4.16(b):

(i) the Project Companies have operated the Projects in material compliance with
all applicable Environmental Laws;

(ii) no Project Company has been served with notice of any material
Environmental Claims, actions, proceedings or investigations that are currently
outstanding, and no Environmental Claims are pending or, to Seller’s Knowledge,
threatened, against any Project Company by any Governmental Authority under any
Environmental Laws, except, with respect to any such notices received or Claims,
actions, proceedings or investigations arising after the date hereof but on or
prior to the Closing Date, as would not reasonably be expected to result in a
Material Adverse Effect;

(iii) there is no site to which Seller has transported or arranged for the
transport of Hazardous Materials associated with any Project Company which, to
Seller’s Knowledge, is the subject of any environmental action or that would
result in a material Environmental Claim, except, with respect to any such
actions or Claims arising after the date hereof but on or prior to the Closing
Date, as would not reasonably be expected to result in Material Adverse Effect;
and

(iv) since the initial ownership date of each Project by Seller or its
Affiliates, there has been no Release of any Hazardous Material at or from a
Project in connection with a Project Company’s operations at such Project that
would result in a material Environmental Claim.

(c) Schedule 4.16(c) sets forth as of the date of this Agreement all emission
reduction credits (“ERCs”) and emissions allowances, including without
limitation VOC, NOx, PM10, SOx and CO ERCs and SO2 allowances, held or owned by
each of the Project Companies.

4.17 Insurance. Schedule 4.17 sets forth a list of all insurance policies and
fidelity bonds covering the Project Companies, the tangible Assets, the Business
of each Project Company and the Available Employees, other than any such
insurance policies and fidelity bonds related to Benefit Plans. Schedule 4.17
sets forth a list of all pending claims of $100,000 or more under any such
policies, and, with respect to such pending claims, coverage has not been denied
by the underwriters of such policies and bonds. All premiums due and payable
under such policies and bonds have been paid, and each Project Company is
otherwise in material compliance with the terms and conditions of all such
policies and bonds. To the Knowledge of Seller, there is no threatened
termination of such policies and bonds.

 

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4.18 Intellectual Property.

(a) The Project Companies own, or have the licenses or rights to use for their
respective Businesses, all material Intellectual Property (other than the
Excluded Items) currently used in their respective Businesses.

(b) To Seller’s Knowledge, no Project Company has received from any third party
a claim in writing that any Project Company is infringing in any material
respect the Intellectual Property of such third party.

4.19 Brokers. The Project Companies have no liability or obligation to pay fees
or commissions to any broker, finder or agent with respect to the transactions
contemplated by this Agreement.

4.20 Employees and Labor Matters. The Project Companies do not have and have
never had any employees. With respect to Available Employees and except as
described on Schedule 4.20:

(a) no Available Employees are represented by a union or other collective
bargaining entity;

(b) there has not occurred, nor, to Seller’s Knowledge has there been
threatened, a labor strike, request for representation, organizing campaign,
work stoppage, slowdown, or lockout or other labor dispute by or involving
Available Employees in the past two years, except, with respect to any such
events or occurrences arising after the date hereof but on or prior to the
Closing Date, as would not reasonably be expected to result in Material Adverse
Effect;

(c) Neither Seller nor any of its Affiliates has received notice of any charges
before any Governmental Authority responsible for the prevention of unlawful
employment practices and Seller and its Affiliates are in material compliance
with all applicable Laws respecting employment practices, labor relations, terms
and conditions of employment and similar Laws, except, with respect to any such
notice received or non-compliance occurring after the date hereof but on or
prior to the Closing Date, as would not reasonably be expected to result in
Material Adverse Effect; and

(d) Neither Seller nor any of its Affiliates have received notice of any
investigation by a Governmental Authority responsible for the enforcement of
labor or employment Laws and regulations and, to the Knowledge of Seller, no
such investigation is threatened, except, with respect to any such notices
received or investigation threatened after the date hereof but on or prior to
the Closing Date, as would not reasonably be expected to result in Material
Adverse Effect.

4.21 Employee Benefits. The Project Companies do not sponsor, maintain or
contribute to any Benefit Plan. With respect to any “employee benefit plan,”
within the meaning of Section 3(3) of ERISA, that is sponsored, maintained or
contributed to, or has been sponsored, maintained or contributed to within six
years prior to the date of this Agreement, by any Project Company, Seller or any
ERISA Affiliate, (a) no withdrawal liability, within the meaning of

 

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Section 4201 of ERISA, has been incurred, which withdrawal liability has not
been satisfied, (b) no liability to the Pension Benefit Guaranty Corporation has
been incurred by any such entity, which liability has not been satisfied, (c) no
accumulated funding deficiency, whether or not waived, within the meaning of
Section 302 of ERISA or Section 412 of the Code has been incurred, (d) all
contributions (including installments) to such plan required by Section 302 of
ERISA and Section 412 of the Code have been timely made and (e) no condition
exists or event or transaction has occurred with respect to any such plan which
would reasonably be expected to result in any Project Company incurring any
material liability, fine or penalty. Seller has provided Buyer with, or access
to, a copy of the Severance Plan.

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF BUYER

Buyer hereby represents and warrants to Seller that:

5. 1 Organization. Buyer is a limited liability company duly formed, validly
existing and in good standing under the Laws of Delaware. Buyer is duly
qualified or licensed to do business in each other jurisdiction where the
actions to be performed by it hereunder makes such qualification or licensing
necessary, except in those jurisdictions where the failure to be so qualified or
licensed would not reasonably be expected to result in a material adverse effect
on its ability to perform such actions hereunder.

5.2 Authority. Buyer has all requisite company power and authority to enter into
this Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution and delivery by Buyer of this
Agreement and the performance by Buyer of its obligations hereunder have been
duly and validly authorized by all necessary limited liability company action on
behalf of Buyer. This Agreement has been duly and validly executed and delivered
by Buyer and constitutes the legal, valid and binding obligation of Buyer
enforceable against Buyer in accordance with its terms except as the same may be
limited by bankruptcy, insolvency, reorganization, fraudulent conveyance,
arrangement, moratorium or other similar Laws relating to or affecting the
rights of creditors generally or by general equitable principles.

5.3 No Conflicts. The execution and delivery by Buyer of this Agreement do not,
and the performance by Buyer of its obligations hereunder and the consummation
of the transactions contemplated hereby will not:

(a) conflict with or result in a violation or breach of any of the terms,
conditions or provisions of its Charter Documents;

(b) be in violation of or result in a breach of or default (or give rise to any
right of termination, cancellation or acceleration) under (with or without the
giving of notice, lapse of time, or both) any material Contract to which Buyer
is a party, except for any such violations or defaults (or rights of
termination, cancellation or acceleration) which would not, in the aggregate,
reasonably be expected to result in a material adverse effect on Buyer’s ability
to perform its obligations hereunder; or

 

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(c) assuming all required filings, waivers, approvals, consents, authorizations
and notices set forth in Schedule 5.3 (collectively, the “Buyer Approvals”) have
been made, obtained or given, (i) conflict with, violate or breach any material
term or provision of any Law applicable to Buyer or any of its material Assets
or (ii) require any material consent or approval of any Governmental Authority
or notice to, or declaration, filing or registration with, any Governmental
Authority, under any applicable Law.

5.4 Legal Proceedings. Buyer has not been served with notice of any Claim, and
to Buyer’s knowledge, none is threatened, against Buyer which seeks a writ,
judgment, order or decree restraining, enjoining or otherwise prohibiting or
making illegal any of the transactions contemplated by this Agreement.

5.5 Compliance with Laws and Orders. Buyer is not in violation of or in default
under any Law or order applicable to Buyer or its Assets the effect of which, in
the aggregate, would reasonably be expected to hinder, prevent or delay Buyer
from performing its obligations hereunder.

5.6 Brokers. Buyer does not have any liability or obligation to pay fees or
commissions to any broker, finder or agent with respect to the transactions
contemplated by this Agreement for which Seller or any of the Parent Companies
could become liable or obligated.

5.7 Acquisition as Investment. Buyer is acquiring the Company Interests for its
own account as an investment without the present intent to sell, transfer or
otherwise distribute the same to any other Person. Buyer has made, independently
and without reliance on Seller (except to the extent that Buyer has relied on
the representation and warranties of Seller in this Agreement), its own analysis
of the Company Interests, the Project Companies, the Assigned Contracts and the
Purchased Assets for the purpose of acquiring the Company Interests, and Buyer
has had reasonable and sufficient access to documents, other information and
materials as it considers appropriate to make its evaluations. Buyer
acknowledges that the Company Interests are not registered pursuant to the
Securities Act of 1933 (the “1933 Act”) and that none of the Company Interests
may be transferred, except pursuant to an applicable exception under the 1933
Act. Buyer is an “accredited investor” as defined under Rule 501 promulgated
under the 1933 Act.

5.8 Financial Resources. Buyer will have cash on hand or cash available pursuant
to the debt commitment letter and the equity commitment letter set forth on
Schedule 5.8, and will have cash available at the Closing, to enable it to
purchase the Company Interests on the terms hereof; provided that Buyer may
amend, modify, supplement or replace such debt commitment letter to the extent
that such actions could not reasonably be expected to in any way materially
delay or adversely affect the Closing or the transactions contemplated by this
Agreement (including by (a) adding any conditions to, or modifying any term that
results in the conditions being more onerous than, the conditions to closing
and/or funding set forth in such debt commitment letter or (b) decreasing the
amount of net proceeds available to be paid to Seller from the proceeds of loans
relating to such debt commitment letter (after giving effect to other
incremental funds available to the Buyer on similar or more favorable terms), or
(c) other actions that could reasonably be expected to adversely affect or
materially delay the Closing).

 

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5.9 No Conflicting Contracts. Except as set forth in Schedule 5.9. neither Buyer
nor any of its Affiliates is a party to any Contract to build, develop, acquire
or operate any power facility that would reasonably be expected to cause a delay
in any Governmental Authority’s granting of a Buyer Approval or a Seller
Approval, and neither Buyer nor any of its Affiliates has any plans to enter
into any such Contract prior to the Closing Date.

5.10 Opportunity for Independent Investigation.

Prior to its execution of this Agreement, Buyer has conducted to its
satisfaction an independent investigation and verification of the current
condition and affairs of the Project Companies, the Assigned Contracts, the
Purchased Assets and the Projects. In making its decision to execute this
Agreement and to purchase the Company Interests and assume the Assigned
Contracts, Buyer has relied and will rely solely upon the results of such
independent investigation and verification and the terms and conditions of this
Agreement.

5.11 Bridgeport and Griffith Purchase Price.

The Bridgeport 33 1/3% Purchase Price and the Griffith 50% Purchase Price
reflect the Buyer’s good faith, reasonable allocation of the Base Purchase Price
with respect to Company Interests relating thereto and the assets and
liabilities associated therewith.

ARTICLE VI

COVENANTS

The Parties hereby covenant and agree as follows:

6.1 Regulatory and Other Approvals. From the date of this Agreement until
Closing (the “Interim Period”):

(a) The Parties will, in order to consummate the transactions contemplated
hereby, (i) take all commercially reasonable steps necessary, and proceed
diligently and in good faith and use all commercially reasonable efforts, as
promptly as practicable, to obtain the Seller Approvals, Company Consents and
Buyer Approvals in form and substance reasonably satisfactory to Seller and
Buyer, and to make all required filings with, and to give all required notices
to, Governmental Authorities (provided that HSR Act filings and attachments need
not be exchanged or preapproved by the other party and provided that any
exchange of information between Seller and Buyer in connection with any filings
shall be done in a manner that complies with applicable antitrust laws) and
(ii) provide such other information and communications to such Governmental
Authorities or other Persons as such Governmental Authorities or other Persons
may reasonably request in connection therewith.

(b) The Parties will provide prompt notification to each other when any such
approval referred to in Section 6.1(a) is obtained, taken, made, given or
denied, as applicable, and will advise each other of any material communications
with any Governmental Authority or other Person regarding any of the
transactions contemplated by this Agreement.

 

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(c) In furtherance of the foregoing covenants:

(i) Each Party shall prepare, as soon as is practical following the execution of
this Agreement, all necessary filings in connection with the transactions
contemplated by this Agreement that may be required by FERC or under the HSR Act
or any other federal, state or local Laws. Each Party shall submit such filings
as soon as practicable, but in no event later than 14 days (subject to extension
by mutual agreement) after the execution hereof for filings with the FERC, and
14 days after the execution hereof for filings under the HSR Act. The Parties
shall request expedited treatment of any such filings, shall promptly furnish
each other with copies of any notices, correspondence or other written
communication from the relevant Governmental Authority, shall promptly make any
appropriate or necessary subsequent or supplemental filings and shall cooperate
in the preparation of such filings as is reasonably necessary and appropriate.

(ii) Buyer shall not, and shall cause its Affiliates not to, take any action
that could reasonably be expected to adversely affect the approval of any
Governmental Authority of any of the aforementioned filings.

(iii) Buyer shall cooperate in good faith with the Governmental Authorities and
undertake promptly any and all action required to complete lawfully the
transactions contemplated by this Agreement, including proffering and consenting
to a governmental order providing for the sale or other disposition, or the
holding separate, of particular Assets, categories of Assets or lines of
business, of either assets or lines of business of any of the Project Companies
or of any other assets or lines of business of Buyer or its Affiliates in order
to remedy any material competition concerns that any Governmental Authority may
have. The entry by any Governmental Authority in any legal proceeding of a
governmental order permitting the consummation of the transactions contemplated
hereby but requiring any of the Assets or lines of business of Buyer or its
Affiliates to be held separate or sold or disposed of thereafter (including the
business and Assets of the Project Companies) shall not be deemed a failure to
satisfy the conditions specified in Sections 7.2, 7.4, 7.5, 8.2, 8.4 or 8.5.

6.2 Access of Buyer and Seller. (a) During the Interim Period, Seller will
provide Buyer and its Representatives with reasonable access, upon reasonable
prior notice and during normal business hours, to the Projects and the officers
and employees of Seller and its Affiliates who have significant responsibility
for one or more Project Companies, but only to the extent that such access does
not unreasonably interfere with the Business of Seller or the Project Companies
and that such access is reasonably related to the requesting Party’s obligations
and rights hereunder, and subject to compliance with applicable Laws; provided,
however, that Seller shall have the right to (i) have a Representative present
for any communication with employees or officers of Seller or its Affiliates and
(ii) impose reasonable restrictions and requirements for safety purposes. Buyer
shall be entitled, at its sole cost and expense, to have the Property surveyed
and to conduct non-invasive physical inspections (including a Phase I
environmental site assessment conforming generally with ASTM Standard E1527-00)
of the Property; provided, however, that Buyer shall not be entitled to collect
any air, soil, surface water or ground water samples nor to perform any invasive
or destructive sampling on the Property. Any such right of access and right to
survey and conduct physical inspections described in this Section 6.2 shall be
subject to the rights, if any, of any other owner of a Project Company or a
Project to approve such access. Buyer shall provide Seller with not less than
five Business Days prior written

 

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notice of the date and time on which any such entry upon the Property shall
occur. Promptly upon completion of any such entry, Buyer shall repair any damage
caused by such entry.

