Exhibit 10.1

 

EXECUTION COPY

 

 

 

 

PURCHASE AND SALE AGREEMENT

 

 

by and between

 

 

ORION POWER HOLDINGS, INC.,

 

as Seller,

 

RELIANT ENERGY, INC.

 

as Guarantor,

 

and

 

ASTORIA GENERATING COMPANY ACQUISITIONS, L.L.C.

 

as Buyer

 

 

dated as of September 30, 2005

 

 

 

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

 

TABLE OF CONTENTS

 

ARTICLE I
DEFINITIONS AND CONSTRUCTION

 

 

 

Section 1.01

Definitions and Construction

 

 

 

 

ARTICLE II
PURCHASE AND SALE AND CLOSING

 

 

 

Section 2.01

Purchase and Sale

 

Section 2.02

Purchase Price

 

Section 2.03

Closing

 

Section 2.04

Closing Deliveries by Seller to Buyer

 

Section 2.05

Closing Deliveries by Buyer

 

Section 2.06

Post-Closing Adjustment

 

Section 2.07

Allocation of Purchase Price

 

Section 2.08

Calculation of Estimated Purchase Price

 

 

 

 

ARTICLE III
REPRESENTATIONS AND WARRANTIES REGARDING THE SELLER ENTITIES

 

 

 

Section 3.01

Organization and Qualification

 

Section 3.02

Authority

 

Section 3.03

No Conflicts; Consents and Approvals

 

Section 3.04

Capitalization

 

Section 3.05

Legal Proceedings

 

Section 3.06

Brokers

 

 

 

 

ARTICLE IV
REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANIES

 

 

 

Section 4.01

Organization and Qualification

 

Section 4.02

No Conflicts; Consents and Approvals

 

Section 4.03

Capitalization; Subsidiaries

 

Section 4.04

Financial Statements

 

Section 4.05

Absence of Undisclosed Liabilities; Certain Developments

 

Section 4.06

Litigation

 

Section 4.07

Compliance with Laws

 

Section 4.08

Contracts

 

Section 4.09

Taxes

 

Section 4.10

Employee Benefit Plans; ERISA

 

Section 4.11

Labor and Employment

 

Section 4.12

Environmental Matters

 

Section 4.13

Intellectual Property

 

Section 4.14

PUHCA; Regulation as Utility

 

Section 4.15

Real Property

 

Section 4.16

Insurance

 

 

i

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Section 4.17

Affiliate Transactions

 

Section 4.18

Permits

 

Section 4.19

Sufficiency of Assets

 

 

 

 

ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER

 

 

 

Section 5.01

Organization and Qualification

 

Section 5.02

Authority

 

Section 5.03

No Conflicts; Consents and Approvals

 

Section 5.04

Legal Proceedings

 

Section 5.05

Compliance with Laws and Orders

 

Section 5.06

Brokers

 

Section 5.07

Acquisition as Investment

 

Section 5.08

Financial Resources

 

Section 5.09

No Knowledge of Seller’s Breach

 

Section 5.10

Opportunity for Independent Investigation

 

 

 

 

ARTICLE VI
COVENANTS

 

 

 

 

Section 6.01

Access of Buyer

 

Section 6.02

Conduct of Business Pending the Closing

 

Section 6.03 [a05-17149_1ex10d1.htm#Section6_03ResignationOfMembersMa_045327]

Resignation of Members, Managers, Officers and Directors
[a05-17149_1ex10d1.htm#Section6_03ResignationOfMembersMa_045327]

 

Section 6.04 [a05-17149_1ex10d1.htm#Section6_04UseOfCertainNames_With_045328]

Use of Certain Names
[a05-17149_1ex10d1.htm#Section6_04UseOfCertainNames_With_045328]

 

Section 6.05 [a05-17149_1ex10d1.htm#Section6_05SupportObligations__045332]

Support Obligations
[a05-17149_1ex10d1.htm#Section6_05SupportObligations__045332]

 

Section 6.06 [a05-17149_1ex10d1.htm#Section6_06ExcludedAssets_Notwith_045336]

Excluded Assets [a05-17149_1ex10d1.htm#Section6_06ExcludedAssets_Notwith_045336]

 

Section 6.07 [a05-17149_1ex10d1.htm#Section6_07TerminationOfCertainSe_045337]

Termination of Certain Services, Contracts, Receivables and Payables
[a05-17149_1ex10d1.htm#Section6_07TerminationOfCertainSe_045337]

 

Section 6.08 [a05-17149_1ex10d1.htm#Section6_08PaymentOfIndebtedness__045340]

Payment of Indebtedness
[a05-17149_1ex10d1.htm#Section6_08PaymentOfIndebtedness__045340]

 

Section 6.09 [a05-17149_1ex10d1.htm#Section6_09Insurance__045357]

Insurance [a05-17149_1ex10d1.htm#Section6_09Insurance__045357]

 

Section 6.10 [a05-17149_1ex10d1.htm#Section6_10TaxMatters__045400]

Tax Matters [a05-17149_1ex10d1.htm#Section6_10TaxMatters__045400]

 

Section 6.11 [a05-17149_1ex10d1.htm#Section6_11CertainRestrictions_Du_045404]

Certain Restrictions
[a05-17149_1ex10d1.htm#Section6_11CertainRestrictions_Du_045404]

 

Section 6.12 [a05-17149_1ex10d1.htm#Section6_12NoSolicitation_DuringT_045405]

No Solicitation [a05-17149_1ex10d1.htm#Section6_12NoSolicitation_DuringT_045405]

 

Section 6.13 [a05-17149_1ex10d1.htm#Section6_13Confidentiality__045406]

Confidentiality [a05-17149_1ex10d1.htm#Section6_13Confidentiality__045406]

 

Section 6.14 [a05-17149_1ex10d1.htm#Section6_14EmployeeAndBenefitMatt_045409]

Employee and Benefit Matters
[a05-17149_1ex10d1.htm#Section6_14EmployeeAndBenefitMatt_045409]

 

Section 6.15 [a05-17149_1ex10d1.htm#Section6_15PublicAnnouncements_Se_045417]

Public Announcements
[a05-17149_1ex10d1.htm#Section6_15PublicAnnouncements_Se_045417]

 

Section 6.16 [a05-17149_1ex10d1.htm#Section6_16ExpensesAndFees_Except_045418]

Expenses and Fees
[a05-17149_1ex10d1.htm#Section6_16ExpensesAndFees_Except_045418]

 

Section 6.17 [a05-17149_1ex10d1.htm#Section6_17AgreementToCooperate__045419]

Agreement to Cooperate
[a05-17149_1ex10d1.htm#Section6_17AgreementToCooperate__045419]

 

Section 6.18 [a05-17149_1ex10d1.htm#Section6_18DirectorsAndOfficersIn_045422]

Directors’ and Officers’ Indemnification
[a05-17149_1ex10d1.htm#Section6_18DirectorsAndOfficersIn_045422]

 

Section 6.19 [a05-17149_1ex10d1.htm#Section6_19FurtherAssurances_Subj_045430]

Further Assurances
[a05-17149_1ex10d1.htm#Section6_19FurtherAssurances_Subj_045430]

 

Section 6.20 [a05-17149_1ex10d1.htm#I_045454]

Non-Solicitation [a05-17149_1ex10d1.htm#I_045454]

 

Section 6.21 [a05-17149_1ex10d1.htm#Section6_21HedgingAndEnergyManage_045455]

Hedging and Energy Management Services
[a05-17149_1ex10d1.htm#Section6_21HedgingAndEnergyManage_045455]

 

Section 6.22 [a05-17149_1ex10d1.htm#Section6_22SubsequentFinancialsSt_045458]

Subsequent Financials Statements
[a05-17149_1ex10d1.htm#Section6_22SubsequentFinancialsSt_045458]

 

Section 6.23 [a05-17149_1ex10d1.htm#Section6_23FundingCommitments_Buy_045516]

Funding Commitments
[a05-17149_1ex10d1.htm#Section6_23FundingCommitments_Buy_045516]

 

Section 6.24 [a05-17149_1ex10d1.htm#Section6_24TitleDefects_NoLaterTh_045517]

Title Defects [a05-17149_1ex10d1.htm#Section6_24TitleDefects_NoLaterTh_045517]

 

Section 6.25 [a05-17149_1ex10d1.htm#Section6_25Workaround_IfThereAreA_045519]

Work-Around [a05-17149_1ex10d1.htm#Section6_25Workaround_IfThereAreA_045519]

 

 

ii

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ARTICLE VII
CONDITIONS TO THE CLOSING
[a05-17149_1ex10d1.htm#ArticleViiConditionsToTheClosing_045522]

 

 

 

Section 7.01 [a05-17149_1ex10d1.htm#Section7_01ConditionsToTheObligat_045523]

Conditions to the Obligations of Each Party
[a05-17149_1ex10d1.htm#Section7_01ConditionsToTheObligat_045523]

 

Section 7.02 [a05-17149_1ex10d1.htm#Section7_02_053628]

Conditions to the Obligations of Buyer
[a05-17149_1ex10d1.htm#Section7_02_053628]

 

Section 7.03 [a05-17149_1ex10d1.htm#Section7_03_053633]

Conditions to the Obligations of Seller
[a05-17149_1ex10d1.htm#Section7_03_053633]

 

 

 

 

ARTICLE VIII
TERMINATION [a05-17149_1ex10d1.htm#ArticleViiiTermination_045528]

 

 

 

 

Section 8.01 [a05-17149_1ex10d1.htm#Section8_01Termination_ThisAgreem_045530]

Termination [a05-17149_1ex10d1.htm#Section8_01Termination_ThisAgreem_045530]

 

Section 8.02 [a05-17149_1ex10d1.htm#Section8_02EffectOfTermination_In_045534]

Effect of Termination
[a05-17149_1ex10d1.htm#Section8_02EffectOfTermination_In_045534]

 

 

 

 

ARTICLE IX
INDEMNIFICATION [a05-17149_1ex10d1.htm#ArticleIxIndemnification_045536]

 

 

 

Section 9.01 [a05-17149_1ex10d1.htm#Section9_01Survival_AllRepresenta_045537]

Survival [a05-17149_1ex10d1.htm#Section9_01Survival_AllRepresenta_045537]

 

Section 9.02 [a05-17149_1ex10d1.htm#Section9_02Indemnification__045540]

Indemnification [a05-17149_1ex10d1.htm#Section9_02Indemnification__045540]

 

Section 9.03 [a05-17149_1ex10d1.htm#Section9_03_052953]

Waiver of Other Representations [a05-17149_1ex10d1.htm#Section9_03_052953]

 

Section 9.04 [a05-17149_1ex10d1.htm#Section9_04_052958]

Waiver of Remedies; Certain Limitations
[a05-17149_1ex10d1.htm#Section9_04_052958]

 

Section 9.05 [a05-17149_1ex10d1.htm#Section9_05_053004]

Procedures for Indemnification [a05-17149_1ex10d1.htm#Section9_05_053004]

 

 

 

 

ARTICLE X
MISCELLANEOUS [a05-17149_1ex10d1.htm#ArticleX_053013]

 

 

 

Section 10.01 [a05-17149_1ex10d1.htm#Section10_01_053016]

Notices [a05-17149_1ex10d1.htm#Section10_01_053016]

 

Section 10.02 [a05-17149_1ex10d1.htm#Section10_02_053021]

Headings [a05-17149_1ex10d1.htm#Section10_02_053021]

 

Section 10.03 [a05-17149_1ex10d1.htm#Section10_03_053023]

Assignment [a05-17149_1ex10d1.htm#Section10_03_053023]

 

Section 10.04 [a05-17149_1ex10d1.htm#Section10_04_053027]

Governing Law [a05-17149_1ex10d1.htm#Section10_04_053027]

 

Section 10.05 [a05-17149_1ex10d1.htm#Section10_05_053030]

Arbitration [a05-17149_1ex10d1.htm#Section10_05_053030]

 

Section 10.06 [a05-17149_1ex10d1.htm#Section10_06_053035]

Counterparts [a05-17149_1ex10d1.htm#Section10_06_053035]

 

Section 10.07 [a05-17149_1ex10d1.htm#Section10_07_053039]

Amendments; Extensions [a05-17149_1ex10d1.htm#Section10_07_053039]

 

Section 10.08 [a05-17149_1ex10d1.htm#Section10_08_053041]

Entire Agreement [a05-17149_1ex10d1.htm#Section10_08_053041]

 

Section 10.09 [a05-17149_1ex10d1.htm#Section10_09_053044]

Severability [a05-17149_1ex10d1.htm#Section10_09_053044]

 

Section 10.10 [a05-17149_1ex10d1.htm#Section10_10_053047]

Guarantor Guaranty [a05-17149_1ex10d1.htm#Section10_10_053047]

 

 

iii

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APPENDICES

 

 

 

Appendix I [a05-17149_1ex10d1.htm#AppendixI_053102]

– [a05-17149_1ex10d1.htm#AppendixI_053102]

Construction; Definitions [a05-17149_1ex10d1.htm#AppendixI_053102]

 

 

 

EXHIBITS

 

 

 

 

 

Exhibit A

–

Forms of Assignment of Partnership Interest

Exhibit B

–

Form of Assignment and Assumption Agreement

Exhibit C

-

Form of Confidentiality Agreement Assignment

 

 

 

SCHEDULES

 

 

 

 

 

Schedule 2.02(b)

 

Target Working Capital Amount

 

 

Schedule 2.04(c)

 

Assigned Contracts

 

 

Schedule 3.03(b)

 

Seller Consents

 

 

Schedule 3.03(c)

 

Seller Governmental Approvals

 

 

Schedule 3.04

 

Capitalization

 

 

Schedule 4.02(b)

 

Company Consents

 

 

Schedule 4.03

 

Capitalization

 

 

Schedule 4.04(a)

 

OPNY LP Financial Statements

 

 

Schedule 4.04(b)

 

Companies Financial Statements

 

 

Schedule 4.04(c)

 

June 30 Balance Sheets

 

 

Schedule 4.05(a)

 

Certain Company Liabilities

 

 

Schedule 4.05(b)

 

Certain Developments

 

 

Schedule 4.06

 

Litigation

 

 

Schedule 4.07

 

Compliance with Laws

 

 

Schedule 4.08

 

Material Contracts

 

 

Schedule 4.08(c)

 

ConEd Indemnity Claims

 

 

Schedule 4.09

 

Taxes

 

 

Schedule 4.10(a)

 

Employee Benefit Plans

 

 

Schedule 4.10(c)

 

Employee Benefit Matters

 

 

Schedule 4.10(d)

 

Company Plan Trigger Events

 

 

Schedule 4.12

 

Environmental Matters

 

 

Schedule 4.13(a)

 

Intellectual Property

 

 

Schedule 4.16

 

Insurance Policies

 

 

Schedule 4.17

 

Affiliate Transactions

 

 

Schedule 4.18

 

Permits

 

 

Schedule 4.19(a)

 

Sufficiency of Assets

 

 

Schedule 4.19(b)

 

Emissions Allowances

 

 

Schedule 5.03(c)

 

Buyer Governmental Approvals

 

 

Schedule 6.02

 

Certain Permitted Actions

 

 

Schedule 6.02(a)(iii)

 

Certain Interim Period Expenditures

 

 

Schedule 6.02(b)(iv)

 

Permitted Capital Expenditures

 

 

Schedule 6.05(a)

 

Support Obligations

 

 

Schedule 6.06

 

Excluded Assets

 

 

Schedule 6.07

 

Terminated Contracts

 

 

Schedule 6.09

 

Scheduled Insurance Policies

 

 

iv

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

 

Schedule 6.14(c)

 

Affiliate Employees

Schedule 6.14(i)

 

Certain Retirees

Schedule 7.01(c)

 

Third Party Consents

Schedule I-1

 

Seller’s Knowledge Persons

Schedule I-2

 

Buyer’s Knowledge Persons

Schedule I-3

 

Spare Parts

 

v

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

 

PURCHASE AND SALE AGREEMENT

 

This Purchase and Sale Agreement (this “Agreement”) dated as of September 30,
2005 (the “Execution Date”) is made and entered into by and between Orion Power
Holdings, Inc., a Delaware corporation (“Seller”), Reliant Energy, Inc., a
Delaware corporation (“Guarantor”), and Astoria Generating Company Acquisitions,
L.L.C., a Delaware limited liability company (“Buyer”).

 

RECITALS

 

Seller desires to sell to Buyer, and Buyer desires to purchase from Seller, 100%
of the equity interests in Astoria Generating Company, L.P., a Delaware limited
partnership (“Astoria LP”), and Orion Power Operating Services Astoria, Inc., a
Delaware corporation (“OPOS”), which are indirect subsidiaries of Seller and own
and operate three power plants in New York City, on the terms and subject to the
conditions set forth herein.

 

Astoria LP is owned by Orion Power New York, L.P., a Delaware limited
partnership (“OPNY LP”), and Orion Power New York GP, Inc., a Delaware
corporation (“OPNY GP”).  OPNY LP is owned by Orion Power New York LP, LLC, a
Delaware limited liability company (“OPNY LLC”), and OPNY GP.  OPNY LLC and OPNY
GP are owned by Orion Power Capital, LLC, a Delaware limited liability company
(“Orion Power Capital”).  Orion Power Capital is owned by Seller.

 

OPOS is owned by Orion Power Operating Services, Inc., a Delaware corporation
(“OPOS Parent”).  OPOS Parent is owned by Seller.

 

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

 

Section 1.01                                                        Definitions
and Construction.  Capitalized terms used in this Agreement and rules of
construction to apply to this Agreement are set forth in Appendix I.

 

ARTICLE II
PURCHASE AND SALE AND CLOSING

 

Section 2.01                                                        Purchase and
Sale.  On the terms and subject to the conditions set forth in this Agreement,
Buyer agrees to purchase from Seller, and Seller agrees to sell or cause to be
sold to Buyer, the following equity interests (the “Company Interests”):  (i)
100% of the general and limited partnership interests in Astoria LP, and (ii)
100% of the capital stock of OPOS (Astoria LP and OPOS, collectively, the
“Companies”).

 

1

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

 

Section 2.02                                                        Purchase
Price.

 

(a)                                  The purchase price to be paid by Buyer to
Seller for the Company Interests is $975,000,000 (the “Base Purchase Price”), as
adjusted pursuant to Section 2.02(b).

 

(b)                                 If the Working Capital Adjustment Amount is
negative, then the Base Purchase Price shall be decreased by the absolute value
of the Working Capital Adjustment Amount.  If the Working Capital Adjustment
Amount is positive, then the Base Purchase Price shall be increased by the
Working Capital Adjustment Amount.

 

(c)                                  If the Capital Expenditures actually paid
by the Companies in accordance with Section 6.02(a)(iii) during the Interim
Period is less than $15,000,000, the Base Purchase Price shall be decreased by
an amount equal to 50% of such deficiency.

 

Section 2.03                                                        Closing. 
Subject to satisfaction or waiver of the conditions to the Closing set forth
herein, unless the Parties mutually agree otherwise in writing, the closing of
the transactions contemplated by this Agreement (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 seventh Business Day after the conditions to the
Closing set forth in Article VII (other than actions to be taken or items to be
delivered at the Closing) have been satisfied or waived by the applicable Party
or Parties if such satisfaction or waiver occurs prior to March 1, 2006, or on
the fifth Business Day after the conditions to the Closing set forth in
Article VII (other than actions to be taken or items to be delivered at the
Closing) have been satisfied or waived by the applicable Party or Parties if
such satisfaction or waiver occurs on or after March 1, 2006; provided, however,
that the Closing shall not take place prior to January 31, 2006.  All actions
listed in Section 2.04 or Section 2.05 that occur on the Closing Date shall be
deemed to occur simultaneously at the Closing.  Subject to the provisions of
Article VIII, failure to consummate the purchase and sale provided for in this
Agreement on the date determined pursuant to this Section 2.03 will not result
in the termination of this Agreement and will not relieve any Party of any
obligation under this Agreement.

 

Section 2.04                                                        Closing
Deliveries by Seller to Buyer.  At the Closing, Seller shall deliver, or shall
cause to be delivered, to Buyer the following:

 

(a)                                  Assignments of Partnership Interests of
Astoria LP in the forms attached hereto as Exhibit A, providing for the
assignment of all partnership interests of Astoria LP;

 

(b)                                 stock certificates for all shares of common
stock of OPOS, with valid stock powers executed in blank;

 

(c)                                  subject to receipt of the applicable Seller
Consents, an executed counterpart of the Assignment and Assumption Agreement
substantially in the form attached as Exhibit B (the “Assignment and Assumption
Agreement”), which shall effect the assignment to Buyer or the Companies of
Contracts set forth on Schedule 2.04(c) (the “Assigned Contracts”), as
applicable, and the assumption by Buyer or the Companies of all obligations
arising under such Assigned Contracts, together with the applicable Seller
Consents;

 

2

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

 

(d)                                 an executed counterpart of the Transition
Services Agreement, in the form reasonably satisfactory to the Parties (the
“Transition Services Agreement”).  The Parties agree that Seller will provide
the transition services reasonably requested by Buyer; provided that, (i) such
services shall not extend beyond six months after the Closing Date, (ii) such
services shall be provided at Seller’s cost which shall be reimbursed by Buyer,
(iii) Seller shall not be required to perform any services that it cannot
perform under applicable Law, (iv) Seller shall be indemnified by Buyer against
any and all risks associated with providing such services (other than losses
attributable to Seller’s gross negligence or willful misconduct), and (v) Seller
shall indemnify Buyer against any and all losses suffered by Buyer attributable
to Seller’s gross negligence or willful misconduct;

 

(e)                                  the certificate described in Section
7.02(g);

 

(f)                                    a duly executed affidavit of non-foreign
status by the Guarantor and the Seller described in Section 1445 of the Code and
the regulations thereunder;

 

(g)                                 to the extent assignable without consent of
the counterparty, an executed assignment by Guarantor, on behalf of itself and
its subsidiaries, of its rights as they relate to the Companies and their
business, under each of the confidentiality agreements executed by or on behalf
of the Guarantor and/or its subsidiaries in connection with the proposed sale of
the Companies, in the form attached as Exhibit C; and

 

(h)                                 subject to obtaining approval from the
applicable insurers, certificates of insurance for the Scheduled Insurance
Policies showing that Buyer and the Companies are the named insureds and Seller
is an additional insured under the Scheduled Insurance Policies, together with
consents of the applicable insurers consenting to designating Buyer and the
Companies as named insureds and Seller as an additional insured.

 

Section 2.05                                                        Closing
Deliveries by Buyer.  At the Closing, Buyer shall deliver the following:

 

(a)                                  to Seller, a wire transfer of immediately
available funds (to such account as Seller shall have notified Buyer of at least
two Business Days prior to the Closing Date) in an amount equal to the Estimated
Purchase Price as determined in accordance with Section 2.08;

 

(b)                                 to Seller, an executed counterpart of the
Assignment and Assumption Agreement;

 

(c)                                  to Seller, the certificate described in
Section 7.03(c); and

 

(d)                                 to the Escrow Agent, the Escrow Amount, if
any.

 

Section 2.06                                                        Post-Closing
Adjustment.

 

(a)                                  As soon as practicable after the Closing,
but no later than 90 days after the Closing Date, Seller shall determine the
actual adjustment to the Base Purchase Price pursuant to Section 2.02(b) and
Section 2.02(c) as of the Closing Date.  Seller and Buyer shall cooperate and
provide each other access to their respective books and records (and those of
the Companies) as are reasonably requested in connection with the matters
addressed in this Section 2.06. Seller

 

3

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

 

shall provide Buyer with written notice of such determinations within such 90
days, along with reasonable supporting information (the “Seller’s Post-Closing
Estimate”).

 

(b)                                 If Buyer objects to any determinations set
forth in Seller’s Post-Closing Estimate, then it shall provide Seller written
notice thereof within 20 Business Days after receiving Seller’s Post-Closing
Estimate.  If the Parties are unable to agree on the disputed amounts as of the
Closing Date within 150 days after the Closing Date or such longer time as may
be agreed by the Parties, the Parties shall refer such dispute to an
internationally recognized accounting firm that is not the principal accounting
firm of either Buyer or Seller, mutually acceptable to Buyer and Seller, which
firm shall make a final and binding determination as to all such 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.

 

(c)                                  If the Base Purchase Price adjusted using
such actual values (as agreed or determined by the above-referenced accounting
firm) (the “Final Purchase Price”) is greater than the Estimated Purchase Price,
then Buyer shall, or shall cause one of the Companies to, pay Seller within 10
Business Days after such actual values are agreed or determined, by wire
transfer of immediately available funds, the difference between the Final
Purchase Price and the Estimated Purchase Price plus interest thereon at the
Interest Rate from the Closing Date through and including the date of such
payment.  If the Final Purchase Price is less than the Estimated Purchase Price,
then Seller shall pay Buyer within 10 Business Days after such actual values are
agreed or determined, by wire transfer of immediately available funds, the
difference between the Estimated Purchase Price and the Final Purchase Price
plus interest thereon at the Interest Rate from the Closing Date through and
including the date of such payment.  In each case, the recipient Party shall
designate the account to which such payment is to be made at least two Business
Days prior to the date such payment is due.

 

Section 2.07                                                        Allocation
of Purchase Price.  Buyer shall provide Seller an allocation of the Base
Purchase Price (plus any assumed liabilities that are treated as consideration
for federal income tax purposes) among the assets of Astoria LP and to the stock
of OPOS, in accordance with applicable Treasury Regulations within 30 days after
the Closing Date (the “Base Purchase Price Allocation”).  Not later than 30 days
after the determination of the Final Purchase Price, Buyer shall notify Seller
regarding the allocation of any adjustments resulting from such determination,
with such adjustments to be made in a manner consistent with the Base Purchase
Price Allocation and in accordance with applicable Treasury Regulations (as
adjusted, the “Final Purchase Price Allocation”).  Seller must inform Buyer of
any objections related to the Final Purchase Price Allocation in writing within
10 days after receipt thereof.  Buyer and Seller shall work in good faith to
resolve any disagreements regarding the Final Purchase Price Allocation within
30 days after receipt of Seller’s written objections.  If the Parties fail to
agree within such 30-day period upon the Final Purchase Price Allocation, such
dispute shall be resolved by an independent accounting firm mutually acceptable
to Buyer and Seller, and the decision of such independent accounting firm shall
be final and binding on the Parties.  The fees and expenses of such accounting
firm shall be borne equally by Seller and Buyer.  Seller and Buyer shall each
prepare and timely file IRS Form 8594 “Asset Acquisition Statement Under Section
1060” and any other statements or forms prescribed under federal, state, local
or foreign

 

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Tax Law (including any exhibits thereto) to report the Final Purchase Price
Allocation.  The Parties agree that they shall not, and shall not permit their
Affiliates (including the Companies) to, take a position on any Tax Return or
for any Tax purpose that is inconsistent with the Final Purchase Price
Allocation; provided, however, that neither Seller nor Buyer shall be obligated
to litigate any challenge to the Final Purchase Price Allocation by any
Governmental Authority.  The Parties agree to provide each other promptly with
any information required to complete such Tax forms or statements as are
required under applicable law to report the Final Purchase Price Allocation.

