Exhibit 10.2

 

EXECUTION VERSION

 

PURCHASE AGREEMENT

 

between

 

Allegheny Energy Supply Company, LLC

 

as “Seller”

 

and

 

Grant Peaking Power, LLC

 

as “ArcLight Buyer”

 

and

 

ArcLight Energy Partners Fund II, L.P.

 

September 27, 2004

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TABLE OF CONTENTS

 

               Page

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1.

   Definitions    1

2.

   Purchase and Sale of the Interests    10      2.1   

Basic Transaction

   10      2.2   

Purchase Price

   11      2.3   

Purchase Price Adjustment

   11      2.4   

The Closing

   12      2.5   

Deliveries at the Closing

   12      2.6   

Allocation of Purchase Price

   13

3.

   Representations and Warranties Concerning the Seller    13      3.1   

Organization of the Seller

   13      3.2   

Authorization of Transaction

   14      3.3   

Noncontravention

   14      3.4   

Consents

   14      3.5   

Ownership and Transfer of the Interests

   15      3.6   

Brokers’ Fees

   15

4.

   Representations and Warranties Concerning the Company    15      4.1   

Organization, Qualification and Power

   15      4.2   

Capitalization

   15      4.3   

Noncontravention

   16      4.4   

Consents

   16      4.5   

Title to Assets

   16      4.6   

Books and Records

   17      4.7   

Tax Matters

   17      4.8   

Real Property

   18      4.9   

Legal Compliance

   19      4.10   

Environmental Matters

   19      4.11   

Powers of Attorney

   21      4.12   

Litigation

   21      4.13   

Employment Matters

   21      4.14   

Employee Benefits

   22      4.15   

Intellectual Property

   24      4.16   

Contracts

   25      4.17   

Permits

   25      4.18   

Brokers’ Fees

   25      4.19   

Transactions with Affiliates

   26      4.20   

Regulatory

   26      4.21   

Financial Statements

   26      4.22   

Undisclosed Liabilities

   27      4.23   

No Guarantees

   27      4.24   

Insurance

   27

 

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     4.25   

Due Diligence Materials

   27      4.26   

No Other Business

   28      4.27   

Bank Accounts

   28      4.28   

Disclaimer of Other Representations and Warranties

   28

5.

   Representations and Warranties Concerning the Buyers    29      5.1   

Organization of the Buyers

   29      5.2   

Authorization of Transaction

   29      5.3   

Noncontravention

   29      5.4   

Consents

   30      5.5   

Brokers’ Fees

   30      5.6   

Investment

   30      5.7   

Financing

   30      5.8   

Litigation

   30      5.9   

No Knowledge of Certain Conditions

   30      5.10   

Due Diligence Investigation and Other Acknowledgements

   31

6.

   Pre-Closing Covenants    31      6.1   

General

   31      6.2   

Notices and Consents

   31      6.3   

Operation of Business

   33      6.4   

Full Access

   35      6.5   

Notice of Developments

   35      6.6   

Exclusivity

   36      6.7   

Guaranties of the Seller

   36      6.8   

Intercompany Obligations and Agreements

   37      6.9   

Risk of Loss

   37      6.10   

Employee Benefits

   37

7.

   Post-Closing Covenants    38      7.1   

General

   38      7.2   

Transition

   38      7.3   

Access to Information

   38      7.4   

Transfer Taxes

   39      7.5   

Securities Law Covenant

   39      7.6   

Employment Matters

   39      7.8   

Non-Use of Allegheny Marks

   41

8.

   Conditions to Obligation to Close    42      8.1   

Conditions to Obligation of the Buyers

   42      8.2   

Conditions to Obligation of the Seller

   44

9.

   Remedies for Breaches of this Agreement    45      9.1   

Survival of Representations, Warranties and Covenants

   45      9.2   

Indemnification Provisions for Benefit of the Buyers

   46      9.3   

Indemnification Provisions for Benefit of the Seller

   46      9.4   

Matters Involving Third Parties

   46

 

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     9.5   

Limitation on Certain of Seller’s Indemnification Obligations

   47      9.6   

Environmental Indemnification

   48      9.7   

Employment Indemnification

   49      9.8   

Other Indemnification Provisions

   50      9.9   

Exclusive Remedy

   50

10.

   Tax Matters    50      10.1   

Tax Periods Ending on or Before the Closing Date

   50      10.2   

Straddle Periods

   51      10.3   

Tax Indemnification

   51      10.4   

Refunds and Tax Benefits; Amended Tax Returns

   52      10.5   

Cooperation on Tax Matters

   52

11.

   Termination    53      11.1   

Termination of Agreement

   53      11.2   

Effect of Termination

   55

12.

   Miscellaneous    55      12.1   

Press Releases and Public Announcements

   55      12.2   

No Third-Party Beneficiaries

   55      12.3   

Entire Agreement

   55      12.4   

Succession and Assignment

   56      12.5   

Counterparts and Facsimile Signatures

   56      12.6   

Headings

   56      12.7   

Notices

   56      12.8   

Governing Law

   57      12.9   

Amendments and Waivers

   58      12.10   

Severability

   58      12.11   

Expenses

   58      12.12   

Construction

   58      12.13   

Incorporation of Exhibits and Schedules

   58      12.14   

Specific Performance

   59      12.15   

Waiver of Consequential Damages

   59

 

EXHIBITS AND SCHEDULES

 

Exhibit 2.3

 

—

  

Sample Calculation of Net Working Capital

Exhibit 2.5

 

—

  

Form of Transition Services Agreement

Exhibit 8.1(f)

 

—

  

Form of Exelon Consent

Seller’s Disclosure Schedule

Buyers’ Disclosure Schedule

 

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PURCHASE AGREEMENT

 

This PURCHASE AGREEMENT (this “Agreement”) between ALLEGHENY ENERGY SUPPLY
COMPANY, LLC, a Delaware limited liability company (the “Seller”), GRANT PEAKING
POWER, LLC, a Delaware limited liability company (the “ArcLight Buyer,” with
each of the ArcLight Buyer and any other Person that becomes a Buyer as provided
in Section 12.4 below being called a “Buyer” and, collectively, the “Buyers”
even if no other Person becomes a Buyer) takes effect on September 27, 2004.
Each of the Buyers and the Seller is referred to individually as a “Party” and
collectively as the “Parties.” ArcLight Energy Partners Fund II, L.P., a
Delaware limited partnership, is also executing this Agreement for the limited
purpose of the guaranty provided above its signature on the signature page of
this Agreement.

 

RECITALS

 

A. The Seller owns all of the issued and outstanding membership interests in
Allegheny Energy Supply Lincoln Generating Facility, LLC, a Delaware limited
liability company (the “Company”).

 

B. This Agreement contemplates a transaction in which the Buyers will purchase
from the Seller, and the Seller will sell to the Buyers, all of the issued and
outstanding membership interests in the Company, all on the terms and subject to
the conditions of this Agreement.

 

AGREEMENT

 

In consideration of the above recitals and the promises set forth in this
Agreement, the Parties agree as follows:

 

1. Definitions.

 

“Adverse Consequences” means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, Orders, damages, dues,
penalties, fines, costs, reasonable amounts paid in settlement, Liabilities,
Taxes, Encumbrances, losses, expenses and fees, including all litigation costs
and reasonable attorneys’ fees and expenses.

 

“Affiliate” has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act of 1934, as amended.

 

“Agreement” has the meaning set forth in the preface above.

 

“Allegheny Employee Benefit Plans” has the meaning set forth in Section 4.14 of
this Agreement.

 

“Allegheny Marks” means the names and marks “Allegheny Energy” and “Allegheny”
together with all derivations and variations thereof, and the Allegheny Energy,
Inc. corporate logo, together with all derivations or variations thereof.

 

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“ArcLight Buyer” has the meaning set forth in the preface above.

 

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

 

“Buyer” and “Buyers” have the meanings set forth in the preface above.

 

“Buyer Employee Benefit Plans” has the meaning set forth in Section 7.6 of this
Agreement.

 

“Buyers’ Disclosure Schedule” has the meaning set forth in Section 5 of this
Agreement.

 

“Buyers’ Indemnitee” has the meaning set forth in Section 9.2 of this Agreement.

 

“Buyers’ Required Consents” means those consents and notices set forth in
Section 1(a) of the Buyer’s Disclosure Schedule.

 

“Buyers’ Required Regulatory Approvals” means those consents, approvals, filings
and notices set forth in Section 1(b) of the Buyer’s Disclosure Schedule.

 

“Capital Expenditure” means any capital expenditure or commitment for any
additions to or replacements of property, plant or equipment for the Facility.

 

“CERCLA” means the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, 42 U.S.C. § 9601 et seq., as amended as of the date of
this Agreement.

 

“Closing” has the meaning set forth in Section 2.4 of this Agreement.

 

“Closing Date” has the meaning set forth in Section 2.4 of this Agreement.

 

“Closing Purchase Price” has the meaning set forth in Section 2.2 of this
Agreement.

 

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

 

“Commercially Reasonable Efforts” means efforts that are reasonable for a
prudent business enterprise in circumstances similar to those of the performing
Party but that do not require the performing Party to expend funds other than
expenditures that are customary and reasonable in transactions of the kind and
nature contemplated by this Agreement in order for the performing Party to
satisfy its obligations under this Agreement.

 

“Common Terms Agreement” means the Common Terms Agreement dated as of March 8,
2004 among Seller, the Loan Parties referred to therein, the Lenders referred to
therein, Citicorp North America, Inc., as Administrative Agent, and Citibank,
N.A., as Collateral Agent and Intercreditor Agent.

 

“Company” has the meaning set forth in the preface above.

 

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“Company Financial Statements” has the meaning set forth in Section 4.21 of this
Agreement.

 

“Company Intellectual Property” means all Intellectual Property that is needed
for the Company to conduct its business in the same manner as such business is
currently conducted and was conducted in the periods covered by the Company
Financial Statements.

 

“Confidentiality Agreement” means that certain confidentiality agreement between
Seller and ArcLight Capital Holdings, LLC, dated May 28, 2004.

 

“Due Diligence Materials” means (a) all due diligence materials provided for
review or distributed in written or digital form by the Seller or its
Representatives to the Buyer or its Representatives, (b) all written, oral or
electronic answers to questions provided by the Seller or its Representatives to
the Buyer or its Representatives, and (c) all materials contained in data rooms
or privately-accessible internet sites established for purposes of providing due
diligence materials to the Buyer or its Representatives.