(b) Buyer agrees to indemnify and hold harmless Seller, its Affiliates and their
Representatives for any and all liabilities, losses, costs or expenses incurred
by Seller, its Affiliates or their Representatives arising out of the access
rights under this Section 6.2, including any Claims by any of Buyer’s
Representatives for any injuries or property damage while present on the
Property.

(c) From and after Closing, Buyer agrees, upon reasonable prior notice from
Seller, to provide to Seller and its Representatives access to or copies of
books and records of the Project Companies and Continued Employees to the extent
relating to events that occurred prior to Closing and to the extent needed for a
legitimate business purpose.

6.3 Certain Restrictions. Except as required or expressly permitted hereby, or
as otherwise set forth in Schedule 6.3, during the Interim Period, Seller will
(i) cause the Project Companies to operate in the ordinary course of business
consistent with past practices, and (ii) use commercially reasonable efforts to
preserve, maintain and protect in all material respects consistent with past
practices the Assets, rights, Properties and goodwill of each Project Company
(including by (A) taking the actions set forth on Schedule 2.2(c) to the extent
such actions were scheduled by such Project Company to be taken on or prior to
the Closing Date (subject to any delays or events beyond the control of such
Project Company), (B) pursuing the demolition of former units 1 through 5 and
the tank farm at the Moss Landing Project, including any remediation work in
connection therewith to the extent such actions were scheduled by such Project
Company to be taken on or prior to the Closing Date (subject to any delays or
events beyond the control of such Project Company) and (C) maintaining in all
material respects the Project Companies’ relationships with customers, suppliers
and Governmental Authorities). Without limiting the foregoing, except as
otherwise required or expressly permitted hereby or required by the terms of any
Permit identified on Schedule 4.15 or any Material Contract, as set forth in
Schedule 6.3 or as consented to by Buyer, which consent shall not be
unreasonably withheld, conditioned or delayed (except that this Section 6.3
shall not apply to Excluded Items, Terminated Contracts or services terminated
pursuant to Section 6.8), during the Interim Period, Seller shall not, and shall
cause the Project Companies and, where applicable, any Parent Company and any
Non-Company Affiliate, not to:

(b) create, permit or allow to exist any Lien (other than a Permitted Lien or
any Lien the release of which Seller is pursuing by commercially reasonable
efforts) against any of the Purchased Assets;

(c) grant any waiver of any material term under, or give any material consent
with respect to, any Material Contract or any Affiliate Contract;

(d) sell, transfer, remove, assign, convey, distribute or otherwise dispose of,
or use, other than in the ordinary course of business consistent with past
practices, any material Purchased Assets, including (i) any emissions
allowances, emission reduction credits, capital spares or inventory and (ii) any
transfer of capital spares other than transfers of such capital

 

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spares to another Project Company to the extent the failure to maintain such
capital spares would reasonably be expected to materially and adversely affect a
Project;

(e) other than accounts payable incurred in the ordinary course of business
consistent with past practices, or otherwise incurred pursuant to the Material
Contracts, Terminated Contracts, or Excluded Items incur, create, assume or
otherwise become liable for any Indebtedness or issue any debt securities or
assume or guarantee the obligations of any other Person;

(f) except as may be required to meet the requirements of applicable Law or
GAAP, change any accounting method or practice in a manner that is inconsistent
with past practice in a way that would materially and adversely affect the
Business or a Project Company;

(g) fail to maintain its limited liability company existence, merge or
consolidate with any other Person or acquire all or substantially all of the
Assets of any other Person;

(h) issue, reserve for issuance, pledge or otherwise encumber, sell or redeem or
enter into any Contract with respect to any limited liability company interests
or Equity Securities of any Project Company;

(i) liquidate, dissolve, recapitalize, reorganize or otherwise wind up its
business or operations;

(j) purchase any securities of any Person, except for short-term investments
made in the ordinary course of business consistent with past practices;

(k) enter into, terminate or amend any Material Contract or Affiliate Contract
(other than any Material Contract or Affiliate Contract entered into in the
ordinary course of business consistent with past practices which will be fully
performed prior to Closing);

(l) cancel any debts or waive any claims or rights having a value in excess of
$1,000,000;

(m) make any new, or change any existing, material election with respect to
Taxes;

(n) amend or modify its Charter Documents;

(o) purchase any individual item of equipment involving total consideration in
excess of $5,000,000;

(p) settle any dispute or Claim or compromise or settle any material liability
which results in a material non-current liability becoming due from a Project
Company after Closing or restrictions or limitations that materially and
adversely affect a Project Company’s ability to conduct business after Closing;

 

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(q) except in the ordinary course of business consistent with past practices or
as otherwise required by the terms of any collective bargaining agreement,
increase salaries or aggregate benefits payable to Available Employees;

(r) fail to discharge any material liability or make any material payment as it
comes due except in connection with a good faith dispute; or

(s) agree or commit to do any of the foregoing.

Notwithstanding the foregoing, Seller may permit the Project Companies to take
commercially reasonable actions with respect to emergency situations so long as
Seller shall, upon receipt of notice of any such actions, promptly inform Buyer
of any such actions taken outside the ordinary course of business consistent
with past practices.

6.4 Use of Certain Names. Within forty-five (45) days following Closing, Buyer
shall cause the Project Companies to cease using the words “DENA,” “DEGM”,
“Duke”, “DE”, “Duke Energy”, “Duke Energy Americas”, “Duke Energy North
America”, or “Duke Energy Global Markets” and any word or expression similar
thereto or constituting an abbreviation or extension thereof (the “Seller
Marks”), including eliminating the Seller Marks from the Property and Purchased
Assets and disposing of any unused stationery and literature of the Project
Companies bearing the Seller Marks, and thereafter, Buyer shall not, and shall
cause the Project Companies and their Affiliates not to, use the Seller Marks or
any logos, trademarks, trade names, patents or other Intellectual Property
rights belonging to Seller or any Affiliate thereof, and Buyer acknowledges that
it, its Affiliates and the Project Companies have no rights whatsoever to use
such Intellectual Property. Without limiting the foregoing:

(a) Within three Business Days after the Closing Date, Buyer shall cause each
Project Company whose name contains any of the Seller Marks to change its name
to a name that does not contain any of the Seller Marks.

(b) Within 30 days after the Closing Date, Buyer shall provide evidence to
Seller, in a format that is reasonably acceptable to Seller, that Buyer has made
all governmental filings required pursuant to clause (a) above and has provided
notice to all applicable Governmental Authorities and all counterparties to the
Material Contracts regarding the sale of the Project Companies and the Purchased
Assets to Buyer and the new addresses for notice purposes.

6.5 Support Obligations. (a) Buyer recognizes that certain of the Non-Company
Affiliates have provided credit support to certain of the Project Companies with
respect to the Projects pursuant to certain credit support obligations, all of
which that are outstanding as of the date hereof are set forth on Schedule
6.5(a) (the “Support Obligations”).

 

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(b) Prior to Closing, Buyer shall use commercially reasonable efforts to effect
the full and unconditional release, effective as of the Closing Date, of the
Non-Company Affiliates from all Support Obligations (provided, that with respect
to any Support Obligations posted or maintained in connection with an Affiliate
Contract, the terms of this Section 6.5 shall apply only to such Support
Obligations posted or maintained in connection with those Affiliate Contracts
that become Assigned Contracts), including by:

(i) subject to Section 6.5(c) with respect to the Lease Guaranty and the
Specified Guaranties, providing a Buyer guaranty to replace each existing
guaranty that is a Support Obligation containing terms equal to or more
favorable to the beneficiary thereof than the terms of such existing guaranty
(other than with respect to the credit rating of the guarantor); provided, that
if the beneficiary of any existing guaranty does not accept such a replacement
guaranty by the date that is 45 days after the date hereof (A) and the terms of
such existing guaranty or of any Contract or Law requiring such existing
guaranty to be maintained permit the replacement of such existing guaranty with
another form of credit support, Buyer will offer the beneficiary of such
existing guaranty such other form of credit support in order to obtain the
release of such existing guaranty or (B) if the terms of such existing guaranty
or of any such Contract or Law requiring such existing guaranty to be maintained
do not so permit the replacement of such existing guaranty, Buyer will offer to
replace such existing guaranty with a Letter of Credit or cash in the amount of
such existing guaranty in substitution therefor;

(ii) furnishing a Letter of Credit to replace each existing letter of credit
that is a Support Obligation containing terms and conditions that are
substantially identical to the terms and conditions of such existing letter of
credit;

(iii) instituting an escrow arrangement to replace each existing escrow
arrangement that is a Support Obligation with terms equal to or more favorable
to the counterparty thereunder than the terms of such existing escrow
arrangement;

(iv) posting a surety or performance bond to replace each existing surety or
performance bond that is a Support Obligation issued by a Person having a net
worth and Credit Rating at least equal to those of the issuer of such existing
surety or performance bond, and containing terms and conditions that are
substantially identical to the terms and conditions of such existing surety or
performance bond; and

(v) replacing any other security agreement or arrangement on substantially
identical terms and conditions to the existing security agreement or arrangement
that is a Support Obligation.

(c) Effective on or prior to Closing:

(i) With respect to the Lease Guaranty, Buyer shall cause the full defeasance of
the Outstanding Bonds (as defined in the South Bay Indenture) in accordance with
Article X of the South Bay Indenture or, if such Outstanding Bonds cannot be
defeased on the Closing Date, shall have deposited into an escrow account
satisfactory to Seller an amount of cash necessary to effect the defeasance
described above in this clause (i);

(ii) With respect to the PG&E Guaranties, the SDUPD Guaranties, and the SDG&E
Guaranty (collectively, the “Specified Guaranties”) and the Lease Guaranty
(other than the obligations thereunder that are satisfied by the defeasance of
the Outstanding Bonds (as defined in the South Bay Indenture) in accordance with
Section 6.5(c)(i)), Buyer shall use commercially reasonable efforts to effect
the full and unconditional release of Duke Capital LLC from all obligations
thereunder in accordance

 

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with the requirements of Section 6.5(b)(i) and by offering to the applicable
beneficiaries of such guaranties both (A) an unlimited guaranty from Buyer to
cover any obligations thereunder and (B)(1) with respect to the Lease Guaranty,
a Letter of Credit in an amount equal to $34 million,, (2) with respect to the
PG&E Guaranties, one or more Letters of Credit in an amount equal to $15 million
in the aggregate for all such PG&E Guaranties; (3) with respect to the SDUPD
Guaranties, one or more Letters of Credit in an amount equal to $5 million in
the aggregate for all of the SDUPD Guaranties, and (4) with respect to the SDG&E
Guaranty, a Letter of Credit in an amount equal to $1 million.

(d) Buyer shall use commercially reasonable efforts to cause the beneficiary or
beneficiaries of the Support Obligations to (i) remit any cash to Seller or one
of its Affiliates, as applicable, held under any escrow arrangement that is a
Support Obligation promptly following the replacement of such escrow arrangement
pursuant to Section 6.5(b)(iii) and (ii) terminate and redeliver to Seller or
one of its Affiliates each original copy of each original guaranty, letter of
credit or other instrument constituting or evidencing such Support Obligations.

(e) If Buyer is not successful, following the use of commercially reasonable
efforts, in obtaining the complete and unconditional release of the Non-Company
Affiliates from any Support Obligations prior to Closing (each such Support
Obligation, until such time as such Support Obligation is released in accordance
with Section 6.5(e)(i), a “Continuing Support Obligation”), then:

(i) from and after the Closing, Buyer shall continue to use commercially
reasonable efforts to obtain promptly the full and unconditional release of the
Non-Company Affiliates from each Continuing Support Obligation;

(ii) Buyer shall indemnify Seller and the Non-Company Affiliates for any
liabilities, losses, costs or expenses incurred by it or the Non-Company
Affiliates in connection with each Continuing Support Obligation;

(iii) Buyer shall not, and shall cause the Project Companies not to, effect any
amendments or modifications or any other changes to the contracts or obligations
to which any of the Continuing Support Obligations relate, or to otherwise take
any action, in each case that increases, extends or accelerates the liability of
the Non-Company Affiliates under any Continuing Support Obligation, without
Seller’s prior written consent;

(iv) Buyer shall deliver to Seller (for the benefit of Duke Capital LLC) at the
Closing and maintain at all times until the full and unconditional release of
each Continuing Support Obligation in accordance with Section 6.5(e)(i) either:

(A) a Letter of Credit in an amount equal to maximum amount as set forth under
“Subject Amount” on Schedule 6.5(a) for all Continuing Support Obligations in
the aggregate (and the full amount of such Letter of Credit shall be available
for drawing with respect to any one or more of the Continuing Support
Obligations), which shall include, as applicable, (1) until such time as the San
Diego Unified Port District (or another Person mutually agreed by the Parties)
provides an acknowledgement to Seller and Buyer that the demolition and

 

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remediation under the South Bay Lease Facility have been completed in accordance
with the terms of the South Bay Lease Facility, an amount equal to $34 million
with respect to the obligations under the Lease Guaranty, (other than the
obligations thereunder that are satisfied by the defeasance of the Outstanding
Bonds (as defined in the South Bay Indenture) in accordance with
Section 6.5(c)(i)),(2) $21.0 million in the aggregate for the PG&E Guaranties,
the SDUPD Guaranties and the SDG&E Guaranty collectively (the “Specified
Guaranty Amount”), which Specified Guaranty Amount shall decrease upon the full
and unconditional release of (x) the PG&E Guaranties by $15 million, (y) the
SDUPD Guaranties by $5 million, and (z) the SDG&E Guaranty by $1 million;
provided that if Buyer elects to fulfill its obligations under this
Section 6.5(e)(iv) through the provision of a Letter of Credit under this clause
(A) then, on the last Business Day of each three month period after the later of
the Closing Date or the effective date of such guaranty through the ten year
anniversary of the Closing Date, Buyer shall pay Seller or Seller’s designee a
fee of 1.0% (on a per annum basis) on the amount under the heading “Subject
Amount” on Schedule 6.5(a) with respect to each Specified Guaranty, which fee
shall increase by an additional 0.5% (on a per annum basis) on each six month
anniversary of the Closing Date (or such effective date, as applicable) with
respect to any such Specified Guaranty that remains outstanding, up to a maximum
fee of 3.0% (on a per annum basis); or

(B) an unlimited guaranty of the Buyer’s obligations hereunder with respect to
the Continuing Support Obligations from a Person with a Credit Rating of
Investment Grade, which guarantee shall be in form and substance satisfactory to
Seller in its sole discretion, provided that if Buyer elects to fulfill its
obligations under this Section 6.5(e)(iv) through the provision of a guaranty
pursuant to this clause (B), then on the last Business Day of each three month
period after the later of the Closing Date or the effective date of such
guaranty, Buyer shall pay Seller or Seller’s designee a fee of 1.0% (on a per
annum basis) on the amount under the heading “Subject Amount” on Schedule 6.5(a)
with respect to each Continuing Support Obligation, which fee shall increase by
an additional 0.5% (on a per annum basis) on each six month anniversary of the
Closing Date (or such effective date, as applicable) with respect to any such
Continuing Support Obligation that remains outstanding, up to a maximum fee of
3.0% (on a per annum basis);

(f) Notwithstanding anything in this Agreement to the contrary, Seller and the
Non-Company Affiliates may not terminate any Continuing Support Obligations at
any time after the Closing Date until such Continuing Support Obligations
terminate or expire by their terms or by consent of the applicable beneficiary
or are replaced pursuant to this Section 6.5.