 

Section 2.08                                                        Calculation
of Estimated Purchase Price.  Not less than 10 Business Days prior to the
Closing Date, the Seller shall deliver to Buyer its good faith calculation of
the Base Purchase Price, with estimated adjustments pursuant to Section 2.02(b)
and Section 2.02(c) (the “Preliminary Purchase Price”) and shall deliver to
Buyer a schedule showing its calculation of the Preliminary Purchase Price
(including the estimated adjustments to the Base Purchase Price pursuant to
Section 2.02(b) and Section 2.02(c)).  During the five (5) Business Day period
after delivery of Seller’s calculation of the Preliminary Purchase Price, Seller
shall provide Buyer and its Representatives with such information and access to
such personnel of the Seller Entities, the Guarantor and the Companies as Buyer
may reasonably request in order to calculate the Preliminary Purchase Price.  If
in good faith Buyer disagrees with Seller’s calculation of the Preliminary
Purchase Price, it shall deliver to Seller a written notice of disagreement (a
“Notice of Disagreement”) and its good faith calculation, based on the
information available to it, of the Preliminary Purchase Price.  If Buyer
delivers a Notice of Disagreement on or prior to the fifth Business Day after
delivery of Seller’s calculation of the Preliminary Purchase Price, the Parties
shall negotiate in good faith during the three (3) Business Day period following
delivery of the Notice of Disagreement as to the calculation of the Preliminary
Purchase Price.  If the Parties agree in writing to such calculation during such
three Business Day period, the “Estimated Purchase Price” for purposes of this
Agreement shall be the Preliminary Purchase Price as agreed to by the Parties. 
If the Parties do not agree in writing to such calculation prior to the
expiration of such three Business Day period, the Closing shall nonetheless
occur and the “Estimated Purchase Price” for purposes of this Agreement shall be
the average of Seller’s calculation of the Preliminary Purchase Price and
Buyer’s calculation of the Preliminary Purchase Price.  In the event that Buyer
does not deliver a Notice of Disagreement prior to the expiration of the five
Business Day period referred to above, the “Estimated Purchase Price” for
purposes of this Agreement shall be Seller’s calculation of the Preliminary
Purchase Price.  If the Estimated Purchase Price is the average of Seller’s
calculation of the Preliminary Purchase Price and Buyer’s calculation of the
Preliminary Purchase Price, at the Closing, Buyer shall deposit with an escrow
agent reasonably satisfactory to Buyer and Seller (the “Escrow Agent”) an amount
equal to the difference between the Seller’s calculation and such average (the
“Escrow Amount”), and such amount shall be held and released in accordance with
the terms of the Escrow Agreement (the “Escrow Agreement”), which will be in
form and substance reasonably satisfactory to Buyer, Seller and the Escrow
Agent.  The Parties agree that the Escrow Agreement shall contemplate that (a)
in the event that Estimated Purchase Price exceeds the Final Purchase Price, the
parties shall cause the Escrow Amount (together with interest thereon and
without otherwise limiting the obligations of Seller under Section 2.06) to be
paid to the Buyer and (b) in the event that the Final Purchase Price exceeds the
Estimated Purchase Price (the “Excess Amount”), the parties shall cause the
Escrow Amount (together with interest thereon earned in accordance with the
Escrow Agreement and in partial satisfaction of

 

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Buyer’s obligations under Section 2.06 to the extent that the Excess Amount
exceeds the Escrow Amount (i.e., the Buyer shall also be responsible to pay the
amount by which the Excess Amount exceeds the Escrow Amount)) to be paid to
Seller; provided that in the case of clause (b), in the event that the Escrow
Amount exceeds the Excess Amount, a portion of the Escrow Amount (together with
interest on such portion earned in accordance with the Escrow Agreement) equal
to the Excess Amount shall be paid to Seller in full satisfaction of Buyer’s
obligations under Section 2.06 and the remaining portion of the Escrow Amount
(together with interest thereon earned in accordance with the Escrow Agreement)
shall be paid to Buyer.  Nothing in this Section 2.08 shall be deemed to prevent
application of Section 2.06 with respect to the post-Closing adjustment.

 

ARTICLE III
REPRESENTATIONS AND WARRANTIES REGARDING THE SELLER ENTITIES

 

In order to induce Buyer to enter into this Agreement and consummate the
transactions contemplated hereby, Seller hereby represents and warrants to Buyer
as of each of the Execution Date and the Closing Date that, except as set forth
in Seller’s Disclosure Schedule:

 

Section 3.01                                                        Organization
and Qualification.  Each of the Seller Entities (other than OPNY LP) is a
corporation, duly formed, validly existing and in good standing under the Laws
of Delaware.  OPNY LP is a limited partnership, duly formed, validly existing
and in good standing under the Laws of Delaware.  Each of the Seller Entities is
duly qualified or licensed to do business in each other jurisdiction where the
actions required to be performed by it hereunder make such qualification or
licensing necessary, except in those jurisdictions where the failure to be so
qualified or licensed would not, in the aggregate, reasonably be expected to
result in a material adverse effect on Seller’s ability to perform its
obligations hereunder.

 

Section 3.02                                                        Authority. 
Seller has all requisite corporate 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 corporate 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, arrangement, moratorium or other similar Laws
relating to or affecting the rights of creditors generally, or by general
equitable principles.

 

Section 3.03                                                        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 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 of the Seller Entities;

 

(b)                                 assuming all consents set forth on Schedule
3.03(b) (collectively, the “Seller Consents”) have been obtained, violate or
result in a default (or give rise to any right of termination, cancellation or
acceleration) under any material Contract to which any Seller Entity

 

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is a party, except for any such violations or defaults (or rights of
termination, cancellation or acceleration) which, individually or in the
aggregate, would not reasonably be expected to result in a material adverse
effect on Seller’s ability to perform its obligations hereunder; and

 

(c)                                  assuming all required filings, approvals,
consents, authorizations and notices set forth on Schedule 3.03(c)
(collectively, the “Seller Governmental Approvals”) have been made, obtained or
given, (i) conflict with, violate or breach any material term or provision of
any Law or writ, judgment, order or decree applicable to the Seller Entities or
(ii) require the material consent or approval of any Governmental Authority
under any applicable Law.

 

Section 3.04                                                       
Capitalization.  Seller indirectly owns 100% of the Company Interests.  The
capitalization and ownership of Astoria LP and OPOS are set forth on Schedule
3.04.  Except as set forth on Schedule 3.04, each owner of the Company Interests
as indicated on Schedule 3.04 owns such Company Interests directly and free and
clear of all Liens, restrictions on transfer or other encumbrances other than
those arising pursuant to this Agreement or applicable securities laws and, in
the case of Astoria LP, its limited partnership agreement (all of which
restrictions, in the case of the limited partnership agreement of Astoria LP,
have been irrevocably satisfied or waived on or prior to the Execution Date to
the extent such restrictions restrict the transactions contemplated by this
Agreement).  Without limiting the generality of the foregoing, none of the
Company Interests are subject to any voting trust, shareholder agreement, voting
agreement or similar agreement.

 

Section 3.05                                                        Legal
Proceedings.  None of the Seller Entities has been served with written notice of
any Claim, and to Seller’s Knowledge none is threatened against any of the
Seller Entities, which seeks a writ, judgment, order or decree restraining,
enjoining or otherwise prohibiting or making illegal any of the transactions
contemplated by this Agreement.

 

Section 3.06                                                        Brokers. 
None of the Seller Entities 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 or the Companies could become
liable or obligated.

 

ARTICLE IV
REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANIES

 

In order to induce Buyer to enter into this Agreement and consummate the
transactions contemplated hereby, Seller hereby represents and warrants to Buyer
as of each of the Execution Date and the Closing Date that, except as set forth
in Seller’s Disclosure Schedule:

 

Section 4.01                                                        Organization
and Qualification.  Astoria LP is a limited partnership duly formed and validly
existing under the laws of the State of Delaware, and OPOS is a corporation duly
organized and validly existing under the laws of the State of Delaware.  Each
Company has the requisite partnership, corporate or company power and authority
to own, lease and operate its assets and properties and to carry on its business
as it is now being conducted or as contemplated herein.  Each Company is
qualified to transact business and, where applicable, is in good standing in
each jurisdiction in which the Real Property or the nature of the business
conducted by it makes such qualification necessary, except as would not, in the
aggregate,

 

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reasonably be expected to have a Material Adverse Effect.  True, accurate and
complete copies of each Company’s Charter Documents, in each case as amended and
in effect on the Execution Date, have previously been delivered or made
available to Buyer.

 

Section 4.02                                                        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 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 the Charter Documents of
either Company;

 

(b)                                 assuming the consents set forth on Schedule
4.02(b) (the “Company Consents”) have been obtained, be in violation of or
result in a default (or give rise to any notice requirement or right of
termination, cancellation or acceleration) under any Material Contract; and

 

(c)                                  assuming all the Seller Governmental
Approvals 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 or writ,
judgment, order or decree applicable to either Company or any of their Purchased
Assets or (ii) require the material consent or approval of any Governmental
Authority under any applicable Law.

 

Section 4.03                                                       
Capitalization; Subsidiaries.  Except as disclosed on Schedule 4.03, neither
Company is a party to any written or oral agreement, and neither Company has
granted or issued, or agreed to grant or issue, 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 either Company.  Neither of the Companies has
subsidiaries or owns equity interests in any Person.

 

Section 4.04                                                        Financial
Statements.

 

(a)                                  Attached as Schedule 4.04(a) are true,
correct and complete copies of the following:  the audited consolidated balance
sheets at December 31, 2003 of OPNY LP and its subsidiaries, the unaudited
consolidated balance sheet at December 31, 2004 of OPNY LP and its subsidiaries,
the audited consolidated statements of operations, partners’ capital and
comprehensive income (loss) and cash flows for OPNY LP and its subsidiaries for
the year ending December 31, 2003, and the unaudited consolidated statements of
operations and comprehensive income (loss) for OPNY LP and its subsidiaries for
the year ending December 31, 2004 and the related notes and supplemental
information.  All such financial statements set forth on Schedule 4.04(a) for
the year ending December 31, 2003 fairly present, in all material respects and
in accordance with GAAP, the consolidated financial position, the results of
operations and cash flows, as the case may be, of OPNY LP and its subsidiaries,
at the dates and for the periods indicated.  All such financial statements set
forth on Schedule 4.04(a) for the year ending December 31, 2004 fairly present,
in all material respects and in accordance with GAAP, the consolidated financial
position, the results of operations and cash flows, as the case may be, of OPNY
LP and its subsidiaries, at the dates and for the periods indicated, except for
the allocation of corporate support and general and administrative expenses and
the allocation of

 

8

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goodwill and its related accounting in accordance with SFAS No. 142, “Goodwill
and Other Intangible Assets,” and except for the absence of footnote disclosure.

 

(b)                                 Attached as Schedule 4.04(b) are true,
correct and complete copies of the following:  the unaudited consolidated
balance sheet of the Companies at December 31, 2004, December 31, 2003 and
December 31, 2002, the unaudited consolidated statements of operations and
comprehensive income (loss) for the Companies for the years ending December 31,
2004, December 31, 2003 and December 31, 2002.  All such financial statements
set forth on Schedule 4.04(b) fairly present, in all material respects and in
accordance with GAAP, the consolidated financial position and the results of
operations, as the case may be, of the Companies, at the dates and for the
periods indicated, except for the allocation of corporate support and general
and administrative expenses and the allocation of goodwill and its related
accounting in accordance with SFAS No. 142, “Goodwill and Other Intangible
Assets,” and except for the absence of footnote disclosure.

 

(c)                                  Attached as Schedule 4.04(c) are copies of
the following for the Companies:  the unaudited balance sheet at June 30, 2005
(collectively, the “June 30 Balance Sheets”), the unaudited balance sheet at
June 30, 2004 and the unaudited statements of operations for the periods January
1, 2005 through June 30, 2005 and January 1, 2004 through June 30, 2004.  All
such financial statements set forth on Schedule 4.04(c) fairly present, in all
material respects and in accordance with GAAP, the financial position and the
results of operations, as the case may be, of the respective Companies, at the
dates and for the periods indicated, except for the allocation of corporate
support and general and administrative expenses and the allocation of goodwill
and its related accounting in accordance with SFAS No. 142, “Goodwill and Other
Intangible Assets,” and except for the absence of footnote disclosure.

 

Section 4.05                                                        Absence of
Undisclosed Liabilities; Certain Developments.

 

(a)                                  Except as recorded in the June 30 Balance
Sheets or as disclosed in Schedule 4.05(a), except for liabilities incurred in
the ordinary course of business since June 30, 2005 that have been paid, will be
paid prior to the Closing Date or otherwise included in the computation of
Closing Date Working Capital Amount and except as will be repaid or extinguished
on or prior to the Closing Date pursuant to Section 6.08, the Companies do not
have liabilities that would be required to be recorded on a balance sheet (or
footnotes thereto) of the Companies prepared in accordance with GAAP, other than
post-Closing performance obligations under the Material Contracts and
liabilities incurred after the date of this Agreement with the consent of Buyer.

 

(b)                                 Since June 30, 2005, except as disclosed in
Schedule 4.05(b), there has not occurred (i) any circumstance, development or
event or series of such occurrences that, in the aggregate, has had or would
reasonably be expected to have a Material Adverse Effect; (ii) any loss or
interference with the operation of the Facilities from fire, explosion, flood or
other calamity, whether or not covered by insurance, or from any labor dispute
or action, order or decree of any Governmental Authority that, in the aggregate,
has had or would reasonably be expected to have a Material Adverse Effect; or
(iii) any material change by either Company in financial accounting principles,
practices or methods, except as required by GAAP or by a Change of Law.

 

9

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Section 4.06                                                        Litigation. 
Except as disclosed on Schedule 4.06, there is no material litigation,
arbitration or other dispute resolution pending, or, to Seller’s Knowledge,
threatened, against either Company or the Purchased Assets before (or in the
case of threatened material litigation that could come before) any Governmental
Authority or any arbitrator, except for matters of general applicability
relating to the electric industry generally, or specifically to participants in
New York City electric markets, pending before FERC.  Except as disclosed on
Schedule 4.06, neither Company nor any of the Purchased Assets is subject to any
judgment, decree or injunction of any Governmental Authority or any arbitrator
that prohibits the consummation of the transactions contemplated by this
Agreement or that is otherwise binding on the Companies, their business or
Facilities from and after the Closing, other than matters of general
applicability or judgments, decrees or injunctions of Governmental Authorities
which would not reasonably be expected to have, a Material Adverse Effect. 
Except as disclosed on Schedule 4.06, neither Company nor any of the Purchased
Assets is subject to any rule or order of any Governmental Authority or any
arbitrator that prohibits the consummation of the transactions contemplated by
this Agreement.

 

Section 4.07                                                        Compliance
with Laws.  Except as disclosed on Schedule 4.07, each Company and the Owned
Real Property are and, since February 19, 2002, have at all times been in
compliance with applicable Law and no Non-Company Affiliate nor either of the
Companies has been given written notice of any violation of any Law, except for
non-compliance or violations that would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect.  Except as
disclosed on Schedule 4.07, to Seller’s Knowledge, no investigation or review
relating to either Company or the Owned Real Property by any Governmental
Authority is pending or threatened.

 

Section 4.08                                                        Contracts.

 

(a)                                  Excluding the Terminated Contracts and any
Benefit Plans, Schedule 4.08 sets forth a list as of the date of this Agreement
of the following Contracts to which either Company is a party, by which the
Purchased Assets may be bound (collectively, the “Material Contracts”):

 

(i)                                                             Contracts for
the future purchase, exchange or sale of electric power or ancillary services or
fuel;

 

(ii)                                                          Contracts for the
future transmission of electric power or fuel or for the storage of fuel;

 

(iii)                                                       interconnection
and/or facilities joint use Contracts;

 

(iv)                                                      other than Contracts
of the nature addressed by Section 4.08(a)(i) - (ii), Contracts (A) for the sale
of any asset of a Company or (B) that grant a right or option to purchase any
asset of a Company, other than in each case Contracts entered into in the
ordinary course of business consistent with past practices relating to assets
with a value of less than $500,000 individually or $2,000,000 in the aggregate;

 

(v)                                                         other than Contracts
of the nature addressed by Section 4.08(a)(i) - (ii), Contracts for the future
provision of goods or services requiring payments in excess of $1,000,000 for
each individual Contract;

 

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(vi)                                                      Contracts under which
a Company has created, incurred, assumed or guaranteed any outstanding
indebtedness for borrowed money, any capitalized lease obligation or any other
Indebtedness, or under which such Company has imposed a security interest or
Company Lien on any of its assets, tangible or intangible;

 

(vii)                                                   outstanding agreements
of guaranty, surety or indemnification, direct or indirect, by a Company, or by
Seller or any Non-Company Affiliate for the benefit of a Company;

 

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

 

(ix)                                                        employment and
consulting Contracts providing annual compensation in excess of $150,000 or
providing severance benefits in excess of $150,000;

 

(x)                                                           any collective
bargaining agreement;

 

(xi)                                                        any settlement,
conciliation or similar Contract, the performance of which will involve payment
after the execution of this Agreement of consideration in excess of $1,000,000;

 

(xii)                                                     any Contract under
which a Company has advanced or loaned any amount to any of its directors,
officers, and employees outside the ordinary course of business;

 

(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, fuel or securities;

 

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

 

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

 

(xvi)                                                 Contracts conveying,
granting, leasing or assigning an interest in real property to a Company
(including the Leases);

 

(xvii)                                              Contracts with Consolidated
Edison for the purchase or sale of the Companies or any business, division, or
operation of the Companies or any of Facilities or Real Property pursuant to
which indemnification rights remain in favor of or against the Companies or any
Non-Company Affiliates;

 

(xviii)                                           Contracts which require
payment or increased obligations by or on behalf of the Companies or to any
employees of the Companies as a result of the transactions contemplated by this
Agreement; and

 

(xix)                                                   Contracts for leases of
personal property involving annual payments in excess of $1,000,000.

 

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(b)                                 Seller has provided Buyer with, or access
to, true and complete copies of all Material Contracts and all Assigned
Contracts.

 

(c)                                  Neither Company, and, to Seller’s
Knowledge, no counterparty, is in default in the performance or observance of
any term or provision of, and no event has occurred which, with lapse of time or
action by a third party, would result in such a default under any Contract to
which either Company is a party or by which either of them is bound or to which
any of the Purchased Assets is subject, other than as would not, individually or
in the aggregate, reasonably be expected to have a Material Adverse Effect.  To
Seller’s Knowledge, all Assigned Contracts and all other Material Contracts (and
Contracts entered into after the Execution Date that would be Material Contracts
if entered into prior to the Execution Date) are in full force and effect. 
Except as set forth on Schedule 4.08(c), to Seller’s Knowledge, no claims for
indemnification are pending by or against the Companies or any Non-Company
Affiliate under the ConEd Agreement.

 

Section 4.09                                                        Taxes. 
Except as set forth on Schedule 4.09:

 

(a)                                  The Companies have duly filed with the
appropriate Taxing Authorities all Tax Returns required to be filed by them, and
such Tax Returns are accurate and complete in all material respects; provided,
however, that nothing in this representation shall be construed as a
representation or warranty by the Seller as to the Tax basis of the assets of
the Companies or the amount or availability of any net operating losses, capital
losses, Tax credits or other Tax attributes of the Companies.  The Companies
have duly paid in full any and all Taxes that are due and payable (whether or
not such Taxes are shown on or required to be shown on a Tax Return).

 

(b)                                 There are no liens for Taxes upon any
property or asset of either Company, except for liens for Taxes not yet due.

 

(c)                                  There are not pending or, to Seller’s
Knowledge, threatened in writing any Tax audits or examinations of the Companies
and no written notices of deficiency, proposed deficiency or assessment from any
Taxing Authority with respect to Taxes of either Company have been received by
the Companies or any Non-Company Affiliate.  All material deficiencies asserted
or assessments made for Taxes due by the Companies with respect to any completed
and settled examinations or any concluded litigation have been fully paid.

 

(d)                                 There are no outstanding agreements
extending or waiving the statutory period of limitations applicable to any claim
for, or the period for the collection or assessment or reassessment of, Taxes
due from the Companies for any taxable period and no request for any such waiver
or extension is currently pending.

 

(e)                                  Neither Company is a party to any agreement
relating to the sharing, allocation or indemnification of Taxes, or any similar
agreement, contract or arrangement, (collectively, “Tax Sharing Agreements”) or
has any liability for Taxes of any Person (other than members of the Seller
Group) under Treasury Regulation § 1.1502-6, Treasury Regulation § 1.1502-78 or
similar provision of state, local or foreign Law, as a transferee or successor,
by contract, or otherwise.

 

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(f)                                    The Companies have each withheld and paid
all Taxes required to have been withheld and paid in connection with any amounts
paid or owing to any employee, independent contractor, creditor, stockholder, or
other third party, except for any failure to withhold and make such payments
which would not, in the aggregate, reasonably be expected to have a Material
Adverse Effect.

 

(g)                                 OPOS has not constituted a “distributing
corporation” or a “controlled corporation” (within the meaning of Section
355(a)(1)(A) of the Code) in a distribution of shares purported or intended to
be governed by Section 355 or Section 361 of the Code.

 

(h)                                 Astoria LP has been treated as a partnership
for federal, state, and local income tax purposes since its formation.

 

(i)                                     Astoria LP has no outstanding liability
for and is not subject to payment of the New York City Utility Tax, has received
no demand, notice or claim from any Governmental Authority for payment of such
Tax, and has received no notification or assertion by any Governmental Authority
that it is or may be liable for the payment of such Tax.

 

Section 4.10                                                        Employee
Benefit Plans; ERISA.

 

(a)                                  Schedule 4.10(a) sets forth a true, correct
and complete list, as of the Execution Date, of (i) the Company Plans and (ii)
all Seller Plans sponsored, maintained or contributed to by a Company, and such
list identifies each such plan as either a Company Plan or Seller Plan.  On or
before the Execution Date, Seller has made available to Buyer true and complete
copies of each of the following with respect to the Company Plans, to the extent
applicable:  the most recent annual report (Form 5500) filed with the Employee
Benefits Security Administration, the plan document (including any amendments
thereto), the trust agreement, the most recent summary plan description if
required by ERISA, the most recent actuarial report or valuation that is
required to be prepared under applicable Laws, and the most recent determination
letter or opinion letter issued by the IRS with respect to any Company Plan
intended to be qualified under Section 401(a) of the Code.  Neither Company
contributes to, or has an obligation to contribute to, or has any liability or
potential liability with respect to a multiemployer plan (within the meaning of
Section 3(37) of ERISA). No Company Plan is a multiple employer plan within the
meaning of Section 413(c) of the Code or a multiple employer welfare arrangement
as defined in Section 3(40) of ERISA. On or before the Execution Date, Seller
has also made available to Buyer copies of the Severance Plan.

 

(b)                                 With respect to any Seller Plan that is an
“employee benefit plan,” within the meaning of Section 3(3) of ERISA, (i) no
withdrawal liability, within the meaning of Section 4201 of ERISA, has been
incurred by Seller or by any trade or business, whether or not incorporated,
that together with Seller would be a “single employer” within the meaning of
Section 4001(b) of ERISA (a “Commonly Controlled Entity”), which withdrawal
liability has not been satisfied in full, (ii) no liability to the Pension
Benefit Guaranty Corporation (the “PBGC”) has been incurred by Seller or by any
Commonly Controlled Entity, which liability has not been satisfied (other than
with respect to the payment of premiums that are not past due), (iii) no
accumulated funding deficiency, whether or not waived, within the meaning of
Section 302 of ERISA or Section 412 of the Code currently exists, and (iv) all
contributions (including

 

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installments) to such plan required of Seller or any Commonly Controlled Entity
prior to the Execution Date by Section 302 of ERISA and Section 412 of the Code
have been made.

 

(c)                                  Except as otherwise set forth in Schedule
4.10(c):

 

(i)                                                             With respect to
each Company Plan, the Companies and their Affiliates have substantially
performed all material obligations, whether arising by operation of Law or by
Contract, required to be performed by them, and no event has occurred and, to
the Knowledge of Seller, there exists no condition or set of circumstances in
connection with which the Companies could be subject to any material liability
for failure to operate and administer such Company Plan in accordance with its
terms, the terms of any applicable collective bargaining agreement or any
applicable Laws;

 

(ii)                                                          Each Company Plan
intended to be qualified under Section 401(a) of the Code (A) substantially
satisfies in form the requirements of such Section except to the extent
amendments are not required by applicable Laws to be made until a date after the
Closing Date, (B) has received a favorable determination letter from the IRS
regarding such qualified status and has been submitted to the IRS for a
determination or opinion letter that takes the GUST amendments into account
within the applicable remedial amendment period specified by Section 401(b) of
the Code, and (C) has not been operated in a way that would materially adversely
affect its qualified status;

 

(iii)                                                       As to any Company
Plan subject to Title IV of ERISA or Section 412 of the Code, there has been no
event or condition which presents the material risk of termination of the
Company Plan, no accumulated funding deficiency, whether or not waived, within
the meaning of Section 302 of ERISA or Section 412 of the Code currently exists,
no reportable event within the meaning of Section 4043 of ERISA has occurred, no
notice of intent to terminate the Company Plan has been given under Section 4041
of ERISA, no proceeding has been instituted under Section 4042 of ERISA to
terminate the Company Plan, and no material liability to the PBGC has been
incurred (other than with respect to the payment of premiums that are not past
due);

 

(iv)                                                      There are no material
actions, suits, or claims pending (other than routine claims for benefits) with
respect to any Company Plan or its assets, and, to the Knowledge of Seller,
there is no matter pending (other than routine qualification determination
filings) with respect to any Company Plan before any Governmental Authority;

 

(v)                                                         There have been no
material non-exempt “prohibited transactions” (as defined in Section 406 of
ERISA or Section 4975 of the Code) with respect to each Company Plan, and no
“fiduciary” (as defined in Section 3(21) of ERISA) has any material liability
for breach of fiduciary duty or any other failure to act or comply in connection
with the administration or investment of the assets of any Company Plan;

 

(vi)                                                      With respect to each
Company Plan, (A) all material contributions (including all material employer
contributions and employee salary reduction

 

14

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contributions) that are due have been made within the time periods prescribed by
ERISA and the Code, and all contributions for any period ending on or before the
Closing Date that are not yet due have been (or will be) made or properly
accrued and (B) as of June 30, 2005, there are no material unfunded liabilities
that are not accurately reflected on the June 30 Balance Sheets; and

 

(vii)                                                   No Company Plan provides
health, life insurance or other welfare benefits to retirees or other terminated
employees of the Company other than as required by COBRA.