 

“Employee Benefit Plan” means any: (a) “employee benefit plan” as such term is
defined in ERISA § 3(3); (b) nonqualified deferred compensation or retirement
plan or arrangement; (c) qualified defined contribution retirement plan or
arrangement that is an Employee Pension Benefit Plan; (d) qualified defined
benefit retirement plan or arrangement that is an Employee Pension Benefit Plan;
(e) employment, bonus, incentive compensation, stock purchase, stock option,
severance or termination pay plan, agreement or arrangement; (f) Employee
Welfare Benefit Plan; or (g) other similar plan, program, agreement or
arrangement.

 

“Employee Pension Benefit Plan” has the meaning set forth in ERISA § 3(2).

 

“Employee Welfare Benefit Plan” has the meaning set forth in ERISA § 3(1).

 

“Employees” means those individuals employed by the Company.

 

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

 

“Energy Services Conversion Agreement” means that certain Energy Services
Conversion Agreement dated June 13, 2002, between Seller and Exelon.

 

“Environmental Claims” has the meaning set forth in Section 9.6 of this
Agreement.

 

“Environmental Condition” means the presence or Release to the environment of
Hazardous Substances, including any migration of Hazardous Substances through
air, soil or groundwater.

 

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“Environmental Laws” means all Laws and the common law: (a) concerning pollution
or protection of the environment or natural resources, including without
limitation CERCLA, the Resource Conservation and Recovery Act of 1976, 42 U.S.C.
§ 6901 et seq., the Clean Air Act, 42 U.S.C. § 7401 et seq., the Federal Water
Pollution Control Act, 33 U.S.C. § 1251 et seq., and the Oil Pollution Act of
1990, 33 U.S.C. § 2701 et seq., each as amended as of the date of this
Agreement; and (b) concerning Hazardous Substances.

 

“Environmental Permit” means any permit, authorization, approval, decision,
zoning Order, franchise, registration, license, filing, certificate, variance or
similar permission or right granted by or obtained from any Governmental
Authority that are issued under Environmental Laws.

 

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

 

“ERISA Affiliate” has the meaning set forth in Section 4.14 of this Agreement.

 

“Estimated Net Working Capital” has the meaning set forth in Section 2.3 of this
Agreement.

 

“Exelon” means Exelon Generation Company, LLC, a Delaware limited liability
company.

 

“Exelon Consent” means the Consent and Agreement dated as of a date on or before
the Closing Date among Exelon, the Seller and the Company and substantially in
the form of Exhibit 8.1(f).

 

“Existing Debt Documents” means, collectively, (a) the Credit Agreement dated as
of March 8, 2004 among Allegheny Energy, Inc., the Lenders and the Lender
Parties referred to therein, and Citicorp North America, Inc., as Administrative
Agent, (b) the Credit Agreement dated as of February 21, 2003 and amended and
restated March 8, 2003, among Seller, the Lenders referred to therein, and
Citicorp North America, Inc., as Administrative Agent, (c) the Term C Credit
Agreement dated as of March 8, 2004, among Seller, the Lenders referred to
therein, and Citicorp North America, Inc., as Administrative Agent, (d) the
Common Terms Agreement, (e) the Amendment Agreement dated as of March 8, 2004,
among Seller, the other Grantors referred to therein, Citibank, N.A. as
Collateral Agent, Intercreditor Agent and Depository Bank, and Citicorp North
America, Inc., as Administrative Agent, (f) the Security and Intercreditor
Agreement, (g) the Refinancing Indenture referred to in the Security and
Intercreditor Agreement, and (h) other documents, instruments and agreements
executed and delivered in connection with or otherwise relating to the foregoing
agreements, including any mortgages, deeds of trust, security agreements,
financing statements, pledge agreements and other documents creating or
evidencing Encumbrances securing the indebtedness or other obligations under the
foregoing.

 

“Facility” means the approximately 656 MW electric generating facility located
in Manhattan, Illinois.

 

4

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“FERC” means the Federal Energy Regulatory Commission.

 

“GAAP” means United States generally accepted accounting principles as in effect
from time to time.

 

“Good Utility Practice” means any of the practices, methods and acts engaged in
and approved by a significant portion of the independent electric power
generation industry during the relevant time period that, in the exercise of
reasonable judgment in light of the applicable manufacturer’s recommendations
and the facts known at the time the decision was made, could have been expected
to accomplish the desired result at a reasonable cost consistent with good
business practices, reliability, safety and expedition. Good Utility Practice is
intended to consist of practices, methods or acts generally accepted in the
region where the Facility is located, and is not intended to be limited to
optimum practices, methods or acts to the exclusion of all others.

 

“Governmental Authority” means any federal, state, local or foreign
governmental, administrative or regulatory authority (including the FERC, the
Federal Communications Commission, the Mid-American Interconnected Network, Inc.
and PJM Interconnection, L.L.C.), court, agency or body, or any division or
subdivision, or any arbitrator, arbitration board, tribunal or mediator.

 

“Hazardous Substances” means any chemicals, materials or substances, whether
solids, liquids, semi-liquids or gas, defined as or listed as “hazardous
substances,” “hazardous wastes,” “hazardous materials,” “hazardous
constituents,” “restricted hazardous materials,” “extremely hazardous
substances,” “toxic substances,” “contaminants,” “pollutants,” “irritants,”
“toxic pollutants” or words of similar meaning and regulatory effect under any
Environmental Law, including without limitation, petroleum and its by-products.

 

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

 

“Income Tax” means any federal, state, local or foreign income Tax or other Tax
based (in whole or in part) upon or related to income or receipts, including any
interest, penalty or addition, whether disputed or not.

 

“Income Tax Return” means any return, declaration, report, claim for refund, or
information return or statement relating to Income Taxes, including any
schedule, supplement, attachment or amendments thereto.

 

“Indemnified Party” has the meaning set forth in Section 9.4 of this Agreement.

 

“Indemnifying Party” has the meaning set forth in Section 9.4 of this Agreement.

 

“Initial Purchase Price” has the meaning set forth in Section 2.2 of this
Agreement.

 

“Intellectual Property” means all patents and industrial designs (including any
continuations, divisionals, continuations-in-part, renewals, reissues, and
applications for

 

5

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any of the foregoing); copyrights (including any registrations and applications
for any of the foregoing); trademarks, trade names, mask works, service marks,
service names, logos and Internet domain names (together with all goodwill,
registrations and applications related to the foregoing); technology, know-how,
processes, trade secrets, inventions, proprietary rights, proprietary data,
formulae, research and development data, databases, computer software programs
and any other intellectual property as provided by applicable Law, and any
registrations or applications for the same and all goodwill associated
therewith.

 

“Interests” means all of the issued and outstanding membership interests in the
Company.

 

“Knowledge” means, with respect to an individual, that, with respect to a
particular fact or other matter, such individual is actually aware of such fact
or other matter. With respect to Seller, “Knowledge” means the Knowledge of any
of the Persons listed in Section 1(c) of the Seller’s Disclosure Schedule. With
respect to Buyers, “Knowledge” means the Knowledge of any of the Persons listed
in Section 1(c) of the Buyers Disclosure Schedule

 

“Law” means any federal, state, local or foreign constitution, law, code, plan,
statute, rule, regulation or ordinance of any Governmental Authority, each as
amended and in effect as of the date of this Agreement.

 

“Liability” means any liability or obligation of whatever kind or nature,
whether known or unknown, whether asserted or unasserted, whether absolute or
contingent, whether accrued or unaccrued, whether liquidated or unliquidated,
and whether due or to become due.

 

“Material Adverse Effect” means any change or effect that is materially adverse
to the business, operation, properties, financial conditions, assets,
Liabilities (including contingent Liabilities), or prospects of the Company,
taken as a whole. “Material Adverse Effect,” however, does not include any
effect that is attributable to any of the following:

 

  (a) Any change (or changes taken together) or effect generally affecting the
international, national or regional electric generating, transmission or
distribution industry as a whole;

 

  (b) Any change (or changes taken together) or effect resulting from changes in
the international, national or regional wholesale or retail markets for electric
power;

 

  (c) Any change (or changes taken together) or effect resulting from changes in
the international, national or regional fuel markets for the type of fuel used
at the Facility;

 

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  (d) Any change (or changes taken together) in or effect on the North American,
national or regional electric transmission or distribution systems;

 

  (e) Any change (or changes taken together) or effect resulting from changes in
the general national or regional economic or financial conditions;

 

  (f) Any change that is cured (including by the payment of money) before the
earlier of the Closing or the termination of the Agreement pursuant to Section
11 of this Agreement, which cure or payment does not have a Material Adverse
Effect; or

 

  (h) Any change in Law or any Order generally applicable to providers of
generation, transmission or distribution of electricity or to owners and
operators of industrial facilities in Illinois.

 

Any determination as to whether any condition or other matter has a Material
Adverse Effect will be made only after taking into account all effective
insurance coverages and effective indemnifications (other than under this
Agreement) with respect to such condition or matter.

 

“Material Agreement” means any written or oral contract, note, bond, mortgage,
indenture, instrument, arrangement and other agreement to which the Company is a
party, the performance of which involves or would involve consideration in
excess of $25,000 per year or $100,000 over the life of such agreement or the
non-performance of which would have a Material Adverse Effect.

 

“Net Working Capital” means the remainder (whether positive or negative) as of
the Closing Date of (a) the sum of (i) the Company’s cash plus (ii) accounts
receivable of the Company (or of the Seller to the extent the account receivable
has been assigned to the Company) under the Energy Services Conversion
Agreement, if any, plus (iii) the Company’s inventory of materials and supplies
(provided that the amount in this clause (a)(iii) may not to exceed
$686,002.83), minus (b) all Liabilities of the Company. All such items shall be
determined in accordance with GAAP on an ongoing basis but adjusted to include
revenues from the Energy Services Conversion Agreement to the extent those
revenues have been assigned or otherwise accrue to the Company and assuming that
the transactions to occur at the Closing have not and will not occur; provided,
however, that assets, liabilities, gains, losses, revenues and expenses in
interim periods or as of dates other than year-end (which are determined through
the application of so-called interim accounting conventions or procedures) shall
be determined through full application of the procedures used in preparing the
balance sheet included within the Company Financial Statements. A sample
calculation of Net Working Capital is attached to this Agreement as Exhibit 2.3.

 

“New Operator” means the Person that the Company engages to operate the Facility
after the Closing.