(g) During the Interim Period, Buyer shall have the right to contact and have
discussions with each beneficiary of a Support Obligation in order to satisfy
its obligations under this Section 6.5; provided, however, that Buyer shall give
Seller prior notice before making any such contact.

 

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(h) From and after the Closing, Buyer shall indemnify Duke Capital LLC for any
liabilities, losses, costs or expenses incurred by it under (i) any guaranty
issued by it pursuant to (A) the requirements of Section 2.4(m) of the
Cooperation Agreement in respect of the Port Leases and Permits (as defined in
the Cooperation Agreement) or (B) the requirements of Section 13.14 of the
Cooperation Agreement, in either case where such liabilities, losses, costs or
expenses are incurred due to a breach of the Cooperation Agreement by Duke South
Bay or a breach of such Port Leases and Permits and (ii) the Siemens Guaranty,
except to the extent any such liabilities, losses, costs or expenses with
respect to the Siemens Guaranty constitute an Excluded Liability described as
the second item under the heading “Bridgeport” on Schedule 6.6.

6.6 Excluded Items. Notwithstanding anything in this Agreement to the contrary,
Buyer and Seller agree that the Purchased Assets shall exclude those items
listed on Schedule 6.6 (collectively, the “Excluded Items”), Seller shall retain
all benefits and liabilities with respect to the Excluded Items, and Seller
shall, prior to the Closing Date, use commercially reasonable efforts to cause
the Project Companies to distribute, transfer or assign each Excluded Item to
Seller or a Non-Company Affiliate. Buyer acknowledges that the inability of
Seller to have any Excluded Item distributed, transferred or assigned from any
Project Company for any reason shall not delay Closing and any Excluded Item
that Seller is unable to so distribute, transfer or assign by the Closing shall
be referred to as a “Non-Transferred Excluded Item.” After the Closing Date with
respect to each Non-Transferred Excluded Item, Buyer shall permit Seller to
exclusively direct and manage each Project Company’s participation in all
negotiations, arbitrations, litigation, claims, and/or bankruptcy or other
proceedings involving such Non-Transferred Excluded Item, whether existing on
the Closing Date or arising thereafter. Buyer shall also permit Seller to settle
or compromise on behalf of any Project Company any Non-Transferred Excluded Item
in Seller’s sole discretion, and shall promptly pay Seller any proceeds or
recoveries received in connection with any Non-Transferred Excluded Item. Buyer
shall, at Seller’s expense: (a) cause any Person under its control with
knowledge of relevant facts pertaining to any Non-Transferred Excluded Item to
provide assistance to Seller as reasonably requested by Seller; and (b) provide
any relevant books, records, or other information of any Project Company to
Seller and access to each Project site, as reasonably requested by Seller, in
connection with any Non-Transferred Excluded Item.

6.7 Employee and Benefit Matters. (a) Schedule 6.7(a) sets forth a list of
certain employees of Seller or its Affiliates (the “Available Employees”) who
have provided services relating to the Projects and that Seller and such
Affiliates will make available to Buyer to discuss potential employment with
Buyer (which discussions the Parties agree shall not violate Section 6.7(c)).
The list of Available Employees set forth on Schedule 6.7(a) identifies which
Available Employees are covered by a collective bargaining agreement or other
agreement with any labor representative of the Available Employees (the “Union
Employees”). Within five Business Days following the execution of this
Agreement, Seller has provided to Buyer (i) certain aggregated employee
information (with ranges and averages) relating to employee compensation and
benefits of the Available Employees and (ii) specific information relating to
each Available Employee (including salary) and as of a specified date regarding
such employee’s name (to the extent permitted by any applicable Contract and
Laws), job title and work location. As soon as administratively practicable
after Buyer provides Seller with a list of the Available Employees who have
accepted an employment offer from Buyer in accordance with Section 6.7(b),
Seller shall provide to Buyer, with respect to each Available Employee on such
list and

 

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subject to the consent of any such employee that Seller determines is required
by Law, information as of a specified date regarding such employee’s current
base salary or wages, hire date, vacation and sick leave accrual rates and
severance benefits.

(b) Within forty-five (45) days after the execution of this Agreement, Buyer
shall make offers of employment to each of the Available Employees that Buyer
desires to employ after Closing and such offer shall include terms and
provisions determined by Buyer that are consistent with the provisions of this
Section 6.7; provided, however, that (i) the base salary/wage rate that Buyer
extends to an Available Employee for the initial 12 consecutive month period of
employment with Buyer or an Affiliate of Buyer shall not be less than the
Available Employee’s base salary/wage rate that was in effect for the Available
Employee immediately prior to the Closing Date for employment with Seller or an
Affiliate of Seller and (ii) each offer that Buyer extends to a Union Employee
shall permit such Union Employee to maintain his or her work location (as of the
Closing Date) for the 12 month period after the Closing Date. Within forty-five
(45) days after the execution of this Agreement, Buyer shall provide Seller with
a list of the Available Employees to whom it has made offers of employment.
Within sixty (60) days after the execution of this Agreement, Buyer shall notify
Seller as to each Available Employee who has accepted employment with Buyer or
any of its Affiliates (each, a “Continued Employee”), which acceptance may be
conditioned upon the occurrence of the Closing and other typical hiring
policies, and each Available Employee who has rejected Buyer’s offer of
employment. Buyer shall indemnify and hold harmless Seller and its Affiliates
with respect to all claims and liabilities directly relating to or arising out
of Buyer’s employee selection and employment offer process described in this
Section 6.7(b) (including any claim of discrimination or other illegality in
such selection and offer process). The employment with Buyer or an Affiliate of
Buyer of each Available Employee who accepts such employment shall be effective
as of the Closing Date; provided, however, that on such date such Available
Employee is actively at work or is on a previously scheduled and approved (by
Seller or an Affiliate of Seller) paid time-off or other paid leave of absence
(other than a military leave of absence or a leave pursuant to which the
individual is eligible to receive long-term disability benefits under a Seller
Plan). Notwithstanding the foregoing, with respect to each Available Employee
who fails to become a Continued Employee as of the Closing Date because he or
she did not satisfy the requirements of the preceding sentence as of the Closing
Date, Buyer shall, or shall cause an Affiliate of Buyer to, at the time such
Available Employee is ready and available to return to active employment status,
provide such Available Employee with employment in a position comparable to that
which the individual had prior to the commencement of his or her absence from
active employment. Each Available Employee who becomes employed by Buyer or an
Affiliate of Buyer pursuant to the preceding sentence shall be considered a
Continued Employee for purposes of this Agreement, except that transitional
matters addressed in this Section 6.7 shall apply with respect to such employee
as of the date of his or her commencement of employment with Buyer or an
Affiliate of Buyer (rather than as of the Closing Date). Nothing in the
foregoing shall affect the right of Seller, or any Affiliate of Seller, to
terminate the employment of an Available Employee for any reason or at any time.

(c) Buyer agrees, if the Closing has not occurred, until the date that is two
years from and after the date of termination of this Agreement pursuant to
Section 9.1, not to employ, and to cause its Affiliates not to employ, any
Available Employees without Seller’s prior written consent. Buyer agrees that
neither it nor any of its Affiliates will, directly or

 

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indirectly, in any manner whatsoever, solicit for hire or employment any officer
or employee of the Seller or any of its Affiliates which Buyer or its Affiliates
learned of in connection with the acquisition contemplated hereby for a period
of two years after the date of this Agreement; provided, however, that this
sentence shall not apply to any solicitation (or any hiring as a result of any
solicitation) that consists of advertising in a newspaper or periodical of
general circulation or through the Internet.

(d) Effective as of the Closing Date, the Continued Employees shall cease to
participate in all “employee benefit plans” within the meaning of Section 3(3)
of ERISA of Seller or its Affiliates providing benefits to any Continued
Employees (the “Seller Plans”). Buyer shall not assume any of the Seller Plans.

(e) From and after the Closing Date and subject to the provisions set forth in
the proviso to the first sentence of Section 6.7(b), Buyer shall cause each
Continued Employee to be provided with compensation and benefits on a basis
substantially similar to those provided to similarly situated employees of Buyer
and its Affiliates; provided, however, that if the employment of any Continued
Employee is terminated by Buyer or an Affiliate of Buyer for a reason other than
cause within one year after the commencement of such employment, then Buyer
shall provide such Continued Employee with severance benefits equal to the
greater of (i) the severance benefits described in the Severance Plan that would
have been provided to such employee if his or her employment had been terminated
under circumstances entitling such employee to benefits under the Severance Plan
or (ii) the severance benefits described in the severance plan that Buyer and
its Affiliates make available to their similarly situated employees and that
would have been provided to such employee if his or her employment had been
terminated under circumstances entitling such employee to benefits under such
severance plan. Notwithstanding the foregoing, Buyer shall cause each Continued
Employee and his or her eligible dependents (including all such Continued
Employee’s dependents covered immediately prior to the Closing Date by a group
health plan maintained by Seller or an Affiliate of Seller) to be covered under
a group health plan maintained by Buyer or an Affiliate of Buyer that
(1) provides major medical and dental benefits coverages to the Continued
Employee and such eligible dependents effective immediately upon the Closing
Date and (2) credits such Continued Employee, for the year during which such
coverage under such group health plan begins, with any deductibles and
co-payments already incurred during such year under a group health plan
maintained by Seller or an Affiliate of Seller; provided, however, that for
purposes of applying this clause (3) with respect to any Continued Employee, the
Continued Employee shall be responsible for providing the necessary information
to Buyer based on explanation of benefit forms received by the Continued
Employee from the group health plan maintained by Seller or an Affiliate of
Seller. From and after the Closing Date, Buyer shall (and shall cause the
Project Companies and their respective Affiliates, as the case may be to)
recognize each Continued Employee’s years of company service prior to the
Closing Date with Seller and its Affiliates and any other Person that was
acquired by Seller or an Affiliate of Seller (whether through purchase, merger
or other combination) for purposes of terms of employment, compensation and
eligibility, vesting or other benefit/coverage eligibility (including
eligibility for retiree benefits/coverages), benefit accrual and benefit
determination under all employee benefit and compensation plans and programs
maintained after the Closing by Buyer, the Project Companies, and their
respective Affiliates in which such Continued Employee is permitted to
participate (other than for benefit accrual purposes under any defined benefit
pension plan), including paid

 

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vacation, paid sick time and severance benefits. Buyer shall cause each employee
welfare benefit plan or program sponsored by Buyer or an Affiliate of Buyer that
the Continued Employees may be eligible to participate in on or after the
Closing Date to waive any preexisting condition exclusion or restriction with
respect to participation and coverage requirements applicable to Continued
Employees. From and after the Closing Date, Buyer shall (and shall cause the
Project Companies and their respective Affiliates, as the case may be to)
recognize and give each Continued Employee credit for his or her accumulated
sick leave balance as of the Closing Date under the sick leave program
maintained by Seller and its Affiliates.

(f) Claims of Continued Employees and their eligible beneficiaries and
dependents for medical, dental, prescription drug, life insurance or other
welfare benefits (“Welfare Benefits”) (other than disability benefits) that are
incurred before the Closing Date shall be the sole responsibility of Seller and
the Seller Plans. Claims of Continued Employees and their eligible beneficiaries
and dependents for Welfare Benefits (other than disability benefits) that are
incurred from and after the Closing Date shall be the sole responsibility of
Buyer and its Affiliates. For purposes of this paragraph, a medical/dental claim
shall be considered incurred on the date when the medical/dental services are
rendered or medical/dental supplies are provided, and not when the condition
arose or when the course of treatment began. Claims of individuals receiving
long-term disability benefits under a Seller Plan as of the Closing Date shall
be the sole responsibility of Seller and the Seller Plans. Except as provided in
the preceding sentence, claims of Continued Employees and their eligible
beneficiaries and dependents for short-term or long-term disability benefits
from and after the Closing Date shall be the sole responsibility of Buyer and
its Affiliates (without regard to whether the circumstances giving rise to such
claim occurred before, on or after the Closing Date).

(g) All claims for health care and dependent care flexible spending account
benefits submitted after the Closing Date for expenses incurred prior to the
Closing Date by Continued Employees shall be paid by Seller’s or its Affiliates’
health care and dependent care flexible spending account plan to the extent
permitted in accordance with the terms of such plan.

(h) Claims for workers’ compensation benefits arising out of occurrences prior
to the Closing Date shall be the responsibility of Seller. Claims for workers’
compensation benefits for Continued Employees arising out of occurrences on or
after the Closing Date shall be the responsibility of Buyer.

(i) Notwithstanding anything to the contrary in Section 6.7, Buyer shall have
the right to use a third party or an Affiliate of Buyer operator to hire
Available Employees and to perform certain actions on behalf of Buyer under
Section 6.7, provided that in no event will such use of or performance by a
third party operator release Buyer from any of its obligations under
Section 6.7.

6.8 Termination of Certain Services and Contracts. Notwithstanding anything in
this Agreement to the contrary, prior to the Closing, Seller shall
(i) terminate, sever, or assign to Seller or a Non-Company Affiliate effective
upon or before the Closing any services provided to any of the Project Companies
by Seller or a Non-Company Affiliate, including the termination or severance of
insurance policies (including those policies referred to in Section 6.10), Tax
services, legal services and banking services (to include the severance of any
centralized

 

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clearance accounts), (ii) use commercially reasonable efforts to terminate or
assign to Seller or a Non-Company Affiliate each Contract listed on Schedule 6.8
, and (iii) cause all Claims or obligations (contingent or otherwise) between
any Project Company, on one hand, and Seller or any Non-Company Affiliate, on
the other, to be released effective immediately prior to Closing (collectively
such Contracts listed, the “Terminated Contracts”).