 

(d)                                 Except as set forth on Schedule 4.10(d), the
execution and performance of the transactions contemplated by this Agreement
will not (either alone or upon the occurrence of any additional subsequent
event) constitute an event under any Company Plan that will or may result in any
payments of money or other property, acceleration of benefits or payments,
forgiveness of indebtedness, vesting, distribution, increase in benefits or
obligation to fund benefits with respect to any employee or former employee of
the Company or under any Company Plan.

 

Section 4.11                                                        Labor and
Employment.

 

(a)                                  Except for the Collective Bargaining
Contract, neither Company is a party to, or is bound by, the terms of any
collective bargaining agreement or any other Contract with any labor union or
representative of employees.  Seller has provided Buyer with, or access to, a
true and complete copy of the Collective Bargaining Contract.  To Seller’s
Knowledge, there are no organizational or decertification efforts underway or
threatened involving any of the employees of either Company.

 

(b)                                 Except as disclosed on Schedule 4.06, with
respect to either Company, since February 19, 2002:  (i) there has not been any
filed representation petition or written demand for recognition by any labor
organization or group of employees; (ii) no labor strike, work stoppage,
slowdown, or other material labor dispute has occurred or is underway or, to
Seller’s Knowledge, threatened; (iii) there has not been, and there is not
currently pending, any material union grievance, and (iv) there is no workers’
compensation liability, experience or matter that, individually or in the
aggregate, would reasonably be expected to have a Material Adverse Effect.

 

(c)                                  With respect to this transaction, any
notice required under any law or collective bargaining agreement has been given,
and all bargaining obligations with any employee representative have been, or
prior to the Closing will be, satisfied.  Within the past three years, neither
Company has implemented any plant closing or layoff of employees that could
implicate the Worker Adjustment and Retraining Notification Act of 1988, as
amended, or any similar foreign, state or local law, regulation or ordinance
(jointly, the “WARN Act”), and no such action will be implemented without
advance notification to Buyer.

 

Section 4.12                                                       
Environmental Matters.  Except as disclosed on Schedule 4.12:  (a) except as
would not reasonably be expected to have a Material Adverse Effect, each Company
and Facility is, and since February 19, 2002, at all times has been in
compliance with all applicable Environmental Laws, which compliance includes
obtaining and complying with all

 

15

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Permits required under Environmental Laws for the ownership and operation of the
Facilities as they are currently being operated, (b) neither Company has
received any written notice, demand or request for information from any
Governmental Authority or other Person indicating that it or any of the
Facilities currently is, or may be, in violation of any Environmental Law, (c)
except as would not reasonably be expected to have a Material Adverse Effect,
there are no civil, criminal or administrative actions, suits, demands, claims,
hearings, investigations or proceedings pending or, to Seller’s Knowledge,
threatened against either Company relating to any violation, or alleged
violation, of, or liability under, any Environmental Law, (d) to Seller’s
Knowledge, neither Company has disposed of, released or transported, or arranged
for the disposal, release, or transportation of, any Hazardous Substance in
violation of any applicable Environmental Law, or so as to give rise to any
liability under Environmental Law and none of the Facilities is contaminated
with any Hazardous Substance so as to give rise to any material liabilities
under any Environmental Law, (e) neither Company is subject to any liabilities
or expenditures (fixed or contingent) relating to any suit, settlement, court
order, administrative order, regulatory requirement, judgment or claim asserted
or arising under any Environmental Law, (f) except as would not reasonably be
expected to have a Material Adverse Effect, neither Company has assumed in
writing or undertaken by operation of law any liability of any other Person
relating to Environmental Law, and (g) Seller has provided to Buyer copies of
all material environmental reports, audits and assessments prepared since
February 19, 2002, and any other material environmental documents (in each
instance, relevant to the Companies or the Facilities), to the extent the
forgoing are in the possession, custody, or reasonable control of the Seller or
the Companies.  Notwithstanding any other provision of this Agreement to the
contrary, this section contains the sole and exclusive representations and
warranties of Seller with regard to environmental matters.

 

Section 4.13                                                        Intellectual
Property.  Except as would not reasonably be expected to have a Material Adverse
Effect, (a) except for the Seller Marks and except as set forth on Schedule
4.13(a), each Company owns, or otherwise has the right to use, all patents,
patent rights (including patent applications and licenses), know-how, trade
secrets, trademarks (including trademark applications), trademark rights, trade
names, trade name rights, service marks, service mark rights, copyrights and
other proprietary intellectual property rights (collectively, “Intellectual
Property”) used in the conduct of such Company’s business as it is currently
conducted, (b) except as set forth on Schedule 4.13(a) and as otherwise set
forth in this Agreement, the Company’s ownership of, or rights to use, the
Intellectual Property used in the conduct of such Company’s business as it is
currently conducted shall not expire as a result of the transactions
contemplated by this Agreement, (c) the use of Intellectual Property by each
Company does not infringe on or otherwise violate the rights of any third party,
and is in accordance with the applicable license pursuant to which such Company
acquired the right to use such Intellectual Property, (d) to Seller’s Knowledge,
no third party is challenging, infringing on or otherwise violating any right of
either Company with respect to such Company’s Intellectual Property, and (e)
neither Company has granted or been granted, or is obligated to grant, any
license, sub-license, or assignment of any Intellectual Property.

 

Section 4.14                                                        PUHCA;
Regulation as Utility.

 

(a)                                  Neither Company is (i) subject to
regulation as a “public-utility company,” a “holding company,” or a “subsidiary
company” or “affiliate” of a “public-utility company,” or a

 

16

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“holding company” within the meaning of the Public Utility Holding Company Act
of 1935, as amended, or (ii) currently regulated pursuant to any state law or
regulation with respect to the rates charged for sales of electricity, but
Astoria LP is subject to state law or regulation with respect to the financial
and organizational regulation of electric utilities.  OPOS is not subject to
regulation as a “public utility” within the meaning of the FPA.  Astoria LP is
subject to regulation as a “public utility” within the meaning of the FPA, but
is not subject to cost-of-service regulation with regard to its rates for sales
of wholesale power.

 

(b)                                 Astoria LP meets the requirements for, and
has been determined by FERC to be, an “Exempt Wholesale Generator” within the
meaning of the Public Utility Holding Company Act of 1935, as amended.

 

(c)                                  Astoria LP has on file with FERC effective
rate schedules in compliance with the FPA.  Such rate schedules are in full
force and effect.

 

Section 4.15                                                        Real
Property.  Seller has delivered or otherwise made available to Buyer true,
correct and complete copies of the Title Commitments and all existing title
policies, title reports and surveys for the Facilities in the possession of the
Companies.

 

Section 4.16                                                        Insurance. 
Schedule 4.16 identifies each of the insurance policies carried by Seller or any
of its Affiliates which cover risks associated with or arising out of the
business, property or assets of the Companies (including general liability
policies and property and casualty policies) during the last five (5) years (the
“Insurance Policies”).  Seller and its Affiliates have paid all premiums or
other amounts due and owing to the insurers in respect of the Insurance Policies
and is not otherwise in default under any such Insurance Policy.

 

Section 4.17                                                        Affiliate
Transactions.  Schedule 4.17 sets forth (a) each Contract between either or both
of the Companies, on the one hand, and any Non-Company Affiliate, on the other
hand, (b) each Contract with a third-party to which a Non-Company Affiliate is
party that is material to the business of the Companies, and (c) the material
services provided to either of the Companies by one or more Non-Company
Affiliates.

 

Section 4.18                                                        Permits. 
Schedule 4.18 sets forth a complete and accurate list of all material Permits
held by the Companies and the Facilities.  All such Permits are held by one of
the Companies and, to Seller’s Knowledge, are in full force and effect, and
except as shown on Schedule 4.07, neither the Seller nor of its Affiliates
(including, without limitation, the Companies) has received any notice of
violation or proposed revocation or termination relating to any such Permit from
any Governmental Authority.  Except as disclosed on Schedule 4.07, neither
Company, nor any of the Facilities, is in violation of the terms of any
covenants, conditions, restrictions or easements or of any Permits, except for
violations which, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect.

 

Section 4.19                                                        Sufficiency
of Assets.  Except as disclosed on Schedule 4.19(a), except for the services to
be provided to Buyer and the Companies under the Transition Services Agreement
and except for assets consumed in the ordinary course of business, the assets
available for use by the Companies immediately after Closing will include all of
the assets (whether tangible or intangible) used by the Companies to conduct the
business of the

 

17

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Companies as conducted as of each of June 30, 2005 and the date hereof, except
as would not reasonably be expected to have a Material Adverse Effect.  Except
as would not reasonably be expected to have a Material Adverse Effect, the
Companies have good title to, or valid license or right to use, free and clear
of all Liens (other than Liens that will be discharged prior to Closing), all of
the tangible personal property described in the preceding sentence.  As of the
Closing, the Companies shall have available the air emission allowances
identified in Schedule 4.19(b) without payment, transfer, reissuance, or consent
of any third party or Governmental Agency.

 

ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER

 

In order to induce Seller to enter into this Agreement and consummate the
transactions contemplated hereby, Buyer hereby represents and warrants to Seller
that:

 

Section 5.01                                                        Organization
and Qualification.  Buyer is a limited liability company duly formed, validly
existing and in good standing under the Laws of the State of Delaware.  Buyer is
duly qualified or licensed to do business in each other jurisdiction where the
actions required to be performed by it hereunder make 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 Buyer’s ability to perform its obligations hereunder.

 

Section 5.02                                                        Authority. 
Buyer has all requisite limited liability 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, arrangement,
moratorium or other similar Laws relating to or affecting the rights of
creditors generally or by general equitable principles.

 

Section 5.03                                                        No
Conflicts; Consents and Approvals.  The execution and delivery by Buyer of this
Agreement, 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 default
(or give rise to any right of termination, cancellation or acceleration) under
any material Contract to which Buyer is a party or by which any of its assets
may be bound 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

 

18

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(c)                                  assuming all required filings, approvals,
consents, authorizations and notices set forth in Schedule 5.03(c)
(collectively, the “Buyer Governmental Approvals”) 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 or writ, judgment, order or decree applicable to Buyer
or any of its assets or (ii) require the material consent or approval of any
Governmental Authority under any applicable Law.

 

Section 5.04                                                        Legal
Proceedings.  Buyer has not been served with written 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.

 

Section 5.05                                                        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 result in a material adverse effect
on Buyer’s ability to perform its obligations hereunder.

 

Section 5.06                                                        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 could become liable or obligated.

 

Section 5.07                                                        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 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.

 

Section 5.08                                                        Financial
Resources.  Buyer has delivered true, correct and complete copies of (a) the
commitment letter received by Buyer and its affiliates and executed by all
parties thereto (the “Debt Commitment Letter”) to provide the debt financing for
the transactions contemplated hereby and (b) a true, correct and complete copy
of the commitment letter received by Buyer and its affiliates and executed by
all parties thereto (the “Equity Commitment Letter” and, together with the Debt
Commitment Letter, the “Commitment Letters”) to provide equity financing for the
transactions contemplated hereby.  Assuming receipt of all of the financing
contemplated by the Commitment Letters, at Closing, Buyer shall have sufficient
funds to satisfy its obligations required to be performed at Closing.

 

Section 5.09                                                        No Knowledge
of Seller’s Breach.  Except for breaches of which Buyer informs Seller in
accordance with Section 9.04(e) and except for breaches of which Buyer is
informed by Seller in accordance with Section 6.02(a)(ii), Buyer does not have
Knowledge of any breach by Seller of any of the representations and warranties
herein.

 

Section 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 Companies, the Purchased Assets and
the Facilities without reliance on Seller; provided that such independent
investigation and

 

19

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verification shall not affect the express representations, warranties, covenants
or other obligations of Seller contained in this Agreement.  Buyer has had
reasonable and sufficient access to documents, other information and materials
as it considers appropriate to make its evaluations.

 

ARTICLE VI
COVENANTS

 

In order to induce the other Party to enter into this Agreement and consummate
the transactions contemplated hereby, the Parties hereby covenant and agree as
follows:

 

Section 6.01                                                        Access of
Buyer.

 

(a)                                  During the Interim Period, Seller will
provide Buyer and its prospective financing sources and its and their
Representatives with reasonable access during normal business hours (and other
hours as reasonably appropriate to fulfill the intent of this provision) to the
Facilities and the officers and management employees of Seller and its
Affiliates (including the Companies) in such a manner so as not to unreasonably
interfere with the business or operations of Seller or its Affiliates (including
the Companies), such access to include participation by Buyer in material
management meetings and technical meetings,  including those relating to major
capital projects and unit overhauls; provided, 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 or operational purposes.  Buyer shall be entitled, at
its sole cost and expense, to visit the Real Property and to receive such
information as may reasonably be required so that it may prepare and/or review
financial statements after the date hereof.  Notwithstanding the foregoing,
Seller shall not be required to provide any information or allow any inspection
which it reasonably believes it may not provide to Buyer or allow by reason of
applicable Law, which constitutes or allows access to information protected by
attorney/client privilege, or which Seller or its Affiliates is required to keep
confidential or prevent access to by reason of contract, agreement or
understanding with third parties if Seller has used commercially reasonable
efforts to obtain the consent of such third party to such inspection or
disclosure.  Following the Closing, Seller shall be entitled to retain copies of
all books and records relating to the ownership and/or operation of the
Companies or their respective businesses.

 

(b)                                 Buyer agrees to indemnify, defend and hold
harmless Seller, the Companies, the Non-Company Affiliates and their
Representatives from and against any and all Losses incurred by Seller, the
Companies, the Non-Company Affiliates, their Representatives or any other Person
relating to physical injuries or property damage arising out of the access
rights under this Section 6.01, including any Claims by any of Buyer’s
Representatives for any injuries or Losses while present on the Real Property
unless caused by the gross negligence or willful misconduct of Seller, the
Companies or the Non-Company Affiliates.

 

Section 6.02                                                        Conduct of
Business Pending the Closing.

 

(a)                                  Except as otherwise contemplated by this
Agreement or set forth in Schedule 6.02, during the Interim Period, Seller will
cause the Companies to:

 

20

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(i)                                                             operate the
Facilities and their business in the ordinary course of business consistent with
past practices in all material respects;

 

(ii)                                                          promptly notify
Buyer of any breach of any representation, warranty, covenant or agreement of
Seller made hereunder or any Material Adverse Effect of which Seller has
Knowledge;

 

(iii)                                                       (A) make Capital
Expenditures and continue environmental remediation expenditures substantially
in accordance with the budget attached as Schedule 6.02(a)(iii) (other than the
Capital Expenditures described in clauses (B) and (C) following), (B) subject to
NYISO and ConEd approval, make Capital Expenditures substantially in accordance
with the budget attached as Schedule 6.02(a)(iii) with respect to Capital
Expenditures scheduled for the Unit 30 Outage for November and December of 2005,
and (C) at Seller’s election, make Capital Expenditures substantially in
accordance with the budget attached as Schedule 6.02(a)(iii) with respect to
Capital Expenditures scheduled for the Unit 30 Outage for March and April of
2006;

 

(iv)                                                      pay Taxes as they come
due and payable (except for Taxes being contested in good faith by appropriate
proceedings and for which adequate reserves have been provided for in accordance
with GAAP); and

 

(v)                                                         use their
commercially reasonable efforts to (A) preserve their present business
operations, organization (including management) and goodwill with respect to the
Facilities, (B) preserve their present relationship with Persons having business
dealings with respect to the Facilities (including, without limitation,
customers and suppliers) and (C) to the extent allowed by the applicable
Governmental Authority, allow Buyer to participate in material meetings with
Governmental Authorities regarding the Facilities.

 

(b)                                 Except as otherwise contemplated by this
Agreement or set forth in Schedule 6.02 or as consented to by Buyer in writing,
which consent shall not be unreasonably withheld, conditioned or delayed, and
except for matters relating to the Excluded Assets, during the Interim Period
Seller shall not (with respect to the Companies), shall cause the Non-Company
Affiliates not to (with respect to the Companies), and cause the Companies not
to:

 

(i)                                                             other than the
Company Liens referenced in Section 6.08, permit or allow any Lien securing
indebtedness for borrowed money against any of the Purchased Assets;

 

(ii)                                                          amend, modify,
enter into, grant waiver of any material term of, or give any material consent
with respect to, any Material Contract (or Contract entered into after the
Execution Date that would be a Material Contract if entered into prior to the
Execution Date);

 

(iii)                                                       except in respect of
Capital Expenditures permitted by Section 6.02(b)(iv), enter into, terminate or
amend any Contract involving total consideration throughout its term in excess
of $1,000,000 (other than Contracts entered into in the

 

21

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ordinary course of business consistent with past practices which will be fully
performed prior to the Closing without further liability to the Companies);

 

(iv)                                                      commit to incur
Capital Expenditures after the Closing Date in excess of the applicable amount
shown on Schedule 6.02(b)(iv);

 

(v)                                                         other than trade
payables incurred in the ordinary course of business consistent with past
practices or accounts payable pursuant to the Material Contracts (or Contracts
entered into after the Execution Date that would be Material Contracts if
entered into prior to the Execution Date) or the Terminated Contracts, incur,
create, assume or otherwise become liable for Indebtedness or issue any debt
securities or assume or guarantee the obligations of any other Person;

 

(vi)                                                      fail to maintain its
partnership or corporate existence or consolidate with any other Person or
acquire all or substantially all of the assets of any other Person;

 

(vii)                                                   issue or sell any
partnership interests or securities, or rights to acquire or convertible into,
partnership interests or securities, of either Company;

 

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

 

(ix)                                                        (A) hire or promote
any employee, (B) except with respect to increases in compensation that, but for
the timing of the grant thereof, are in the ordinary course of business, grant
any increase in the compensation or benefits of any employee, (C) establish any
new compensation or Benefit Plans, (D) amend or modify any Company Plan, (E)
amend or modify any Seller Plan insofar as any such amendment or modification
relates solely to Affiliate Employees or former employees, officers or directors
of the Companies, or (F) enter into or modify any employment, consulting,
termination, retention, change of control or severance agreement; provided, that
nothing above shall restrict normal periodic increases, promotions, hiring or
changes effected in the ordinary course of business consistent with past
practices, changes required pursuant to applicable Laws, or changes required
pursuant to Contracts in effect as of the Execution Date (including the
Collective Bargaining Contract), except for promotions, hirings or changes
relating to employees not covered by a Collective Bargaining Contract, in which
case Seller shall consult with Buyer prior to any such promotions, hirings or
changes;

 

(x)                                                           enter into, modify
or terminate any labor or collective bargaining agreement of either Company or,
through negotiations or otherwise, make any material commitment or incur any
material liability to any labor organizations, except that either Company may
reasonably bargain and negotiate matters in good faith, as contemplated by the
Collective Bargaining Contract and applicable Laws;

 

(xi)                                                        implement any layoff
of employees that could implicate the WARN Act;

 

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(xii)                                                     enter into any
Contract under which either Company advances or loans any amount to any of its
directors, officers, and employees outside the ordinary course of business

 

(xiii)                                                  enter into any
settlement, conciliation or similar agreement, the performance of which will
involve payment after the execution of this Agreement of consideration in excess
of $1,000,000;

 

(xiv)                                                 except in the ordinary
course of business, acquire any material properties or assets or sell, assign,
license, transfer, convey, lease or otherwise dispose of any of the material
Purchased Assets;

 

(xv)                                                    enter into or agree to
enter into any merger or consolidation with, any corporation or other entity,
and not engage in any new business or invest in, make a loan, advance or capital
contribution to, or otherwise acquire the securities of any other Person;

 

(xvi)                                                 make any material change
in its accounting principles, methods or policies, except as otherwise required
by GAAP or make any material change in its risk management policies or internal
controls that are less restrictive than those in effect on the Execution Date;

 

(xvii)                                              enter into any Contract that
restrains, restricts, limits or impedes the ability of a Facility to conduct any
business or line of business in any geographic area;

 

(xviii)                                           except in the ordinary course
of business, terminate, amend, restate, supplement or waive any rights under any
(A) Assigned Contract, (B) any Material Contract (or Contract entered into after
the Execution Date that would be a Material Contract if entered into prior to
the Execution Date) or (C) any Permit;

 

(xix)                                                   enter into, modify or
renew any material Contracts with respect to the sale of energy that will be
performed after the Closing except that would not require the payment,
individually or in the aggregate, of amounts in excess of $1,000,000;

 

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

 

(xxi)                                                   cancel, settle or
compromise debts having a value in excess of $1,000,000 or waive claims or
rights having a value in excess of $1,000,000;

 

(xxii)                                                enter into a fuel
purchase, storage, transportation, option, swap or other arrangement with a term
over one year;

 

(xxiii)                                             enter into an energy or
capacity purchase, sale, exchange, option, swap, or other arrangement, or
transmission arrangement with a term over one year or that would require credit
support in an amount greater than $1,000,000;

 

(xxiv)                                            enter into any speculative
energy or fuel transactions;

 

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(xxv)                                               seek to lower any reference
price or bid or cap price for energy or capacity that Astoria LP sells into the
markets administered by the NYISO;

 

(xxvi)                                            make or revoke any material
election with respect to Taxes or fail to pay any Taxes of the Companies as they
become due and payable (except for Taxes being contested in good faith by
appropriate proceedings and for which adequate reserves have been provided for
in accordance with GAAP);

 

(xxvii)                                         amend or modify its Charter
Documents; or

 

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

 

Notwithstanding the foregoing, Seller may permit the Companies to take
commercially reasonable actions with respect to emergency situations and to
comply with applicable Law so long as Seller shall promptly inform Buyer of such
emergency actions.

 

Section 6.03                                                        Resignation
of Members, Managers, Officers and Directors.  At Closing, Seller shall cause
the resignation of all officers and directors or similar persons nominated or
appointed by Seller or its Affiliates to any board or operating, management or
other committee established under either Company’s Charter Documents.

 

Section 6.04                                                        Use of
Certain Names.  Within 120 days following the Closing, Buyer shall cause the
Companies to cease using the words “Reliant”, “Orion” and any word or expression
similar thereto or constituting an abbreviation or extension thereof (the
“Seller Marks”), including eliminating the Seller Marks from each Company’s
property and Purchased Assets and disposing of any unused stationery and
literature of the Companies bearing the Seller Marks; and thereafter, Buyer
shall not, and shall cause the Companies and their Affiliates not to, use the
Seller Marks or any logos, trademarks, trade names, or other registered
Intellectual Property belonging to Seller or any Non-Company Affiliate, and
Buyer acknowledges that it, its Affiliates and the Companies have no rights
whatsoever to use such Intellectual Property, except as provided in the
Transition Services Agreement.

 

Without limiting the foregoing:

 

(a)                                  Within 30 days after the Closing Date,
Buyer shall cause each Company 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 acceptable to Seller, that
Buyer has provided notice to all applicable Governmental Authorities and all
counterparties to the Material Contracts (and Contracts entered into after the
Execution Date that would be Material Contracts if entered into prior to the
Execution Date) regarding the sale of the Companies and the Purchased Assets to
Buyer and the new addresses for notice purposes.

 

Section 6.05                                                        Support
Obligations.

 

(a)                                  Buyer recognizes that Seller and the
Non-Company Affiliates have provided credit support to the Companies with
respect to the Facilities pursuant to certain credit support

 

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obligations set forth on Schedule 6.05(a) and any other credit support entered
into in compliance with Section 6.02(b) (collectively, the “Support
Obligations”), such Support Obligations (excluding non-dollar denominated
guaranties) not to exceed $25,000,000 in the aggregate at any one time.  During
the Interim Period, Seller and the Non-Company Affiliates agree not to enter
into any additional non-dollar denominated Support Obligations without the prior
consent of Buyer.  Prior to the Closing, Buyer shall use commercially reasonable
efforts to effect the full and unconditional release of Seller and the
Non-Company Affiliates from all Support Obligations by:

 

(i)                                                             furnishing
letters of credit containing terms and conditions that are substantially
identical to the terms and conditions of existing letters of credit and from
lending institutions that are either Investment Grade Persons or have a Credit
Rating commensurate with or better than that of lending institutions for
existing letters of credit;

 

(ii)                                                          instituting escrow
arrangements with terms equal to or more favorable to the counterparty than the
terms of existing escrow arrangements; and

 

(iii)                                                       posting surety or
performance bonds issued by an Investment Grade Person or another Person having
a net worth or a Credit Rating at least equal to those of the issuer of existing
surety or performance bonds, and which replacement surety or performance bond
contains terms and conditions that are substantially identical to the terms and
conditions of existing surety or performance bonds.