 

7

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“Off-Site Location” means any real property other than the Site, but excluding
any real property to which Hazardous Substances disposed of, on or Released at
the Site or the Facility have migrated.

 

“Order” means any writ, judgment, decree, injunction, or order of any
Governmental Authority (in each such case whether preliminary or final).

 

“Ordinary Course of Business” means the ordinary course of business consistent
with (a) past custom and practice (including with respect to quantity and
frequency) in a manner not inconsistent with customs and practices reflected in
the statements of income and cash flows included in the Company Financial
Statements, (b) the requirements of any agreement or any Permit, and (c) Good
Utility Practice.

 

“Other Real Property Rights” means the easements, rights-of-way and other
interests in real property identified in Section 1(d) of the Seller’s Disclosure
Schedule under the heading “Other Real Property Rights.”

 

“Owned Real Property” means the real property identified in Section 1(d) of the
Seller’s Disclosure Schedule under the heading “Owned Real Property,” together
with (a) all buildings, structures and improvements located thereon, including
the Facility, (b) all easements, rights-of-way and other appurtenances to the
foregoing, and (c) all fixtures, machinery, apparatus or equipment affixed to
the foregoing, to the extent that such items constitute fixtures, but excluding
any equipment that is being leased to the Company.

 

“Parent” means Allegheny Energy Inc., a Maryland corporation.

 

“Party” has the meaning set forth in the preface above.

 

“Percentage” means (a) in the case of the ArcLight Buyer, 100% subject to
adjustment as provided in Section 12.4 and (b) in the case of any other Buyer,
the Percentage provided in Section 12.4.

 

“Permit” means any permit, authorization, approval, decision, zoning Order,
franchise, registration, license, filing, certificate, variance or similar
permission or right granted by or obtained from any Governmental Authority
except as are issued under Environmental Laws.

 

“Permitted Encumbrances” means: (a) the Encumbrances set forth in Section 1(e)
of the Seller’s Disclosure Schedule; (b) mechanic’s, materialmen’s and similar
liens and rights arising or incurred in the Ordinary Course of Business for
amounts not yet due and payable or that are being contested in good faith
through appropriate proceedings; (c) liens for Taxes or other governmental
charges or assessments not yet due and payable or that are being contested in
good faith through appropriate proceedings; (d) purchase money liens and liens
securing rental payments under capital lease arrangements; (e) all exceptions
specifically set forth in the Title Policy; (f) all exceptions, restrictions,
easements, charges, rights-of-way and monetary and non-monetary encumbrances set
forth in any Permit; (g) zoning, entitlement, conservation restriction and other
land use and environmental regulations of any Governmental Authority and (h) to
the extent the

 

8

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same do not, individually or in the aggregate, have a Material Adverse Effect,
defects of title, easements, encroachments, rights-of-way, restrictions,
reservations and other charges or encumbrances.

 

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

 

“Post-Closing Benefit Plan” has the meaning set forth in Section 7.6(a) of this
Agreement.

 

“Property Tax” means any ad valorem or similar Tax imposed upon real or personal
property, whether tangible or intangible, by any Governmental Authority.

 

“PUHCA” means the Public Utility Holding Company Act of 1935, 15 U.S.C. § 79a,
et seq., as amended.

 

“Purchase Price” has the meaning set forth in Section 2.2 of this Agreement.

 

“Release” means any release, spill, leak, discharge, disposal of, pumping,
pouring, emitting, emptying, injecting, leaching, dumping or allowing to escape
into or through the environment.

 

“Representatives” of a Person means, collectively, such Person’s Affiliates and
his, her or its and their respective directors, officers, partners, members,
employees, representatives, agents, advisors (including accountants, legal
counsel, environmental consultants, engineering consultants and financial
advisors), parent entities and other controlling Persons.

 

“Response Actions” means the activities defined in 42 U.S.C. § 9601(25) of
CERCLA.

 

“Security and Intercreditor Agreement” means the Amended and Restated Security
and Intercreditor Agreement among the Seller, the other Grantors referred to
therein, Citibank, N.A. as Collateral Agent, Intercreditor Agent and Depository
Bank, Citicorp North America, Inc., as Administrative Agent, and Law Debenture
Trust Company of New York, as Indenture Trustee, dated February 21, 2003, as
amended and restated in its entirety on March 8, 2004.

 

“Seller” has the meaning set forth in the preface above.

 

“Seller’s Disclosure Schedule” has the meaning set forth in Section 3 of this
Agreement.

 

“Seller’s Indemnitee” has the meaning set forth in Section 9.3 of this
Agreement.

 

“Seller’s Required Consents” means those consents and notices set forth in
Section 1(a) of the Seller’s Disclosure Schedule.

 

9

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“Seller’s Required Regulatory Approvals” means those consents, approvals,
filings and notices set forth in Section 1(b) of the Seller’s Disclosure
Schedule.

 

“Site” means, collectively, the Owned Real Property and the Other Real Property
Rights.

 

“Straddle Period” means a taxable year or period beginning on or before, and
ending after, the Closing Date.

 

“Tax” means any federal, state, local or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental, customs, duties, utility, production, capital
stock, franchise, profits, withholding, social security (or similar),
unemployment, disability, real property, personal property, sales, use,
transfer, registration, value added, alternative or add-on minimum, estimated,
or other taxes, fees, levies, tariffs, imposts, assessments, obligations or
charges of the same or of a similar nature to any of the foregoing, including
any interest, penalty or addition, whether disputed or not.

 

“Tax Return” means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule,
supplement, attachment or amendment thereto.

 

“Third Party Claim” has the meaning set forth in Section 9.4 of this Agreement.

 

“Title Policy” means the owner’s policy of title insurance, policy number 1410
001370022 WB, dated April 17, 2001, issued by Chicago Title Insurance Company in
favor of the Company.

 

“Transaction Documents” means all documents and agreements to be entered into by
one or more of the Parties in connection with the transactions contemplated by
this Agreement.

 

“Transferred Employee” has the meaning set forth in Section 7.6(b) of this
Agreement.

 

“Updated Title Policy” means the Title Policy, as supplemented by, (a) a
date-down endorsement to the Title Policy amending the date of the Title Policy
to the Closing Date or such other date as shall be acceptable to the Buyers and
(b) a non-imputation endorsement. The Updated Title Policy shall provide for
coverage in the amount of $90,000,000 and insure the fee title of the Company in
the Site, free and clear of all Encumbrances, other than Permitted Encumbrances.

 

2. Purchase and Sale of the Interests.

 

  2.1 Basic Transaction. On the terms and subject to the conditions of this
Agreement, at the Closing, the Buyers agree to purchase and accept delivery from
the Seller, and the Seller agrees to sell, assign, transfer and deliver to the
Buyers, all of the Interests, in exchange for the Purchase Price.

 

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  2.2 Purchase Price. At the Closing, each of the Buyers shall pay to the Seller
by wire transfer or delivery of other immediately available funds to an account
in the United States designated by the Seller by notice to the Buyers at least
two Business Days prior to the Closing, that Buyer’s Percentage of an amount
equal to (a) the result of (i) One Hundred Seventy Three Million Dollars
($173,000,000), (ii) minus $33,333 for each day (if any) that occurs from and
after the Closing Date to and including October 31, 2004, (iii) plus $33,333 for
each day that occurs from and including November 1, 2004 to and including
December 31, 2004 (or if earlier, the Closing Date), (iv) minus $95,000 for each
day that occurs from and including January 1, 2005 to and including January 7,
2005 (or if earlier, the Closing Date), (v) minus $65,000 for each day that
occurs from and including January 8, 2005 to and including January 31, 2005 (or
if earlier, the Closing Date), (vi) minus $71,000 for each day that occurs from
and including February 1, 2005 to and including February 28, 2005 (or if
earlier, the Closing Date), (vii) minus $21,000 for each day that occurs from
and including March 1, 2005 to and including the Closing Date (the “Initial
Purchase Price”), (b) increased or decreased by the adjustment set forth in
Section 2.3(a) below (the Initial Purchase Price, as so adjusted, the “Closing
Purchase Price”). The Closing Purchase Price shall be subject to a further
adjustment pursuant to Section 2.3(c) of this Agreement (the Closing Purchase
Price, as so adjusted, the “Purchase Price”).

 

  2.3 Purchase Price Adjustment.

 

  (a) Not later than three Business Days before the Closing Date, the Seller
shall provide the Buyers by notice with the Seller’s good-faith estimate of the
Net Working Capital, based upon the accounting books and records of the Company
(the “Estimated Net Working Capital”), and all underlying documentation
supporting the Estimated Net Working Capital. If the Estimated Net Working
Capital is greater than $0, then the Initial Purchase Price shall be increased
by the amount of such excess. If the Estimated Net Working Capital is less than
$0, then the Initial Purchase Price shall be decreased by the amount of such
deficit.

 

  (b) Within 60 days after the Closing Date, the Buyers will prepare and deliver
to the Seller a written calculation of the Net Working Capital. Buyers will
provide copies and otherwise make available to Seller and its representatives
the work papers and back-up materials used in calculating the Net Working
Capital.

 

  (c)

If the Seller has any good faith objections to the Buyers’ calculation of the
Net Working Capital, then it must deliver a detailed written statement
describing its objections to the Buyers within 20 Business Days after the Buyers
deliver their calculation of the Net Working Capital to the Seller. If the
Seller does not object to the Buyers’ calculation of Net Working Capital (and
any adjustments resulting therefrom) within such 20 Business Day period, then
the Seller shall be deemed to have accepted the Buyers’ calculation thereof and
any amounts due shall be paid pursuant to clause

 

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(d) below. If the Seller does object in a timely manner, the Parties will make a
diligent, good faith effort to resolve all such objections. Any payment due
pursuant to clause (d) below shall be paid upon resolution of such objections
whether between the Parties or by the national accounting firm as set forth
below. If the Parties do not resolve all objections to Buyers’ calculation of
the Net Working Capital within 10 Business Days after the Buyers receive the
Seller’s statement of objections, then the Parties will select a mutually
acceptable, nationally-recognized accounting firm (which may not be the regular
outside accounting firms of any Party) to resolve any remaining objections. If
the Buyers and the Seller do not agree upon the choice of an accounting firm,
they will select a nationally-recognized accounting firm by lot (after excluding
their respective regular outside accounting firms). The Buyers will collectively
pay 50%, and the Seller will pay 50%, of the costs and expenses of any
accounting firm so used. The Buyers and the Seller will jointly instruct the
accounting firm to compute the disputed items as soon as practicable, and the
determination made by such accounting firm will be set forth in writing and will
be conclusive and binding upon the Parties. The amount of the Net Working
Capital as agreed to by the Buyers and the Seller or as determined by the
accounting firm constitutes the Net Working Capital for purposes of clause (d)
below.