6.9 Indebtedness; Spare Parts; Distributions. Notwithstanding anything in this
Agreement to the contrary:

(a) Except for the South Bay Lease Facility, prior to or at the Closing, Seller
shall cause any and all Indebtedness of the Project Companies to be paid in full
and any and all Liens securing any such Indebtedness to be released such that
Buyer shall take title to the Project Companies free of any such Indebtedness or
any such Liens.

(b) Seller shall have the right to cause the Project Companies to pay cash
dividends, make cash distributions and assign accounts receivable to Seller or
its Affiliates at any time prior to the Closing. After the Closing, Buyer shall
promptly remit to Seller any amounts received by Buyer or the Project Companies
as payment on accounts receivable of any Project Company that such Project
Company assigned to Seller or a Non-Company Affiliate and that was not reflected
in the Adjusted Net Working Capital of the Project Companies as of the Closing
Date.

6.10 Insurance. Seller shall maintain or cause to be maintained in full force
and effect the insurance policies described on Schedule 4.17 until the Closing.
All such insurance coverage shall be terminated as of the Closing, except any
insurance described on Schedule 4.17 that relates to the Griffith Project and
that is not maintained by Seller or a Non-Company Affiliate. Buyer shall be
solely responsible for providing insurance to the Project Companies for any
event or occurrence after the Closing. Within 30 days after the execution of
this Agreement, Buyer shall prepare and file with the California Department of
Toxic Substances Control (“DTSC”) all documentation necessary to achieve
compliance by Buyer, effective as of Closing, with the financial responsibility
requirements of Division 4.5, Title 22 of the California Code of Regulations
applicable to the Morro Bay, Moss Landing, South Bay and Oakland Projects. Buyer
shall use its commercially reasonable efforts to expedite DTSC review and
approval of such documentation and DTSC release of Seller and any Non-Company
Affiliates from such financial responsibility.

6.11 Casualty. If any of the Purchased Assets is damaged or destroyed by
casualty loss after the date hereof and prior to the Closing, and (x) the cost
of restoring such damaged or destroyed Purchased Assets to a condition
reasonably comparable to their prior condition and (y) the amount of any lost
profits reasonably expected to accrue after Closing as a result of such damage
or destruction to such Purchased Assets (net of and after giving effect to any
insurance proceeds available to the Project Companies for such restoration and
lost profits and any tax benefits related thereto) (such costs and lost profits
with respect to any Purchased Assets, the “Restoration Cost”, provided, that
with respect to the Purchased Assets of Southwest Power Partners, ED Services,
or Griffith Energy, “Restoration Cost” shall include only one-half (1/2) of such
costs) is greater than $2,500,000 but does not exceed 10% of the Base Purchase
Price, Seller may elect to reduce the amount of the Purchase Price by the
estimated Restoration Cost (as

 

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estimated by a qualified firm reasonably acceptable to Buyer and Seller), by
notice to Buyer, and such casualty loss shall not affect the Closing. If Seller
does not make such an election within 45 days after the date of such casualty
loss, Buyer may elect to terminate this Agreement within 10 Business Days after
the end of such 45 day period by written notice to Seller. If the Restoration
Cost is in excess of 10% of the Base Purchase Price, Seller may, by notice to
Buyer within 45 days after the date of such casualty loss, elect to (a) reduce
the Purchase Price by the estimated Restoration Cost (as estimated by a
qualified firm reasonably acceptable to Buyer and Seller) or (b) terminate this
Agreement, in each case by providing written notice to Buyer; provided, however,
that if Seller does not elect to terminate this Agreement as provided in this
sentence, then Buyer may, by written notice to Seller, terminate this Agreement
within ten Business Days of receipt by Buyer of Seller’s notice regarding its
election. If the Restoration Cost is $2,500,000 or less, (i) neither Buyer nor
Seller shall have the right or option to terminate this Agreement and (ii) there
shall be no reduction in the amount of the Purchase Price.

6.12 Condemnation. If any of the Purchased Assets is taken by condemnation after
the date hereof and prior to the Closing and such Purchased Assets have the sum
of (x) a condemnation value and (y) to the extent not included in preceding
clause (x), the amount of any lost profits reasonably expected to accrue after
Closing as a result of such condemnation of such Purchased Assets (net of and
after giving effect to any condemnation award any tax benefits related thereto)
(such sum with respect to any Purchased Assets, the “Condemnation Value”,
provided, that with respect to the Purchased Assets of Southwest Power Partners,
ED Services, or Griffith Energy, “Condemnation Value” shall include only
one-half (1/2) of such value)) greater than $2,500,000 but do not have a
Condemnation Value (as determined by a qualified firm reasonably acceptable to
Buyer and Seller) in excess of 10% of the Base Purchase Price, Seller may elect
to reduce the Purchase Price by such Condemnation Value (less the amount of any
condemnation award and tax benefits related thereto) by notice to Buyer, and
such condemnation shall not affect the Closing. If Seller does not make such an
election within 45 days after the date of such condemnation, Buyer may elect to
terminate this Agreement within 10 Business Days after such 45 day period by
written notice to Seller. If the Condemnation Value is in excess of 10% of the
Base Purchase Price, Seller may, by notice to Buyer within 45 days after the
award of condemnation proceeds, elect to (a) reduce the Purchase Price by such
Condemnation Value (after giving effect to any condemnation award available and
tax benefits related thereto) or (b) terminate this Agreement, in each case by
providing written notice to Buyer; provided, however, that if Seller does not
elect to terminate this Agreement as provided in this sentence, then Buyer may,
by written notice to Seller, terminate this Agreement within 10 Business Days of
receipt by Buyer of Seller’s notice regarding its election. If the Condemnation
Value is $2,500,000 or less, (A) neither Buyer nor Seller shall have the right
or option to terminate this Agreement and (B) there shall be no reduction in the
amount of the Purchase Price.

6.13 Transfer Taxes. Notwithstanding anything in this Agreement to the contrary,
Seller and Buyer shall each pay any Transfer Taxes imposed on it by Law as a
result of the sale of the Company Interests, but, notwithstanding such
requirement at Law, each of Seller and Buyer shall bear half of the total of all
such Transfer Taxes. Accordingly, if either Party is required at Law to pay more
than its half of any such Transfer Taxes, the other Party shall promptly
reimburse such first Party for amounts in excess of such half. Seller and Buyer
shall timely file their own Transfer Tax returns as required by Law and shall
notify the other Party

 

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when such filings have been made. Seller and Buyer shall cooperate and consult
with each other prior to filing such Transfer Tax returns to ensure that all
such returns are filed in a consistent manner. Seller’s Transfer Tax obligation
under this Section 6.13 is limited to those Transfer Taxes arising from Buyer’s
purchase of the Company Interests and the Purchased Assets and any actions
occurring prior to the Closing, and Buyer is solely responsible for any Transfer
Taxes arising from any action to dissolve, terminate or restructure any Project
Company or to convey, distribute or transfer any assets, properties or other
rights by deed, bill of sale or otherwise to or from any Project Company after
the Closing.

6.14 Transition Services Arrangements.

(a) For a period of three months following the Closing Date, upon the request
from time to time from Buyer, Seller shall provide or cause to be provided to
the Project Companies or Buyer those services listed on Schedule 6.14(a) as are
requested by Buyer (but Seller shall have no obligation to provide any such
services that were provided by any employee of Seller that is hired by Buyer,
its Affiliates or the Project Companies on or after the Closing) (the services
listed thereon, collectively, the “Transition Services”). Seller shall and shall
cause its Affiliates to perform any Transition Services provided hereunder in
good faith, on a commercially reasonable basis, (i) in all material respects in
compliance with all Laws and (ii) to the extent not inconsistent therewith, in
substantially the same quality and manner as the same or comparable services
were provided by Seller or its Affiliates to the Project Companies during the
one year preceding the Closing Date; provided, however, that (x) Seller shall
have no liability to Buyer or its affiliates for any acts or omissions of it or
of any Non-Company Affiliate in connection with this Section 6.14 and the
Transition Services (and Buyer shall indemnify and hold harmless Seller and the
Non-Company Affiliates from and against any and all losses, liabilities and
expenses relating to the Transition Services) except to the extent of the gross
negligence or willful misconduct of Seller or such Non-Company Affiliate and
(y) the exclusive remedies of Buyer and its Affiliates against Seller and the
Non-Company Affiliates for any breach of this Section 6.14 shall be limited to
termination (effective upon notice) of the affected Transition Service and
monetary damages, which in no event shall exceed the amount paid to Seller and
the Non-Company Affiliates pursuant to Section 6.14(b). Buyer also acknowledges
that certain personnel of Seller and/or the Non-Company Affiliates may leave the
employment of such Persons or terminate their employment or contract with such
Persons during the period during which Seller shall provide Transition Services
hereunder, and that the loss of such personnel may materially impede Seller’s
ability to perform its obligations hereunder; Seller makes no representation or
warranty regarding the ability of Seller and/or the Non-Company Affiliates to
retain any such employees or subcontractors and neither Seller nor any of its
Affiliates shall have any liability as to the result of the loss of any such
employees.

(b) Buyer, upon not less than 30 days’ written notice, at any time and from time
to time may, as of the date set forth in such notice (which may not precede the
end of such 30-day period without Seller’s approval), reduce or terminate its
right to receive (and Seller’s associated obligations to provide or cause the
provision of) any or all of the applicable Transition Services. Buyer shall
reimburse Seller for the reasonable costs or expenses actually incurred by
Seller or any Non-Company Affiliate attributable to the provision of Transition
Services, including any allocations of overhead expenses of Seller or any
Non-Company Affiliate and any retention payments required to retain employees
who provide Transition Services (such costs and

 

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expenses, the “Direct Costs”). No later than the 15th Business Day after each
calendar month during which Seller provided Transition Services, beginning with
the calendar month immediately following the Closing, Seller shall submit an
invoice to the Buyer for the Direct Costs incurred during such calendar month.
If the Closing occurs on a day other than the last day of a month, the invoice
shall be only for those Transition Services provided from such date until the
end of the month in which the Closing took place. Buyer shall pay or cause to be
paid the undisputed portion of each such invoice it receives within 15 days
after its receipt.

6.15 Morro Bay Lease Consent. Notwithstanding anything to the contrary in this
Agreement:

(a) If each condition to Closing set forth in Articles VII and VIII has been
fulfilled other than the Company Consents with respect to the Morro Bay Project
identified with an asterisk on Schedule 4.2 (any such Company Consents, the
“Outstanding Consent”), Seller may, at its election, require Buyer to proceed
with the Closing with respect to the Company Interests other than the Morro Bay
Company Interest (the “Initial Company Interests”). If Seller so elects to
proceed with Closing with respect to the Initial Company Interests, it shall
provide Buyer with written notice of such election, and the Closing with respect
to the Company Interests other than the Morro Bay Company Interest (the “Initial
Closing”) shall occur on the third Business Day after delivery of such notice to
Buyer (such date, the “Initial Closing Date”). The terms and procedures for the
Initial Closing shall be the same as for the Closing provided for herein, except
that (i) Seller shall not be obligated to convey, and Buyer shall not be
obligated to accept, the Morro Bay Company Interest, (ii) the portion of the
Purchase Price payable at the Initial Closing shall be equal to the amount set
forth in Section 2.2(a) less the Morro Bay Purchase Price plus or minus the
amounts calculated pursuant to Sections 2.2(b) and (c) (but excluding from such
calculation any amounts attributable to the Morro Bay Project) and (iii) the
Morro Bay Project and the Morro Bay Company Interest shall be deemed to be
excluded from each representation and warranty made by Seller at the Initial
Closing. Each reference to “the Closing” or “the Closing Date” in a provision
hereof as such provision relates to any of the Initial Company Interests (and
the Projects associated therewith) shall be deemed to be a reference to “the
Initial Closing” or “the Initial Closing Date,” respectively. If the Initial
Closing has occurred, no Party may terminate this Agreement pursuant to Article
IX except with respect to the Morro Bay Company Interest and the Morro Bay
Project and the obligation to close with respect thereto.

(b) If the Parties have consummated the Initial Closing and the Outstanding
Consent is subsequently obtained, the closing with respect to the Morro Bay
Company Interest (the “Subsequent Closing”) shall take place on the date and in
the manner required for the Closing under Section 2.3 (the date of such
Subsequent Closing, the “Subsequent Closing Date”), except that (i) the portion
of the Purchase Price payable at the Subsequent Closing shall be equal to the
Morro Bay Purchase Price plus or minus the amounts calculated pursuant to
Sections 2.2(b) and (c) (calculated using the Subsequent Closing Date in place
of the Closing Date, but including in such calculations only amounts
attributable to the Morro Bay Project) and (ii) all representations and
warranties made by Seller at the Subsequent Closing shall be deemed to be made
solely with respect to the Morro Bay Project and the Morro Bay Company Interest.
For purposes of the Subsequent Closing, each reference to “the Closing” or “the
Closing Date” in a provision hereof as such provision relates to the Morro Bay
Company Interest (and the Morro

 

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Bay Project) shall be deemed to be a reference to “the Subsequent Closing” or
“the Subsequent Closing Date” respectively.

6.16 Bridgeport Dispute. It is recognized that as of the date hereof UBE has put
the UBE Interests to Duke Bridgeport Energy pursuant to Section 8.3(b) of the
Bridgeport LLC Agreement, that Duke Bridgeport Energy owes to UBE the purchase
price therefor when such price is determined in connection with the settlement
or resolution of the Bridgeport Dispute, that Duke Bridgeport Energy has the
obligation to purchase the UBE Interests from UBE, and that the Purchase Price
to be paid on the Closing Date reflects whether the Bridgeport Dispute is
resolved prior to the Closing Date. If the Bridgeport Dispute is not resolved
prior to the Closing Date, then from and after the Closing Date Seller shall
have the exclusive right, at its expense, to direct, control, settle and resolve
the Bridgeport Dispute (including the right to agree with UBE upon a value of
the UBE Interest). Buyer shall be liable for, and shall pay or cause Duke
Bridgeport Energy to pay to UBE any amount agreed upon by Seller and UBE for the
value of the UBE Interest in connection with the settlement or resolution of the
Bridgeport Dispute (such amount, the “Bridgeport Resolution Amount”), provided,
however, that (concurrently with such payment to UBE) Seller shall pay to Buyer,
or Buyer shall pay to Seller, the amount by which the Bridgeport Resolution
Amount is greater or lesser than, respectively, the sum of (a) the Bridgeport
33 1/33% Purchase Price plus (b) one third (1/3) of the Adjusted Net Working
Capital with respect to Bridgeport Energy and NC Development as of Closing.