 

(b)                                 Buyer and Seller shall use commercially
reasonable efforts to cause the beneficiary or beneficiaries of the Support
Obligations to terminate and redeliver to Seller or the Non-Company Affiliates,
as applicable, prior to the Closing, each original copy of each original
guaranty, letter of credit or other instrument constituting or evidencing such
Support Obligations as well as to redeliver to Seller or the Non-Company
Affiliate, as applicable, any cash collateral in respect of the Support
Obligations and, as to any Support Obligations terminated after the Closing,
promptly to redeliver such originals or cash to Seller or the Non-Company
Affiliates, as applicable, and in each case, to take such other actions as may
be required to terminate such Support Obligations.

 

(c)                                  If Buyer is not successful in obtaining the
complete and unconditional release of Seller and the Non-Company Affiliates from
the Support Obligations prior to the Closing, then Buyer shall indemnify, defend
and hold harmless Seller and the Non-Company Affiliates from and against any and
all Losses incurred by any such indemnified Persons in connection with the
Support Obligations.  Buyer shall, for so long as any Support Obligation remains
outstanding, not, and shall cause the Companies not to, effect any amendments or
modifications or any other changes to the Contracts to which any of such Support
Obligations relate, or otherwise take any action that would effect any change to
such Contracts, guaranties or letters of credit, without Seller’s prior written
consent.  Notwithstanding anything in this Agreement to the contrary, 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 6.05; provided, that (i) Buyer shall give Seller prior notice
before making any such contact, (ii) Seller shall have the right to have one of
its Representatives present on the telephone line or in person, as applicable,
during any such contact or discussion, (iii) Buyer shall only contact and hold

 

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discussions with such beneficiaries through Representatives of Buyer previously
approved by Seller, and (iv) Buyer shall cause such Representatives to comply
with all procedures and protocols regarding such contacts and discussions that
may be established by Seller.  Notwithstanding the foregoing, in no event shall
this Section 6.05(c) entitle Seller to receive any confidential information of
Buyer.

 

(d)                                 Prior to the Release Date, Buyer agrees not
to assign, sell, transfer or convey all or any portion of the Company Interests
and shall cause the Companies not to assign, sell, transfer or convey all or any
substantial portion of the Purchased Assets, in a single transaction or series
of related transactions, in each case without the assignment to the transferee
of the rights of Buyer under this Agreement and the assumption in writing by the
transferee (which assumption shall be enforceable by Seller) of the obligations
of Buyer under this Agreement (including the obligations of Buyer pursuant to
Section 6.05(c)); provided that, for the avoidance of doubt, the sale of equity
interests of Buyer (whether accomplished by merger or otherwise) shall not be
deemed a sale, transfer, conveyance or assignment for purposes of this Section
6.05.  Any assignment, sale, transfer or conveyance in contravention of the
preceding sentence shall be null and void ab initio.  Buyer agrees to provide
Seller with a copy of such assignment and assumption agreement prior to
execution and prior to the assignment, sale, transfer or conveyance and a copy
of the executed assignment and assumption agreement which shall be in the same
form with such changes as Seller may reasonably request.  Upon such an
assignment, sale, transfer or conveyance pursuant to which the transferee
assumes all of Buyer’s rights and obligations under this Agreement, Buyer shall
have no further rights or obligations under this Agreement (except for
obligations relating to breaches by Buyer occurring prior to the date of the
assignment, sale, transfer or conveyance).  The “Release Date” shall be the
later of the date on which all of the Support Obligations have been fully and
unconditionally released and the date on which Seller has no more obligations
owing to Buyer under this Agreement.

 

Section 6.06                                                        Excluded
Assets.  Notwithstanding anything in this Agreement to the contrary, Buyer
acknowledges and agrees that Seller will, prior to the Closing Date, cause the
Companies to distribute, transfer or assign to Seller and the Non-Company
Affiliates those assets described on Schedule 6.06 (the “Excluded Assets”). 
With respect to Excluded Assets that constitute claims or refunds, Buyer agrees
to deliver to the applicable counterparty or party against whom the claim is
asserted written instructions, in a form reasonably acceptable to Seller,
directing such third party to pay to Seller any and all proceeds relating to
such Excluded Asset.  In the event Buyer or the Companies receive any such
proceeds following the Closing, Buyer will cause such proceeds to be wire
transferred in immediately available funds promptly following receipt by Buyer
or the Companies to the account designated in writing by Seller.  At the request
and direction of Seller, Buyer agrees to cause the Companies to join or initiate
an action to recover the Excluded Assets; provided that (a) Seller shall be
responsible for the out-of-pocket costs and expenses of the Companies with
respect to any such action, (b) Seller shall have the right to select the legal
counsel with respect to such action, and (c) if Buyer or the Companies desire to
have additional legal counsel with respect to such action, they may do so at
their sole cost and expense.  Without limiting the foregoing, Buyer shall and
shall cause the Companies to cooperate reasonably with Seller following the
Closing with respect to the recovery by Seller of the Excluded Assets.  Seller
shall be liable for any Taxes incurred by the Companies as a result of the
removal of Excluded Assets from the Companies.

 

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Section 6.07                                                        Termination
of Certain Services, Contracts, Receivables and Payables.

 

(a)                                  Notwithstanding anything in this Agreement
to the contrary, during the Interim Period, (i) Seller shall take such actions
as may be necessary to terminate or sever as to the Companies (with appropriate
mutual releases) upon the Closing any services jointly shared or used by any of
the Companies and Seller or a Non-Company Affiliate, joint Tax services, joint
legal services and joint banking services (to include the severance of any
centralized clearance accounts) and each Contract listed on Schedule 6.07 (the
“Terminated Contracts”), (ii) the Companies shall be entitled to transfer cash
to Seller and the Non-Company Affiliates, and (iii) Seller shall be entitled to
take such actions as may be necessary to settle (through offsets and/or cash
transactions) immediately prior to the Closing such Intercompany Payables and
Intercompany Receivables as Seller, in its sole discretion, elects to settle. 
Notwithstanding clause (i) foregoing, no such termination shall affect
obligations of Seller and the Non-Company Affiliates under the Transition
Services Agreement or this Agreement.  Except for the RES Payable, all
Intercompany Receivables and Intercompany Payables outstanding as of the Closing
shall be deemed to be cancelled immediately prior to the Closing, and the
Companies shall have no continuing liabilities with respect to such payables or
otherwise with respect to the terminated services, Terminated Contracts and cash
transfers contemplated by this Section 6.07.

 

(b)                                 Promptly following the Closing, Buyer shall
take such actions as may be necessary to become a “Replacement Shipper” as such
term is defined in the FERC Gas Tariff of Iroquois Gas Transmission System, L.P.
(“Iroquois”), including the submission of such data as Iroquois may require and
the execution of a “Blanket Gas Transportation Contract for Firm Reserved
Service” as such term is defined in the Iroquois FERC Gas Tariff; and Seller
shall cause submission of a notice to Iroquois of its election to release
capacity under Contract Nos. R-2130-02 and R-2130-03 pursuant to Section 28.6 of
the Iroquois FERC Gas Tariff (collectively, the “Iroquois Contract”), which such
notice shall specify the following information: (i) the designation of Buyer or
an Affiliate of Buyer as the Prearranged Replacement Shipper; (ii) the term of
the releases being the Closing Date through the remaining term of each contract;
(iii) the quantities of firm daily capacity to be released being the entire
Maximum Equivalent Quantity set forth in each contract; (iv) the rate that Buyer
has agreed to pay being Monthly Demand Rate and the Daily Commodity Rate set
forth in Schedule 3 to each contract; and (v) such other information required
pursuant to Section 28.6(c) of the Iroquois FERC Gas Tariff, and Buyer shall
agree to participate as such Prearranged Replacement Shipper.

 

Section 6.08                                                        Payment of
Indebtedness.  Notwithstanding anything in this Agreement to the contrary, prior
to or at the Closing, Seller shall (a) cause any and all Indebtedness of the
Companies referred to in (i) and (ii) of the definition of Indebtedness
(including intercompany Indebtedness) to be paid in full, (b) cause any and all
Liens (other than Permitted Encumbrances) securing any such Indebtedness on the
Purchased Assets (collectively, the “Company Liens”) to be released, and (c)
cause any and all agreements relating to the Company Liens or the Indebtedness
secured thereby to be terminated as to the Companies, such that Buyer shall take
title to the Companies and the Purchased Assets free of all such Indebtedness
and Company Liens.  Furthermore, Seller shall cause the Companies to be released
from all guarantees of third-party obligations and all obligations of all
Non-Company Affiliates and provide such evidence as the Title Insurer may
reasonably request to show that the Liens issued to Bank of America reflected on
the Title Commitments have been released.  At the

 

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Closing, Seller shall deliver to Buyer copies of all pay-off letters and
releases for all Company Liens and the guarantees referenced in this Section
6.08.

 

Section 6.09                                                        Insurance.

 

(a)                                  With respect to the insurance policies
listed on Schedule 6.09 (the “Scheduled Insurance Policies”), Seller shall use
commercially reasonable efforts to cause Buyer (or, at Buyer’s direction, the
Companies) to be listed at Closing as a “Named Insured” under each such policy
and for the Non-Company Affiliate which is currently the “Named Insured” under
such policy to be listed as an “Additional Insured”.

 

(b)                                 With respect to Insurance Policies that are
“occurrence-based” policies, Seller covenants and agrees that  (i) the Companies
will, with respect to the Purchased Assets and their business, be provided full
coverage under the Insurance Policies not assigned to Buyer or the Companies
(excluding the Scheduled Insurance Policies to the extent not assigned to Buyer
or the Companies at Closing, the “Retained Policies”) after the Closing (subject
only to deductibles, self-insured retentions and policy limits of such Retained
Policies), with respect to occurrences on and prior to the Closing Date,
regardless of whether claims are brought prior to or after the Closing; and (ii)
after Closing, the Companies will have the right to bring claims (whenever
brought) under the Retained Policies for all occurrences that relate to actions,
events, conditions and/or operations of the Purchased Assets and the business of
the Companies on and prior to the Closing Date within the scope of the Retained
Policies.  Buyer and the Companies will be responsible for satisfying any
deductibles, self-insured portions, retentions and other retained amounts on
insurance coverage with respect to losses arising under claims made by Buyer or
the Companies under the Retained Policies; provided that Seller shall be
responsible for any such deductibles, self-insured portions, retentions and
other retained amounts on insurance coverage with respect to any such losses
arising under the Retained Policies to the extent relating to liabilities for
which Seller and the other Non-Company Affiliates are responsible or pursuant to
this Agreement.

 

(c)                                  With respect to the Excess Liability
Policies, Seller covenants and agrees to use its commercially reasonable efforts
such that (i) the Non-Company Affiliates shall, for a period of two years after
Closing, provide the Companies the ability to file claims under such policies
for occurrences on and prior to the Closing Date (the “Sunset Coverage”); (ii)
the Companies will, with respect to the Purchased Assets and their business, be
provided with the benefit of the Sunset Coverage for two years after the Closing
(subject only to deductibles, self-insured retentions and policy limits of the
Sunset Coverage); and (iii) the applicable Non-Company Affiliates will
administer claims on behalf of the Companies under the Sunset Coverage unless
the insurers allow the Companies to administer such claims.  Seller will be
responsible for any and all premiums associated with the Sunset Coverage.  Buyer
and the Companies will be responsible for satisfying any deductibles,
self-insured portions, retentions and other retained amounts on insurance
coverage with respect to losses arising under claims made by Buyer or the
Companies under the Sunset Coverage; provided that Seller shall be responsible
for any such deductibles, self-insured portions, retentions and other retained
amounts on insurance coverage with respect to any such losses arising under the
Sunset Coverage to the extent relating to

 

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liabilities for which Seller and the other Non-Company Affiliates are
responsible or pursuant to this Agreement.

 

(d)                                 Except as otherwise set forth in this
Section 6.09, Buyer and the Companies shall be responsible for all cost and
expenses incurred by Seller in maintaining and administering claims under the
Retained Policies and the Sunset Coverage; provided that Seller shall be
responsible for such costs and expenses to the extent relating to liabilities
for which Seller and the other Non-Company Affiliates are responsible pursuant
to this Agreement.  Buyer agrees to provide, and to cause the Companies to
provide, such cooperation as Seller may reasonably request in connection with
the matters covered by this Section 6.09.

 

Section 6.10                                                        Tax Matters.

 

(a)                                  Consolidated Tax Returns.  Seller shall
cause to be included in the consolidated federal income Tax Returns (and the
state income Tax Returns of any state that permits consolidated, combined or
unitary income Tax Returns, if any) of the affiliated group of corporations that
includes Seller and OPOS all items of income, gain, loss, deduction and credit
or other items (“Tax Items”) of OPOS through the Closing Date, shall cause such
Tax Returns to be timely filed with the appropriate Taxing Authorities and shall
be responsible for the timely payment (and entitled to any refund, except to the
extent such refund is attributable to the carryback of losses or other Tax items
arising after the Closing Date) of all Taxes due with respect to the periods
covered by such Tax Returns.  To the extent permitted by Law or administrative
practice, (i) the Tax year of OPOS that includes the Closing Date shall be
treated as closing on the Closing Date and (ii) all transactions occurring on
the Closing Date but after the Closing shall have occurred shall be reported on
Buyer’s consolidated United States federal income Tax Return to the extent
permitted by Treasury Regulation Section 1.1502-76(b)(1)(ii)(B) and shall be
similarly reported on other Tax Returns of Buyer or its Affiliates.  Without the
prior written consent of Seller, Buyer shall not, and shall not permit any of
its Affiliates (including OPOS) to, carry back any Tax Item of OPOS into a
consolidated, combined or unitary income Tax Return filed by Seller or any of
its Affiliates for a taxable period (or portion thereof) ending on or before the
Closing Date.

 

(b)                                 Partnership Tax Returns.  Seller shall
prepare or cause to be prepared all federal Tax Returns (Forms 1065) and all
similar state Tax Returns required to be filed by or with respect to Astoria LP
to report to the partners of Astoria LP partnership Tax Items for Tax periods
ending on or before the Closing Date.

 

(c)                                  Cooperation. Buyer and Seller shall
cooperate fully, and shall cause their respective Affiliates, including OPOS and
Astoria LP, to cooperate fully, as and to the extent reasonably requested by
either Party, in connection with the filing of Tax Returns pursuant to this
Section 6.10 and any audit, litigation or other proceeding (each a “Tax
Proceeding”) with respect to such Tax Returns.  Such cooperation shall include
the retention and (upon a Party’s request) the provision of records and
information which are reasonably relevant to any such Tax Proceeding and making
employees available on a mutually convenient basis to provide additional
information and explanation of any material provided hereunder.

 

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(d)                                 Transfer Taxes.  Seller shall file all Tax
Returns required to be filed to report Transfer Taxes imposed on or with respect
to the transactions contemplated by this Agreement, shall be solely liable for
and shall pay all such Transfer Taxes, and shall indemnify, defend and hold
harmless Buyer from and against any and all liability for the payment of such
Transfer Taxes and the filing of such Tax Returns.

 

(e)                                  Obligations Under Tax Sharing Agreement. 
From and after the Closing, the Companies shall have no liability for Tax
payments pursuant to any Tax Sharing Agreements (including the Tax Allocation
Agreement) between the Companies and the Seller Group.

 

(f)                                    Tax Indemnities.  Seller shall indemnify
Buyer, the Companies, and their Affiliates and hold them harmless from and
against any loss, claim, liability, expense, or other damages attributable to
(i) all Taxes (or the non-payment thereof) of the Companies for all taxable
periods ending on or before the Closing Date and the portion through the end of
the Closing Date for any taxable period that includes (but does not end on) the
Closing Date (“Pre-Closing Tax Periods”), (ii) all Income Taxes of any member of
an Affiliated Group of which any Company is or was a member on or prior to the
Closing Date including pursuant to Treasury Regulation §1.1502-6 or any
analogous or similar state, local, or foreign law or regulations, (iii) all
Taxes attributable to the assets or operations of the Companies for periods (or
partial periods) on or before the Closing Date, and (iv) any and all Taxes of
any Person (other than the Companies) imposed on the Companies as a transferee
or successor, by contract (including pursuant to a Tax Sharing Agreement) or
pursuant to any law, rule, or regulation, which Taxes relate to an event or
transaction occurring before Closing; provided, however, that Seller shall not
be obligated to indemnify Buyer for any such Taxes to the extent such Taxes were
included as a liability in the computation of Closing Date Working Capital
Amount and such liability for Taxes exceed the liability for such Taxes included
in the June 30 Balance Sheets.

 

(g)                                 Straddle Period Taxes.  In the case of any
taxable period that includes (but does not end on) the Closing Date (a “Straddle
Period”), the amount of any Income Taxes of the Companies for the Pre-Closing
Tax Period shall be determined based on an interim closing of the books as of
the close of business on the Closing Date (and for such purpose, the taxable
period of any partnership or other pass-through entity in which the Companies
hold a beneficial interest shall be deemed to terminate at such time) and the
amount of Taxes (other than Income Taxes) of the Companies for a Straddle Period
that relate to the Pre-Closing Tax Period shall be deemed to be the amount of
such Tax for the entire taxable period multiplied by a fraction the numerator of
which is the number of days in the taxable period ending on the Closing Date and
the denominator of which is the number of days in such Straddle Period.

 

(h)                                 Resolution of Disputes.  Seller and Buyer
agree to work in good faith to resolve any disputes related to the amount of Tax
Items and Taxes attributable to periods prior to and after the Closing.  Failing
such agreement, the Parties shall refer the matter to an independent accounting
firm of nationally recognized standing, mutually acceptable to both Seller and
Buyer (the “Independent Accountant”), and the determination of the Independent
Accountant with respect to such matter shall be final and binding.  The fees and
expenses of the Independent Accountant shall be borne equally by Seller and
Buyer.

 

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Section 6.11                                                        Certain
Restrictions.  During the Interim Period, Buyer agrees that except as may be
agreed in writing by Seller or as may be expressly permitted pursuant to this
Agreement, it shall not, and shall not permit any of its subsidiaries or
Affiliates to, acquire, develop or construct any electric generation or
transmission facility, enter into any Contract with respect thereto, or
otherwise obtain control over any electric generation or transmission facility,
in each case located within the control area operated by the New York
Independent System Operator or take any action with any Governmental Authority
relating to the foregoing, or agree, in writing or otherwise, to do any of the
foregoing, in each case which could reasonably be expected to materially delay
the consummation of the transactions contemplated hereby or result in the
failure to satisfy any condition to consummation of the transactions
contemplated hereby.

 

Section 6.12                                                        No
Solicitation.  During the Interim Period, except as permitted by this Agreement
with Buyer and its Affiliates and Representatives, Seller shall not and shall
cause its Affiliates and officers, directors and employees not to, and Seller
shall direct and use its commercially reasonable efforts to cause its and its
Affiliates’ other Representatives not to, directly or indirectly, initiate,
solicit or negotiate, enter into an agreement with respect to, or provide
nonpublic or confidential information to facilitate, any proposal or offer with
respect to any acquisition, reorganization, exchange, consolidation or similar
transaction involving either Company, or any purchase of any voting or other
securities or partnership interest of either Company, or any material assets or
businesses of the Companies, in a single transaction or a series of related
transactions, or any combination of the foregoing.

 

Section 6.13                                                       
Confidentiality.

 

(a)                                  All nonpublic information provided to, or
obtained by, Buyer or its Representatives from Seller or its Representatives in
connection with the transactions contemplated hereby shall be “Information” for
purposes of the letter dated February 13, 2004 between Madison Dearborn Capital
Partners IV, L.P. and Guarantor (the “Confidentiality Agreement”), the terms of
which shall continue in force until the Closing; provided, that Buyer may
disclose such information as may be necessary in connection with seeking Buyer
Governmental Approvals and to obtain financing for the transactions contemplated
hereby (as long as the financing recipient has executed a confidentiality
undertaking at least as restrictive as the Confidentiality Agreement); provided
further, that the obligations of Buyer and its Affiliates under the
Confidentiality Agreement shall terminate as of the Closing Date.

 

(b)                                 From and after the Closing, Seller shall,
and shall cause each of the Non-Company Affiliates to, treat and hold as
confidential any information concerning the business and affairs (including
know-how and trade secrets) of the Companies (the “Confidential Information”),
except (i) as expressly permitted hereunder, (ii) to the extent such information
comes into the public domain after the Closing through no fault of a Non-Company
Affiliate or any Person to whom the Seller released or disclosed such
information, or (iii) to the extent such information was or becomes available to
a Non-Company Affiliate after the Closing Date on a non-confidential basis from
a source other than one of the Companies or Buyer, refrain from using any of the
Confidential Information, and deliver promptly to Buyer or destroy, at the
request and option of Buyer, all tangible embodiments of the Confidential
Information which are in a Non-Company Affiliate’s possession or under a
Non-Company Affiliate’s control, and Seller shall certify such delivery or
destruction in a written certificate given by an officer of Seller.

 

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Seller acknowledges and agrees, and shall cause each of the other Non-Company
Affiliates to acknowledge and agree, that the Confidential Information is the
property of the Companies; provided that Seller may retain one copy of the
Confidential Information that it shall treat as confidential pursuant to the
terms of this Section 6.13(b).  In the event that any Non-Company Affiliate is
requested or required (by oral question or request for information or documents
in any legal proceeding, interrogatory, subpoena, civil investigative demand, or
similar process) to disclose any Confidential Information, Seller shall notify
Buyer promptly of the request or requirement so that Buyer may seek an
appropriate protective order or waive compliance with the provisions of this
Section 6.13(b).  If, in the absence of a protective order or the receipt of a
waiver hereunder, the Non-Company Affiliate is, on the advice of counsel,
compelled to disclose any Confidential Information to any Governmental Authority
or else stand liable for contempt, such Non-Company Affiliate may disclose such
Confidential Information to the tribunal; provided that Seller shall use its
commercially reasonable efforts to obtain, at the expense and request of Buyer
or the Companies, an order or other assurance that confidential treatment shall
be accorded to such portion of the Confidential Information required to be
disclosed as Buyer or the Companies shall designate.

 

Section 6.14                                                        Employee and
Benefit Matters.

 

(a)                                  Except as set forth in the Transition
Services Agreement (to the extent applicable), on or before the Closing, Seller
shall take all actions necessary, if any, to cause (i) the Companies to cease to
be adopting or participating employers under all Seller Plans and (ii) Seller
and the Non-Company Affiliates to cease to be sponsors or adopting or
participating employers under all Company Plans (and, if Seller or a Non-Company
Affiliate is a sponsor of a Company Plan, Seller shall cause OPOS to assume such
sponsorship).  Seller and the Non-Company Affiliates shall not, from and after
the Closing, have any responsibility or liability with respect to the Company
Plans; provided, that, with respect to the Retirement Plan, Seller shall timely
file or cause the appropriate Non-Company Affiliate to timely file (to the
extent the following forms have not been filed prior to the Closing) (A) the
annual report on Form 5500 for 2004 with the Employee Benefits Security
Administration and (B) PBGC Form 1 or PBGC Form 1-EZ (as applicable) for 2005
with the PBGC.  Buyer shall cooperate, and Buyer shall cause its Affiliates to
cooperate, with Seller with respect to the filings described in the preceding
sentence, and Buyer shall provide to Seller such information as Seller may
reasonably request in respect of such filings.

 

(b)                                 Buyer acknowledges and agrees that (i)
certain employees of the Companies are represented by the Utility Workers Union
of America, AFL-CIO and its Local Union No. 1-2 (the “Union”) pursuant to the
terms of the Collective Bargaining Contract, (ii) OPOS will continue to
recognize the Union as the exclusive bargaining representative of the employees
whose employment is covered by the Collective Bargaining Contract, (iii) the
Collective Bargaining Contract will continue to be effective until it expires by
its own terms or is renegotiated, and (iv) OPOS will continue to be bound by the
terms, conditions and provisions of the Collective Bargaining Contract.  Buyer
further acknowledges that, subject to the terms of the Collective Bargaining
Contract and applicable Law, the employees covered by the Collective Bargaining
Contract will continue to be employed by the Companies following the Closing.

 

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(c)                                  Within 45 days after the Execution Date,
but effective as of the Closing Date, Buyer or an Affiliate of Buyer shall offer
employment (which shall be contingent on the occurrence of the Closing) to each
individual listed on Schedule 6.14(c) (each, an “Affiliate Employee”).  Each
such offer of employment shall be consistent with the provisions of this Section
6.14 and shall remain open for a period of at least 10 days.  For a period of at
least one year beginning on the Closing Date and subject to the remaining
paragraphs of this Section 6.14 and an individual’s continued employment with a
Company or an Affiliate of a Company, Buyer shall cause each Continuing Employee
to be provided with base salary and wages, bonus opportunity (including annual
incentive compensation but excluding any equity based arrangements) and health,
welfare and 401(k) benefits on a basis substantially similar in the aggregate to
the compensation and health, welfare and 401(k) benefits provided to such
Continuing Employee by Seller and its Affiliates (including the Companies)
immediately prior to the Closing; provided, that with respect to Continuing
Employees whose employment is covered by the Collective Bargaining Contract,
Buyer shall cause the compensation and benefits provided to such employees from
and after the Closing Date to also be consistent with the terms of the
Collective Bargaining Contract.

 

(d)                                 To the extent consistent with the Collective
Bargaining Contract, as applicable, Buyer shall cause, or shall cause the
Companies to cause, each Continuing Employee and his or her eligible dependents
(including all such Continuing Employee’s dependents covered immediately prior
to the Closing Date by a Company Plan or a Seller Plan that is a group health
plan) to be offered coverage under a group health plan maintained by Buyer or an
Affiliate of Buyer that (i) provides medical and dental benefits to the
Continuing Employee and such eligible dependents effective immediately upon the
Closing Date or such other time as set forth in the Transition Services
Agreement and (ii) credits such Continuing 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 Company Plan or a Seller
Plan that is a group health plan.

 

(e)                                  Buyer shall cause, or shall cause the
Companies to cause, the employee benefit plans and programs maintained after the
Closing Date for the benefit of the Continuing Employees to recognize each
Continuing Employee’s years of service and level of seniority prior to the
Closing Date with Seller, the Companies and their Affiliates (including service
and seniority with any other employer that was recognized by Seller, the
Companies or their Affiliates for purposes of any applicable Company Plan or
Seller Plan) for purposes of terms of compensation and benefits under such plans
and programs.  Buyer shall cause, or shall cause the Companies to cause, each
employee welfare benefit plan or program sponsored by Buyer or one of its
Affiliates that a Continuing Employee may be eligible to participate in on or
after the Closing Date to waive any preexisting condition exclusion with respect
to participation and coverage requirements applicable to such Continuing
Employee to the same extent such preexisting condition exclusion was not
applicable under the Company Plan or Seller Plan immediately prior to the
Closing Date.