 

  (d) In the event that the Net Working Capital exceeds the Estimated Net
Working Capital, then each Buyer shall pay to Seller in cash that Buyer’s
Percentage of the amount of such excess. In the event that the Estimated Net
Working Capital exceeds the Net Working Capital, then the Seller shall pay to
each Buyer in cash that Buyer’s Percentage of the amount of such excess. All
amounts payable under this Section 2.3(d) shall be paid within three Business
Days of the determination of the Closing Date Net Working Capital by wire
transfer of immediately available funds to a bank account designated in writing
by the recipient not less than one Business Day before such payment.

 

  2.4 The Closing. The closing of the transactions contemplated by this
Agreement (the “Closing”) will take place at the offices of Skadden, Arps,
Slate, Meagher & Flom LLP, Four Times Square, New York, New York, at 10:00 a.m.
local time, on the fifth Business Day after the respective Parties have
satisfied or waived all conditions to the obligations of the Parties to
consummate the transactions contemplated by this Agreement (other than actions
the Parties will take at the Closing itself) or any other time, date and
location as the Parties may agree. The date on which such proceedings actually
occur is referred to as the “Closing Date.”

 

  2.5

Deliveries at the Closing. At the Closing: (a) the Seller will execute,
acknowledge (if appropriate) and deliver to the Buyers any certificates,
instruments and documents, including those referred to in Section 8.1, as the
Buyers and their respective counsel may reasonably request; (b) each Buyer will

 

12

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execute, acknowledge (if appropriate) and deliver to the Seller any
certificates, instruments and documents, including those referred to in Section
8.2, as the Seller and its counsel may reasonably request; (c) the Seller will
deliver to each Buyer certificates, if any, representing its respective share of
the Interests (such certificates, if any, collectively representing all of the
Interests), endorsed in blank or accompanied by duly executed assignment
documents, or other documents of conveyance; (d) each Buyer will deliver to the
Seller its respective share of the Closing Purchase Price as provided in Section
2.2; (e) the Seller shall deliver to the Buyers originals (if available) or
true, correct and complete copies of all books and records of the Company,
including employee records, that are in the possession of the Seller or any
Affiliate of the Seller; (f) the Buyers will cause to be delivered to Exelon the
letter of credit and the Seller will cause to be delivered to Exelon the notice,
required under paragraph 1 of the Exelon Consent; and (g) the Seller shall, and
shall cause the Company to, enter into a Transition Services Agreement in the
form attached as Exhibit 2.5 to this Agreement.

 

  2.6 Allocation of Purchase Price. Each Buyer and the Seller will negotiate in
good faith upon an allocation of the Purchase Price, together with any
liabilities that are deemed to be assumed for United States federal Income Tax
purposes, among the Company’s assets for United States federal Income Tax
purposes consistent with Section 1060 of the Code and the applicable Treasury
Regulations within 60 days after the Closing Date. In the event that the Parties
do not agree on a mutually satisfactory allocation within such 60-day period,
the Parties will appoint a mutually acceptable, nationally-recognized accounting
firm that will determine the appropriate allocation. The Buyers will
collectively pay 50% and the Seller will pay 50%, of the costs and expenses of
any accounting firm so used. The Buyers and the Seller will jointly instruct the
accounting firm to determine the allocation as soon as practicable, and the
determination made by such accounting firm will be set forth in writing and will
be conclusive and binding upon the Parties. Each Buyer and the Seller will
report the transactions contemplated by this Agreement for United States federal
Income Tax and all other Tax purposes in a manner consistent with the allocation
determined pursuant to this Section 2.6. Each Buyer and the Seller will notify
and provide the other Parties with reasonable assistance in the event of an
examination, audit or other proceeding regarding the agreed-upon allocation of
the Purchase Price.

 

3. Representations and Warranties Concerning the Seller. The Seller represents
and warrants to each Buyer that the statements contained in this Section 3 are
correct and complete as of the date of this Agreement, except as set forth in
the disclosure schedule of the Seller (the “Seller’s Disclosure Schedule”)
attached to this Agreement.

 

  3.1 Organization of the Seller. The Seller is duly organized, validly existing
and in good standing under the laws of the State of Delaware.

 

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  3.2 Authorization of Transaction.

 

  (a) The Seller has full power and authority (including full entity power and
authority) to execute and deliver this Agreement and the Transaction Documents
to which it is a party, and to perform its obligations under this Agreement and
the Transaction Documents to which it is a party.

 

  (b) The Seller has duly authorized the execution, delivery and performance of
this Agreement and the Transaction Documents to which it is a party.

 

  (c) This Agreement and the Transaction Documents to which it is a party
constitute the valid and legally binding obligations of the Seller, enforceable
in accordance with their respective terms and conditions, subject, however, to
the effects of bankruptcy, insolvency, reorganization, moratorium or similar
Laws affecting creditor’s rights generally and to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).

 

  3.3 Noncontravention. Subject to obtaining or making, as applicable, all of
the Seller’s Required Consents and the Seller’s Required Regulatory Approvals,
neither the execution and the delivery of this Agreement or the Transaction
Documents to which it is a party, nor the consummation of the contemplated
transactions, will:

 

  (a) Violate any Law or Order applicable to the Seller, except where the
violation would not, individually or in the aggregate, materially adversely
affect the Seller’s ability to consummate the transactions contemplated by this
Agreement or have a Material Adverse Effect;

 

  (b) Violate any provision of the Seller’s limited liability company agreement
or other organizational documents; or

 

  (c) Conflict with, result in a breach of, constitute a default under, result
in the acceleration of, create in any party the right to accelerate, terminate,
modify or cancel, or require any notice under any agreement, contract, lease,
license, instrument or other arrangement to which the Seller is a party or by
which it is bound, or to which any of its assets is subject, except where the
violation, conflict, breach, default, acceleration, termination, modification,
cancellation or failure to give notice would not, individually or in the
aggregate, materially adversely affect the Seller’s ability to consummate the
transactions contemplated by this Agreement or have a Material Adverse Effect;
and without limiting the generality of the foregoing, the transactions
contemplated with this Agreement comply with the provisions of Section
5.02(e)(v) of the Common Terms Agreement and the Seller has obtained the board
approval and the appraisal required under Section 5.02(e)(v)(B) of the Common
Terms Agreement.

 

  3.4

Consents. The Seller need not give any notice to, make any filing with, or
obtain any authorization, consent or approval of, any Person (including any

 

14

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Governmental Authority) in order for it to consummate the transactions
contemplated by this Agreement and the Transaction Documents to which it is a
party, except for the Seller’s Required Consents and the Seller’s Required
Regulatory Approvals, and except for notices, filings, authorizations, consents
or approvals that, if not made or obtained, would not materially adversely
affect the Seller’s ability to consummate the transactions contemplated by this
Agreement or have a Material Adverse Effect.

 

  3.5 Ownership and Transfer of the Interests. Except as set forth in Section
3.5 of the Seller’s Disclosure Schedule, Seller is the record and beneficial
owner of the Interests, free and clear of any and all Encumbrances, and has made
no agreements or arrangements with respect to the sale, transfer or assignment
of any of the Interests other than this Agreement.

 

  3.6 Brokers’ Fees. There is no Liability to pay any fees or commissions to any
broker, finder or agent with respect to the transactions contemplated by this
Agreement for which any Buyer or the Company could become liable or obligated,
other than amounts (if any) arising by, through or under a Buyer.

 

4. Representations and Warranties Concerning the Company. The Seller represents
and warrants to each Buyer that the statements contained in this Section 4 are
correct and complete as of the date of this Agreement, except as set forth in
the Seller’s Disclosure Schedule.

 

  4.1 Organization, Qualification and Power. The Company is a limited liability
company duly organized, validly existing and in good standing under the laws of
the State of Delaware. The Company is duly authorized to conduct business and is
in good standing under the laws of the State of Illinois. The Company has full
power and authority to carry on the businesses in which it is engaged and to own
and use the properties owned and used by it. The Seller has made available to
the Buyers correct and complete copies of the governing documents of the Company
(as amended to date).

 

  4.2 Capitalization. The Interests represent all of the issued and outstanding
membership interests in the Company. All of the Interests have been duly
authorized and are validly issued, fully paid and nonassessable. Except as set
forth in Section 4.2 of the Seller’s Disclosure Schedule, The Seller owns all of
the Interests, free and clear of any restrictions on transfer (other than
restrictions under the Securities Act of 1933, as amended, and state securities
Laws), Taxes, Encumbrances (other than Permitted Encumbrances), options,
warrants, purchase rights, contracts, commitments, equities, claims and demands.
There are no outstanding or authorized options, warrants, purchase rights,
subscription rights, conversion rights, exchange rights or other contracts or
commitments that could require the Company to issue, sell or otherwise cause to
become outstanding any of its membership interests. The Company owns no equity
interest in any other Person.

 

15

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  4.3 Noncontravention. Except as set forth in Section 4.3 of the Seller’s
Disclosure Schedule, and subject to obtaining or making, as applicable, all of
the Seller’s Required Consents and the Seller’s Required Regulatory Approvals,
neither the execution and the delivery of this Agreement by the Seller, nor the
consummation of the contemplated transactions, will:

 

  (a) Violate any Law or Order applicable to the Company, except where the
violation would not, individually or in the aggregate, materially adversely
affect the Seller’s ability to consummate the transactions contemplated by this
Agreement or have a Material Adverse Effect;

 

  (b) Violate any provision of the articles, charter, limited liability company
agreement, partnership agreement, bylaws or other organizational documents of
the Company; or

 

  (c) Conflict with, result in a breach of, constitute a default under, result
in the acceleration of, create in any party the right to accelerate, terminate,
modify or cancel, or require any notice under any agreement to which the Company
is a party or by which it is bound, except where the violation, conflict,
breach, default, acceleration, termination, modification, cancellation or
failure to give notice would not, individually or in the aggregate, materially
adversely affect the Seller’s ability to consummate the transactions
contemplated by this Agreement or have a Material Adverse Effect.