6.17 Connecticut Transfer Act. Buyer shall, at its sole cost and expense,
(a) prepare the Form III and Environmental Condition Assessment Form required by
the Connecticut Transfer Act for the purchase and sale of the Company Interests
in Duke Bridgeport Energy to occur at the Closing; (b) provide the completed
Form III and Environmental Condition Assessment Form to Seller not less than 10
days prior to the Closing for Seller’s review and approval; (c) execute said
Form III as the “Transferee” and as the “Certifying Party” thereon on or before
the Closing Date; (d) execute the Environmental Condition Assessment Form as the
party submitting same; (e) provide a bank check made payable to the Connecticut
Department of Environmental Protection in the amount required for a Form III
filing at the Closing; and (f) perform the obligations imposed upon it as the
“Certifying Party” on said Form III and by this Section 6.17. Seller shall, at
its sole cost and expense (i) execute said Form III as the “Transferor” thereon;
and (ii) file the duly executed and delivered Form III and duly executed and
delivered Environmental Condition Assessment Form with the Connecticut
Department of Environmental Protection together with the appropriate filing fee
and fee form within 10 days after the Closing.

6.18 Long Term Services Agreements. Seller may cause each Project Company party
to a GE LTSA to terminate such GE LTSA effective as of the Closing Date unless
(a) Buyer provides written notice at least 10 Business Days prior to the Closing
Date to Seller requesting that such Project Company not terminate such GE LTSA
and (b) Buyer delivers to Seller, contemporaneous with the notice described in
the preceding clause (a), a written release with an effective date on or before
the Closing Date fully discharging and releasing the guarantor under each
Support Obligation issued with respect to such GE LTSA on behalf of such Project
Company and executed by the beneficiary of such Support Obligation. During the
Interim Period, Buyer shall have the right to contact and have discussions with
General Electric International, Inc. to discuss the GE LTSAs.

 

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6.19 Tax Matters. Except as provided in Section 6.13 relating to Transfer Taxes:

(a) With respect to any Tax return covering a taxable period ending on or before
the Closing Date (a “Pre-Closing Taxable Period”) that is required to be filed
after the Closing Date with respect to a Project Company, (i) Seller shall cause
such Tax return to be prepared in a manner consistent with practices followed in
prior taxable periods and in compliance with applicable Law except as required
by change in Law or fact and shall deliver such Tax return as so prepared to
Buyer not later than 15 days (30 days with respect to the partnership returns
for Bridgeport Energy and NC Development and 3 days with respect to any Property
Tax return) prior to the due date (including extensions) for filing such Tax
return for Buyer’s review and comments, (ii) with respect to any issue that
could materially and adversely affect Buyer or the applicable Project Company in
a taxable period (or portion thereof) beginning after the Closing Date, Seller
shall cooperate and consult with Buyer to finalize such Tax return, and
(iii) thereafter, subject to Seller’s payment to Buyer of such Tax in compliance
with Section 6.19(b), Buyer shall cause such Tax return to be executed and duly
and timely filed with the appropriate Taxing Authority and shall pay all Taxes
shown as due and payable on such Tax return. With respect to any Tax return
covering a taxable period beginning on or before the Closing Date and ending
after the Closing Date (a “Straddle Taxable Period”) that is required to be
filed after the Closing Date with respect to a Project Company, (i) Buyer shall
cause such Tax return to be prepared (in a manner consistent with practices
followed in prior taxable periods except as required by a change in Law or fact)
and shall deliver a draft of such Tax return to Seller for Seller’s review and
approval at least 15 days prior to the due date (including extensions) for
filing such Tax return, (ii) Seller and Buyer shall cooperate and consult with
each other in order to finalize such Tax return, and (iii) thereafter, subject
to Seller’s payment to Buyer of any portion of such Tax in compliance with
Section 6.19(b), Buyer shall cause such Tax return to be executed and duly and
timely filed with the appropriate Taxing Authority and shall pay all Taxes shown
as due and payable on such Tax return. Notwithstanding the foregoing, with
respect to Southwest Power Partners, ED Services and Griffith Energy, neither
Seller nor Buyer shall be required by reason of this Section 6.19(a) to prepare
any Tax return which for the prior taxable period was prepared by a Person other
than Seller.

(b) Subject to Section 10.1(b), Seller shall be responsible for and indemnify
the Buyer Indemnified Parties against, and Seller shall be entitled to all
refunds or credits of, any Tax with respect to a Project Company that is
attributable to a Pre-Closing Taxable Period or to that portion of a Straddle
Taxable Period that ends on the Closing Date. Within 5 days prior to the due
date for the payment of any such Tax, Seller shall pay to Buyer the amount of
such Taxes, less any prepaid Taxes. With respect to a Straddle Taxable Period,
Seller and Buyer shall determine the Tax attributable to the portion of the
Straddle Taxable Period that ends on the Closing Date by an interim closing of
the books of the Project Company as of the Closing Date, except for ad valorem
or property Taxes (“Property Taxes”) and franchise Taxes based solely on capital
which shall be prorated on a daily basis to the Closing Date. For this purpose,
any franchise Tax paid or payable with respect to the Project Company shall be
allocated to the taxable period for which payment of the Tax provides the right
to engage in business, regardless of the taxable period during which the income,
operations, assets or capital comprising the base of such Tax is measured. In
determining whether a Property Tax is attributable to a Pre-Closing Taxable
Period or a Straddle Taxable Period, any Property Tax that is based on the
assessed value of any assets, property or other rights as of any lien date or
other specified valuation date

 

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shall be deemed a Property Tax attributable to the taxable period (whether a
fiscal year or other tax year) specified on the relevant Property Tax bill that
is issued with respect to that lien date or other valuation date.
Notwithstanding the foregoing, with respect to any Project Company in which
Seller does not directly or indirectly own 100% of the Company Interests, the
calculation of the amount of Tax of such Project Company for which Seller is
responsible or entitled to refunds or credits under this Section 6.19(b) shall
be made by reference to Seller’s direct and indirect percentage ownership of
such Project Company.

(c) Subject to Section 10.1 (a), Buyer shall be responsible for and indemnify
Seller against, and Buyer shall be entitled to all refunds and credits of, all
Taxes of the Project Companies that are attributable to a taxable period (or
portion thereof) beginning after the Closing Date.

(d) With respect to any Tax for which Seller is responsible, Seller shall have
the right, at its sole cost and expense, to initiate any claim for refund and to
control (in the case of a Pre-Closing Taxable Period) or participate in (in the
case of a Straddle Taxable Period) the prosecution, settlement or compromise of
any proceeding involving such Tax, including the determination of the value of
property for purposes of real and personal property ad valorem Taxes. Buyer
shall (and shall cause the relevant Project Company to) take such action in
connection with any such proceeding as Seller shall reasonably request from time
to time to implement the preceding sentence, including the selection of counsel
and experts and the execution of powers of attorney. Notwithstanding the
foregoing, Seller shall not settle any proceeding with respect to any issue that
could materially and adversely affect Buyer or the applicable Project Company in
a taxable period (or portion thereof) beginning after the Closing Date without
Buyer’s prior written consent, not to be unreasonably withheld. Buyer shall (and
shall cause the relevant Project Company to) give written notice to Seller of
its receipt of any notice of any audit, examination, claim or assessment for any
Tax for which Seller is responsible within 20 days after its receipt of such
notice; failure to give any such written notice within such 20-day period shall
limit Seller’s indemnification obligation pursuant to this Agreement to the
extent Seller is actually prejudiced by such failure.

(e) Seller shall grant to Buyer (or its designees) access at all reasonable
times to all of the information, books and records relating to the Project
Companies within the possession of Seller (including workpapers and
correspondence with Taxing Authorities), and shall afford Buyer (or its
designees) the right (at Buyer’s expense) to take extracts therefrom and to make
copies thereof, to the extent reasonably necessary to permit Buyer (or its
designees) to prepare Tax returns, respond to Tax audits and investigations,
prosecute Tax protests, appeals and refund claims and to conduct negotiations
with Taxing Authorities. Buyer shall grant or cause the Project Companies to
grant to Seller (or its designees) access at all reasonable times to all of the
information, books and records relating to the Project Companies for Pre-Closing
Taxable Periods or Straddle Taxable Periods within the possession of Buyer
(including workpapers and correspondence with Taxing Authorities) and to the
employees of the Project Companies, and shall afford Seller (or its designees)
the right (at Seller’s expense) to take extracts therefrom and to make copies
thereof, in each case to the extent reasonably necessary to permit Seller (or
its designees) to prepare Tax returns, respond to Tax audits and investigations,
prosecute Tax protests, appeals and refund claims and to conduct negotiations
with Taxing Authorities. After the Closing Date, Seller and Buyer will preserve
all information, records or

 

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documents in their respective possessions relating to liabilities for Taxes of
the Project Companies for Pre-Closing Taxable Periods or Straddle Taxable
Periods until six months after the expiration of any applicable statute of
limitations (including extensions thereof) with respect to the assessment of
such Taxes; provided, that neither Party shall dispose of any of the foregoing
items without first offering such items to the other Party.

(f) If after the Closing Buyer or a Project Company receives a refund or
utilizes a credit of any Tax of a Project Company attributable to a Pre-Closing
Taxable Period or that portion of a Straddle Taxable Period ending on the
Closing Date, Buyer shall pay to Seller within ten Business Days after such
receipt or utilization an amount equal to such refund received or credit
utilized, together with any interest received or credited thereon. Buyer shall,
and shall cause the Project Company to, use commercially reasonable efforts to
obtain a refund or credit of any Tax of the Project Company attributable to a
Pre-Closing Taxable Period or that portion of a Straddle Taxable Period ending
on the Closing Date or to mitigate, reduce or eliminate any such Tax that could
be imposed for a Pre-Closing Taxable Period or that portion of a Straddle
Taxable Period ending on the Closing Date (including with respect to the
transactions contemplated hereby).

(g) In the event that Seller initiates a claim for refund from a Taxing
Authority with regard to any Tax of a Project Company attributable to a
Pre-Closing Taxable Period or that portion of a Straddle Taxable Period ending
on the Closing Date, whether the initiation of such claim begins prior to or
after the Closing, Seller shall have all rights to and interest in such refund.
Buyer shall, upon request, provide Seller a limited power of attorney allowing
Seller to pursue such claim for refund with and collect such refund from such
Taxing Authority. Notwithstanding the foregoing, Buyer shall have the right to
participate at its own expense in any action with respect to such claim for
refund, and Seller shall not settle any such claim in a manner that could
materially and adversely affect Buyer or the applicable Project Company in a
taxable period (or portion thereof) beginning after the Closing Date without
Buyer’s prior written consent, not to be unreasonably withheld. If after the
Closing Buyer or the Project Company receives a refund or utilizes a credit of
any such Tax with regard to a claim so initiated by Seller, Buyer shall pay to
Seller within ten Business Days after such receipt or utilization an amount
equal to such refund received or credit utilized, together with any interest
received or credited thereon.

(h) In the event that Seller initiates a claim for refund from a third party who
improperly withheld sales and use Tax, or withheld excessive sales and use Tax,
with regard to a Project Company attributable to a Pre-Closing Taxable Period or
that portion of a Straddle Taxable Period ending on the Closing Date, whether
the initiation of such claim begins prior to or after the Closing, Seller shall
have all rights to and interest in such refund. Buyer shall, upon request,
provide Seller a limited power of attorney allowing Seller to pursue such claim
for refund with and collect such refund from such third party. Notwithstanding
the foregoing, (A) Seller shall not initiate any such claim for refund from a
third party without Buyer’s prior written consents, not to be unreasonably
withheld, (B) Buyer shall be entitled to participate with Seller in any
discussions with such third party and (C) Seller shall not settle any such claim
in a manner that could materially and adversely affect Buyer or the applicable
Project Company in a taxable period (or portion thereof) beginning after the
Closing Date without Buyer’s prior written consent, not to be unreasonably
withheld. If after the Closing Buyer or the Project Company

 

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receives a refund of any such Tax with regard to a claim so initiated by Seller,
Buyer shall pay to Seller within ten Business Days after such receipt an amount
equal to such refund received, together with any interest received or credited
thereon.

(i) To the extent that the provisions of Article X are inconsistent with or
conflict with the provisions of this Section 6.19, the provisions of this
Section 6.19 shall control.

(j) Seller will use commercially reasonable efforts to cause each of Bridgeport
Energy, NC Development and Southwest Power Partners to have in effect for its
taxable year in which the Closing Date occurs an election under section 754 of
the Code.

6.20 Affiliate Contracts. From and after the date hereof, Buyer and Seller shall
use commercially reasonable efforts to obtain the written consent from each
party (other than Seller and its Affiliates) (each a “Counterparty”) to each
Affiliate Contract that is not a Terminated Contract to the assignment and
assumption or novation of such Affiliate Contract by each Assignor to each
Assignee identified on Schedule 1.1-AC as contemplated by Section 2.4(b) to
occur at Closing, provided, however, that with respect to those Affiliate
Contracts not marked with an asterisk on Schedule 1.1-AC, the failure to obtain
such consent shall not delay or prevent Closing, and any obligation to seek such
consent by Buyer or Seller shall (except with respect to any of the Affiliate
Contracts listed as items 4, 5 and 7 on Schedule 1.1-AC) terminate as of the
Closing. Without limiting the foregoing, Buyer’s efforts shall include offering
to replace any credit support posted or maintained by Seller or a Non-Company
Affiliate in favor of any Counterparty to any Affiliate Contract in accordance
with the requirements of Section 6.5, and in the case of Affiliate Contracts
with respect to which none of Seller or any Non-Company Affiliate has posted or
maintains any credit support, Buyer shall comply with all commercially
reasonable requests from any Counterparty under such Affiliate Contracts to post
or maintain credit support as security for the performance of the obligations of
the Assignee thereof. With respect to any of the Affiliate Contracts listed as
items 4, 5 and 7 on Schedule 1.1-AC which cannot be assigned and assumed or
novated at the Closing because of the failure to obtain such consent of the
Counterparty, (a) Seller and Buyer shall, to the extent permissible under
applicable Laws and under the terms of such Affiliate Contract, cause the
respective Assignor and Assignee identified on Schedule 1.1-AC to enter into
arrangements intended to put such Assignor and Assignee in substantially the
same economic position as if such Affiliate Contract were assigned and assumed
or novated from the Closing until such Affiliate Contract expires by its terms
and (b) if such arrangements are not entered into, Seller shall indemnify Buyer
against all losses and liabilities (including Non-reimbursable Damages) arising
out of the failure of any such Affiliate Contract to be assigned and assumed or
of such arrangements to be entered into; provided, however, that Seller’s
liability under this clause (b) with respect to the Affiliate Contract listed as
item 7 on Schedule 1.1-AC shall not exceed $10 million.