 

(f)                                    Buyer agrees that it assumes all
obligations to provide any required notice under the WARN Act or other
applicable Laws, and, except as otherwise provided herein, to pay all severance
payments, damages for wrongful dismissal and related costs, with respect to the
termination of any employee of the Companies that occurs on or after the Closing
Date.

 

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(g)                                 As soon as practicable following the Closing
Date, Seller shall cause to be transferred from the trustee of the Seller
Savings Plans to the trustee of a defined contribution plan maintained by Buyer
(the “Buyer Savings Plan”) an amount in cash equal to the aggregate account
balances of the Company Participants under the Seller Savings Plans determined
as of the transfer date; provided, that to the extent any Company Participant
owes any amount to a Seller Savings Plan pursuant to the terms of a loan
(provided such loan is not in default) from such plan to such Company
Participant, an in-kind transfer of such loan shall be made in lieu of the
transfer of cash.  From and after the date of such transfer, Buyer shall cause
the Buyer Savings Plan to assume the obligations of the Seller Savings Plans
with respect to benefits accrued by the Company Participants under the Seller
Savings Plans, and the Seller Savings Plans shall cease to be responsible
therefor.  The Companies shall be responsible for, and shall contribute to each
Seller Savings Plan as soon as practicable after the Closing Date and prior to
the transfer described in this paragraph, all unpaid (A) pre-tax and after-tax
contributions to such Seller Savings Plan attributable to withholdings from the
compensation of employees of the Companies with respect to periods ending on or
before the Closing Date and (B) employer matching contributions due with respect
to pre-tax and after-tax contributions to such Seller Savings Plan by employees
of the Companies for periods ending on or before the Closing Date.  For purposes
of determining the amount of such employer matching contributions under each
Seller Savings Plan, the Closing Date shall be deemed to be the last day of a
payroll period.  Buyer and Seller shall cooperate in making all appropriate
arrangements and filings, if any, in connection with the transfer described in
this paragraph.  Further, Buyer and Seller shall cooperate and take such actions
as are necessary to permit the continuation of loan repayments by Continuing
Employees to the Seller Savings Plans by payroll deductions during the period
beginning on the Closing Date and ending on the date of the transfer described
in this paragraph.  Seller represents, covenants and agrees with respect to each
Seller Savings Plan, and Buyer represents, covenants and agrees with respect to
the Buyer Savings Plan, that, as of the date of the transfer described in this
paragraph, such plan will satisfy the requirements of Sections 401(a), (k), and
(m) of the Code and will have received, or shall timely file for, a favorable
determination letter from the IRS regarding such qualified status and covering
amendments required to have been adopted prior to the expiration of the
applicable remedial amendment period.

 

(h)                                 Claims of Continuing Employees and their
eligible beneficiaries and dependents for medical, dental, prescription drug,
life insurance, and/or other welfare benefits (“Welfare Benefits”) (other than
disability benefits) and/or workers compensation benefits that are incurred on
or before the Closing Date shall be the sole responsibility of Seller, whether
pursuant to a Seller Plan, a Company Plan or otherwise.  Claims of Continuing
Employees and their eligible beneficiaries and dependents for Welfare Benefits
(other than disability benefits) and/or workers compensation benefits that are
incurred after the Closing Date shall be the sole responsibility of Buyer and
the Companies.  For purposes of the preceding provisions 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, and a
claim for workers’ compensation benefits shall be considered incurred when the
injury occurred.  Seller and Buyer hereby agree that any employee of the
Companies or any Affiliate Employee who (i) as of the day immediately preceding
the Closing Date is receiving or entitled to receive short-term disability
benefits under a Seller Plan and who subsequently becomes eligible to receive
long-term disability benefits, or (ii) as of the

 

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day immediately preceding the Closing Date is receiving or entitled to receive
long-term disability benefits, shall become eligible or continue to be eligible,
as applicable, to receive long-term disability benefits under a Seller Plan that
is a long-term disability plan unless and until such employee is no longer
disabled (subject to the terms of such Seller Plan).  Claims of Continuing
Employees and their eligible beneficiaries and dependents for short-term or
long-term disability benefits that arise from disabling events that occur on or
after the Closing Date shall be the sole responsibility of Buyer and the
Companies.

 

(i)                                     With respect to all employees who
terminated from employment with a Company prior to the Closing Date and who are
listed on Schedule 6.14(i) (which schedule shall be updated no later than 30
days following the Closing Date to reflect an inclusive list of such former
employees) and who have been, or are eligible to be, provided with
post-retirement medical, dental, life insurance and/or other welfare benefit
coverage as of the Closing Date under a Seller Plan or Company Plan, the
Companies shall assume and/or retain any and all liability with respect to the
provision of such coverages to such terminated employees and their eligible
dependents and beneficiaries on and after the Closing Date.  In addition, the
Companies shall extend post-retirement medical, dental, disability, life
insurance and/or other welfare benefit coverages to all Continuing Employees
(and their eligible dependents and beneficiaries) who are, or who are hereafter
found to be or have been, eligible for such coverages; provided, however, that
nothing contained herein shall be construed as limiting or restricting Buyer’s
or a Company’s ability to amend, modify or terminate such post-retirement
medical, dental, disability, life insurance and/or other welfare benefit
coverages after the Closing Date.  Neither Seller nor any of the Non-Company
Affiliates shall have any liability on or after the Closing Date with respect to
the provision of post-retirement medical, dental, disability, life insurance
and/or other welfare benefit coverages for those persons described in the
preceding sentences of this paragraph.

 

(j)                                     Except to the extent required by
applicable Law, Seller shall not pay Continuing Employees (other than Affiliate
Employees who are Continuing Employees, who will be paid by Seller their accrued
and unused vacation as of the Closing Date) their accrued and unused vacation,
and a Company, Buyer or an Affiliate of Buyer, as applicable, shall provide,
without duplication of benefits, all such Continuing Employees with vacation
time rather than cash in lieu of vacation time for all accrued and unused
vacation through the Closing Date to the extent the liability for such accrued
but unused vacation is reflected in the Closing Date Working Capital Amount.

 

(k)                                  As soon as practicable following the
Closing Date, Seller shall cause to be transferred from the trustee of the
master trust that holds the assets of the Retirement Plan as of the Closing Date
to the trustee of a trust established or maintained by Buyer or a Company to
hold the assets of the Retirement Plan after the Closing Date an amount equal to
the Retirement Plan’s share of the assets of the master trust as determined as
of the transfer date in accordance with such master trust, the Code, ERISA, and
the Retirement Plan by the Reliant Energy, Inc. Benefits Committee (the
“Benefits Committee”) (which determination shall be based on the books and
records maintained by the trustee of the master trust).  Such transfer shall be
made in cash or in-kind as agreed to by the Benefits Committee and Buyer or the
Companies.  Buyer and Seller shall cooperate in making all appropriate
arrangements and filings, if any, in connection with the transfer described in
this paragraph.  In addition, (i) effective as of the Closing Date,

 

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Seller shall cause the Benefits Committee to cease to be the plan administrator
and to otherwise administer any aspect of the Retirement Plan as of the Closing
Date, and (ii) on the Closing Date, Buyer shall cause one of the Companies to
appoint a new plan administrator for the Retirement Plan effective as of such
date.

 

(l)                                     If, within the one-year period beginning
on the Closing Date, (i) a Continuing Employee (other than a Continuing Employee
whose employment is covered by the Collective Bargaining Contract) voluntarily
terminates his or her employment with Buyer and its Affiliates within 30 days
after the date upon which he or she is notified that the principal place of his
or her employment is changing to a location that is 25 miles or more from the
location of such employee’s principal place of employment immediately prior to
the Closing Date, or (ii) the employment of a Continuing Employee (other than a
Continuing Employee whose employment is covered by the Collective Bargaining
Contract) is terminated by Buyer or an Affiliate of Buyer for a reason other
than cause (as that term is defined in the Severance Plan, but based on the
terms of such plan as in effect on the Execution Date), then, in any such case,
Buyer shall provide such Continuing Employee with severance benefits at least
equal to the severance benefits which such Continuing Employee would have
received under the Severance Plan had the employment of such Continuing Employee
been terminated under circumstances entitling him or her to benefits under such
plan.  Such severance benefits shall be determined based on the terms of the
Severance Plan in effect on the Execution Date, but Buyer shall take into
account such Continuing Employee’s aggregate service with Buyer and its
Affiliates and his or her pre-Closing Date service recognized pursuant to
Section 6.14(e).

 

(m)                               Except as specifically set forth in this
Section 6.14 or in the Transition Services Agreement, Seller agrees to indemnify
and hold harmless Buyer, the Companies and their Affiliates with respect to all
claims and liabilities under any Seller Plan.

 

Section 6.15                                                        Public
Announcements.  Seller and Buyer will consult with each other before issuing,
and provide each other a reasonable opportunity to review and make reasonable
comment upon, any press release or making any public statement with respect to
this Agreement and the transactions contemplated hereby and, except as may be
required by applicable Law or any listing agreement with the NYSE, will not
issue any such press release or make any such public statement prior to such
consultation; provided, that each of the Parties may issue a press release or
make any public statement in response to specific questions by the press,
analysts, investors or those attending industry conferences or financial analyst
conference calls, so long as any such statements are not inconsistent with or
provide more information than is contained in previous press releases, public
disclosures or public statements made by the other Party, as the case may be;
provided further, that each Party may make disclosures to Persons bound by a
confidentiality obligation to the disclosing Party that covers such disclosed
information.

 

Section 6.16                                                        Expenses and
Fees.  Except as expressly provided otherwise herein, all costs and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the Party incurring such expenses.

 

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Section 6.17                                                        Agreement to
Cooperate.

 

(a)                                  Subject to the terms and conditions of this
Agreement and applicable Law, each Party shall use its commercially reasonable
efforts to fulfill the conditions precedent to the other’s respective
obligations hereunder and to secure all necessary or appropriate waivers,
consents, approvals or authorizations of Governmental Authorities (including by
pursuing all possible appeals) and third-parties required in order to consummate
the transactions contemplated by this Agreement.

 

(b)                                 In addition to and without limitation of the
foregoing, each of Buyer and Seller undertakes and agrees to (i) file (and each
Party agrees to cause any Person that may be deemed to be the ultimate parent
entity or otherwise to control such Party to file, if such filing is required by
Law) as soon as practicable, and in any event prior to 20 Business Days after
the Execution Date, a Notification and Report Form under the HSR Act with the
United States Federal Trade Commission and the Antitrust Division of the United
States Department of Justice, (ii) file as soon as practicable, and in any event
prior to 20 Business Days after the Execution Date, any form or report required
by FERC, (iii) file as soon as practicable any form or report required by any
other Governmental Authority relating to antitrust, competition, trade or energy
regulation matters, and (iv) use commercially reasonable efforts to receive any
clearance or approval required by any Governmental Authority or applicable Law,
in each case, with respect to the transactions contemplated by this Agreement. 
Each of Buyer and Seller shall (and shall cause any such parent entity to) (A)
respond as promptly as practicable to any inquiries or requests received from
any Governmental Authority for additional information or documentation, (B) not
extend any waiting period under the HSR Act or enter into any agreement with any
Governmental Authority not to consummate the transactions contemplated by this
Agreement, except with the prior consent of the other Party (which shall not be
unreasonably withheld, delayed or conditioned), and (C) bear 50% of the filing
fees made with Governmental Authorities in connection with the transactions
contemplated hereby.  Each Party shall consult and cooperate in the regulatory
review process and (I) promptly notify the other Party of any written
communication to that Party or its Affiliates from any Governmental Authority
and, subject to applicable Law, permit the other Party or its counsel to review
in advance any proposed written communication to any of the foregoing; (II) not
agree to participate, or to permit its Affiliates to participate, in any
substantive meeting or discussion with any Governmental Authority in respect of
any filings, investigation or inquiry concerning this Agreement or the
transactions contemplated hereby unless it consults with the other Party in
advance and, to the extent permitted by such Governmental Authority, gives the
other Party the opportunity to attend and participate thereat; and (III) subject
to applicable Law, furnish the other Party with copies of all correspondence,
filings, and communications (and memoranda setting forth the substance thereof)
between them and their Affiliates and their respective Representatives on the
one hand, and any Governmental Authority or members of their respective staffs
on the other hand, with respect to this Agreement and the transactions
contemplated hereby.  Promptly after the Execution Date, Seller agrees to cause
the Companies to petition the NYISO and ConEd to approve the bifurcation of work
shown on Schedule 6.02(a)(iii) between November and December of 2005 and March
and April of 2006.

 

(c)                                  In addition to and without limiting the
foregoing, each Party shall avoid or eliminate each and every impediment
applicable to such Party under any applicable antitrust, competition, or trade
or energy regulation law (including the Federal Power Act, as amended, and the
FERC’s regulations thereunder, any applicable New York Laws, and the New York
State

 

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Public Service Commission regulations thereunder; the HSR Act; and, if
applicable, the Public Utility Holding Company Act of 1935, as amended, and the
regulations promulgated thereunder) that may be asserted by any Governmental
Authority with respect to the transactions contemplated hereby so as to enable
the Closing to occur no later than the Termination Date.

 

(d)                                 Seller shall provide reasonable assistance
to Buyer in obtaining (i) on or prior to the 30th day prior to Closing, Surveys
on the Real Property and (ii) on or prior to the Closing Date, the Title
Policies on the Real Property.  Seller shall deliver to the Title Insurer such
affidavits as may be reasonably necessary to remove the mechanic’s lien and
parties in possession exceptions from the Title Policies.

 

(e)                                  With regard to water intake and discharge
issues at the Facilities, and any related consent orders from Governmental
Authorities, to the extent permitted by applicable Law, Seller shall (A)
promptly notify Buyer of any material written communication from any
Governmental Authority and permit Buyer or its counsel to review in advance any
proposed material written communication to any Governmental Authority, (B) not
agree to participate, or to permit its Affiliates to participate, in any
substantive meeting or discussion with any Governmental Authority unless it
consults with Buyer in advance and gives Buyer the opportunity to attend such
meetings and discussions, and (C) furnish Buyer with copies of all material
correspondence, filings, and communications (and memoranda setting forth the
substance thereof) between them and their Affiliates and their respective
Representatives on the one hand, and any Governmental Authority or members of
their respective staffs on the other hand.

 

Section 6.18                                                        Directors’
and Officers’ Indemnification.

 

(a)                                  The indemnification provisions of each
Company’s Charter Documents as in effect at the Closing shall not be amended,
repealed or otherwise modified for a period of six years from the Closing Date
in any manner that would adversely affect the rights thereunder of individuals
who at the Closing were directors, officers or employees of either Company;
provided, that all rights to indemnification in respect of any action pending or
asserted or any claim made within such period shall continue until the
disposition of such action or resolution of such claim.  From and after the
Closing, Buyer shall assume, be jointly and severally liable for, and honor,
guaranty and stand surety for, and shall cause the Companies to honor, in
accordance with their respective terms, each of the covenants contained in this
Section 6.18, without limit as to time.

 

(b)                                 Buyer shall pay all reasonable expenses,
including reasonable attorneys’ fees, that may be incurred by an indemnified
person in enforcing the indemnity set forth in Section 6.18(a).

 

Section 6.19                                                        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
and execute and deliver such other documents as such Party may reasonably
request in order to consummate the transactions contemplated by this Agreement. 
Furthermore, in the event that after the Closing, Seller or any Non-Company

 

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Affiliate receives any cash or has title to any other asset primarily related to
the operations of the Companies (other than Excluded Assets and cash or assets
to which Seller is entitled hereunder), Seller shall, and shall cause each such
Non-Company Affiliate, to pay such cash or deliver such other asset to the
Companies promptly, but in any event within five (5) Business Days, after
receipt thereof.

 

Section 6.20                                                       
Non-Solicitation.  For a period of two years from and after the Closing Date,
Seller shall not, and shall cause the Non-Company Affiliates not to, directly or
indirectly, cause, solicit, induce or encourage any Continuing Employees to
leave the employment of the Companies or hire, employ or otherwise engage any
such individual (except pursuant to a general solicitation not targeted at such
employees).

 

Section 6.21                                                        Hedging and
Energy Management Services.  On the Execution Date, the Companies have entered
into that certain Hedging Agreement with Morgan Stanley Capital Group Inc. (the
“Hedging Agreement”).  On and prior to the Closing Date, Seller shall not, and
shall cause the Non-Company Affiliates and the Companies not to, amend, modify,
waive or terminate any rights or obligations under the Hedging Agreement or take
any action or fail to take any action which could cause the counterparty to such
Hedging Agreement to terminate, suspend or accelerate its obligations under the
Hedging Agreement (other than in connection with the exercise of the rights of
the Non-Company Affiliates and the Companies in the event of a payment default
by the counterparty).

 

Section 6.22                                                        Subsequent
Financials Statements.

 

(a)                                  As soon as practicable, (i) but in any
event no later than 30 days after the end of each calendar month, beginning with
the calendar month end immediately preceding the date of this Agreement, Seller
will deliver to Buyer a copy of the consolidated balance sheet, and statement of
operations for the Companies, at and for the year to date periods ending on the
last day of each such month, (ii) but in any event no later than 45 days after
the end of each calendar quarter, beginning with the calendar quarter end
immediately preceding the date of this Agreement, Seller will deliver to Buyer a
copy of the consolidated balance sheet, and statement of operations for the
Companies, at and for the year to date periods ending of the last day of such
calendar quarter, and (iii) but in any event no later than 45 days after the end
of each calendar quarter, beginning with the calendar quarter ending September
30, Seller will deliver to Buyer a copy of the consolidated cash flow statement
for the Companies.  The financial statements referred to in this Section 6.22(a)
are collectively referred to as the “Subsequent Financial Statements”.

 

(b)                                 As soon as practicable, but in any event no
later than 45 days prior to the Closing, Seller shall furnish to Buyer the
audited consolidated balance sheet of the Companies (after elimination of any
Excluded Assets and any liabilities for which Seller and the Non-Company
Affiliates are to remain solely responsible by operation of law or this
Agreement, in each case to the extent permitted by Regulation S-X) as at
December 31, 2004 and December 31, 2003, together with the related audited
consolidated statement of income and consolidated statement of cash flows for
the twelve-month periods ended December 31, 2004 and December 31, 2003.  Not
less than 45 days prior to Closing, Seller shall furnish to Buyer the audited
consolidated balance sheet of the Companies (after elimination of any Excluded
Assets and any liabilities for which

 

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Seller and the Non-Company Affiliates are to remain solely responsible by
operation of law or this Agreement, in each case to the extent permitted by
Regulation S-X) as at December 31, 2005, together with the related audited
consolidated statement of income and consolidated statement of cash flows for
the twelve-month period ended December 31, 2005; provided, however, that Seller
shall not be required to provide the audited financial statements provided for
in this sentence to Buyer before March 31, 2006 if the Closing has occurred on
or prior to such date and if the Closing occurs prior to such date, Seller shall
only be required to assist Buyer in preparing such financial statement.  The
financial statements referred to in this Section 6.22(b) (other than the
financial statement referred to in the preceding sentence that Seller assists in
preparing) are collectively referred to herein as the “Audited Financial
Statements”.

 

(c)                                  Seller agrees that, when delivered, each of
the Subsequent Financial Statements, and Audited Financial Statements will
fairly present in accordance with GAAP, the financial condition of the Companies
as of the date of presentation and the results of operations for the periods
covered thereby, except in the case of the Subsequent Financial Statements for
the allocation of corporate support and general and administrative expenses and
the allocation of goodwill and its related accounting in accordance with SFAS
No. 142, “Goodwill and Other Intangible Assets,” and except for the absence of
footnote disclosure.  Seller agrees that it shall execute any management
representation letters such that the Audited Financial Statements will be
delivered with unqualified opinions (including to the foregoing effect) and
shall cause the Audited Financial Statements to be addressed to the Companies. 
Seller agrees that it shall use its commercially reasonable efforts to cause its
independent accountants to provide their written agreement to permit the use of
the Audited Financial Statements (i) in connection with rating agency
presentations, bank syndication meetings, bank books and offerings of securities
by Buyer and/or one or more of the Companies as contemplated by the Commitment
Letters, and (ii) subject to such accounting firm’s normal procedures, in other
private or public offerings of securities as may be reasonably requested by
Buyer and/or one or more of the Companies, together in each case with any
comfort letter from Seller’s independent accountants with respect to such
financial statements requested by Buyer and/or one or more of the Companies.

 

(d)                                 Seller shall, and shall cause the other
Non-Company Affiliates to, use its commercially reasonable efforts to cooperate
with Buyer in connection with Buyer’s financing for the transactions
contemplated hereby and to cause satisfaction of the conditions for receipt of
such financing to be satisfied.  Without limiting the generality of the
foregoing, Seller shall, and shall cause the other Non-Company Affiliates to,
provide information to and permit the financing sources and their
Representatives access to the Purchased Assets and the business of the
Companies, as provided in Section 6.01 hereof, and, upon the reasonable request
of Buyer, participate in meetings with prospective investors and participate in
meetings with rating agencies and any “road shows”, participate in drafting
sessions related to the bank book and offering materials for the debt financing
of Buyer and the Companies contemplated for the transactions contemplated
hereby, use commercially reasonable efforts to cause the independent accountants
that prepared the Audited Financial Statements to participate in drafting
sessions related to any offering materials for the debt financing contemplated
for the transactions contemplated hereby and make work papers available to
Buyer, the agent for the debt financing and their respective Representatives. 
Out-of-pocket costs incurred by Seller for participation by its external
accountants, outside counsel, and other outside advisors and consultants in the
transactions contemplated in the immediately foregoing sentence shall be paid by
Buyer;

 

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provided that, for the avoidance of doubt, the fees of Seller’s independent
accountants for preparation of the Audited Financial Statements shall be borne
by Seller.

 

Section 6.23                                                        Funding
Commitments.  Buyer agrees to use reasonable best efforts to obtain the
financing specified in the Debt Commitment Letter on terms no less favorable to
Buyer than those specified therein or other terms reasonably satisfactory to
Buyer, whether with the counterparty to the Debt Commitment Letter or an
alternative financing source.  Buyer shall use reasonable best efforts to
promptly negotiate definitive documentation (“Definitive Financing
Documentation”) for the transactions contemplated by the Commitment Letters and
to have such Definitive Financing Documentation ready for execution at Closing. 
Without the prior written approval of Seller, Buyer agrees not to amend in any
respect or waive any right with respect to the Commitment Letters that could
reasonably be expected to materially delay the consummation of the Closing.

 

Section 6.24                                                        Title
Defects.  No later that 15 days after Buyer has received updated commitments for
the issuance of the Title Policies (the “Updated Title Commitments”), Buyer may
provide a written notice (“Objection Notice”) to Seller of any Liens, defects or
exceptions (other than Permitted Exceptions) that appear on the Updated Title
Commitments, but did not appear on the Title Commitments.  If no Objection
Notice is given to Seller by the time specified in the preceding sentence, then
Buyer shall be deemed to have accepted all such defects and exceptions, and all
such defects and exceptions shall be deemed to be Permitted Exceptions
hereunder.  Seller shall have the option to either (i) cure any defect or
exception which is the subject of an Objection Notice, within 60 days after
receipt of the Objection Notice, or (ii) indemnify Buyer against Losses incurred
by Buyer as a result of such defect or exception.  At Closing, Seller shall
indemnify and hold the Title Company harmless from any exceptions to the Updated
Title Commitments created by, through or under Seller or any of its Affiliates
during the period between the issuance of the Title Commitments and the issuance
of the Updated Title Commitments.

 

Section 6.25                                                       
Work-Around.  If there are any Assigned Contracts that require consent of the
counterparty thereto for assignment or that are not by their terms assignable or
transferable, Seller shall use commercially reasonable efforts to obtain, or
cause to be obtained, on or prior to the Closing, any approvals or consents
necessary to convey to assign such Assigned Contracts to the Companies effective
as of the Closing.  Buyer shall cooperate with Seller in such manner as may be
reasonably requested in connection therewith, but Buyer shall not be required to
pay any amount to effect such assignment.  In the event any consent or approval
to an assignment contemplated hereby is not obtained on or prior to the Closing
Date, Seller shall continue to use commercially reasonable efforts to obtain any
such approval or consent after the Closing Date until such time as such consent
or approval has been obtained or it shall become reasonably apparent that such
consent or approval is not forthcoming, and Seller shall use commercially
reasonable efforts, in cooperating with Buyer, to provide Buyer with an
appropriate and economically feasible arrangement (a “Work-around”) to provide
that the Companies shall receive the Non-Company Affiliate’s interest in and to
the benefits under any such Contract; provided, that Buyer shall undertake to
pay or satisfy the corresponding liabilities for the enjoyment of such benefit
to the extent (a) Buyer is receiving such interest and benefits and (b) Buyer
would have been responsible therefor if such consent or approval had been

 

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obtained, in which case such Contract will be treated as an Assumed Contract for
all purposes hereunder to the extent of such Work-around.

 

ARTICLE VII
CONDITIONS TO THE CLOSING

 

Section 7.01                                                        Conditions
to the Obligations of Each Party.  The obligations of the Parties to proceed
with the Closing are subject to the satisfaction on or prior to the Closing Date
of all of the following conditions, any one or more of which may be waived in
writing, in whole or in part, as to a Party by such Party:

 

(a)                                  (i) no judgment, injunction, order or
decree of a court or other Governmental Authority of competent jurisdiction
shall be in effect which has the effect of making the transactions contemplated
by this Agreement illegal or otherwise restraining or prohibiting the
consummation of the transactions contemplated by this Agreement (each Party
agreeing to use its commercially reasonable efforts, including appeals to higher
courts, to have any judgment, injunction, order or decree lifted) and (ii) no
material legal proceedings shall have been instituted against either Seller or
Buyer, or any of the Purchased Assets, seeking to restrain or prohibit the
consummation of the transactions contemplated hereby; provided, that Seller and
Buyer shall use their commercially reasonable efforts to have dismissed, settle
or otherwise resolve such legal proceedings;

 

(b)                                 (i) any waiting period applicable to
consummation of the transactions contemplated by this Agreement under the HSR
Act shall have expired or been terminated, and (ii) all Seller Governmental
Approvals and Buyer Governmental Approvals shall have been filed, made and
obtained, as the case may be, on terms and subject to conditions that would not
reasonably be expected to have a Material Adverse Effect; provided, that a Party
whose breach of its obligations under this Agreement caused a failure to so
file, make or obtain such Seller Governmental Approvals or Buyer Governmental
Approvals, as the case may be, shall be deemed to have waived this condition to
the extent of such failure; and

 

(c)                                  all consents, waivers and approvals listed
on Schedule 7.01(c) shall have been obtained.