 

  4.4 Consents. The Company need not give any notice to, make any filing with,
or obtain any authorization, consent or approval of, any Person (including any
Governmental Authority) in order for the Seller to consummate the transactions
contemplated by this Agreement and the Transaction Documents to which the Seller
is a party, except for the Seller’s Required Consents and the Seller’s Required
Regulatory Approvals, and except for notices, filings, authorizations, consents
or approvals that, if not made or obtained, would not, individually or in the
aggregate, materially adversely affect the Seller’s ability to consummate the
transactions contemplated by this Agreement or have a Material Adverse Effect.

 

  4.5 Title to Assets. Without limiting the provisions of Section 4.8, and
except as set forth in Section 4.5 of the Seller’s Disclosure Schedule, the
Company has good and valid title to, or a valid leasehold interest in, the
Facility and the other properties and assets (tangible and intangible) reflected
in the balance sheet for June 30, 2004 included in the Company Financial
Statements, and holds such properties and assets free and clear of all
Encumbrances (other than Permitted Encumbrances). The rights, properties and
other assets presently owned, leased or licensed by the Company include all such
rights, properties and other assets as are necessary to permit the Company to
conduct its business in the same manner as such business as currently conducted
and was conducted in the periods covered by the Company Financial Statements
except where the absence of such rights, properties or assets would not have a
Material Adverse Effect.

 

16

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  4.6 Books and Records. The minute books and other similar records of the
Company have been made available to Buyers prior to the execution of this
Agreement and contain a true and complete record, in all material respects, of
all action taken at all meetings and by all written consents in lieu of meetings
of the stockholders, members, boards of directors and similar governing bodies
of the Company. The membership interest transfer ledgers or other similar
records of the Company as made available to Buyers prior to the execution of
this Agreement accurately reflect all transfers of the membership interests of
the Company made prior to the date of this Agreement. The maintenance records
for the Facility set forth in Section 4.6 of the Seller’s Disclosure Schedule
are true and complete as to the matters set forth thereon in all material
respects.

 

  4.7 Tax Matters. Except as described in Section 4.7 of the Seller’s Disclosure
Schedule:

 

  (a) All Tax Returns of the Company or with respect to the assets or activities
of the Company have been timely filed with the appropriate tax authorities in
the jurisdictions in which such Tax Returns are required to be filed, except
where the failure timely to file would not have a Material Adverse Effect. All
Taxes shown on such Tax Returns as owing have been timely paid. All such Tax
Returns are correct and complete in all material respects.

 

  (b) All material Tax deficiencies asserted or assessed against the Company or
with respect to the assets or activities of the Company have been resolved and
paid in full.

 

  (c) Neither the Seller nor the Company has waived any statute of limitations
in respect of Taxes of the Company or with respect to the assets or activities
of the Company or agreed to any extension of time with respect to a Tax
assessment or deficiency against the Company or with respect to the assets or
activities of the Company which waiver or extension remains in effect.

 

  (d) The Company (and any predecessors thereto) has qualified as, and been
treated as, disregarded as an entity separate from its owner for United States
federal and Illinois state Income Tax purposes at all times since the date of
its formation on February 26, 1998.

 

  (e)

Since December 31, 2003, neither the Seller nor the Company has (i) changed any
financial or Tax accounting methods, policies or practices of the Company or
with respect to the assets or activities of the Company, except as required by a
change in GAAP or SEC rules, regulations or guidelines or applicable law, (ii)
made, revoked, or amended any Tax election of the Company or with respect to the
assets or activities of the Company, (iii) filed any amended Tax Return or claim
for refund of the Company or with respect to the assets or activities of the
Company, (iv)

 

17

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entered into any closing agreement affecting any Tax liability or refund of the
Company or with respect to the assets or activities of the Company, or (v)
settled or compromised any Tax liability or refund of the Company or with
respect to the assets or activities of the Company.

 

  (f) There are no audits, claims, assessments, levies, administrative or
judicial proceedings pending, or to Seller’s Knowledge, threatened, proposed or
contemplated against the Company, or with respect to the assets or activities of
the Company, by any Tax authority.

 

  (g) There are no liens for Taxes on any assets of the Company except for Taxes
not yet due and payable.

 

  (h) The Company is not a party to, bound by or have any obligation under, any
Tax allocation, Tax sharing, Tax indemnity or similar agreement, arrangement or
understanding.

 

  (i) The Company has withheld and paid all Taxes required to have been withheld
and paid in connection with amounts paid or owing to any employee, independent
contractor, creditor, member or other third party.

 

  (j) None of the assets of the Company are (i) required, pursuant to section
168(g) of the Code, to be depreciated under the “alternative depreciation
system” within the meaning of section 168(g)(2) of the Code, or (ii) subject to
the provisions of section 168(f) of the Code.

 

  4.8 Real Property.

 

  (a) Except as set forth in Section 4.8(a) of Seller’s Disclosure Schedule, the
Company has good and indefeasible fee simple title to the Owned Real Property,
free and clear of all Encumbrances, other than Permitted Encumbrances. The Owned
Real Property is the only real property owned by the Company. The Seller has
made available to the Buyers a correct and complete copy of the Title Policy.
The exceptions listed in the Title Policy do not and will not have a Material
Adverse Effect on the Facility and related off-Site improvements and their use,
operation and maintenance in accordance with past practices.

 

  (b) The Other Real Property Rights constitute all leases, easements,
rights-of-way and other rights of the Company to use real property owned by
Persons other than the Company. The Other Real Property Rights are in full force
and effect, and except as set forth in Section 4.8(b) of the Seller’s Disclosure
Schedule, the Seller holds the Other Real Property Rights free and clear of all
Encumbrances, other than Permitted Encumbrances.

 

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  (c) Except as set forth in Section 4.8(c) of the Seller’s Disclosure Schedule,
(i) the Site is the only real property in which the Company has any ownership,
leasehold or other interest, (ii) to Seller’s Knowledge there is no proposed
special assessment that would affect the Site, (iii) to Seller’s Knowledge there
are no claims, causes of action, lawsuits or proceedings pending or threatened
regarding the ownership, use or possession of the Site, including condemnation
or similar proceedings, or regarding the Company’s right to use utilities used
or otherwise reasonably necessary to operate the Facility, (iv) the Facility is
located entirely on Owned Real Property (other than off-Site improvements
required to connect the Facility with the electric transmission grid and with
natural gas pipelines, which are properly located on Other Real Property Rights)
and the Company’s rights in the Site are sufficient to permit the continued
presence, use, operation and maintenance of the Facility and such related
off-Site improvements, and (v) no portion of the Site is leased, subleased or
licensed by the Company to any other Person.

 

  4.9 Legal Compliance. Except where failure to do so would not, individually or
in the aggregate, have a Material Adverse Effect, each of the Company and its
Affiliates has since May 4, 2001, and to the Knowledge of the Seller before that
time, complied in a timely manner with all Laws and Orders of all United States
federal, state, local, foreign governments and agencies thereof that affect the
business, properties or assets of the Company. No notice, charge, claim, action
or assertion has been received by the Company or has been filed, commenced or,
to the Knowledge of the Seller, threatened in writing against the Company
alleging any violation of any of the foregoing, except for violations that would
not, individually or in the aggregate, have a Material Adverse Effect.

 

  4.10 Environmental Matters. Except as set forth on Section 4.10 of the
Seller’s Disclosure Schedule:

 

  (a) The Company has been and is in material compliance with Environmental Laws
and Environmental Permits.

 

  (b) There are no pending or, to the Seller’s Knowledge, threatened claims,
demands, actions, notices of noncompliance, administrative proceedings, lawsuits
or investigations or outstanding Orders against the Company under any
Environmental Laws, claiming any personal injury, property damage or other harm
allegedly resulting from the Release of or exposure to Hazardous Substances, or
arising from any activities not in compliance with any Environmental Laws.

 

  (c)

The Company has not received any written notice or request for information
indicating that it is a potentially responsible party under CERCLA or any
similar state law with respect to the Site, any real property adjacent to the
Site or any Off-Site Location, or any written

 

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notice of any Governmental Authority’s allegation or investigation of any
criminal or civil violations by the Company of any Environmental Laws.

 

  (d) The Company holds all Environmental Permits needed to operate the Facility
as it is being operated as of the date of this Agreement. All such Environmental
Permits are in effect and no appeal nor any other action is pending to revoke
any such permit. To the extent required by applicable Environmental Laws, the
Company has filed (or will have filed by the Closing Date) all applications
necessary to renew or obtain any necessary Environmental Permits in a timely
fashion so as to allow the Company to continue to operate its business and the
Facility in compliance with applicable Environmental Laws, and the Company does
not have reason to know that such new or renewed Environmental Permits will
include any terms or conditions that will be more stringent than the terms and
conditions of existing Environmental Permits, except for such applications,
terms and conditions that would not, individually or in the aggregate, have a
Material Adverse Effect.

 

  (e) The Seller has heretofore delivered to the Buyers true and complete copies
of all material environmental studies, audits and assessment reports in its
possession or prepared on its behalf and made in the last seven years relating
to the Site or the construction or operations of the Facility.

 

  (f) The Company has not and to the Seller’s Knowledge, no other Person has,
Released any Hazardous Substances on, beneath or adjacent to the Site, or any
real property formerly owned or operated by the Company, except for Releases of
Hazardous Substances that are not reasonably likely to result in a claim against
the Company under Environmental Laws.

 

  (g) To the Seller’s Knowledge, the Facility does not contain toxic or
hazardous mold that would require remediation in order to protect the health of
individuals working at the Facility.

 

  (h) All of the emissions allowances for present or future years allocated to
the Company with respect to the Facility remain in the Company’s relevant
federal or state compliance accounts, other than allowances that have previously
been used by the Company for purposes of demonstrating the Facility’s compliance
with applicable Environmental Laws, and the Company has not entered into any
agreement with any Person (including Affiliates of the Company) to sell,
transfer or other otherwise convey emissions allowances that have been issued to
it, that will or may be issued to it in the future, or that have been acquired
by the Company prior to August 20, 2004, other than sales of emissions
allowances that have been completed prior to August 20, 2004.

 

  (i)

With the exception of those set forth in Sections 4.21 and 4.22, the only
representations and warranties given by Seller in respect to environmental

 

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matters are those contained in this Section 4.10, and none of the other
representations and warranties given by Seller in this Agreement other than
those set forth in Sections 4.21 and 4.22 will be deemed to constitute, directly
or indirectly, a representation or warranty in respect of any matter relating to
Environmental Laws or Environmental Permits.