6.21 Further Assurances. Subject to the terms and conditions of this Agreement,
at any time or from time to time after the Closing, at any Party’s request and
without further consideration, the other Party shall execute and deliver to such
Party such other instruments of sale, transfer, conveyance, assignment and
confirmation, provide such materials and information and take such other actions
as such Party may reasonably request in order to consummate the transactions
contemplated by this Agreement.

 

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6.22 Moss Landing Toll. (a) If (i) an Affiliate of Seller (or, at the Seller’s
request, Buyer or a Project Company designated by Buyer) enters into the Moss
Landing Toll on or prior to the 90th day following the Closing Date and (ii) the
Counterparty to such Moss Landing Toll has approved on or prior to November 30,
2006 the transfer thereof to Buyer or a Project Company designated by Buyer (or
if no such approval is required), then Seller shall promptly provide notice to
Buyer which shall (A) state that the items set forth in Section 6.22(a)(i)and
(ii) have been satisfied, (B) attach a copy of the Moss Landing Toll, and
(C) set forth the amount of the Moss Landing Toll Purchase Price Adjustment
(which may be positive, negative or zero). Seller shall use commercially
reasonable efforts to cause the Moss Landing Toll to be transferred, if
applicable, to Buyer or such Project Company within 5 Business Days following
such notice. Concurrently with such transfer (or, if requested by Seller,
concurrently with the entry by Buyer or a Project Company designated by Buyer
into the Moss Landing Toll directly), Buyer shall pay to Seller or its designee
(by wire transfer of immediately available funds to an account designated by
Seller) an amount equal to the sum of the Moss Landing Toll Purchase Price and
the Moss Landing Toll Purchase Price Adjustment (which may be positive, negative
or zero).

(b) If Buyer fails to maintain a Minimum Net Worth of at least $440 million at
all times during the period from the Closing through December 15, 2006 (or, if
earlier, the date on which the Moss Landing Toll Purchase Price (as adjusted by
the Moss Landing Toll Purchase Price Adjustment) has been paid by Buyer to
Seller pursuant to Section 6.22(a)), then Buyer shall pay to an escrow agent
designated by Seller an amount equal to the Moss Landing Toll Purchase Price.
The monies held by such escrow agent shall be applied to the payment of the Moss
Landing Toll Purchase Price (as adjusted by the Moss Landing Toll Purchase Price
Adjustment) at the times set forth in Section 6.22(a) for the payment of such
amounts by Buyer. If the conditions set forth in Section 6.22(a)(i) and
(ii) above have not been satisfied on or before November 30, 2006, then such
funds on deposit with the escrow agent shall be returned to Buyer.

(c) During the period from the date of this Agreement through the earlier to
occur of (i) the assignment of the Moss Landing Toll to Buyer or a Project
Company designated by Buyer and (ii) November 30, 2006, Buyer and Seller agree
to use commercially reasonable efforts to enter into additional agreements or to
take such further actions as may be reasonably necessary to implement the items
set forth in Section 6.22, including (A) Buyer or such Project Company posting
(effective as of the transfer of the Moss Landing Toll to Buyer or such Project
Company) a guaranty, letter of credit or other credit support in accordance with
the terms of the Moss Landing Toll to the Counterparty under the Moss Landing
Toll, (B) Buyer effecting the full and unconditional release of Seller or its
Affiliates from any credit support provided by or on behalf of Seller and its
Affiliates with respect to the Moss Landing Toll, and (C) Buyer cooperating with
Seller, its Affiliates and the Counterparty to the Moss Landing Toll to cause
the assignment of such Toll to Buyer or such Project Company.

(d) In connection with the Moss Landing Toll, Seller agrees (a) to use
commercially reasonably efforts to include in the Moss Landing Toll (i) ML Other
Terms that are consistent with the corresponding terms described in the Moss
Landing RFP; provided that the ML Fixed Terms shall not be changed in any
material adverse respect from those corresponding terms set forth in the Moss
Landing RFP without the prior written consent of Buyer, which consent shall

 

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not be unreasonably withheld, conditioned or delayed and (ii) gas and power
scheduling procedures that are commercially reasonable in light of the operating
characteristics for the Moss Landing Project, (b) to use commercially reasonable
efforts to minimize the amount of credit support that Buyer will have to provide
in support of its obligations under the Moss Landing Toll and (c) not to agree
to any requirement that Buyer provide a Letter of Credit in excess of
$100 million without Buyer’s consent, which may be withheld in its sole,
reasonable discretion. If Buyer withholds its consent with respect to any
changes to the ML Fixed Terms, Buyer shall not enter into a transaction with
respect to the Moss Landing Project on terms that are similar to the Moss
Landing Toll proposed by Seller for a period of eighteen months following the
date on which Buyer withheld such consent.

(e) During the period from the date of this Agreement through November 30, 2006,
neither Buyer nor any of its Affiliates shall enter into any agreements or
negotiations with any potential Counterparty to the Moss Landing Toll that is
engaged in discussions with respect to the Moss Landing Toll with Seller or its
Affiliates to the extent such agreements or negotiations relate to sales of all
or any portion of the energy, capacity or other ancillary services with respect
to Unit 6 and/or Unit 7 of the Moss Landing Project.

6.23 Monthly Operating Report. During the Interim Period, on or prior to 30
Business Days following the end of each calendar month, Seller shall cause each
Project Company to provide Buyer with a monthly operating report with respect to
such Project Company prepared in the ordinary course of business consistent with
past practice.

6.24 Griffith Tag Along Offer. Within 5 Business Days after the date of this
Agreement, Buyer shall deliver to PPL a written offer to be held open for at
least 10 Business Days to purchase from PPL all the membership interests owned
by PPL in Southwest Power Partners for a purchase price equal to the Griffith
50% Purchase Price, plus fifty percent (50%) of the Net Working Capital (as of
the closing of the transactions contemplated by such offer) of Southwest Power
Partners, Griffith Energy and ED Services and upon substantially similar terms
and conditions as those set forth in this Agreement. Buyer shall promptly
provide Seller with updates on its discussions with PPL regarding such purchase.

6.25 DEGM Restructuring. Notwithstanding anything to the contrary in this
Agreement, and assuming any necessary Seller Approval relating to the FERC 203
filing has been obtained, Seller will prior to Closing effect the DEGM
Restructuring by causing DEGM to transfer the Company Interests of DE Mulberry,
DE Mohave and Duke Bridgeport Energy to DEGM Holding Subsidiary.

6.26 DENA Restructuring. Notwithstanding anything to the contrary in this
Agreement, Seller may at any time prior to Closing at its option effect the DENA
Restructuring and, promptly following the DENA Restructuring, Seller, shall
deliver to Buyer a new Schedule 3.4 reflecting the DENA Restructuring and a
supplement to Schedule 4.13 reflecting any changes to the Charter Documents of
the Parent Companies and/or the Project Companies resulting from the DENA
Restructuring. From and after the date of the delivery of such revised or
replacement Schedules, all references in this Agreement to Schedule 3.4 or
Schedule 4.13 shall be deemed to be references to such replacement Schedule 3.4
and revised Schedule 4.13, as applicable.

 

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6.27 Seller Creditworthiness. If Seller fails to maintain a Minimum Net Worth of
at least $700 million at any time from the Closing until the five year
anniversary of the Closing or at least $100 million thereafter, then Seller
shall cause one of its Affiliates with a Minimum Net Worth of at least such
amount during such relevant time period to guarantee to Buyer, in a form and
substance reasonably satisfactory to Buyer, the obligations of Seller under
Section 10.1 of this Agreement (it being agreed that Seller may, from time to
time, substitute a different Affiliate with such applicable Minimum Net Worth
for the Affiliate then guaranteeing such obligations and Buyer shall promptly
release such Affiliate then guaranteeing such obligations).

6.28 Letter of Credit. On or prior to January 11, 2006, Buyer shall provide to
Seller (i) $75,000,000 of cash to be held by Seller as collateral to secure
Buyer’s obligations under Section 9.3 or (ii) an irrevocable, standby letter of
credit with a face amount equal to $75,000,000 from a commercial bank with
ratings of at least “A-” by Standard & Poor’s Ratings Group ( a division of
McGraw Hill, Inc.) and at least “A3” by Moody’s Investor Services, Inc. which
shall be in form and substance reasonably satisfactory to Seller and which shall
permit Seller to draw upon such letter of credit upon a certification by Seller
to such bank that the amount of the requested draw is the amount due from Buyer
to Seller pursuant to Section 9.3.

ARTICLE VII

BUYER’S CONDITIONS TO CLOSING

The obligation of Buyer to consummate the Closing is subject to the fulfillment
of each of the following conditions (except to the extent waived in writing by
Buyer in its sole discretion):

7.1 Representations and Warranties. The representations and warranties made by
Seller in Articles III and IV shall be true and accurate in all material
respects on and as of the Closing Date as though made on and as of the Closing
Date or, in the case of representations and warranties that speak as to an
earlier date, such representations and warranties shall be true and accurate in
all material respects as of such earlier date.

7.2 Performance. Seller shall have performed and complied, in all material
respects, with the agreements, covenants and obligations required by this
Agreement to be performed or complied with by Seller at or before the Closing.

7.3 Officer’s Certificate. Seller shall have delivered to Buyer at the Closing a
certificate of an officer of Seller, dated as of the Closing Date, as to the
matters set forth in Sections 7.1 and 7.2.

7.4 Orders and Laws. There shall not be any litigation or proceedings (filed by
a Person other than Buyer or its Affiliates) or Law or order restraining,
enjoining or otherwise prohibiting or making illegal or threatening to restrain,
enjoin or otherwise prohibit or make illegal the consummation of the
transactions contemplated by this Agreement.

7.5 Consents and Approvals. Subject to Section 6.15, the Buyer Approvals and
those Company Consents marked with an asterisk on Schedule 4.2 shall have been
duly obtained, made or given and shall be in full force and effect, and all
terminations or expirations of waiting periods imposed by any Governmental
Authority shall have occurred; provided, however, that

 

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the absence of any appeals and the expiration of any appeal period with respect
to any of the foregoing shall not constitute a condition to Closing hereunder.

7.6 Resignation of Members, Managers, Officers and Directors. Seller shall have
caused the resignation or removal of all members, managers, officers and
directors, as applicable, nominated or appointed by Seller or its Affiliates to
any board or operating, management or other committee relating to the Projects
or established under the Project Companies’ Charter Documents, and shall have
delivered to Buyer at the Closing evidence of such resignations or removals.

7.7 Release of Intercompany Indebtedness; Release of Liens.

Seller shall have delivered to Buyer evidence, if any, of (i) cancellation of
any intercompany Indebtedness between any Project Company, on the one hand, and
Seller or any Non-Company Affiliate, on the other hand; and (ii) release of all
Liens on the Purchased Assets (other than Permitted Liens or Liens created by or
at the behest of Buyer) and the Company Interests (other than Liens described in
Section 3.4 and Liens created by or at the behest of Buyer).

ARTICLE VIII

SELLER’S CONDITIONS TO CLOSING

The obligation of Seller to consummate the Closing is subject to the fulfillment
of each of the following conditions (except to the extent waived in writing by
Seller in its sole discretion):

8.1 Representations and Warranties. The representations and warranties made by
Buyer in Article V shall be true and accurate in all material respects on and as
of the Closing Date as though made on and as of the Closing Date.

8.2 Performance. Buyer shall have performed and complied, in all material
respects, with the agreements, covenants and obligations required by this
Agreement to be so performed or complied with by Buyer at or before the Closing.

8.3 Officer’s Certificate. Buyer shall have delivered to Seller at the Closing a
certificate of an officer of Buyer, dated as of the Closing Date, as to the
matters set forth in Sections 8.1 and 8.2.

8.4 Orders and Laws. There shall not be any litigation or proceedings (filed by
a Person other than Seller or its Affiliates) or Law or order restraining,
enjoining or otherwise prohibiting or making illegal or threatening to restrain,
enjoin or otherwise prohibit or make illegal the consummation of the
transactions contemplated by this Agreement.

8.5 Consents and Approvals. The Seller Approvals shall have been duly obtained,
made or given and shall be in full force and effect, and all terminations or
expirations of waiting periods imposed by any Governmental Authority shall have
occurred; provided, however, that the absence of any appeals and the expiration
of any appeal period with respect to any of the foregoing shall not constitute a
condition to Closing hereunder.

 

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ARTICLE IX

TERMINATION

9.1 Termination. This Agreement may be terminated, and the transactions
contemplated hereby may be abandoned, as follows:

(a) at any time before the Closing, by Seller or Buyer, by written notice to the
other, in the event that any Law or final order restrains, enjoins or otherwise
prohibits or makes illegal the transactions contemplated pursuant to this
Agreement;

(b) at any time before the Closing, by Seller or Buyer, by notice to the other,
if the other has materially breached its obligations hereunder and such breach
(other than a breach of Buyer’s obligation to pay the Purchase Price in
accordance with the terms of Article II) has not been cured within 30 days
following written notification thereof; provided, however, that if, at the end
of such 30 day period, the breaching Party is endeavoring in good faith, and
proceeding diligently, to cure such breach, the breaching Party shall have an
additional 30 days in which to effect such cure;

(c) at any time before the Closing, by Buyer or Seller, by notice to the other,
on or after May 31, 2006;

(d) by Buyer or Seller pursuant to Section 6.11 or 6.12, by notice to the other
party in accordance with such Sections;

(e) by Seller, by written notice to the other, if Buyer has breached its
obligation under Section 6.28 and such breach has not been cured within one
Business Day; or

(f) by mutual written consent of Buyer and Seller.

9.2 Effect of Termination. If this Agreement is validly terminated pursuant to
Section 9.1, there will be no liability or obligation on the part of Seller or
Buyer (or any of their respective Representatives or Affiliates), provided that
(a) Sections 6.2(b), 9.2, 10.5(a), 10.5(b), 11.3, 11.4, 11.12 and 11.3 will
survive any such termination and (b) each Party shall continue to be liable for
any willful breach of this Agreement by it occurring prior to such termination.