 

Section 7.02                                                        Conditions
to the Obligations of Buyer.  The obligation of Buyer to proceed with the
Closing is subject to the satisfaction on or prior to the Closing Date of the
following further conditions, any one or more of which may be waived, in whole
or in part, by Buyer:

 

(a)                                  Seller shall have performed in all material
respects all of its obligations (other than its obligations under the first
sentence of Section 6.22(c)) hereunder required to be performed by it at or
prior to the Closing Date, including, without limitation, its obligation to make
the deliveries contemplated by Section 2.04 hereof;

 

(b)                                 the representations and warranties of Seller
contained in this Agreement (without regard to “materiality”, “material adverse
effect”, Material Adverse Effect or similar qualifiers, without regard to any
updates to the Seller’s Disclosure Schedules and without regard to any notice of
any breach of any representation or warranty given on or after the Execution
Date) shall

 

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be true and correct as of the Closing Date (except to the extent such
representations and warranties expressly relate to an earlier date, in which
case as of such earlier date), except for failures to be true and correct that
would not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect;

 

(c)                                  Each of the conditions to the
counterparties’ obligations in the Debt Commitment Letter shall have been
satisfied in full (other than conditions relating to (i) funding pursuant to the
Equity Commitment Letter or similar undertaking regarding equity funding by
Buyer and its Affiliates, (ii) the delivery of documents at the closing by the
borrower, the Sponsors (as defined in the Debt Commitment Letter) or their
Affiliates pursuant to the financing documents executed in accordance with the
Debt Commitment Letter, (iii) costs, fees, expenses and other compensation
contemplated by the Debt Commitment Letter or related letters payable by the
borrower, the Sponsors (as defined in the Debt Commitment Letter) or their
Affiliates to the lead arrangers, other lenders and administrative agents, and
(iv) a breach in any material respect by the borrower, the Sponsors (as defined
in the Debt Commitment Letter) or their Affiliates under the Debt Commitment
Letter or fee letters; provided that the failure to meet a condition under the
Debt Commitment Letter would not be covered by this clause (iv) unless there was
a corresponding breach that led to the failure of the condition);

 

(d)                                 Seller shall have delivered to Buyer not
less than 45 days prior to Closing the Audited Financial Statements, and there
shall be no changes in the Audited Financial Statements compared to the
corresponding unaudited financial statements described in Section 4.04 that
could reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect, disregarding any changes solely by virtue of making the
adjustments described in the GAAP exceptions in Section 4.04(a) and the
eliminations described in Section 6.22(b);

 

(e)                                  There shall have been no Material Adverse
Effect since each of June 30, 2005 and the Execution Date;

 

(f)                                    The Hedging Agreement shall remain in
full force and effect and no default shall have arisen under the Hedging
Agreement and no right of termination, amendment or modification of the Hedging
Agreement shall have arisen; and

 

(g)                                 Buyer shall have received a certificate
signed on behalf of Seller by an executive officer of Seller indicating that the
conditions provided in Section 7.02(a) and Section 7.02(b) have been satisfied.

 

Section 7.03                                                        Conditions
to the Obligations of Seller.  The obligation of Seller to proceed with the
Closing is subject to the satisfaction on or prior to the Closing Date of the
following further conditions, any or more of which may be waived, in whole or in
part, by Seller:

 

(a)                                  Buyer shall have performed in all material
respects all of its obligations hereunder required to be performed by it at or
prior to the Closing Date;

 

(b)                                 the representations and warranties of Buyer
contained in this Agreement (i) that are qualified as to “material adverse
effect” shall be true and correct in as of the Closing Date, except to the
extent such representations and warranties expressly relate to an earlier date
(in which case as of such earlier date), and (ii) those not so qualified shall
be true and correct as of

 

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the Closing Date, except to the extent such representations and warranties
expressly relate to an earlier date (in which case as of such earlier date),
except for failures of the representations and warranties referred to in this
clause (ii) to be true and correct as do not and would not reasonably be
expected to have, in the aggregate, a material adverse effect on Buyer’s ability
to perform its obligations hereunder; and

 

(c)                                  Seller shall have received a certificate
signed on behalf of Buyer by an executive officer of Buyer indicating that the
conditions provided in Section 7.03(a) and Section 7.03(b) have been satisfied.

 

ARTICLE VIII
TERMINATION

 

Section 8.01                                                       
Termination.  This Agreement may be terminated and the consummation of the
transactions contemplated hereby may be abandoned at any time prior to the
Closing only under one of the following circumstances:

 

(a)                                  by mutual written consent of Seller and
Buyer;

 

(b)                                 by either Seller or Buyer:

 

(i)                                                             if the Closing
has not occurred on or before one year after the Execution Date (such date, as
it may be extended under clause (A) of this paragraph, the “Termination Date”)
provided, that (A) each of the Parties shall have the option, in its sole
discretion, to extend the Termination Date for an additional period of time not
to exceed 90 days if all other conditions to Closing (other than the condition
described in the following clause (B)) are satisfied or capable of then being
satisfied and the sole reason (other than the condition described in the
following clause (B)) that the Closing has not occurred by such date is that the
condition set forth in Section 7.01(a) or (b) has not been satisfied due to the
failure to obtain the necessary waivers, consents, approvals and authorizations
under applicable Laws or a judgment, injunction, order or decree of a court or
other Governmental Authority of competent jurisdiction shall be in effect and
Buyer or Seller is still attempting to obtain such necessary waivers, consents,
approvals and authorizations under applicable Laws, or is contesting (x) the
refusal of the relevant Governmental Authority to give such consents or
approvals or (y) the entry of any such judgment, injunction, order or decree, in
court or through other applicable proceedings; (B) each of the Parties shall
have the option, in its sole discretion, to extend the Termination Date for an
additional period of time, not to exceed 90 days if all other conditions to
Closing (other than the condition described in the preceding clause (A) to the
extent applicable) are satisfied or capable of being satisfied and the sole
reason (other than the condition described in the preceding clause (A) to the
extent applicable) that the Closing has not occurred by such date is that the
condition set forth in Section 7.01(a)(ii) has not been satisfied due to the
existence of material legal proceedings; and (C) the right to terminate this
Agreement pursuant to this Section 8.01(b)(i) shall not be available to any
Party whose breach of any provision of this Agreement has been the cause of, or
resulted in, the failure of the Closing to occur by the Termination Date; or

 

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(ii)                                                          if any court of
competent jurisdiction in the United States or other United States Governmental
Authority shall have issued a final order, decree or ruling or taken any other
final action restraining, enjoining or otherwise prohibiting the consummation of
the transactions contemplated by this Agreement and such order, decree, ruling
or other action is or shall have become final and nonappealable, provided, that
the Party seeking to terminate this Agreement pursuant to this Section
8.01(b)(ii) shall have used commercially reasonable efforts to prevent the entry
of and to remove such order, decree, ruling or final action;

 

(c)                                  by Buyer if there has been a material
breach by Seller of any representation, warranty, covenant or agreement
contained in this Agreement which (x) would result in a failure of a condition
set forth in Section 7.02(a) or (b) and (y) if curable, cannot be cured prior to
the Termination Date or is not cured within 20 days following written
notification of such breach or longer period as may be reasonably necessary to
cure such breach, but not to exceed 90 days in the aggregate;

 

(d)                                 by Seller if there has been a material
breach by Buyer of any representation, warranty, covenant or agreement contained
in this Agreement which (x) would result in a failure of a condition set forth
in Section 7.03(a) or (b) and (y) if curable cannot be cured prior to the
Termination Date or is not cured within 20 days following written notification
of such breach or longer period as may be reasonably necessary to cure such
breach, but not to exceed 90 days in the aggregate; and

 

(e)                                  by Seller, on or prior to the tenth (10th)
Business Day after the occurrence of a Specified Termination Event.

 

The Party desiring to terminate this Agreement pursuant to Section 8.01 (other
than pursuant to Section 8.01(a)) shall give notice of such termination to the
other Party.

 

Section 8.02                                                        Effect of
Termination.  In the event of termination of this Agreement by either Seller or
Buyer prior to the Closing pursuant to the provisions of Section 8.01, this
Agreement shall forthwith become void, and there shall be no liability or
further obligation on the part of Buyer or Seller or their respective officers
or directors (except pursuant to Section 6.01(b), Section 6.13, Section 6.16,
this Section 8.02, Section 9.03, Section 9.04(a), Section 9.04(b), Section
9.04(d), Section 9.04(f), Section 10.04 and Section 10.05, all of which shall
survive the termination); provided, that nothing in this Section 8.02 shall
relieve any Party from liability for any willful breach of this Agreement by
such Party prior to termination of this Agreement.  Notwithstanding anything
herein to the contrary, in the event that this Agreement is terminated by Seller
pursuant to and in accordance with Section 8.01(e), Buyer shall pay to Seller an
aggregate amount of $26,125,000 (the “Break-Up Fee Payment”) and Seller agrees
that the Break-Up Fee Payment shall be the sole and exclusive remedy of Seller,
its Affiliates, and its and their Representatives against the Buyer, its
Affiliates and its their Representatives related to this Agreement and the
transactions contemplated hereby in the event of a termination pursuant to
Section 8.01(e).

 

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ARTICLE IX
INDEMNIFICATION

 

Section 9.01                                                        Survival. 
All representations, warranties, covenants and agreements contained herein, and
the right to commence any Claim with respect thereto, shall terminate upon the
first anniversary of the Closing Date, except that (a) the representations and
warranties contained in the Excluded Sections, Section 5.01 and Section 5.02
shall survive without limitation as to time, (b) the representations and
warranties contained in Section 4.11 and Section 4.12 shall survive until the 18
month anniversary of the Closing Date, (c) the representations and warranties
contained in Section 4.09 shall survive until the end of the period of the
applicable statute of limitations (taking into account extensions thereof) and
(d) the covenants and agreements of the Parties contained herein that by their
terms are to be performed on or following the Closing Date (including covenants
and agreements in this Article IX, including Section 9.02(a)(iii), Section
9.02(a)(iv), and Section 9.02(a)(v)), shall survive the Closing Date and
continue in effect in accordance with their terms; provided, that in the event
written notice of any Claim for indemnification under Section 9.02(a)(i),
Section 9.02(a)(ii), Section 9.02(b)(i), or Section 9.02(b)(ii) shall have been
given in accordance herewith within the applicable survival period setting forth
such Claim in reasonable detail (including, to the extent known, a reasonable
specification of the legal and factual basis for such Claim and the Loss
suffered or incurred), the representations, warranties, covenants and agreements
that are the subject of such indemnification Claim shall survive with respect to
that Claim until such time as the Claim is fully and finally resolved.  Without
limiting the generality of the foregoing, in the event that notice of a
Third-Party Claim has been asserted by an Indemnified Party prior to the
expiration of the applicable survival period and otherwise in accordance with
this Agreement, the obligation of the Indemnifying Party to indemnify with
respect to any Losses with respect to the matter set forth in such Third-Party
Claim was made shall survive notwithstanding termination of the survival period
and shall include the obligation to indemnify for Losses with respect to the
matter set forth in such Third-Party Claim was made that were suffered both
before and after expiration of the applicable survival period and that are
otherwise indemnifiable under this Agreement.

 

Section 9.02                                                       
Indemnification.

 

(a)                                  Subject to the provisions of this Article
IX, from and after the Closing, Seller shall indemnify and hold the Buyer
Indemnified Group harmless from and against any and all Losses, whether arising
out of contract, tort, strict liability, other Law or otherwise, incurred or
suffered by any of them to the extent arising out of or resulting from:

 

(i)                                                             any breach as of
the Execution Date and/or Closing Date of a representation or warranty made by
Seller herein or in any certificate delivered pursuant to this Agreement;

 

(ii)                                                          any breach of any
covenant or agreement of Seller herein (other than its obligations under the
first sentence of Section 6.22(c) to the extent relating to the Subsequent
Financial Statements);

 

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(iii)                                                       the business or
operations of any current, former or future Non-Company Affiliate (including the
Seller and the Guarantor), whenever and wherever conducted (other than to the
extent directly attributable to the business of the Companies conducted at the
Facilities);

 

(iv)                                                      the Excluded Assets;

 

(v)                                                         the Seller
Environmental Liabilities; and

 

(vi)                                                      if the certificate of
insurance described in Section 2.04(h) is not delivered at or prior to the
Closing for the Cleanup Cost Cap insurance policy issued by C&I Commerce and
Industry Insurance Company, claims that would be recoverable by Buyer under such
policy if Buyer were a named insured under such policy.

 

Notwithstanding anything to the contrary in this Agreement, Seller shall not be
liable for any Losses with respect to the matters set forth in Section
9.02(a)(i) (other than Losses arising out of or resulting from a breach of any
of the representations and warranties made in the Excluded Sections) or Section
9.02(a)(ii) unless (x) a Claim is timely asserted during the survival period
specified in Section 9.01, (y) the Loss with respect to the particular act,
circumstance, development, event, fact, occurrence or omission exceeds $100,000
(aggregating all Losses arising from substantially identical facts) and (z) the
aggregate of all Losses under Section 9.02(a)(i) and Section 9.02(a)(ii)
exceeds, on a cumulative basis, 1.5% of the Final Purchase Price (and then only
to the extent of such excess); provided, that for purposes of determining
whether such deductible has been attained, all qualifications as to “material,”
“materiality,” “Material Adverse Effect” or similar exception or qualifier
contained in a representation shall be disregarded.  Notwithstanding anything to
the contrary in this Agreement, (A) the aggregate liability of Seller to the
Buyer Indemnified Group arising under or related to the matters set forth in
Section 9.02(a)(i) (other than Losses arising out of or relating to a breach of
the Excluded Sections) and Section 9.02(a)(ii) (to the extent arising out or
relating to a breach of the Included Covenants), whether based in contract,
tort, strict liability, other Law or otherwise, shall not exceed 50% of the
Final Purchase Price, (B) Seller shall have no liability to the Buyer
Indemnified Group arising under or relating to this Agreement to the extent the
Buyer Indemnified Group has recovered the applicable Losses from Guarantor, and
(C) the limitations on indemnification set forth in this paragraph shall not
apply to the matters set forth in Section 9.02(a)(i) to the extent relating to
the representations and warranties made in the Excluded Sections, the matters
set forth in Section 9.02(a)(ii) (except solely to the extent relating to an
Included Covenant), or the matters set forth in Section 9.02(a)(iii), Section
9.02(a)(iv), Section 9.02(a)(v) or Section 9.02(a)(vi).  Notwithstanding
anything herein to the contrary, the aggregate liability of Seller to the Buyer
Indemnified Group arising under or related to all matters set forth in this
Agreement (including those otherwise subject to clause (A) foregoing), whether
based in contract, tort, strict liability, other Law or otherwise, shall not
exceed 100% of the Final Purchase Price.  Notwithstanding anything herein to the
contrary, Seller’s indemnification obligation under Section 9.02(a)(vi) shall
terminate upon the earlier to occur of (i) the delivery of the certificate of
insurance for such policy described in Section 2.04(h) and Buyer and the
Companies being effectively named as the named insureds under such policy and
(ii) the expiration of the term of such policy.

 

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(b)                                 Subject to the provisions of this Article
IX, from and after the Closing, Buyer hereby agrees to indemnify and hold the
Seller Indemnified Group harmless from and against any and all Losses, whether
arising out of contract, tort, strict liability, other Law or otherwise,
actually incurred by any of them to the extent arising out of or resulting from:

 

(i)                                                             any breach as of
the Execution Date or the Closing Date of a representation or warranty made by
Buyer herein;

 

(ii)                                                          any breach of any
covenant or agreement of Buyer herein;

 

(iii)                                                       the status of any of
the Non-Company Affiliates as former partners of Astoria LP, whether
attributable to the ownership or operation of the Purchased Assets and the
Companies before or after the Closing Date, regardless of when the applicable
Claims are asserted;

 

(iv)                                                      any of the matters
listed on Schedule 4.06 (other than such matters which are also listed on
Schedule 6.06), whether attributable to the ownership or operation of the
Purchased Assets and the Companies before or after the Closing Date, regardless
of when the applicable Claims are asserted;

 

(v)                                                         except to the extent
arising out of resulting from (A) a breach by Seller of the representations and
warranties set forth in Section 4.12, (B) the Seller Environmental Liabilities
or (C) indemnification claims recoverable pursuant to Section 9.02(a)(vi),
Environmental Laws or any environmental conditions to the extent relating to the
Purchased Assets or the Companies, whether attributable to the ownership or
operation of the Purchased Assets and the Companies before or after the Closing
Date, regardless of when the applicable Claims are asserted;

 

(vi)                                                      except to the extent
attributable to breaches of such Contracts by the Seller Indemnified Group
before the Closing, any of the Assigned Contracts or the Iroquois Contract,
whether attributable to the ownership or operation of the Purchased Assets and
the Companies before or after the Closing Date, regardless of when the
applicable Claims are asserted; and

 

(vii)                                                   in the event the
Gunderboom Contract is not assigned to Buyer, any breach by Astoria LP of the
Gunderboom Contract, attributable to the ownership or operation of the Purchased
Assets and the Companies after the Closing Date, regardless of when the
applicable Claims are asserted.

 

Notwithstanding anything to the contrary in this Agreement, Buyer shall not be
liable (A) for any Losses with respect to the matters set forth in Section
9.02(b)(i) or Section 9.02(b)(ii) unless a Claim is timely asserted during the
survival period specified in Section 9.01 and (B) to the extent that the Losses
for which the Seller Indemnified Party is seeking indemnification is a matter
for which Seller has agreed to be responsible pursuant to this Agreement or for
which a Buyer Indemnified Party is entitled to indemnification under this
Agreement.

 

(c)                                  THE PARTIES INTEND AND AGREE THAT THE
INDEMNITY OBLIGATIONS SET FORTH IN THIS SECTION 9.02 ARE INTENDED TO AND

 

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SHALL EXTEND TO AND COVER ANY AND ALL LOSSES RESULTING FROM OR CAUSED IN WHOLE
OR IN PART BY ANY ACTIVE, PASSIVE, AFFIRMATIVE, SOLE, CONCURRENT OR OTHER
NEGLIGENCE, STRICT LIABILITY OR OTHER FAULT OF, REGARDLESS OF WHETHER SUCH
LOSSES RESULT FROM OR ARE CAUSED IN WHOLE OR IN PART BY ANY ALLEGED OR ACTUAL
NEGLIGENCE OR OTHER FAULT OF, (I) ANY OF BUYER INDEMNIFIED PARTIES WITH RESPECT
TO SECTION 9.02(a), AND (II) ANY OF THE SELLER INDEMNIFIED PARTIES WITH RESPECT
TO SECTION 9.02(b).

 

Section 9.03                                                        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 NO PARTY 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 COMPANIES OR ANY OF THE
PURCHASED ASSETS, OR ANY PART THEREOF, EXCEPT THOSE EXPRESS REPRESENTATIONS AND
WARRANTIES CONTAINED IN THIS AGREEMENT.  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 SECTION 4.12, (II)
SELLER MAKES NO REPRESENTATION OR WARRANTY TO BUYER WITH RESPECT TO ANY
FINANCIAL PROJECTIONS OR FORECASTS RELATING TO THE COMPANIES OR THE PURCHASED
ASSETS, AND (III) SELLER MAKES NO REPRESENTATION OR WARRANTY TO BUYER WITH
RESPECT TO INFORMATION PROVIDED TO BUYER IN RESPONSE TO QUESTIONS PRESENTED BY
BUYER OR OTHER INFORMATION PROVIDED TO BUYER RELATING TO THE COMPANIES OR THE
PURCHASED ASSETS; PROVIDED, THAT THIS SENTENCE SHALL NOT LIMIT THE EXPRESS
REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS (INCLUDING INDEMNITIES)
CONTAINED IN THIS AGREEMENT.

 

(b)                                 EXCEPT FOR THOSE EXPRESS REPRESENTATIONS,
WARRANTIES, COVENANTS AND AGREEMENTS (INCLUDING INDEMNITIES) CONTAINED IN THIS
AGREEMENT, SELLER’S INTERESTS IN THE 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 COMPANIES AND
THE PURCHASED ASSETS OR THE PROSPECTS (FINANCIAL OR OTHERWISE), RISKS AND OTHER
INCIDENTS OF THE COMPANIES AND THE PURCHASED ASSETS.

 

(c)                                  BUYER ACKNOWLEDGES THAT IT HAS INVESTIGATED
TO ITS SATISFACTION, THE CONDITION AND SUITABILITY OF THE PURCHASED ASSETS AND
ALL MATTERS AFFECTING THE VALUE OR DESIRABILITY OF

 

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THE PURCHASED ASSETS, INCLUDING, BUT NOT LIMITED TO, THE OPERATIONAL ASPECTS OF
SUCH PURCHASED ASSETS, POTENTIAL ENVIRONMENTAL HAZARDS ARISING FROM THE PRESENCE
ON OR ABOUT THE PROPERTY OF HAZARDOUS SUBSTANCES, INCLUDING ASBESTOS,
FORMALDEHYDE, RADON GAS, LEAD-BASED PAINT, OTHER LEAD CONTAMINATION, FUEL OR
CHEMICAL STORAGE TANKS, CAVERNS, PIPELINES, ELECTROMAGNETIC FIELDS,
PHOSPHO-GYPSUM OR POLYCHLORINATED BIPHENYLS. EXCEPT AS EXPRESSLY PROVIDED
HEREIN, NEITHER SELLER, NOR ITS AFFILIATES MAKES OR HAS MADE ANY REPRESENTATIONS
OR WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, WRITTEN OR ORAL, AS TO THE
PHYSICAL CONDITION OF THE PURCHASED ASSETS, THE USES OF THE PURCHASED ASSETS OR
ANY LIMITATIONS THEREON, THE INCOME TO BE DERIVED THEREFROM, THE COSTS OF
OPERATION, COMPLIANCE WITH LAW, AND/OR ANY REQUIREMENTS FOR ALTERATIONS OR
IMPROVEMENTS TO COMPLY WITH LAW, INCLUDING ANY REPRESENTATIONS OR WARRANTIES
PERTAINING TO ZONING, ENVIRONMENTAL OR OTHER LAW; THE UTILITIES, PIPELINES OR
OTHER PHYSICAL EQUIPMENT AND FIXTURES ON THE PROPERTY, OR ANY  OTHER ASPECT OF
THE ECONOMIC OPERATIONS ON THE PROPERTY; THE CONDITIONS OF THE SOILS, WATER OR
GROUNDWATER OF, OR IN THE VICINITY OF, THE PROPERTY; THE PRESENCE OR ABSENCE OF
ELECTROMAGNETIC FIELDS, TOXIC MATERIALS OR HAZARDOUS SUBSTANCES ON OR UNDER THE
PROPERTY OR IN THE VICINITY OF SUCH PROPERTY; OR ANY OTHER MATTER BEARING ON THE
USE, VALUE OR CONDITION OF THE PURCHASED ASSETS.  NOTHING IN THIS SECTION
9.03(C) SHALL BE CONSTRUED TO LIMIT, EITHER DIRECTLY OR INDIRECTLY, ANY CLAIM BY
A MEMBER OF THE BUYER INDEMNIFIED GROUP FOR BREACH OF, OR INDEMNIFICATION UNDER,
THIS AGREEMENT.