 

  4.11 Powers of Attorney. There are no outstanding powers of attorney executed
on behalf of the Company.

 

  4.12 Litigation. There is no claim, action, proceeding or investigation
pending or, to the Seller’s Knowledge, threatened in writing against the Company
before any Governmental Authority, or any Order, other than such matters that
would not, individually or in the aggregate, have a Material Adverse Effect or
that would delay or prevent the consummation of the transactions contemplated by
this Agreement.

 

  4.13 Employment Matters.

 

  (a) Other than services by employees of the Seller or its Affiliates provided
under the agreements and arrangements set forth on Section 4.19 of the Seller’s
Disclosure Schedule, the only individuals who are employed to provide services
in respect of the Company are employed by the Company.

 

  (b) Neither the Company nor any other Person is a party to any employment
agreement with any Employee in respect of employment with the Company.

 

  (c) There is not presently pending or existing any strike, slowdown,
picketing, work stoppage or employee grievances in process, or any proceeding
against or affecting the Company relating to the alleged violation of any Law
pertaining to labor relations or employment matters, and, to the Seller’s
Knowledge, none of the foregoing is threatened.

 

  (d) The Company is not and since May 4, 2001, and to the Knowledge of the
Seller before that time, has not been a party to or bound by any collective
bargaining or similar agreement with any labor organization or work rules or
practices agreed to with any labor organization or employee association
applicable to the Employees. Since May 4, 2001, and to the Knowledge of the
Seller before that time, no labor union has been certified by the National Labor
Relations Board as bargaining agent for any of the Employees, no notice has been
received from any labor union stating that it has been designated as the
bargaining agent for any of the Employees, and no petition has been filed by any
labor union requesting an election to determine whether or not it is the
exclusive bargaining agent for any of the Employees.

 

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  (e) The Company has complied with all provisions of Law pertaining to the
employment of employees, including such Laws relating to labor relations, equal
employment and fair employment practices, except for any noncompliance that
would not, individually or in the aggregate, have a Material Adverse Effect.

 

  (f) Section 4.13(f) of the Seller’s Disclosure Schedule sets forth a true and
complete list of (i) the names and current salaries of all directors and elected
and appointed officers of the Company, and the family relationships, if any,
among such individuals, (ii) the wage rates for non-salaried and non-executive
salaried employees of the Company by classification, and (iii) all group
insurance programs in effect for employees of the Company. The Company is not in
default with respect to any of its obligations referred to in the preceding
sentence.

 

  (g) No Employee has notified the Company in writing that he plans to terminate
employment with the Company during the 12 months following the date of this
Agreement.

 

  4.14 Employee Benefits.

 

  (a) Section 4.14(a) of the Seller’s Disclosure Schedule lists each Employee
Benefit Plan that the Company sponsors or maintains, or to which the Company (or
any trade or business, whether or not incorporated, that together with the
Company would be deemed a “single employer” within the meaning of Section
4001(b) of ERISA or Section 414 of the Code (an “ERISA Affiliate”)) contributes
or has any obligation to contribute, that covers any Employee or any individual
formerly employed by the Company (collectively, the “Allegheny Employee Benefit
Plans”). With respect to each of the Allegheny Employee Benefit Plans, the
Seller has delivered or made available to the Buyers complete copies of each of
the following documents: (i) the governing plan document and any funding
instrument established thereunder; (ii) the most recent annual report and
actuarial report, if required under ERISA or the Code, and, if separate, the
most recent financial statement; (iii) the most recent Summary Plan Description,
together with each Summary of Material Modifications, to the extent such
summaries are required under ERISA; and (iv) the most recent determination
letter received from the Internal Revenue Service with respect to each of the
Allegheny Employee Benefit Plans that is intended to be qualified under Section
401(a) of the Code.

 

  (b)

Each of the Allegheny Employee Benefit Plans has been operated and administered
in accordance with its terms and the applicable requirements of ERISA, the Code
and other Laws, except where the noncompliance would not, individually or in the
aggregate, have a Material Adverse Effect. Except as set forth in Section
4.14(b) of the Seller’s Disclosure Schedule, there are no pending or, to the
Seller’s Knowledge, threatened

 

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claims by or on behalf of any of the Allegheny Employee Benefit Plans, by any
Employee or any beneficiary of any such Allegheny Employee Benefit Plan or
otherwise involving any such Allegheny Employee Benefit Plan (other than routine
claims for benefits).

 

  (c) All contributions (including all employer contributions and employee
salary reduction contributions) that are due from the Company or any Employee or
former employee of the Company have been paid to each Allegheny Employee Benefit
Plan, and all contributions for any period ending on or before the Closing Date
that are not yet due from the Company or any Employee or former employee of the
Company have been paid to each Allegheny Employee Benefit Plan or accrued in
accordance with the past custom and practice of the Company and the Allegheny
Employee Benefit Plans. All premiums or other payments due from the Company for
all periods ending on or before the Closing Date have been paid with respect to
each Allegheny Employee Benefit Plan that is an Employee Welfare Benefit Plan.

 

  (d) No liability under Title IV of ERISA has been incurred by the Company or
any ERISA Affiliate that has not been satisfied in full, and, to the Seller’s
Knowledge, no condition exists that presents a material risk to the Company of
incurring a liability under such Title. No Allegheny Employee Benefit Plan
subject to the minimum funding requirements of Section 412 of the Code or
Section 302 of ERISA or any trust established thereunder has incurred any
“accumulated finding deficiency” (as defined in Section 302 of ERISA or Section
412 of the Code), whether or not waived, as of the last day of the most recently
ended fiscal year of such Allegheny Employee Benefit Plan, and all contributions
as of the date hereof and as of the Closing Date required to be made with
respect thereto (whether pursuant to the terms of such Allegheny Employee
Benefit Plan or by Law) have been made.

 

  (e) No Allegheny Employee Benefit Plan is a multiemployer plan within the
meaning of Section 3(37) or 4001(a)(3) of ERISA, and neither the Company nor any
ERISA Affiliate has contributed to or been obligated to contribute to any such
multiemployer plan covering one or more Employees or former employees of the
Company during the preceding six years. No Allegheny Employee Benefit Plan is a
plan described in Section 4063(a) of ERISA.

 

  (f) Each Allegheny Employee Benefit Plan intended to be “qualified” within the
meaning of Section 401(a) of the Code has received a favorable determination
letter from the Internal Revenue Service as to its qualification under said
Section 401(a), and, to the Seller’s Knowledge, no event has occurred that is
likely to result in the disqualification of such Allegheny Employee Benefit
Plan.

 

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  (g) Except as set forth in Section 4.14(g) of the Seller’s Disclosure
Schedule, the consummation of the transactions contemplated by this Agreement
will not, whether alone or together with any other event, (i) entitle any
Employee or any other individual formerly employed by the Company to severance
pay, unemployment compensation or any other payment, or (ii) accelerate the time
of payment or vesting, or increase the amount of compensation due any such
Employee or other individual.

 

  (h) Except as set forth in Section 4.14(h) of the Seller’s Disclosure
Schedule, no Allegheny Employee Benefit Plan provides benefits, including
without limitation death or medical benefits (whether or not insured), with
respect to current or former Employees beyond their retirement or other
termination of service, other than (i) coverage mandated solely by applicable
Law, (ii) death benefits or retirement or other termination of employment
benefits under any “employee pension benefit plan,” as defined in Section 3(2)
of ERISA, or (iii) disability benefits.

 

  (i) To the Seller’s Knowledge, neither the Seller nor any other Person has
engaged in a transaction with respect to any Allegheny Employee Benefit Plan
that, assuming the taxable period of such transaction expired as of the date of
this Agreement, could subject the Company or any Employee to a Tax or penalty
imposed by either Section 4975 of the Code or Section 502(i) of ERISA in respect
of any Allegheny Employee Benefit Plan.

 

  (j) There has been no amendment to, announcement by the Company, the Parent or
any of their Affiliates relating to, or change in employee participation or
coverage under, any Allegheny Employee Benefit Plan which would increase
materially the aggregate benefits provided to any Employee under such Allegheny
Employee Benefit Plan above the level of the aggregate benefits provided
thereunder for the most recent fiscal year.

 

  4.15 Intellectual Property. Except as disclosed in Section 4.15 of the
Seller’s Disclosure Schedule:

 

  (a) The Company owns or has the valid right to use pursuant to license,
sublicense, agreement or permission, in each case free and clear of all
Encumbrances other than Permitted Encumbrances, all Company Intellectual
Property.

 

  (b)

The conduct of the businesses of the Seller (as it relates to the Facility and
the Company) and of the Company as currently conducted, to the Seller’s
Knowledge, does not infringe upon or misappropriate any Intellectual Property of
any third party, and neither the Seller nor the Company has received written
notice by any Person of any pending or threatened claims, suits, actions,
mediations, arbitrations, orders or other adversarial proceedings (i) alleging
infringement (or other violation) by the Seller (except where such violation
would not have a Material Adverse Effect) or

 

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the Company of Intellectual Property or other rights of any Person, or (ii)
challenging the Seller’s or the Company’s ownership or use of, or the validity,
enforcement, registrability or maintenance of, any Company Intellectual
Property.

 

  (c) To the Seller’s Knowledge, no Person is infringing upon or otherwise
violating any Company Intellectual Property.

 

  (d) To the Seller’s Knowledge, the use by the Company of any Company
Intellectual Property is, except as would be immaterial, in accordance with any
and all applicable grants, licenses, agreements, instruments or other
arrangements pursuant to which the Company acquired the right to use such
Company Intellectual Property.

 

  (e) The Company has not entered into and is not bound by any consents, Orders,
indemnifications, forbearances to sue, settlement agreements, licenses or other
arrangements that (i) restrict the Company’s right to use any Company
Intellectual Property, (ii) restrict the business of the Company in order to
accommodate a third Person’s Intellectual Property rights, or (iii) permit any
third party to use any Company Intellectual Property.

 

  4.16 Contracts. Section 4.16 of the Seller’s Disclosure Schedule lists all
Material Agreements. Neither the Company nor, to the Seller’s knowledge, the
other party to any of the Material Agreements is in breach or default under, and
to the Seller’s Knowledge no event has occurred that, with notice or lapse of
time, would constitute a breach or default or permit termination, modification
or acceleration of, any Material Agreements, except for such breaches, defaults
or events as to which requisite waivers have been, or prior to the Closing will
have been, obtained or that would not, individually or in the aggregate, have a
Material Adverse Effect. The Seller has made available to the Buyers a correct
and complete copy of each Material Agreement listed in Section 4.16 of the
Seller’s Disclosure Schedule.