9.3 Break-up Fee. (a) If this Agreement is terminated pursuant to
Section 9.1(b), then, in lieu of all other Claims and remedies that might
otherwise be available with respect thereto, including elsewhere hereunder and
notwithstanding any other provision of this Agreement:

(i) if Buyer has breached its obligation to pay the Purchase Price pursuant to
Sections 2.2 and 2.5 or its obligations under Section 6.1(a), 6.1(c) or 6.28
and, in the case of Section 6.28, such breach has not been cured within one
Business Day, then Buyer shall pay to Seller, by wire transfer of immediately
available funds within three Business Days following the date of termination, as
liquidated damages, 10% of the Base Purchase Price;

 

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(ii) if Seller has breached its obligations to sell the Company Interests to
Buyer pursuant to Sections 2.1 and 2.4 or its obligations under
Section 6.1(a) or 6.1(c), then Seller shall pay Buyer, by wire transfer of
immediately available funds within three Business Days following the date of
termination, as liquidated damages, 10% of the Base Purchase Price; or

(iii) if either Buyer or Seller has materially breached any representation,
warranty, covenant, agreement or obligation hereunder (other than those referred
to in Sections 9.3(a)(i) and 9.3(a)(ii)), then the breaching Party shall pay to
the other, by wire transfer of immediately available funds within three Business
Days following the date of termination, as liquidated damages, the terminating
Party’s actual and reasonable out-of-pocket fees (including reasonable
attorney’s fees and regulatory filing fees) and expenses incurred in connection
with this Agreement, subject to a maximum of $4,000,000.

(b) The provision for payment of liquidated damages in this Section 9.3 has been
included because, in the event of a breach by Buyer or Seller, as the case may
be, the actual damages to be incurred by any Party can reasonably be expected to
approximate the amount of liquidated damages called for herein and because the
actual amount of such damages would be difficult if not impossible to measure
accurately.

ARTICLE X

INDEMNIFICATION, LIMITATIONS OF LIABILITY, WAIVERS AND

ARBITRATION

10.1 Indemnification. (a) Subject to Section 10.2, from and after Closing,
Seller shall indemnify, defend and hold harmless Buyer, each of the Project
Companies, and their respective partners, members, officers, employees,
Affiliates and Representatives (collectively, the “Buyer Indemnified Parties”)
from and against all Losses incurred or suffered by any Buyer Indemnified Party
resulting from:

(i) any breach or inaccuracy as of the Closing Date (as though made on and as of
the Closing Date except to the extent otherwise provided in this Agreement) of
any representation or warranty of Seller contained in this Agreement or any
certificate delivered pursuant to Section 7.3;

(ii) any breach of any covenant or agreement of Seller contained in this
Agreement; and

(iii) the Excluded Liabilities.

(b) Subject to Section 10.2, from and after Closing, Buyer shall indemnify,
defend and hold Seller and its partners, members, officers, employees,
Affiliates and Representatives (collectively, the “Seller Indemnified Parties”
and, together with Buyer Indemnified Parties, the “Indemnified Parties”)
harmless from and against all Losses incurred or suffered by any Seller
Indemnified Party resulting from:

(i) any breach or inaccuracy as of the Closing Date (as though made on and as of
the Closing Date except to the extent otherwise provided in this Agreement) of
any representation or warranty of Buyer contained in this Agreement or any
certificate delivered pursuant to Section 8.3;

 

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(ii) any breach of any covenant or agreement of Buyer contained in this
Agreement; and

(iii) the Assigned Contracts, but only to the extent such Losses relate to
periods on or after Closing.

10.2 Limitations of Liability. Notwithstanding anything in this Agreement to the
contrary:

(a) the representations, warranties, covenants, agreements and obligations in
this Agreement shall survive the Closing; provided, however, that no Party may
make or bring a Claim for liability with respect to (i) any representations or
warranties contained in Articles III, IV or V (other than those representations
and warranties contained in Section 3.2 (Authority), 3.4 (Capitalization), 4.1
(Organization), 4.3 (Capitalization) and 4.6 (Subsidiaries) (collectively, the
“Title and Authority Representations”)) or any covenants, agreements or
obligations in Sections 6.3 or 6.9, after the one-year anniversary of the
Closing Date, (ii) the Title and Authority Representations, after the five-year
anniversary of the Closing Date, and (iii) the representations and warranties
contained in Section 4.11 (Taxes) and the covenants in Section 6.19 after the
expiration of 60 days following the expiration of the applicable statute of
limitations (including extensions thereof consented to in writing by Seller,
such consent not to be unreasonably withheld) and (iv) any covenants, agreements
or obligations of the Parties (other than those contained in Sections 6.2(b),
6.3 and 6.9) that by their terms are to be performed prior to Closing, after the
Closing;

(b) any breach of a representation or warranty in this Agreement (other than a
breach of a representation or warranty contained in Section 4.11) in connection
with any single item or group of related items that results in Losses of less
than $500,000 shall be deemed, for all purposes of this Article X, not to be a
breach of such representation or warranty;

(c) Seller shall have no liability for breaches of representations and
warranties, in this Agreement (other than a breach of a representation or
warranty contained in Section 4.11) until the aggregate amount of all Losses
incurred by Buyer equals or exceeds 1.5% of the Base Purchase Price (the
“Deductible Amount”), in which event Seller shall be liable for Losses only to
the extent they are in excess of the Deductible Amount (except as set forth
below);

(d) in no event shall Seller’s aggregate liability (i) arising out of or
relating to this Agreement, whether relating to breach of representation and
warranty, covenant, agreement or obligation in this Agreement and whether based
on contract, tort, strict liability, other Laws or otherwise (except as set
forth in Section 10.2(j) below), exceed 10% of the Base Purchase Price, except
as set forth in clause (ii) below; and (ii) arising out of or relating to any
breach of a Title or Authority Representation, a breach of a representation or
warranty contained in Section 4.11

 

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or a breach of Section 6.19 (together with the aggregate liability pursuant to
clause (i) above) exceed 100% of the Base Purchase Price;

(e) Seller shall have no liability for any breach of a representation, warranty,
covenant, agreement or obligation in this Agreement by Seller (i) of which Buyer
had knowledge prior to the date hereof or (ii) (x) of which Buyer did not have
knowledge prior to the date hereof but of which Buyer had knowledge prior to the
Closing Date and (y) where due to such breach Buyer’s conditions to closing in
Article VII were not met (and for purposes of this Section 10.2(e), the
documents disclosed to Buyer or its Representatives in the course of its due
diligence, and their contents, are deemed to be known to Buyer); provided that
this provision shall not apply to any willful breaches of a representation,
warranty, covenant, agreement or obligation;

(f) Notwithstanding anything to the contrary herein, the Parties agree that each
representation or warranty of Seller made herein shall be limited solely to
Seller’s Knowledge as such representation or warranty relates to any of the
Jointly Owned Project Companies, and the requirement of any covenant, obligation
or agreement of Seller herein (other than those set forth in Article II)
relating to any of the Jointly Owned Project Companies shall be limited solely
to a requirement to use commercially reasonable efforts to perform such
covenant, obligation or agreement;

(g) a Party must give written notice to the other Party within a reasonable
period of time after becoming aware of any breach by such other Party of any
representation, warranty, covenant, agreement or obligation in this Agreement;

(h) the Parties shall have a duty to mitigate any Loss in connection with this
Agreement;

(i) Seller shall have no liability for any Losses that represent the cost of
repairs, replacements or improvements which enhance the value of the repaired,
replaced or improved asset above its value on the Closing Date or which
represent the cost of repair or replacement exceeding the lowest reasonable cost
of repair or replacement;

(j) Notwithstanding anything herein to the contrary, the limitations, covenants,
agreements and obligations set forth in this Section 10.2 shall not apply to
Seller’s indemnification obligations pursuant to Section 10.1(a)(iii).

(k) Upon and after the Closing, none of the Project Companies shall have any
liability or obligation to indemnify, save or hold harmless or otherwise pay,
reimburse or make any Seller Indemnified Party whole for or on account of any
indemnification claim made by the Seller or any of its Affiliates or
Representatives for any breach of any representation, warranty, covenant or
agreement of the Seller, and the Seller shall have no right of contribution
against any Project Company; other than, in all cases under this clause (k),
with respect to any Contracts between a Project Company, on the one hand, and
Seller or any of its Affiliates, on the other.

(1) The Losses suffered by any Indemnified Party shall be calculated after
giving effect to any amounts covered by third parties, including insurance
proceeds, in each case net of costs and expenses of such recoveries and net of
any associated tax benefits to Buyer or

 

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any Project Company (it being understood and agreed that the Indemnified Parties
shall use their commercially reasonable efforts to seek insurance recoveries in
respect of Losses to be indemnified hereunder). In the event any insurance
proceeds or other recoveries from third parties are actually realized (in each
case calculated net of costs and expenses of such recoveries) by an Indemnified
Party subsequent to the receipt by such Indemnified Party of an indemnification
payment hereunder in respect of the claims to which such insurance proceedings
or third party recoveries relate, appropriate refunds shall be made promptly to
the indemnifying party regarding the amount of such indemnification payment.

10.3 Indirect Claims. From and after the Closing, Buyer agrees to release,
indemnify and hold harmless Seller, its Affiliates and the officers, directors
and employees of the Project Companies (acting in their capacity as such) from
and against any Claims for controlling stockholder liability or breach of any
fiduciary duty relating to any pre-Closing actions or failures to act (including
negligence or gross negligence) by Seller or any of its Affiliates in connection
with the business of the Project Companies prior to the Closing.

10.4 Waiver of Other Representations. (a) NOTWITHSTANDING ANYTHING IN THIS
AGREEMENT TO THE CONTRARY, IT IS THE EXPLICIT INTENT OF EACH PARTY HERETO, AND
THE PARTIES HEREBY AGREE, THAT NONE OF SELLER OR ANY OF ITS AFFILIATES OR
REPRESENTATIVES HAS MADE OR IS MAKING ANY REPRESENTATION OR WARRANTY WHATSOEVER,
EXPRESS OR IMPLIED, WRITTEN OR ORAL, INCLUDING ANY IMPLIED REPRESENTATION OR
WARRANTY AS TO THE CONDITION, MERCHANTABILITY, USAGE, SUITABILITY OR FITNESS FOR
ANY PARTICULAR PURPOSE WITH RESPECT TO THE COMPANY INTERESTS, THE PROJECT
COMPANIES OR ANY OF THE PURCHASED ASSETS, OR ANY PART THEREOF, EXCEPT THOSE
REPRESENTATIONS AND WARRANTIES CONTAINED IN ARTICLES III AND IV. IN PARTICULAR,
AND WITHOUT IN ANY WAY LIMITING THE FOREGOING, (I) SELLER MAKES NO
REPRESENTATION OR WARRANTY REGARDING ANY ENVIRONMENTAL MATTERS EXCEPT AS
EXPRESSLY SET FORTH IN SECTIONS 4.15 AND 4.16 AND (II) SELLER MAKES NO
REPRESENTATION OR WARRANTY TO BUYER WITH RESPECT TO ANY FINANCIAL PROJECTIONS OR
FORECASTS RELATING TO THE PROJECT COMPANIES OR THE PURCHASED ASSETS.

(b) EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THE REPRESENTATIONS AND WARRANTIES
IN ARTICLES III AND IV, SELLER’S INTERESTS IN THE PROJECT COMPANIES ARE BEING
TRANSFERRED THROUGH THE SALE OF THE COMPANY INTERESTS “AS IS, WHERE IS, WITH ALL
FAULTS,” AND SELLER EXPRESSLY DISCLAIMS ANY REPRESENTATIONS OR WARRANTIES OF ANY
KIND OR NATURE, EXPRESS OR IMPLIED, AS TO THE CONDITION, VALUE OR QUALITY OF THE
PROJECT COMPANIES AND THEIR ASSETS OR THE PROSPECTS (FINANCIAL OR OTHERWISE),
RISKS AND OTHER INCIDENTS OF THE PROJECT COMPANIES AND THEIR ASSETS.

10.5 Waiver of Remedies. (a) The Parties hereby agree that, except with respect
to Claims for fraud (but not constructive fraud), neither Party shall have any
liability, and neither Party shall make any Claim, for any Loss or other matter,
under, relating to or arising out of this

 

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Agreement or any other document, agreement, certificate or other matter
delivered pursuant hereto, whether based on contract, tort, strict liability,
other Laws or otherwise, except as provided in Articles IX and X.

(b) NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY, NO PARTY SHALL
BE LIABLE FOR SPECIAL, PUNITIVE, EXEMPLARY, INCIDENTAL, CONSEQUENTIAL OR
INDIRECT DAMAGES OR LOST PROFITS, WHETHER BASED ON CONTRACT, TORT, STRICT
LIABILITY, OTHER LAW OR OTHERWISE AND WHETHER OR NOT ARISING FROM THE OTHER
PARTY’S SOLE, JOINT OR CONCURRENT NEGLIGENCE, STRICT LIABILITY OR OTHER FAULT
(“Non reimbursable Damages”), PROVIDED THAT ANY AMOUNTS PAYABLE TO THIRD PARTIES
PURSUANT A THIRD-PARTY CLAIM (OTHER THAN A CLAIM FOR CONSEQUENTIAL DAMAGES
ARISING UNDER A CONTRACT PROVISION AGREED TO BY THE INDEMNIFIED PARTY THAT DOES
NOT NEGATE CONSEQUENTIAL DAMAGES) SHALL NOT BE DEEMED NON-REIMBURSABLE DAMAGES.

(c) Notwithstanding anything in this Agreement to the contrary, no
Representative or Affiliate of Seller shall have any liability to Buyer or any
other Person as a result of the breach of any representation, warranty,
covenant, agreement or obligation of Seller in this Agreement and, except as set
forth in the commitment letter executed by the Funds as of the date hereof with
respect to obligations relating to Section 9.3, no Representative or Affiliate
of Buyer shall have any liability to Seller or any other Person as a result of
the breach of any representation, warranty, covenant, agreement or obligation of
Buyer in this Agreement.

10.6 Arbitration. (a) Any and all disputes between the Parties arising out of or
relating to this Agreement (a “Dispute”) must be resolved through the use of
binding arbitration using three arbitrators, selected in accordance with the
Commercial Arbitration Rules of the American Arbitration Association (“AAA”), as
supplemented to the extent necessary to determine any procedural appeal
questions by the Federal Arbitration Act (Title 9 of the United States Code). If
there is any inconsistency between this Section 10.6 and the Commercial
Arbitration Rules or the Federal Arbitration Act, the terms of this Section 10.6
will control the rights and obligations of the Parties. If there is more than
one Arbitrable Dispute that involves the same facts and parties as the facts and
parties with respect to which an arbitration has been initiated pursuant to this
Agreement, such Disputes shall be consolidated into the first arbitration
initiated pursuant to this Agreement. No other arbitration shall be consolidated
with any arbitration initiated pursuant to this Agreement without the agreement
of the Parties or parties thereto.

(b) Arbitration must be initiated within the time limits specified in
Section 10.2(a) or, if no time limit is specified, within the time period
allowed by the applicable statute of limitations. Arbitration may be initiated
by either Seller or Buyer (“Claimant”) serving written notice on the other Party
(“Respondent”) that Claimant elects to refer the Dispute to binding arbitration
(the “Arbitrable Dispute”).