 

Section 9.04                                                        Waiver of
Remedies; Certain Limitations.  Notwithstanding anything in this Agreement to
the contrary:

 

(a)                                  the Parties hereby agree that, except for
actual 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 Agreement or any other document, agreement, certificate or other matter
delivered pursuant hereto, whether arising out of contract, tort, strict
liability, other Law or otherwise, except as expressly set forth in Section
6.01(b), Section 6.10(f), Section 8.01, Section 8.02, Section 10.05 and this
Article IX.  The Parties agree that irreparable damage would occur in the event
any of the provisions of this Agreement were not to be performed in accordance
with the terms hereof and that the Parties shall be entitled to specific
performance of the terms hereof in addition to any other remedies at Law or in
equity; provided that in no event shall this specific performance provision be
construed to require Buyer to accept debt financing on terms less favorable to
Buyer than those specified in the Debt Commitment Letter or other terms
reasonably satisfactory to Buyer or to require acceptance by Buyer or its
Affiliates of more equity financing than specified in the Equity Commitment
Letter;

 

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(b)                                 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, EXCEPT SUCH DAMAGES THAT
ARE PAYABLE TO A THIRD PARTY WITH RESPECT TO A THIRD PARTY CLAIM FOR WHICH ANY
PERSON IS SEEKING INDEMNIFICATION HEREUNDER;

 

(c)                                  in calculating any amount of Losses
recoverable pursuant to Section 9.02(a) or Section 9.02(b), the amount of such
Losses shall be reduced by (i) any insurance proceeds actually received relating
to such Loss, net of any related deductible and any expenses to obtain such
proceeds, (ii) any recoveries from third parties pursuant to indemnification (or
otherwise) with respect thereto, net of any expenses incurred by the Indemnified
Party in obtaining such third party payment and (iii) the amount of any net Tax
benefit resulting from the incurrence or payment of such Losses.  The Parties
agree to treat any indemnification payment pursuant to this Article IX as an
adjustment to the Final Purchase Price for all Tax purposes unless otherwise
required by applicable Law;

 

(d)                                 no Representative or Affiliate of Seller
shall have any personal 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 no Representative or Affiliate of Buyer shall have
any personal 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;

 

(e)                                  no Person shall be entitled to
indemnification under this Article IX if, the party from whom indemnification is
sought can demonstrate that on the Closing Date, such Person seeking
indemnification had Knowledge of the breach of representation, warranty,
covenant or agreement with respect to which such Person is seeking
indemnification under this Article IX; provided, if such Person seeking
indemnification is informed by the other Party or its Representatives after the
Execution Date of such other Party’s breach that existed on the Execution Date,
the informed Person and its Affiliates shall not be precluded as a result of
this Section 9.04(e) from seeking indemnification under this Article IX for
breach as of the Execution Date.  Buyer shall promptly notify Seller of any
breach of any representation, warranty, covenant or agreement of Seller or Buyer
made hereunder of which Buyer has Knowledge;

 

(f)                                    each Party shall have a duty to use
commercially reasonable efforts to mitigate any Loss suffered by such Party in
connection with this Agreement in accordance with, and to the extent required
under, applicable Law; provided, that the failure of a Party to mitigate any
Losses shall not relieve an indemnifying Party of its indemnification
obligations hereunder with respect to such Losses except to the extent such
indemnifying Party shall have been prejudiced by such failure;

 

(g)                                 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

 

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asset above its value on the Closing Date or which represent the cost of repair
or replacement exceeding the reasonable cost of repair or replacement;

 

(h)                                 except for its contractual rights under this
Agreement, and except for claims for actual fraud, Buyer hereby releases, waives
and discharges forever Seller and the Non-Company Affiliates from all present
and future Claims and from all Losses, present and future, that are or may be
attributable to the matters described in Section 9.02(b), including cost
recovery or contribution actions pursuant to Environmental Law;

 

(i)                                     Seller shall have no liability for any
Losses for any particular matter for which a claim for indemnification has been
asserted to the extent the Losses with respect to such matter are included as a
liability in the computation of Closing Date Working Capital Amount and such
Losses exceed the liability for such matter included in the June 30 Balance
Sheets; and

 

(j)                                     Effective as of the Closing Date,
Seller, on behalf of itself and each Non-Company Affiliate, hereby waives,
releases and discharges the Companies and each of their Affiliates from any and
all Losses of any kind or nature whatsoever (including, without limitation, in
respect of rights of contribution and indemnification), in each case whether
absolute or contingent, liquidated or unliquidated, known or unknown, and
whether arising under any agreement or understanding or otherwise at law or
equity, and Seller shall not seek to recover any amounts in connection therewith
or thereunder from Buyer, the Companies or any of their respective Affiliates;
provided, however, such waiver shall not in any manner restrict, limit,
extinguish or otherwise adversely affect Seller’s rights under this Agreement or
the rights of Seller to be paid the RES Payable to the extent accrued as current
liability in the computation of Closing Date Working Capital Amount.  Without
limiting the generality of the foregoing, Seller acknowledges and agrees that
upon and after the Closing, neither of the Companies shall have any liability or
obligation to indemnify, hold harmless or otherwise pay, reimburse or make
Seller or any Non-Company Affiliate whole for or on account of any
indemnification claim by a member of the Buyer Indemnified Group for any breach
of any representation, warranty, covenant or agreement of Seller contained in
this Agreement and neither Seller nor any Non-Company Affiliate shall have any
right of indemnification, contribution or subrogation against the Companies or
Buyer.  Seller shall indemnify and hold each member of the Buyer Indemnified
Group harmless for any Losses suffered by any member of the Buyer Indemnified
Group as a result of any Non-Company Affiliate making a claim or defense
released by Seller hereunder.

 

Section 9.05                                                        Procedures
for Indemnification.

 

(a)                                  Whenever a Claim shall arise for
indemnification resulting from or in connection with a Claim by a third party (a
“Third-Party Claim”) (other than under Section 9.02(b)(iv)), the Person entitled
to indemnification (the “Indemnified Party”) shall promptly notify the Party
from which indemnification is sought (the “Indemnifying Party”) of such Claim
and, when known, the facts constituting the basis of such Claim; provided, that
failure to notify the Indemnifying Party shall not relieve the Indemnifying
Party of any liability it may have to the Indemnified Party, except to the
extent that the Indemnifying Party has been materially prejudiced by such
failure.  Following receipt of notice of any such Third-Party Claim, and unless
(i) the assumption of such defense by the Indemnifying Party would be
inappropriate due

 

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to a conflict of interest, (ii) such Third-Party Claim (or the facts or
allegations related to such Third-Party Claim) involves criminal allegations or
seeks equitable or injunctive relief, (iii) the Indemnifying Party does not have
the resources to satisfy such Third-Party Claim or (iv) such Third-Party Claim,
if adversely determined, could reasonably be expected to materially adversely
affect the business or reputation of the Indemnified Party or its Affiliates,
the Indemnifying Party shall have the option, at its cost and expense, to assume
the defense of such Third-Party Claim and to retain counsel (not reasonably
objected to by the Indemnified Party) to defend any such claim or legal
proceeding, and the Indemnifying Party shall not be liable to the Indemnified
Party for any fees of other counsel or any other expenses (except as expressly
provided to the contrary herein) with respect to the defense of such Claim,
other than reasonable fees and expenses of counsel employed by the Indemnified
Party for any period during which the Indemnifying Party has not assumed the
defense thereof.  The Indemnified Party shall have the option of joining the
defense of such Claim (which shall be at the sole cost and expense of the
Indemnified Party) with counsel not reasonably objected to by the Indemnifying
Party and counsel for each party shall, to the extent consistent with such
counsel’s professional responsibilities, cooperate with the other party and any
counsel designated by that party.  In effecting the settlement or compromise of,
or consenting to the entry of any judgment with respect to, any such Third-Party
Claim with respect to which the Indemnifying Party has assumed the defense in
accordance with this Section 9.05(a), the Indemnifying Party, or the Indemnified
Party, as the case may be, shall act in good faith, shall consult with the other
party and shall enter into only such settlement or compromise or consent to the
entry of any judgment as the other party shall consent, such consent not to be
unreasonably withheld, conditioned or delayed.  An Indemnifying Party shall not
be liable for any settlement, compromise or judgment not made in accordance with
the preceding sentence.

 

(b)                                 Buyer shall promptly and diligently defend,
prosecute or settle the matters described in Section 9.02(b)(iv) (including the
defense of any members of the Seller Indemnified Group that are defendants or
respondents with respect to such matters).  If Buyer’s counsel shall have
advised Buyer in writing, in which case Buyer shall deliver a copy to the
Indemnified Party, or if the Indemnified Party reasonably believes, that there
is a conflict of interest that could make it inappropriate under applicable
standards of professional conduct to have common counsel, the Indemnified Party
may retain its own counsel with respect to such defense and Buyer shall pay the
reasonable attorneys’ fees and expenses of counsel for such Indemnified Party. 
Buyer shall obtain the prior written consent of the Indemnified Party, which
consent shall not be unreasonably withheld, delayed or conditioned, before
entering into or making (or allowing the Companies to enter into or make) any
settlement or compromise of the matters described in Section 9.02(b)(iv) if (i)
such settlement or compromise does not include a full release of the Indemnified
Party, (ii) such settlement or compromise includes any non-monetary remedy
binding on the Indemnified Party or (iii) the Indemnified Party reasonably
believes that Buyer will not have the ability to satisfy fully its obligations
pursuant to Section 9.02(b)(iv) at the time of such settlement or compromise.

 

(c)                                  After the Closing Date, Seller and Buyer
shall grant each other (or their respective designees), and Buyer shall cause
the Companies to grant to Seller (or its designees), access at all reasonable
times to all of the information, books and records relating to the 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

 

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provisions of, or to investigate or defend any Third-Party Claims; provided that
no such party shall be entitled to make available any information, books or
records, the disclosure of which would cause a waiver of any applicable
privilege or breach of an obligation of confidentiality to a third-party and
either party may make access to such information, books and records conditioned
upon execution and delivery of a confidentiality agreement reasonably
satisfactory to the party requesting disclosure.  Further, after the Closing,
Buyer shall cause the Companies to grant to Seller (or its designees) the access
and right to take extracts and make copies described in the preceding sentence
for such other purposes as may be reasonably requested by Seller.

 

ARTICLE X
MISCELLANEOUS

 

Section 10.01                                                  Notices.  All
notices and other communications hereunder shall be in writing and shall be
deemed given if delivered personally to, or mailed by registered or certified
mail (return receipt requested) if and when received by, or sent via facsimile
if and when received by, the Parties at the following addresses (or at such
other address for a Party as shall be specified by like notice):

 

If to Seller, to:

 

Orion Power Holdings, Inc.

1000 Main Street, 12th Floor

Houston, Texas  77002

Attention:     General Counsel

Facsimile:     713-537-7465

 

If to Buyer, to:

 

c/o Madison Dearborn Capital Partners IV, L.P.

Three First National Plaza

70 W. Madison

Suite 3800

Chicago, IL 60602

Attention:     Thomas S. Souleles and Patrick C. Eilers

Facsimile:     312-895-1001

 

And

 

US Power Generating Co., LLC

400 Madison Avenue

New York, NY 10017

Attention:     Jacob Worenklein

Facsimile:    212-223-8295

 

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And

 

Kirkland & Ellis LLP

655 15th Street, N.W.

Washington, D.C. 20005

Attention:     Mitchell F. Hertz

Facsimile:    202-879-5200

 

Section 10.02                                                  Headings.  The
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement.

 

Section 10.03                                                  Assignment.  This
Agreement (including the documents and instruments referred to herein) shall not
be assigned, except that Buyer may (i) assign its rights and obligations under
this Agreement in whole or in part to any one or more direct or indirect
Affiliates of Buyer, (ii) assign its rights in whole or in part to its financing
sources as collateral security, but no such assignment pursuant to (i) or (ii)
shall relieve Buyer of its obligations hereunder, and (iii) assign all of its
rights and obligations pursuant to Section 6.05(d).  Without limiting the
generality of the foregoing, Buyer may, effective as of the Closing, but without
relieving Buyer of its obligations hereunder, designate the Companies to assume,
perform and/or pay any of its liabilities and obligations required to be
assumed, paid or performed by Buyer hereunder at or after the Closing and any
performance or payment by either of the Companies shall be deemed to satisfy any
performance or payment obligations of Buyer hereunder.  This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns.

 

Section 10.04                                                  Governing Law. 
THIS AGREEMENT SHALL BE GOVERNED IN ALL RESPECTS, INCLUDING VALIDITY,
INTERPRETATION AND EFFECT, BY THE LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING
EFFECT TO ANY CONFLICT OF LAWS PRINCIPLES OTHER THAN SECTION 5-1401 OF THE
GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK).

 

Section 10.05                                                  Arbitration.

 

(a)                                  EXCEPT AS OTHERWISE EXPRESSLY PROVIDED
HEREIN, ANY DISPUTE OR NEED OF INTERPRETATION ARISING OUT OF THIS AGREEMENT
SHALL BE SETTLED BY BINDING ARBITRATION IN ACCORDANCE WITH THE THEN CURRENT
CENTER FOR PUBLIC RESOURCES RULES FOR NON-ADMINISTERED ARBITRATION IN EFFECT ON
THE DATE OF THIS AGREEMENT (“CPR RULES”) BY THREE ARBITRATORS WHO HAVE NOT
PREVIOUSLY BEEN EMPLOYED BY EITHER PARTY, AND WHO DO NOT HAVE A DIRECT OR
INDIRECT INTEREST IN EITHER PARTY OR THE SUBJECT MATTER OF THE ARBITRATION. 
EACH PARTY SHALL SELECT ONE ARBITRATOR AND THE CENTER FOR PUBLIC RESOURCES SHALL
SELECT ONE ARBITRATOR, ALL IN ACCORDANCE WITH THE “SCREENED” APPOINTMENT
PROCEDURES SET FORTH IN THE CPR RULES.  UNLESS BOTH PARTIES AGREE OTHERWISE, ALL
ARBITRATORS SHALL BE SELECTED FROM THE CPR NATIONAL PANEL OF DISTINGUISHED
NEUTRALS.  EITHER PARTY MAY INITIATE ARBITRATION BY WRITTEN DEMAND TO THE OTHER
PARTY AND THE ARBITRATION SHALL BE CONDUCTED ACCORDING TO THE FOLLOWING:  (i)
EACH PARTY SHALL DIVIDE EQUALLY THE COST OF THE ARBITRATORS AND THE HEARING AND
EACH PARTY SHALL BE RESPONSIBLE FOR ITS OWN EXPENSES

 

55

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AND THOSE OF ITS COUNSEL AND REPRESENTATIVES; (ii) EVIDENCE CONCERNING THE
FINANCIAL POSITION OF THE PARTIES, ANY OFFER MADE OR THE DETAILS OF ANY
NEGOTIATION PRIOR TO ARBITRATION AND THE COST TO THE PARTIES OF THEIR
REPRESENTATIVES AND COUNSEL SHALL NOT BE PERMISSIBLE; (iii) THE ARBITRATION
SHALL BE GOVERNED BY THE SUBSTANTIVE LAWS OF NEW YORK, WITHOUT REGARD TO
CONFLICTS OF LAW RULES, AND BY THE FEDERAL ARBITRATION ACT, 9 U.S.C. 1-16 TO THE
EXCLUSION OF STATE LAWS INCONSISTENT THEREWITH, AND JUDGMENT UPON THE AWARD
RENDERED BY THE ARBITRATORS MAY BE ENTERED BY ANY COURT HAVING JURISDICTION
THEREOF; (iv) UNLESS THE PARTIES OTHERWISE AGREE, THE ARBITRATION HEARING SHALL
TAKE PLACE IN NEW YORK, NEW YORK, OR AT SOME OTHER MUTUALLY AGREEABLE LOCATION
AND THE HEARING SHALL TAKE PLACE WITHIN FOUR (4) MONTHS FROM THE DATE OF DEMAND
FOR ARBITRATION; (v) THE PARTIES SHALL BE PERMITTED TO ENGAGE IN DOCUMENT AND
DEPOSITION DISCOVERY, THE EXTENT OF WHICH SHALL BE DETERMINED BY THE
ARBITRATORS; (vi) THE PARTIES EXPRESSLY AGREE THAT THE ARBITRATORS SHALL REACH A
DECISION IN COMPLIANCE WITH APPLICABLE LAW AND THIS AGREEMENT SHALL CONFER NO
POWER OR AUTHORITY UPON THE ARBITRATORS TO RENDER ANY JUDGMENT OR AWARD THAT IS
ERRONEOUS IN ITS APPLICATION OF SUBSTANTIVE LAW AND EXPRESSLY AGREE THAT NO SUCH
ERRONEOUS JUDGMENT OR AWARD SHALL BE ELIGIBLE FOR CONFIRMATION; (vii) THE
ARBITRATORS SHALL HAVE THE AUTHORITY TO DISPOSE OF A MATTER IN SUMMARY FASHION,
AND TO GRANT INJUNCTIVE OR DECLARATORY RELIEF; (viii) THE ARBITRATORS SHALL SET
FORTH IN WRITING AT THE TIME THEY RENDER THEIR AWARD, THE DETAILED FINDINGS OF
FACT AND CONCLUSIONS OF LAW UPON WHICH THEIR AWARD IS BASED; (ix) UNLESS THE
PARTIES OTHERWISE AGREE, THE ARBITRATION HEARINGS SHALL BE CONTINUOUS SUBJECT TO
WEEKENDS, HOLIDAYS, OR OTHER DAYS TO BE MUTUALLY AGREED AND THE TOTAL DAYS OF
HEARING SHALL NOT EXCEED TEN (10) HEARING DAYS PER PARTY; (x) THE ARBITRATORS
ARE NOT EMPOWERED TO AWARD DAMAGES IN EXCESS OF COMPENSATORY DAMAGES, AND EACH
PARTY EXPRESSLY WAIVES AND FOREGOES ANY RIGHT TO PUNITIVE, EXEMPLARY OR SIMILAR
DAMAGES UNLESS A STATUTE REQUIRES THAT COMPENSATORY DAMAGES BE INCREASED IN A
SPECIFIED MANNER; (xi) THE ARBITRATORS SHALL COMPILE A RECORD OF ALL PROCEEDINGS
THAT INCLUDES ALL HEARINGS AND ALL EVIDENCE (INCLUDING, WITHOUT LIMITATION,
EXHIBITS, DEPOSITION TRANSCRIPTS, AND AFFIDAVITS ADMITTED INTO EVIDENCE) IN THE
ARBITRATION PROCEEDING FROM WHICH THE APPEAL IS TAKEN; AND (xii) THE ARBITRATORS
SHALL RENDER THEIR AWARD NO LATER THAN THIRTY (30) DAYS AFTER THE CONCLUSION OF
THE HEARINGS. THE SUBMISSION OF POST-HEARING LEGAL BRIEFS SHALL BE SUBJECT TO
THE DISCRETION OF THE ARBITRATORS, BUT IN NO EVENT SHALL THE BRIEFS DELAY THE
ARBITRATORS’ DECISION IN THIS MATTER.  AN APPEAL MAY BE TAKEN UNDER THE CPR
ARBITRATION APPEAL PROCEDURE FROM ANY FINAL AWARD OF AN ARBITRAL PANEL IN ANY
ARBITRATION ARISING OUT OF OR RELATED TO THIS AGREEMENT THAT IS CONDUCTED IN
ACCORDANCE WITH THE

 

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REQUIREMENTS OF SUCH APPEAL PROCEDURE.  THE STANDARD OF REVIEW TO BE APPLIED TO
THE ARBITRATORS’ FINDING OF FACT AND CONCLUSIONS OF LAW SHALL BE THE SAME AS
THAT APPLIED BY AN APPELLATE COURT REVIEWING A DECISION OF A TRIAL COURT SITTING
WITHOUT A JURY.  UNLESS OTHERWISE AGREED BY THE PARTIES AND THE APPEAL TRIBUNAL,
THE APPEAL SHALL BE CONDUCTED AT THE PLACE OF THE ORIGINAL ARBITRATION.  EXCEPT
AS SET FORTH IN ARTICLE II AND EXCEPT FOR CLAIMS FOR INJUNCTIVE OR OTHER
EQUITABLE RELIEF, THE PROCEDURES SPECIFIED IN THIS SECTION 10.05 SHALL BE THE
SOLE AND EXCLUSIVE PROCEDURES FOR THE RESOLUTION OF DISPUTES BETWEEN THE PARTIES
ARISING OUT OF OR RELATING TO THIS AGREEMENT; PROVIDED, THAT A PARTY MAY FILE A
COMPLAINT TO SEEK A PRELIMINARY INJUNCTION OR OTHER PROVISIONAL JUDICIAL RELIEF,
IF IN ITS SOLE JUDGMENT SUCH ACTION IS NECESSARY TO PRESERVE THE STATUS QUO
PENDING APPOINTMENT OF AN ARBITRATOR.  DESPITE SUCH ACTION, THE PARTIES WILL
CONTINUE TO PARTICIPATE IN GOOD FAITH IN THE PROCEDURES SPECIFIED IN THIS
SECTION 10.05.  THE PARTIES AGREE THIS CONSTITUTES A CONSPICUOUS LEGEND.

 

(b)                                 WITH RESPECT TO ANY ACTION PERMITTED BY THIS
SECTION 10.05, THE PARTIES HEREBY IRREVOCABLY SUBMIT TO THE NON-EXCLUSIVE
JURISDICTION OF ANY STATE OR FEDERAL COURT IN NEW YORK, NEW YORK.

 

Section 10.06                                                  Counterparts. 
This Agreement may be executed in two or more counterparts, and by facsimile
and/or electronic transmission, each of which shall be deemed to be an original,
but all of which shall constitute one and the same agreement.

 

Section 10.07                                                  Amendments;
Extensions.

 

(a)                                  This Agreement may not be amended except by
an instrument in writing signed on behalf of each of the Parties.

 

(b)                                 At any time a Party may (i) extend the time
for the performance of any of the obligations or other acts of the other Party,
(ii) waive any inaccuracies in the representations and warranties of the other
Party contained herein or in any document delivered pursuant hereto and (iii)
waive compliance with any of the covenants or agreements of the other Party
contained herein.  Any agreement on the part of a Party to any such extension or
waiver shall be valid only if set forth in a written instrument signed on behalf
of such Party.  The failure or delay of any Party to assert any of its rights
under this Agreement or otherwise shall not constitute a waiver of those rights.

 

Section 10.08                                                  Entire
Agreement.  This Agreement, the Confidentiality Agreement and the other
agreements contemplated hereby constitute the entire agreement between the
Parties with respect to the subject matter hereof and supersede all prior
agreements, understandings and negotiations, both written and oral, between the
Parties with respect to the subject matter of this Agreement.  No
representation, inducement, promise, understanding, condition or warranty not
set forth herein has been made or relied upon by any Party.  Neither this
Agreement nor any provision hereof is intended to confer upon any person other
than the

 

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parties hereto any rights or remedies hereunder except as expressly provided
otherwise in Section 6.01(b), Section 6.05, Section 6.10(d), Section 6.18 and
Article IX.

 

Section 10.09                                                  Severability.  If
any term or other provision of this Agreement is invalid, illegal, or incapable
of being enforced by any rule of applicable Law, or public policy (including any
term or provision of Section 10.05), then such term or provision shall be
severed from the remaining terms and provisions of this Agreement (including the
remaining terms and provisions of Section 10.05), and such remaining terms and
provisions shall nevertheless remain in full force and effect.

 

Section 10.10                                                  Guarantor
Guaranty.

 

(a)                                  Guarantor is a party to this Agreement
solely for the purposes of this Section 10.10.  In consideration of the
transactions contemplated by this Agreement, the receipt and sufficiency of
which are hereby acknowledged, Guarantor hereby unconditionally and irrevocably
(i) guarantees payment and performance by Seller of the obligations of Seller
under this Agreement, subject to any defenses of Seller, but without any
obligation by any Buyer Indemnified Party to bring a claim against Seller before
or at the same time as proceeding against Guarantor and (ii) indemnifies each
Buyer Indemnified Party for any Loss arising from any breach of any
representation, warranty, covenant or agreement of Guarantor made hereunder. 
Guarantor hereby waives any and all rights of indemnification, contribution and
subrogation against Buyer and the Companies with respect to any and all Claims. 
In no event shall the aggregate liability of Guarantor arising under or related
to this Agreement and the transactions contemplated hereby, whether based in
contract, tort, strict liability, other Law or otherwise, exceed 100% of the
Final Purchase Price.  Capitalized terms used in this Section 10.10 shall have
the meanings given to them in Appendix I to this Agreement.  The provisions of
Section 9.04(b) and the remaining Sections of this Article X are incorporated in
this Section 10.10, mutatis mutandis, except that notices and other
communications hereunder to Guarantor shall be delivered to:

 

Reliant Energy, Inc.

1000 Main Street, 12th Floor

Houston, Texas 77002

Attention:  General Counsel

Facsimile:  (713) 537-7465

 

(b)                                 As a material inducement to Buyer to enter
into this Agreement and consummate the transactions contemplated hereby,
Guarantor hereby represents and warrants to Buyer that (i) Guarantor is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware has full corporate power and authority to execute,
deliver and perform this Agreement, (ii) the execution, delivery and performance
by Guarantor of this Agreement have been duly authorized by all requisite
corporate action on the part of Guarantor, (iii) this Agreement has been duly
executed and delivered by Guarantor and constitutes the valid and binding
obligation of Guarantor, enforceable against Guarantor in accordance with its
terms, except as enforceability may be limited by bankruptcy, insolvency,
reorganization, arrangement, moratorium or other similar Laws relating to
creditors’ rights generally, and general equitable principles, (iv) the
execution, delivery and performance by Guarantor of this Agreement and the

 

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consummation of the transactions contemplated hereby does not and will not
(A) violate the Charter Documents of Guarantor; (B) violate any Law applicable
to Guarantor, or any order of any Governmental Authority having jurisdiction
over Guarantor, or (C) violate or conflict with, or constitute (with due notice
or lapse of time or both) a default under, any Contract by which Guarantor or
any of its assets is bound, and (v) no registration or filing with, or consent
or approval of or other action by, any Governmental Authority or any other
Person is or will be necessary for the valid execution, delivery and performance
by Guarantor of its obligations under this Agreement.

 

59

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IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed
by their respective authorized officers as of the day and year first above
written.

 

 

ORION POWER HOLDINGS, INC.

 

 

 

 

 

By:

 

 

 

 

Name:

 

 

 

 

 

 

Title:

 

 

 

 

 

 

 

 

 

RELIANT ENERGY, INC.

 

 

 

 

 

By:

 

 

 

 

Name:

 

 

 

 

 

 

Title:

 

 

 

 

 

 

 

 

 

ASTORIA GENERATING COMPANY
ACQUISITIONS, L.L.C.

 

 

 

 

 

By:

 

 

 

 

Name:

 

 

 

 

 

 

Title:

 

 

 

 

 

SIGNATURE PAGE
PURCHASE AND SALE AGREEMENT

 

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APPENDIX I

 

SECTION 1 – 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 “includes without limitation” or “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)                               Seller may, at its option, include in the
Schedules items that are not material, 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 or would cause a Material Adverse Effect, to
establish any standard of materiality or to define further the meaning of such
terms for purposes of this Agreement.  Information disclosed in the Schedules
shall constitute a disclosure for all purposes of the Section for which such
disclosure was made and each other section for which such disclosure is readily
apparent.  Seller may, at any time on or prior to the fifth Business Day prior
to Closing, amend the Seller’s Disclosure Schedules (to the extent qualifying
Article III and Article IV of this Agreement) after the Execution Date with
respect to matters of which Seller had no Knowledge at the Execution Date, and
the representations and warranties shall be deemed to incorporate such
amendments for purposes of determining whether a breach of such representations
or warranties existed at the Closing Date; provided that no such update to the
Seller’s Disclosure Schedules shall be taken into account in determining
satisfaction of the conditions specified in Section 7.02(b) and no such update
shall be taken into account in determining whether a breach of such
representations and warranties existed as of the Execution Date.  For the
avoidance of doubt, the reference to Seller’s Disclosure Schedule in the
prefatory paragraph to each of Article III and Article IV shall not, for
purposes of the representations and warranties made in Article III and Article
IV as of the Execution Date, include updates to the Seller’s Disclosure
Schedules made after the Execution Date.

 

(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

 

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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.