 

  4.17 Permits. The Company holds and is in material compliance with all Permits
that are required to own or operate the Facility as operated on the date of this
Agreement, except for such failures to hold or comply that would not,
individually or in the aggregate, have a Material Adverse Effect. Each Permit is
in full force and effect, the Company is in compliance in all material respects
with all of its obligations with respect thereto, and no event has occurred and
is continuing which allows, or with or without the giving of notice or the
passage of time or both would allow, the revocation or termination of any
permit.

 

  4.18 Brokers’ Fees. The Company has no Liability to pay any fees or
commissions to any broker, finder or agent with respect to the transactions
contemplated by this Agreement, other than those (if any) by, through or under
Buyers.

 

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  4.19 Transactions with Affiliates. Section 4.19 of the Seller’s Disclosure
Schedule lists all contracts and agreements between the Company, on one hand,
and any of the Seller or its Affiliates, on the other.

 

  4.20 Regulatory.

 

  (a) The Company is not subject to regulation as an “electric utility”,
“electric corporation”, “electrical company”, “public utility”, “holding
company”, “public utility holding company” or “public service corporation” or
the equivalent under any Law or PUHCA or any rule, regulation, order or
interpretation of any Governmental Entity with respect to PUHCA.

 

  (b) None of Seller, the Company nor any of their Affiliates is an “investment
company” or a company “controlled” by an “investment company” within the meaning
of the Investment Company Act of 1940, as amended, or an “investment advisor”
within the meaning of the Investment Company Act of 1940, as amended.

 

  (c) The Project is an “eligible facility” under Section 32(a) of PUHCA and the
FERC regulations implemented thereunder and all administrative and judicial
precedent relating to them. The Parent is a “registered holding company” and is
subject to regulation under PUHCA; however, the Company was determined by FERC’s
staff, acting on delegated authority, to be an exempt wholesale generator within
the meaning of Section 32 of PUHCA by Order dated March 2, 2000 in Docket No.
EG00-80-000. The Company and the Facility have met, and will continue to meet
until the consummation of the Transaction at the Closing, all applicable
requirements for the maintenance of such status.

 

  (d) On January 25, 2001 in Docket No. ER01-623-000, the Company obtained an
Order from the FERC staff, acting on delegated authority, accepting for filing
the Project Company’s Market-Based Rate tariff and granting waivers and blanket
approvals under the Federal Power Act. The Market-Based Rate Order is a final,
non-appealable order.

 

  4.21 Financial Statements.

 

  (a) The Seller has made available to the Buyers the financial statements in
Section 4.21 of the Seller’s Disclosure Schedule (collectively, the “Company
Financial Statements”). The Company Financial Statements have been prepared in
accordance with GAAP (without footnotes) applied on a consistent basis, and
present fairly in all material respects the financial condition and results of
operations of the Company as of the dates of the particular Company Financial
Statements.

 

  (b)

Since June 30, 2004, the Company has conducted its business only in the Ordinary
Course of Business, and the Company has not suffered any Material Adverse Effect
or, other than as set forth in Section 4.21(b) of the

 

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Seller’s Disclosure Schedule, engaged in any action of the type described in
Section 6.3.

 

  (c) To the Seller’s Knowledge, the financial and accounting records regarding
operations of the Facility set forth in Section 4.21(c) of the Seller’s
Disclosure Schedule are true and complete as to the matters set forth thereon in
all material respects.

 

  4.22 Undisclosed Liabilities. The Company has no Liabilities that are required
to be reflected in a balance sheet prepared in accordance with GAAP which would,
individually or in the aggregate, have a Material Adverse Effect, except for (a)
Liabilities reflected or reserved against in the Company Financial Statements;
or (b) Liabilities that have arisen in the Ordinary Course of Business after
June 30, 2004; (c) Liabilities described in Section 4.22 of the Seller’s
Disclosure Schedule; or (d) Liabilities arising under Material Agreements.

 

  4.23 No Guarantees. The Company has no indebtedness for borrowed money, other
than trade payables incurred in the Ordinary Course of Business and payables to
Seller or its Affiliates that will be extinguished as of the Closing.

 

  4.24 Insurance. Section 4.24 of the Seller’s Disclosure Schedule sets forth
(a) a true list and description of applicable insurance policies, other
insurance arrangements and other contracts or arrangements for the transfer or
sharing of insurance risks by the Company, together with a statement regarding
the impairment or likely impairment of each such insurance policy or other
arrangement through the date hereof, (b) coverages and deductible for fire and
casualty, general liability and workers compensation under those policies, (c) a
description of such risks that the Company, or its directors, managers or
officers, have designated as being self-insured and (d) a true and complete list
of all outstanding claims for medical expenses in excess of $10,000 made by or
with respect to any single Employee (but not including the identity of such
Employee). All such policies are in full force and effect, subject to the terms
of each policy, all premiums due with respect thereto covering all periods up to
and including the date as of which this representation is being made have been
paid (other than retroactive premiums which may be payable with respect to
comprehensive general liability and worker’s compensation insurance policies),
and no notice of cancellation or termination has been received with respect to
any such policy which was not replaced on substantially similar terms prior to
the date of such cancellation. During the 12 months preceding the date of this
Agreement, neither the Company nor any of its Affiliates has been refused any
insurance, or had any coverage limited, on account of conditions or events
involving the Company or the Facility.

 

  4.25 Due Diligence Materials.

 

  (a) All of the Due Diligence Materials that are photostatic, facsimile or
electronic copies conform in all material respects with the original documents.

 

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  (b) The financial records attached to Section 4.25(b) of the Seller’s
Disclosure Schedule present fairly in all material respects the matters set
forth thereon.

 

  4.26 No Other Business. The Company has never engaged in any business other
than the development, construction, ownership, operation and financing of the
Facility.

 

  4.27 Bank Accounts. As of the Closing Date, the Company will have no safe
deposit boxes, checking accounts or other accounts of any nature.

 

  4.28 Disclaimer of Other Representations and Warranties.

 

  (a) EXCEPT FOR THOSE REPRESENTATIONS AND WARRANTIES EXPRESSLY SET FORTH IN
SECTION 4 OF THIS AGREEMENT, THE SELLER MAKES NO REPRESENTATIONS OR WARRANTIES
OF ANY KIND OR NATURE, EXPRESS OR IMPLIED, AS TO THE INTERESTS OR THE PROPERTIES
OR ASSETS OF THE COMPANY OR THE FACILITY, THE OPERATIONS OF THE FACILITY, OR THE
PROSPECTS (FINANCIAL AND OTHERWISE), RISKS AND OTHER INCIDENTS OF THE FACILITY,
INCLUDING WITHOUT LIMITATION WITH RESPECT TO THE ACTUAL OR RATED GENERATING
CAPABILITY OF THE FACILITY OR THE ABILITY OF THE BUYERS TO GENERATE OR SELL
ELECTRICAL ENERGY.

 

  (b) WITHOUT LIMITING THE FOREGOING, AND EXCEPT FOR THOSE REPRESENTATIONS AND
WARRANTIES EXPRESSLY SET FORTH IN SECTION 4 OF THIS AGREEMENT, THE SELLER MAKES
NO REPRESENTATIONS OR WARRANTIES OF MERCHANTABILITY, USAGE OR SUITABILITY OR
FITNESS FOR ANY PARTICULAR PURPOSE WITH RESPECT TO THE PROPERTIES OR ASSETS OF
THE COMPANY OR THE FACILITY, OR ANY PART THEREOF, OR AS TO THE WORKMANSHIP
THEREOF, OR THE ABSENCE OF ANY DEFECTS THEREIN, WHETHER LATENT OR PATENT, OR
COMPLIANCE OF SUCH PROPERTIES OR ASSETS WITH ANY LAWS, INCLUDING WITHOUT
LIMITATION ENVIRONMENTAL LAWS, OR AS TO THE CONDITION OF THE PROPERTIES OR
ASSETS OF THE COMPANY OR THE FACILITY, OR ANY PART THEREOF, OR AS TO THE ABSENCE
OF HAZARDOUS SUBSTANCES OR LIABILITY OR POTENTIAL LIABILITY UNDER ENVIRONMENTAL
LAWS WITH RESPECT TO THE COMPANY OR THE FACILITY. ANY SUCH OTHER REPRESENTATIONS
AND WARRANTIES ARE HEREBY EXPRESSLY DISCLAIMED.

 

  (c) EXCEPT FOR THOSE REPRESENTATIONS AND WARRANTIES EXPRESSLY SET FORTH IN
SECTION 4 OF THIS AGREEMENT, THE PROPERTIES AND ASSETS OF THE COMPANY, THE
FACILITY AND THE INTERESTS ARE SOLD “AS IS, WHERE IS” ON THE CLOSING DATE, AND
IN THEIR CONDITION ON THE CLOSING DATE “WITH ALL FAULTS.”

 

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5. Representations and Warranties Concerning the Buyers. Each Buyer represents
and warrants to the Seller that the statements contained in this Section 5 are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date, except as set forth in the disclosure schedule
of the Buyers (the “Buyers’ Disclosure Schedule”) attached to this Agreement.

 

  5.1 Organization of the Buyers. That Buyer is a limited liability company duly
organized, validly existing and in good standing under the laws of the State of
Delaware.

 

  5.2 Authorization of Transaction.

 

  (a) That Buyer has full power and authority to execute and deliver this
Agreement and the Transaction Documents to which it is a party, and to perform
its obligations under this Agreement and the Transaction Documents to which it
is a party.

 

  (b) That Buyer has duly authorized the execution, delivery and performance of
this Agreement and the Transaction Documents to which it is a party.

 

  (c) This Agreement and the Transaction Documents to which it is a party
constitute the valid and legally binding obligations of that Buyer, enforceable
in accordance with their respective terms and conditions, subject, however, to
the effects of bankruptcy, insolvency, reorganization, moratorium or similar
Laws affecting creditor’s rights generally and to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).