(c) Claimant’s notice initiating binding arbitration must describe in reasonable
detail the nature of the Arbitrable Dispute and the facts and circumstances
relating thereto and identify the arbitrator Claimant has appointed. Respondent
shall respond to Claimant within 60

 

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days after receipt of Claimant’s notice, identifying the arbitrator Respondent
has appointed. If Respondent fails for any reason to name an arbitrator within
the 60 day period, the arbitrator for Respondent’s account shall be selected by
the AAA office in New York, New York, with due regard for the selection criteria
set forth below and input from the Parties. The two arbitrators so chosen shall
select a third arbitrator within 30 days after the second arbitrator has been
appointed. If the two arbitrators are unable to agree on a third arbitrator
within 90 days from initiation of arbitration, then a third arbitrator shall be
selected by the AAA office in New York, New York, with due regard for the
selection criteria set forth below and input from the Parties and other
arbitrators.

(d) The AAA shall select the third arbitrator not later than 120 days from
initiation of arbitration. In the event AAA should fail to select the third
arbitrator within 120 days from initiation of arbitration, then either Party may
petition the Chief United States District Judge in New York County, New York to
select the third arbitrator. Due regard shall be given to the selection criteria
set forth below and input from the Parties and other arbitrators.

(e) Subject to the arbitrators’ award of costs to the prevailing party, Claimant
shall pay the compensation and expenses of the arbitrator named by or for it,
Respondent shall pay the compensation and expenses of the arbitrator named by or
for it, and Claimant and Respondent shall each pay one-half of the compensation
and expenses of the third arbitrator. All arbitrators must be neutral parties
who have never been officers, directors or employees of, or otherwise affiliated
in any material respect within the preceding five years with, the Parties or any
of their Affiliates. Each of the three arbitrators must have not less than seven
years experience as an attorney or accountant handling complex business
transactions and have formal training in dispute resolution.

(f) The hearing will be conducted in New York, New York and commence within 60
days after the selection of the third arbitrator. The Parties and the
arbitrators should proceed diligently and in good faith in order that the award
may be made as promptly as possible. The arbitrators shall determine the
Arbitrable Disputes of the Parties and render a final award in accordance with
the choice of Law set forth in this Agreement. The arbitrators shall render
their decision within 60 days following completion of the hearing. The
arbitrators’ decision shall be in writing and set forth the reasons for the
award and shall include an award of costs to the prevailing Party (or an
allocation of such costs between the Parties based upon the extent to which each
prevails), including reasonable attorneys’ fees and disbursements and the fees
and expenses of the arbitrators. All statutes of limitations and defenses based
upon passage of time applicable to any Arbitrable Dispute (including any
counterclaim or setoff) shall be interrupted by the filing of the arbitration
and suspended while the arbitration is pending. The terms of this Section 10.6
shall not create nor limit any obligations of a Party hereunder to defend,
indemnify or hold harmless another Party against Claims or Losses. In order to
prevent irreparable harm, the arbitrators shall have the power to grant
temporary or permanent injunctive or other equitable relief.

(g) A Party may, notwithstanding anything in this Agreement to the contrary,
seek temporary injunctive relief from any court of competent jurisdiction;
provided, however, that the Party seeking such relief shall (if arbitration has
not already been commenced)

 

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simultaneously commence arbitration. Such court-ordered relief shall not
continue more than ten days after the appointment of the arbitrators and in no
event for longer than 60 days.

(h) Except as provided in the Federal Arbitration Act, the decision of the
arbitrators will be binding on and non-appealable by the Parties. Each Party
agrees that any arbitration award against it may be enforced in any court of
competent jurisdiction and that any Party may authorize any such court to enter
judgment on the arbitrators’ decisions. In no circumstances shall the
arbitrators grant or award Non-reimbursable Damages.

10.7 Procedure with Respect to Third-Party Claims. (a) If any Party (or as to
Buyer after Closing, any Project Company) becomes subject to a pending or
threatened Claim of a third party and such Party (the “Claiming Party”) believes
it has a claim against the other Party (the “Responding Party”) as a result,
then the Claiming Party shall notify the Responding Party in writing of the
basis for such Claim setting forth the nature of the Claim in reasonable detail.
The failure of the Claiming Party to so notify the Responding Party shall not
relieve the Responding Party of liability hereunder except to the extent that
the defense of such Claim is prejudiced by the failure to give such notice.

(b) If any proceeding is brought by a third party against a Claiming Party and
the Claiming Party gives notice to the Responding Party pursuant to
Section 10.7, the Responding Party shall be entitled to participate in such
proceeding and, to the extent that it wishes, to assume the defense of such
proceeding, if (i) the Responding Party provides written notice to the Claiming
Party that the Responding Party intends to undertake such defense, (ii) the
Responding Party conducts the defense of the third-party Claim actively and
diligently with counsel reasonably satisfactory to the Claiming Party and
(iii) if the Responding Party is a party to the proceeding, the Responding Party
or the Claiming Party has not determined in good faith that joint representation
would be inappropriate because of a conflict in interest. The Claiming Party
shall, in its sole discretion, have the right to employ separate counsel (who
may be selected by the Claiming Party in its sole discretion) in any such action
and to participate in the defense thereof, and the fees and expenses of such
counsel shall be paid by such Claiming Party. The Claiming Party shall fully
cooperate with the Responding Party and its counsel in the defense or compromise
of such Claim. If the Responding Party assumes the defense of a proceeding, no
compromise or settlement of such Claims may be effected by the Responding Party
without the Claiming Party’s consent unless (A) there is no finding or admission
of any violation of Law or any violation of the rights of any Person and no
effect on any other Claims that may be made against the Claiming Party and
(B) the sole relief provided is monetary damages that are paid in full by the
Responding Party.

(c) If (i) notice is given to the Responding Party of the commencement of any
third-party legal proceeding and the Responding Party does not, within 30 days
after the Claiming Party’s notice is given, give notice to the Claiming Party of
its election to assume the defense of such legal proceeding, (ii) any of the
conditions set forth in clauses (i) through (iii) of Section 10.7(b) above
become unsatisfied or (iii) a Claiming Party determines in good faith that there
is a reasonable probability that a legal proceeding may adversely affect it
other than as a result of monetary damages for which it would be entitled to
indemnification from the Responding Party under this Agreement, then the
Claiming Party shall (upon notice to the Responding Party) have the right to
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claim; provided, however, that the Responding Party shall reimburse the Claiming
Party for the costs of defending against such third-party claim (including
reasonable attorneys’ fees and expenses) and shall remain otherwise responsible
for any liability with respect to amounts arising from or related to such
third-party claim, in both cases to the extent it is ultimately determined that
such Responding Party is liable with respect to such third-party claim for a
breach under this Agreement. The Responding Party may elect to participate in
such legal proceedings, negotiations or defense at any time at its own expense.

10.8 Access to Information. After the Closing Date, Seller and Buyer shall grant
each other (or their respective designees), and Buyer shall cause the Project
Companies to grant to Seller (or its designees), access at all reasonable times
to all of the information, books and records relating to the Project Companies
in its possession, and shall afford such party the right (at such party’s
expense) to take extracts therefrom and to make copies thereof, to the extent
reasonably necessary to implement the provisions of, or to investigate or defend
any claims between the Parties arising under, this Agreement.

ARTICLE XI

MISCELLANEOUS

11.1 Notices. (a) Unless this Agreement specifically requires otherwise, any
notice, demand or request provided for in this Agreement, or served, given or
made in connection with it, shall be in writing and shall be deemed properly
served, given or made if delivered in person or sent by facsimile or sent by
registered or certified mail, postage prepaid, or by a nationally recognized
overnight courier service that provides a receipt of delivery, in each case, to
the Parties at the addresses specified below:

If to Buyer, to:

LSP BAY II HARBOR HOLDING, LLC

c/o LS Power Development LLC

Two Tower Center, 11th Floor

East Brunswick, NJ 08816

Facsimile No.: (732) 249-7290

Attn: Corporate Counsel

If to Seller, to:

Duke Energy Americas, LLC

c/o Duke Energy Corporation

5400 Westheimer Court

Houston, Texas 77056-5310

Facsimile No.: (713) 386-4087

Attn: General Counsel - Acquisitions & Divestitures

(b) Notice given by personal delivery, mail or overnight courier pursuant to
this Section 11.1 shall be effective upon physical receipt. Notice given by
facsimile pursuant to this Section 11.1 shall be effective as of the date of
confirmed delivery if delivered before 5:00

 

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p.m. Central Time on any Business Day or the next succeeding Business Day if
confirmed delivery is after 5:00 p.m. Central Time on any Business Day or during
any non-Business Day.

11.2 Entire Agreement. Except for the Confidentiality Agreement, this Agreement
supersedes all prior discussions and agreements between the Parties with respect
to the subject matter hereof and contains the sole and entire agreement between
the Parties hereto with respect to the subject matter hereof.

11.3 Expenses. Except as otherwise expressly provided in this Agreement, whether
or not the transactions contemplated hereby are consummated, each Party will pay
its own costs and expenses incurred in anticipation of, relating to and in
connection with the negotiation and execution of this Agreement and the
transactions contemplated hereby.

11.4 Disclosure. Seller may, at its option, include in the Schedules items that
are not material in order to avoid any misunderstanding, and any such inclusion,
or any references to dollar amounts, shall not be deemed to be an acknowledgment
or representation that such items are material, to establish any standard of
materiality or to define further the meaning of such terms for purposes of this
Agreement. Information disclosed in any Schedule shall constitute a disclosure
for purposes of all other Schedules notwithstanding the lack of specific
cross-reference thereto, to the extent the applicability of such disclosure to
such other Schedule is reasonably apparent on its face. The Parties shall
promptly notify each other of (a) the occurrence, or failure to occur, of any
event, which occurrence or failure has caused any representation or warranty of
such Party contained in this Agreement or in any exhibit, schedule, certificate,
document or written instrument attached hereto to be untrue or inaccurate,
(b) any failure of such Party to comply with, perform or satisfy, in any
respect, any covenant, condition or agreement to be complied with, performed by
or satisfied by it under this Agreement or any exhibit, schedule, certificate,
document or written instrument attached hereto and (c) any notice or other
communication from any Governmental Authority in connection with this Agreement,
the Assignment and Assumption Agreement, the Company Assignment Agreement or the
transactions contemplated herein and therein; provided that such disclosure,
except as set forth in Section 10.2(e), shall not be deemed to cure, or to
relieve any Party of any liability or obligation with respect to, any breach of
or failure to satisfy any representation, warranty, covenant or agreement or any
condition hereunder, and, except as set forth in Section 10.2(e), shall not
affect any Party’s right with respect to indemnification hereunder.

11.5 Waiver. Any term or condition of this Agreement may be waived at any time
by the Party that is entitled to the benefit thereof, but no such waiver shall
be effective unless set forth in a written instrument duly executed by or on
behalf of the Party waiving such term or condition. No waiver by any Party of
any term or condition of this Agreement, in any one or more instances, shall be
deemed to be or construed as a waiver of the same or any other term or condition
of this Agreement on any future occasion. All remedies, either under this
Agreement or by Law or otherwise afforded, will be cumulative and not
alternative.

11.6 Amendment. This Agreement may be amended, supplemented or modified only by
a written instrument duly executed by or on behalf of each Party.

 

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11.7 No Third Party Beneficiary. Except for the provisions of Section 6.2(b),
6.5(e)(ii) and (h), the third sentence of Section 6.7(b), 10.1 (a) and (b) and
10.3 (which are intended for the benefit of the Persons identified therein), the
terms and provisions of this Agreement are intended solely for the benefit of
the Parties and their respective successors or permitted assigns, and it is not
the intention of the Parties to confer third-party beneficiary rights upon any
other Person, including, without limitation, any Continued Employee, any
beneficiary or dependents thereof, or any collective bargaining representative
thereof.

11.8 Assignment; Binding Effect. Buyer may assign its rights and obligations
hereunder to any Affiliate or Affiliates, or to Buyer’s lenders for collateral
security purposes, but such assignment shall not release Buyer from its
obligations hereunder. Except as provided in the preceding sentence, neither
this Agreement nor any right, interest or obligation hereunder may be assigned
by any Party without the prior written consent of the other Party, and any
attempt to do so will be void, except for assignments and transfers by operation
of Law. Subject to this Section 11.8, this Agreement is binding upon, inures to
the benefit of and is enforceable by the Parties and their respective successors
and permitted assigns.

11.9 Headings. The headings used in this Agreement have been inserted for
convenience of reference only and do not define or limit the provisions hereof.

11.10 Invalid Provisions. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under any present or future Law, and if the
rights or obligations of any Party under this Agreement will not be materially
and adversely affected thereby, such provision will be fully severable, this
Agreement will be construed and enforced as if such illegal, invalid or
unenforceable provision had never comprised a part hereof, the remaining
provisions of this Agreement will remain in full force and effect and will not
be affected by the illegal, invalid or unenforceable provision or by its
severance herefrom and in lieu of such illegal, invalid or unenforceable
provision, there will be added automatically as a part of this Agreement a
legal, valid and enforceable provision as similar in terms to such illegal,
invalid or unenforceable provision as may be possible.

11.11 Counterparts; Facsimile. This Agreement may be executed in any number of
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument. Any facsimile copies
hereof or signature hereon shall, for all purposes, be deemed originals.

11.12 Governing Law; Venue; and Jurisdiction. (a) This Agreement shall be
governed by and construed in accordance with the Laws of the State of New York,
without giving effect to any conflict or choice of law provision that would
result in the imposition of another state’s Law.

(b) WITH RESPECT TO THE ENFORCEMENT OF ANY ARBITRATION AWARD PURSUANT TO SECTION
10.6, THE PARTIES HEREBY IRREVOCABLY SUBMIT TO THE NON-EXCLUSIVE JURISDICTION OF
ANY STATE OR FEDERAL COURT IN NEW YORK, NEW YORK.

 

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(c) WITH RESPECT TO THE ENFORCEMENT OF ANY ARBITRATION AWARD PURSUANT TO SECTION
10.6, EACH PARTY HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY
RIGHT IT MAY HAVE TO A TRIAL BY JURY.

11.13 Attorneys’ Fees. If either of the Parties shall bring an action to enforce
the provisions of this Agreement, the prevailing Party shall be entitled to
recover its reasonable attorneys’ fees and expenses incurred in such action from
the unsuccessful Party.

[signature page follows]

 

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IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the
duly authorized officer of each Party as of the date first above written.

 

SELLER DUKE ENERGY AMERICAS, LLC By:  

/s/ Robert B. Evans

Name:

 

Robert B. Evans

Title:

 

President and CEO

SIGNATURE PAGE

PURCHASE AGREEMENT

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BUYER LSP BAY HARBOR HOLDING, LLC By:  

/s/ Jim Bartlett

Name:

 

Jim Bartlett

Title:

 

President

SIGNATURE PAGE

PURCHASE AGREEMENT