 

(f)                                    Each provision of this Agreement is to be
given independent significance.  No application of the adjustments to Base
Purchase Price pursuant to the provisions of Article II of this Agreement shall
preclude, restrict or otherwise adversely affect any of the parties’ respective
rights to indemnification under this Agreement, including as may arise from a
claim for breach of express representation or warranty under this Agreement.

 

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SECTION 2 – DEFINITIONS

 

“1933 Act” has the meaning set forth in Section 5.07.

 

“Agreement” has the meaning set forth in the introductory paragraph to this
Agreement.

 

“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 to
a corporation, partnership, trust or limited liability company, shall include
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 or of the beneficial interest in a trust.

 

“Affiliate Employee” has the meaning set forth in Section 6.14(c).

 

“Affiliated Group” means any affiliated group within the meaning of Code
§1504(a) or any similar group defined under a similar provision of state, local,
or foreign law.

 

“Assigned Contracts” has the meaning set forth in Section 2.04(c).

 

“Assignment and Assumption Agreement” has the meaning set forth in Section
2.04(c).

 

“Astoria Generating Facility” means the natural gas/fuel oil-fired electric
generating facility located at 18-01 20th Ave Gate (Q135), Astoria, New York
11105.

 

“Astoria LP” has the meaning set forth in the recitals to this Agreement.

 

“Audited Financial Statements” has the meaning set forth in Section 6.22(b).

 

“Base Purchase Price” has the meaning set forth in Section 2.02(a).

 

“Base Purchase Price Allocation” has the meaning set forth in Section 2.07.

 

“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
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 equity plan (whether qualified or
nonqualified), (d) each bonus, deferred compensation or incentive compensation
plan, and any other material employee benefit plan, program, agreement  or
arrangement of any kind (including, without limitation, any employment,
consulting, retention, change in control or severance plan, policy, arrangement
or agreement); provided, that such term shall not include (1) routine employment
policies and procedures, including wage, vacation, holiday, and sick or other
leave policies, (2) workers compensation insurance, and (3) directors and
officers liability insurance.

 

“Benefits Committee” has the meaning set forth in Section 6.14(k).

 

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“Break-Up Fee Payment” has the meaning set forth in Section 8.02.

 

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

 

“Buyer” has the meaning set forth in the introductory paragraph to this
Agreement.

 

“Buyer Governmental Approvals” has the meaning set forth in Section 5.03(c).

 

“Buyer Indemnified Group” means Buyer, the Companies and Buyer’s Affiliates and
their respective officers, directors, employees and agents.

 

“Buyer Savings Plan” has the meaning set forth in Section 6.14(g).

 

“Capital Expenditures” means expenditures for capital additions to or
replacements of property, plant and equipment included in the Purchased Assets
and other expenditures or repairs on property, plant and equipment included in
the Purchased Assets that would be capitalized by the Companies in accordance
with their normal capitalization policies.

 

“Change of Law” means the adoption, implementation, promulgation, or repeal of
any Law of or by any Governmental Authority which occurs subsequent to the
Execution Date.

 

“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, and/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, suit, charge, complaint, grievance, action,
investigation, legal proceeding (whether at law or in equity) or arbitration.

 

“Closing” has the meaning set forth in Section 2.03.

 

“Closing Date” means the date on which Closing occurs.

 

“Closing Date Working Capital Amount” means the current assets of the Companies
minus the current liabilities of the Companies determined as of 11:59 p.m. on
the Closing Date as determined in accordance with GAAP using the same
methodology as was used in preparing the June 30 Balance Sheets; provided that
(i) current assets shall not include and current liabilities shall not be
reduced by (A) any Income Tax assets and (B) any asset related to the sale,
lease or other disposition of long-term asset of the Companies, (C) any cash
deposited or escrowed with a third-party that supports obligations of the
Companies, and (D) any spare parts or equipment in inventory that are not
expected to be used within twelve (12) months (which spare parts or equipment,
the parties agree, is reflected as of the Execution Date, on the attached
Schedule I-3; (ii) current liabilities shall not include liabilities related to
Income Taxes, and (iii) the Closing Date Working Capital Amount shall be
determined without regard to Intercompany Receivables

 

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and Intercompany Payables (other than the RES Payable, which shall be included
as a current liability).

 

“Code” means the Internal Revenue Code of 1986, as amended.

 

“Collective Bargaining Contract” means that certain Collective Bargaining
Contract dated June 25, 2000, and extended by Memorandum of Understanding
effective June 25, 2004, between OPOS and the Utility Workers Union of America,
AFL-CIO and its Local Union No. 1-2, as the same has been amended from time to
time.

 

“Commitment Letters” has the meaning set forth in Section 5.08.

 

“Commonly Controlled Entity” has the meaning set forth in Section 4.10(b).

 

“Companies” has the meaning set forth in Section 2.01.

 

“Company Liens” has the meaning set forth in Section 6.08.

 

“Company Consents” has the meaning set forth in Section 4.02(b).

 

“Company Interests” has the meaning set forth in Section 2.01.

 

“Company Participants” means the Continuing Employees who have an account
balance under a Seller Savings Plan.

 

“Company Plan” means each Benefit Plan that is sponsored, maintained or
contributed to as of the date of this Agreement by Seller or any Affiliate of
Seller and which Benefit Plan provides benefits solely with respect to current
or former directors, officers or employees of either or both of the Companies.

 

“ConEd Agreement” means that certain Generating Plant and Gas Turbine Asset
Purchase Agreement for Astoria Generating Plants, Gowanus Gas Turbines, and
Narrows Gas Turbines by and between Consolidated Edison Company of New York,
Inc.  and Astoria Generating Company, L.P., dated as of March 2, 1999, as the
same has been and may be amended, modified, supplemented or waived from time to
time.

 

“Confidential Information” has the meaning set forth in Section 6.13(b).

 

“Confidentiality Agreement” has the meaning set forth in Section 6.13(a).

 

“Continuing Employee” means (a) each individual who is employed by the Companies
as of the Closing (including each such individual who is on a vacation, sick,
military, disability, short-term disability or other approved leave of absence)
and (b) each Affiliate Employee who accepts an offer of employment from Buyer or
an Affiliate of Buyer as provided in Section 6.14(c) and reports to work with
Buyer.

 

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

 

“CPR Rules” has the meaning set forth in Section 10.05(a).

 

“Credit Rating” means, with respect to any Person, each rating given to such
Person’s long-term, unsecured, unsubordinated debt obligations not supported by
third party credit enhancement by Standard & Poor’s or Moody’s, as applicable.

 

“Debt Commitment Letter” has the meaning set forth in Section 5.08.

 

“Definitive Financing Documentation” has the meaning set forth in Section 6.23.

 

“Environmental Law” means any federal, state, local or foreign law (including
common law), statute, ordinance, rule, regulation, code, license, permit,
authorization, approval, consent, order, judgment, decree, injunction, legally
enforceable requirement of or agreement with any Governmental Authority,
relating to (a) the protection, preservation or restoration of the environment
(including air, water vapor, surface water, groundwater, drinking water supply,
surface land, subsurface land, plant and animal life or any other natural
resource), or (b) the exposure to, or the use, storage, recycling, treatment,
generation, transportation, processing, handling, labeling, production, release
or disposal of Hazardous Substances.

 

“Equity Commitment Letter” has the meaning set forth in Section 5.08.

 

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

 

“Escrow Agent” has the meaning set forth in Section 2.08.

 

“Escrow Agreement” has the meaning set forth in Section 2.08.

 

“Escrow Amount” has the meaning set forth in Section 2.08.

 

“Estimated Purchase Price” has the meaning set forth in Section 2.08.

 

“Excess Amount” has the meaning set forth in Section 2.08.

 

“Excess Liability Policies” means the following insurance policies: (a) Aegis —
primary $35MM limit, (b) Energy Insurance Mutual (EIM) second layer follow-form
AEGIS - $65MM limit, and (c) OIL Casualty INC (OCIL) third layer follow-form
AEGIS $50MM limit.

 

“Excluded Assets” has the meaning set forth in Section 6.06.

 

“Excluded Sections” means Sections 3.01, 3.02, 3.04, 4.01, 4.03, and 4.17.

 

“Execution Date” has the meaning set forth in the introductory paragraph to this
Agreement.

 

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“Facility” or “Facilities” means one or more of the Astoria Generating Facility,
the Gowanus Gas Turbine Facility and the Narrows Gas Turbine Facility.

 

“FERC” means the Federal Energy Regulatory Commission.

 

“Final Purchase Price” has the meaning set forth in Section 2.06(c).

 

“Final Purchase Price Allocation” has the meaning set forth in Section 2.07.

 

“GAAP” means generally accepted accounting principles in the United States of
America.

 

“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, quasi-governmental or non-governmental
body administering, regulating or having general oversight over gas,
electricity, power or other markets.

 

“Gowanus Gas Turbine Facility” means the barge mounted oil fired electric
generating facility located at 29th Street and 2nd Avenue, Brooklyn, New York
11232.

 

“Guarantor” has the meaning set forth in the introductory paragraph to this
Agreement.

 

“Gunderboom Contract” means that certain Cartridge Filter Technology
Development, License and Assignment Agreement dated April 21, 2003 by and among
Guarantor, Seller, Astoria LP, and Gunderboom, Inc.

 

“Hazardous Substance” means any substance presently listed, defined, designated
or classified as a pollutant, contaminant, hazardous substance, toxic substance,
hazardous waste, solid waste, or special waste, or that is otherwise regulated,
under any Environmental Law and shall include petroleum.

 

“Hedging Agreement” has the meaning set forth in Section 6.21.

 

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

 

“Improvements” means all buildings and all components of all buildings,
structures and other improvements included within the Real Property.

 

“Included Covenants” means the covenants and agreements of Seller in Sections
6.01, 6.02 (other than Section 6.02(a)(iii)), 6.09, 6.12, 6.15, and 6.20.

 

“Income Taxes” means all federal, state, local, and foreign income Taxes or
other Taxes based on or measured by income, net worth or receipts including,
without limitation, any franchise Taxes measured by or based upon income or
receipts.

 

“Indebtedness” means, for the Companies, (i) any indebtedness of the Companies
for borrowed money or issued in substitution or exchange for indebtedness for
borrowed money,

 

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(ii) any indebtedness of the Companies evidenced by any note, bond, debenture or
other debt security, (iii) other than such obligations incurred in the ordinary
course of business, any indebtedness of the Companies for the deferred purchase
price of property or services with respect to which the Companies are liable,
contingently or otherwise, as obligor or otherwise (including any deferred
purchase price, however structured, for the acquisition of any assets, business
or other Person), (iv) any obligations under leases which are or, in accordance
with GAAP should be capitalized with respect to which the Companies are liable,
contingently or otherwise, as obligor, guarantor or otherwise, or with respect
to which obligations the Company assures a creditor against loss, (v) all
obligations, contingent or otherwise, of the Companies under acceptance, letter
of credit or similar facilities or any other commitment by which the Companies
assure a creditor against loss, (vi) all guarantees by the Companies of
obligations and liabilities described in clauses (i)-(v) foregoing of another
Person (including Non-Company Affiliates) (assuming for such purposes that the
obligations and liabilities of the Companies referred to in clauses (i)-(v) are
instead liabilities and obligations of such third Person) together with, for
clauses (i)-(v) of this definition, all accrued but unpaid interest, redemption
premium, pre-payment penalty or other payment obligation due and owing with
respect to any of the foregoing (determined in each case, as if paid on the
Closing Date, or as soon thereafter as permitted in accordance with the terms
governing such indebtedness).

 

“Indemnified Party” has the meaning set forth in Section 9.05(a).

 

“Indemnifying Party” has the meaning set forth in Section 9.05(a).

 

“Independent Accountant” has the meaning set forth in Section 6.10(h).

 

“Insurance Policies” has the meaning set forth in Section 4.16.

 

“Intellectual Property” has the meaning set forth in Section 4.13.

 

“Intercompany Payables” means the payables of the Companies to the Seller and
the Non-Company Affiliates.

 

“Intercompany Receivables” means the receivables of the Companies from the
Seller and the Non-Company Affiliates.

 

“Interest Rate” means the prime per annum rate of interest as published by The
Wall Street Journal.

 

“Interim Period” means the period of time from the Execution Date until the
Closing Date or termination of this Agreement.

 

“Investment Grade” means an entity having long term, unsecured, unsubordinated
debt not supported by third party credit enhancement that is rated “BBB-” or
higher by Standard & Poor’s, and “Baa3” or higher by Moody’s, and that in either
case is not on negative credit watch.

 

“Iroquois” has the meaning set forth in Section 6.07(b).

 

“Iroquois Contract” has the meaning set forth in Section 6.07(b).

 

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“IRS” means the U.S. Internal Revenue Service.

 

“June 30 Balance Sheets” has the meaning set forth in Section 4.04(c).

 

“Knowledge” means, in the case of Seller, the actual knowledge (as opposed to
any constructive or imputed knowledge) after reasonable inquiry of and by the
individuals listed on Schedule I-1, and in the case of Buyer, the actual
knowledge (as opposed to any constructive or imputed knowledge) of the
individuals listed on Schedule I-2, after reasonable inquiry.

 

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

 

“Leases” means all leases, subleases, licenses, concessions and other agreements
(written or oral) pursuant to which the Companies, or either of them, holds any
Leased Real Property, including the right to all security deposits and other
amounts and instruments deposited by or on behalf of the Companies, or either of
them.

 

“Leased Real Property” means all leasehold or subleasehold estates and other
rights to use or occupy any land, buildings, structures, improvements, fixtures
or other interest in real property held by the Companies, or any one or more of
them.

 

“Lien” means any mortgage, pledge, assessment, security interest, lien or other
similar encumbrance.

 

“Losses” means any and all judgments, losses, liabilities, amounts paid in
settlement, damages, fines, penalties, deficiencies, losses and expenses
(including interest, court costs, reasonable fees of attorneys, accountants and
other experts or other reasonable expenses of litigation or other proceedings or
of any claim, default or assessment).

 

“Marketing Period Expiration Date” means the date that is the later of (i) the
20th day after (x) satisfaction or waiver in writing by Buyer of all of Buyer’s
conditions to Closing specified in Section 7.01 and Section 7.02 and (y) written
demand by Seller of performance by Buyer of its obligations at the Closing and
(ii) January 31, 2006.

 

“Material Adverse Effect” means any change, event, fact, circumstance or effect
that is or would reasonably be expected to be materially adverse to the
business, assets or financial condition of the Companies, taken as a whole, in
each case, except for any such change, event or effect resulting from or arising
out of (a) changes in economic conditions generally or the industry in which the
Companies operate, (b) changes in international, national, regional, state or
local wholesale or retail markets for electric power or fuel or related products
including those due to actions by competitors, (c) changes in general regulatory
or political conditions (other than items addressed in clauses (d) and (h)), (d)
Changes of Laws governing national, regional, state or local electric
transmission or distribution systems, (e) strikes, work stoppages or other labor
disturbances, (f) increases in costs of commodities or supplies, including fuel,
(g) effects of weather or meteorological events, (h) any Change of Laws (other
than Changes of Laws governing electric transmission or distribution systems),
and (i) any actions to be taken pursuant to or in accordance with this
Agreement, except in the case of clauses (d) and (h) for any such change that
disproportionately impacts the operation of the Companies versus similar power

 

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plants located in New York City; provided that none of clauses (a) through (i)
foregoing shall be deemed to apply as a result of acts of war or terrorist acts.

 

“Material Contracts” has the meaning set forth in Section 4.08(a).

 

“Moody’s” means Moody’s Investors Services, Inc., and its successors.

 

“Narrows Gas Turbine Facility” means the barge-mounted, natural gas/oil-fired
electric generating facility located at 53rd Street and 1st Avenue, Brooklyn,
New York 11232.

 

“Non-Company Affiliates” means Affiliates of Seller other than the Companies.

 

“Notice of Disagreement” has the meaning set forth in Section 2.08.

 

“Objection Notice” has the meaning set forth in Section 6.24.

 

“Off-Site Location” shall mean any location other than the Facilities, but shall
not include any location to which Hazardous Substances disposed of at any of the
Facilities have migrated.

 

“OPNY GP” has the meaning set forth in the recitals to this Agreement.

 

“OPNY LLC” has the meaning set forth in the recitals to this Agreement.

 

“OPNY LP” has the meaning set forth in the recitals to this Agreement.

 

“OPOS” has the meaning set forth in the recitals to this Agreement.

 

“OPOS Parent” has the meaning set forth in the recitals to this Agreement.

 

“Orion Power Capital” has the meaning set forth in the recitals to this
Agreement.

 

“Owned Real Property” means all land, together with all buildings, structures,
improvements and fixtures located thereon, and all easements and other rights
and interests appurtenant thereto owned by the Companies, or either of them.

 

“Parties” means each of Buyer and Seller.

 

“PBGC” has the meaning set forth in Section 4.10(b).

 

“Permits” means all licenses, permits, authorizations, approvals, registrations,
concessions, franchises and similar consents granted or issued by any
Governmental Authority.

 

“Permitted Encumbrances” means (a) with respect to the Owned Real Property
statutory liens for current taxes or other governmental charges with respect to
the Real Property not yet due and payable or the amount or validity of which is
being contested in good faith by appropriate proceedings by Seller and for which
appropriate reserves have been established in accordance with GAAP; (b)
mechanics, carriers workers, repairers and similar statutory liens arising or
incurred in the ordinary course of business for amounts which are not delinquent
and

 

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which are not, individually or in the aggregate, material to the business of the
Companies; (c) zoning, entitlement, building and other land use regulations
imposed by governmental agencies having jurisdiction over the Real Property
which are not violated in any material respect by the current use and operation
of the Real Property; and (d) covenants, conditions, restrictions, easements and
other similar matters affecting title to the Real Property which do not
materially impair the occupancy or use of the Real Property for the purposes for
which it is currently used in connection with the business of the Companies.

 

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

 

“Preliminary Purchase Price” has the meaning set forth in Section 2.08.

 

“Pre-Closing Tax Periods” has the meaning set forth in Section 6.10(f).

 

“Purchased Assets” means all of the assets of the Companies (including the Real
Property), excluding the Excluded Assets.

 

“Real Property” means the Owned Real Property and the Leased Real Property.

 

“Regulation S-X” means Regulation S-X of the Securities Act of 1933, as amended.

 

“Release Date” has the meaning set forth in Section 6.05(d).

 

“Representatives” means officers, directors, employees, counsel, accountants,
financial advisers or consultants of either Seller or Buyer, as applicable.

 

“RES Payable” means amounts due to Reliant Energy Services, Inc. for delivered
fuel provided to Astoria LP which fuel is provided at actual cost and mobile
maintenance charges provided to Astoria LP in the ordinary course of business
consistent with past practices.

 

“Retained Policies” has the meaning set forth in Section 6.09(b).

 

“Retirement Plan” means the Astoria Generating Company, LP Retirement Plan, as
amended.

 

“Scheduled Insurance Policies” has the meaning set forth in Section 6.09.

 

“Seller” has the meaning set forth in the introductory paragraph to this
Agreement.

 

“Seller Consents” has the meaning set forth in Section 3.03(b).

 

“Seller Entities” means Seller, OPNY LP, OPNY GP and OPOS Parent.

 

“Seller Environmental Liabilities” shall mean, to the extent not indemnified by
Consolidated Edison Company of New York pursuant to ConEd Agreement, liability
arising from the disposal of any Hazardous Substance, to the extent relating to
or arising from the

 

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ownership or operation of the Facilities prior to the Closing Date and during
the period of ownership of Orion Power Holdings, Inc. at any Off-Site Location.

 

“Seller Governmental Approvals” has the meaning set forth in Section 3.03(c).

 

“Seller Group” means the Affiliated Group filing a consolidated federal income
tax return of which Guarantor is the common parent.

 

“Seller Indemnified Group” means Seller and Seller’s Affiliates and their
respective officers, directors, employees and agents.

 

“Seller Marks” has the meaning set forth in Section 6.04.

 

“Seller Plan” means each Benefit Plan (other than the Company Plans) that is
sponsored, maintained or contributed to as of the Closing Date by Seller or by
any trade or business, whether or not incorporated, that together with Seller
would be a “single employer” within the meaning of Section 4001(b) of ERISA.

 

“Seller Savings Plans” means the Orion Power Holdings, Inc. Savings Plan and the
Reliant Energy, Inc. Savings Plan.

 

“Seller’s Disclosure Schedule” means the schedules provided pursuant to Article
III and Article IV.

 

“Seller’s Post-Closing Estimate” has the meaning set forth in Section 2.06(a).

 

“Severance Plan” means the Reliant Energy, Inc. 2003 Involuntary Severance
Benefits Plan for Employees With Annual Base Pay Less Than $150,000 As Amended
and Restated Effective June 1, 2004.

 

“Specified Termination Event” means the occurrence of all of the following
events:  (i) all conditions to Buyer’s obligations under this Agreement have
been satisfied in full or waived in writing by Buyer and (ii) the Marketing
Period Expiration Date has occurred.

 

“Standard & Poor’s” means Standard & Poor’s Ratings Group (a division of McGraw
Hill, Inc.), and its successors.

 

“Straddle Period” has the meaning set forth in Section 6.10(g).

 

“Subsequent Financial Statements” has the meaning set forth in Section 6.22(a).

 

“Sunset Coverage” has the meaning set forth in Section 6.09(c).

 

“Support Obligations” has the meaning set forth in Section 6.05(a).

 

“Surveys” means current surveys of each parcel of the Real Property, prepared by
a licensed surveyor, satisfactory to Buyer, and conforming to 1992 ALTA/ACSM
Minimum Detail Requirements for Urban Land Title Surveys, and such standards as
the Title Insurer may require as a condition to the removal of any survey
exceptions from the Title Policy, and certified to

 

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Buyer, Buyer’s lender and the Title Insurer, disclosing the location of all
Improvements, easements, party walls, sidewalks, roadways, utility lines and
such matters shown customarily on such surveys, showing access affirmatively to
public streets and roads, and including Table A Item Nos. 1-4 and 6-14.

 

“Target Working Capital Amount” means the amount set forth on Schedule 2.02(b).

 

“Tax” or “Taxes” means any federal, state, local, or foreign income, profits,
franchise, withholding, ad valorem, personal property (tangible and intangible),
employment, payroll, sales and use, social security (or similar), disability,
occupation, property, severance, excise, gross receipts, utility, license,
severance, stamp, premium, windfall profits, environmental (including taxes
under Code §59A), customs duties, capital stock, unemployment, registration,
utility, production, value added, alternative or add-on minimum, estimated, and
other taxes imposed by a Taxing Authority of any kind whatsoever, whether
computed on a separate of consolidated, unitary or combined basis or in any
other manner, including any interest, penalty or addition thereto, whether
disputed or not and including any obligation to indemnify or otherwise assume or
succeed to the Tax liability of any other Person.

 

“Tax Items” has the meaning set forth in Section 6.10(a).

 

“Tax Proceedings” has the meaning set forth in Section 6.10(c).

 

“Tax Returns” means any return, report or similar statement required to be filed
with respect to any Taxes, including any information return, claim for refund,
amended return and declaration of estimated Tax.

 

“Tax Sharing Agreements” has the meaning set forth in Section 4.09(e).

 

“Taxing Authority” means, with respect to any Tax, the Governmental Authority 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 set forth in Section 6.07(a).

 

“Termination Date” has the meaning set forth in Section 8.01(b)(i).

 

“Third Party Claim” has the meaning set forth in Section 9.05(a).

 

“Title Commitments” means Title Insurance Commitment No. 3605-00302 issued by
Chicago Title Insurance Company dated July 1, 2005, Title Insurance Commitment
No. 3405-00257 issued by Chicago Title Insurance Company dated July 25, 2005 and
Title Insurance Commitment No. 3405-00258 issued by Chicago Title Insurance
Company dated July 25, 2005.

 

“Title Insurer” means Chicago Title Insurance Company.

 

“Title Policies” means an ALTA ‘92 Owners (or Loan) or ALTA ‘92 Owner’s (or
Loan) with “TIRSA Leasehold Endorsement”, as the case may be, for each of the
parcels of Real Property, based upon commitments therefore, dated as of the
Closing Date, issued by the Title

 

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Insurer in such amount as Buyer reasonably determines to be the fair market
value (including all improvements thereon) and for each such parcel (a) insuring
title to such parcel of real estate and all recorded easements benefiting such
parcel, subject only to Permitted Encumbrances and the matters described in the
Title Commitments, (b) containing a “New York Standard Owner’s (or Loan)
Endorsement” providing record GAP and mechanic’s lien coverage, (c) containing a
“TIRSA Land Same As Endorsement” insuring that the parcel described in such
Title Policy is the parcel shown on the survey delivered with respect to such
parcel, (d) containing a “TIRSA Access Endorsement insuring direct and
unencumbered access from such parcel to the physically opened public streets
abutting the parcel, (e) if the real estate covered by such policy consists of
more than one record parcel, containing a “TIRSA Contiguity Endorsement”
insuring that all of the record parcels are contiguous to one another, (f) if
appropriate to the transaction, containing a “TIRSA Non-imputation Endorsement”,
(g) contain the applicable “TIRSA Tax Parcel Endorsement”, and (h) containing
such other endorsements as Buyer and Buyer’s financing sources, if any, may
reasonably request, and as are currently available in New York.

 

“Transfer Taxes” means all transfer, real property transfer, sales, use, goods
and services, value added, recordation, documentary, stamp duty, excise, and
conveyance Taxes and other similar Taxes, duties, fees or charges, as levied by
any Taxing Authority in connection with the transactions contemplated by this
Agreement, including any real property transfer Taxes imposed by the City of New
York or by the State of New York; provided, however, that for the avoidance of
doubt, the term Transfer Taxes shall not include any Income Taxes.

 

“Transition Services Agreement” has the meaning set forth in Section 2.04(d).

 

“Union” has the meaning set forth in Section 6.14(b).

 

“Updated Title Commitments” has the meaning set forth in Section 6.24.

 

“WARN Act” has the meaning set forth in Section 4.11(c).

 

“Welfare Benefits” has the meaning set forth in Section 6.14(h).

 

“Work-around” has the meaning set forth in Section 6.25.

 

“Working Capital Adjustment Amount” means the result of the Closing Date Working
Capital Amount minus the Target Working Capital Amount.

 

14

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