 

  5.3 Noncontravention. Subject to obtaining or making, as applicable, all of
the Buyers’ Required Consents and the Buyers’ Required Regulatory Approvals,
neither the execution and the delivery of this Agreement or the Transaction
Documents to which that Buyer is a party, nor the consummation of the
contemplated transactions, will:

 

  (a) Violate any Law or Order applicable to that Buyer, except where the
violation would not, individually or in the aggregate, have any change or effect
that is reasonably likely to be materially adverse to that Buyer’s ability to
consummate the transactions contemplated by this Agreement;

 

  (b) Violate any provision of that Buyer’s articles, charter, limited liability
company agreement, bylaws or other organizational documents or governance
provisions; or

 

  (c) Conflict with, result in a breach of, constitute a default under, result
in the acceleration of, create in any party the right to accelerate, terminate,
modify or cancel, or require any notice under any material agreement, contract,
lease, license, instrument or other arrangement to which that Buyer is a party
or by which it is bound or to which any of its assets is

 

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subject, except where the violation, conflict, breach, default, acceleration,
termination, modification, cancellation or failure to give notice would not,
individually or in the aggregate, have any change or effect that is reasonably
likely to be materially adverse to that Buyer’s ability to consummate the
transactions contemplated by this Agreement.

 

  5.4 Consents. To that Buyer’s Knowledge, that Buyer need not give any notice
to, make any filing with, or obtain any authorization, consent or approval of,
any Person (including any Governmental Authority) in order to consummate the
transactions contemplated by this Agreement and the Transaction Documents to
which it is a party, except for the Buyers’ Required Consents and the Buyers’
Required Regulatory Approvals, and except for notices, filings, authorizations,
consents or approvals that, if not made or obtained, would not materially
adversely affect that Buyer’s ability to consummate the transactions
contemplated by this Agreement.

 

  5.5 Brokers’ Fees. That Buyer has no Liability to pay any fees or commissions
to any broker, finder or agent with respect to the transactions contemplated by
this Agreement for which the Seller could become liable or obligated.

 

  5.6 Investment. That Buyer is an accredited investor within the meaning of
Rule 501 of Regulation D promulgated under the Securities Act of 1933, as
amended. That Buyer will acquire the Interests for its own account for the
purpose of investment and not with a view towards the resale, transfer or
distribution of the Interests in violation of the Securities Act of 1933, as
amended, or other applicable federal or state securities or blue sky Laws.

 

  5.7 Financing. That Buyer has sufficient cash, available lines of credit or
other sources of funds to enable it to make payment of its Buyer’s Percentage of
the Purchase Price and of all other amounts payable pursuant to this Agreement
and to perform all of its other obligations under this Agreement and the
Transaction Documents within the time contemplated by this Agreement.

 

  5.8 Litigation. There is no claim, action, proceeding or investigation pending
or, to that Buyers’ Knowledge, threatened against or relating to that Buyer or
its Affiliates before any Governmental Authority, or any judgment, decree or
Order of any Governmental Authority, that would delay or prevent the
consummation of the transactions contemplated by this Agreement.

 

  5.9 No Knowledge of Certain Conditions. To that Buyer’s Knowledge, and
assuming the accuracy of the Seller’s representations and warranties in this
Agreement, the Parties’ compliance with their obligations under this Agreement,
and the making or obtaining, as applicable, of all Buyers’ Required Consents and
Seller’s Required Consents, no condition or circumstance exists as of the date
of this Agreement that will excuse that Buyer from its timely performance of its
obligations under this Agreement.

 

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  5.10 Due Diligence Investigation and Other Acknowledgements.

 

  (a) That Buyer acknowledges and agrees that it has fully conducted and is
relying exclusively upon the Seller’s representations and warranties in this
Agreement and its own inspections and investigation in order to satisfy itself
as to the condition and suitability of the business, inventories, assets, real
and personal properties, Liabilities, results of operations, condition
(financial or otherwise) and prospects of the Company and the Facility. In
addition, that Buyer acknowledges that it has reviewed, or has had the
opportunity to review, all of the Due Diligence Materials to its full and
complete satisfaction.

 

  (b) That Buyer acknowledges and agrees that, except as provided in this
Agreement, the Seller makes no representations or warranties (express, implied,
at common law, statutory or otherwise) with respect to the accuracy or
completeness of the Due Diligence Materials now, previously or hereafter made
available to that Buyer in connection with this Agreement (including any
description of the Company or the Facility, revenue, price and expense
assumptions, electricity demand forecasts or environmental information), or of
any other information furnished to that Buyer by the Seller or its
Representatives.

 

6. Pre-Closing Covenants. The Parties agree as follows with respect to the
period between the execution of this Agreement and the Closing.

 

  6.1 General. Each of the Parties will use Commercially Reasonable Efforts to
take all action and to do all things necessary, proper or advisable in order to
consummate and make effective the transactions contemplated by this Agreement
(including satisfaction, but not waiver, of the Closing conditions set forth in
Section 8 of this Agreement). No Party will, without the prior written consent
of the other Party, take any action, or refrain to take any action, where such
action or failure to take action might reasonably be expected to prevent or
materially impede, interfere with or delay the transactions contemplated by this
Agreement.

 

  6.2 Notices and Consents.

 

  (a)

Each Buyer and the Seller will (and the Seller will cause the Company to) give
any notices to, make any filings with, and use Commercially Reasonable Efforts
to obtain any consents of any third party necessary in connection with the
transactions contemplated by this Agreement, including the Buyers’ Required
Consents and the Seller’s Required Consents, as applicable, and the Exelon
Consent. Each Buyer will use Commercially Reasonable Efforts to obtain such
consents and agreements with Persons to which the Buyers or the Company pledge,
assign, or grants a security interest in its right, title, and interest in and
to the Exelon Agreements (as defined in the Exelon Consent) in customary form
that such Persons reasonably may request in connection with any financing

 

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that will close at or promptly after the Closing and that do not adversely
affect Exelon’s rights under the Exelon Agreements. If each of the Exelon
Consent and the consents and agreements described in the immediately preceding
sentence has not been executed and delivered by all parties to it within 60 days
after the filing of the application for the approval listed as item 1 on Section
1(b) of the Seller’s Disclosure Schedule, the Seller may terminate this
Agreement pursuant to Section 11.1(i) of this Agreement by providing written
notice of termination to each Buyer; provided, however, that the Seller shall
not be entitled to so terminate this Agreement in the event the Seller has
breached its obligations under Section 6.6 hereof, and any notice of termination
delivered pursuant to this Section 6.2(a) shall include a certificate executed
and delivered by the Seller to the effect that the Seller has not breached its
obligations under Section 6.6 hereof.

 

  (b) Unless such a filing is not required, as promptly as practicable after the
date of this Agreement, each of the Parties will file any Notification and
Report Forms and related material that it may be required to file with the
Federal Trade Commission and the Antitrust Division of the United States
Department of Justice under the HSR Act, will use Commercially Reasonable
Efforts to obtain an early termination of the applicable waiting period and will
make (and the Seller will cause the Company to make) any further filings that
may be necessary, proper or advisable relating to the HSR Act. Each of the
Parties will cooperate and coordinate with the other Party in connection with
such filings and actions. Each Party will bear its own costs of the preparation
of any such filings, and Seller and Buyers each will pay one-half of the entire
amount of the filing fee with respect to all filings made pursuant to the HSR
Act and Buyers will bear all costs associated with any experts or consultants
reasonably necessary in connection with such filings.

 

  (c) As promptly as practicable after the date of this Agreement, each Buyer
and the Seller will (and the Seller will cause the Company to) give any notices
to, make any filings with, and use Commercially Reasonable Efforts to obtain the
Buyers’ Required Regulatory Approvals and the Seller’s Required Regulatory
Approvals, as applicable, and any other authorizations, consents and approvals
of any Governmental Authority necessary in connection with the transactions
contemplated by this Agreement. Each of the Parties will cooperate and
coordinate with the other Party in connection with such filings and actions. The
Parties will respond promptly to any requests for additional information made by
such Governmental Authority and will use Commercially Reasonable Efforts to
cause all such consents and approvals to be obtained or waived at the earliest
possible date after the date of filing. Each Party will bear its own costs of
the preparation of any such filing or notice, except that each Buyer will bear
its respective percentage of all costs associated with any experts or
consultants reasonably necessary for the preparation of any such

 

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filing or notice or reasonably necessary to obtain such consents and approvals
as promptly as practicable.

 

  (d) In furtherance of Section 6.2(c) above, as promptly as practicable after
the date of this Agreement, the Seller will (and the Seller will cause the
Company to) make all filings required to be made by it under the Federal Power
Act, as amended. The Buyers will cooperate with the Seller in preparing such
applications. Without limiting the generality of the foregoing, the Parties
shall use Commercially Reasonable Efforts to cause the application for the
approval listed as item 1 on Section 1(b) of the Seller’s Disclosure Schedule to
be filed by October 11, 2004. The Seller will be solely responsible for the cost
of preparing and filing such applications, as well as all petition(s) for
rehearing and all reapplications. If any filing is rejected by the FERC, the
Seller will petition the FERC for rehearing or permission to re-submit an
application with the FERC.

 

  (e) The Seller, at its sole expense, will (i) use all Commercially Reasonable
Efforts to cause the transactions contemplated by this Agreement to be
permitted, as of the Closing, under the Existing Debt Documents, including
Section 5.02(e)(v) of the Common Terms Agreement and Section 9.08(a) of the
Security and Intercreditor Agreement, and (ii) will timely seek and cause the
Company timely to seek, and will use all Commercially Reasonable Efforts to
obtain, the releases described in Section 8.1(r).

 

  6.3 Operation of Business. The Seller will not, without the consent of the
Buyers (which will not be unreasonably withheld or delayed), cause or permit the
Company to engage in any practice, take any action or enter into any transaction
outside the Ordinary Course of Business, except as expressly contemplated by
this Agreement. Without limiting the foregoing, the Seller will not, without the
consent of the Buyers (which will not be unreasonably withheld or delayed),
except as expressly contemplated by this Agreement, cause or permit the Company
to do any of the following:

 

  (a) Sell, lease (as lessor), transfer or otherwise dispose of, any of the
material assets of the Company, or any spare parts or other inventory, other
than as used, consumed or replaced in the Ordinary Course of Business;

 

  (b) Encumber, pledge, mortgage or suffer to be imposed on any of the material
assets of the Company, or any spare parts or other inventory, any Encumbrances
other than Permitted Encumbrances;

 

  (c) Amend, terminate, allow to lapse or expire, fail to timely apply for
renewal of, or otherwise modify in any respect any Material Agreement or any
Permit or Environmental Permit or as may be required in connection with
transferring the rights or obligations under such Material Agreement, Permit or
Environmental Permit to the Buyers pursuant to this Agreement;

 

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  (d) Enter into commitments to make any Capital Expenditures;

 

  (e) Amend or otherwise change its charter, bylaws, member control agreement or
equivalent organizational documents;

 

  (f) Issue, sell, pledge, dispose of, grant, encumber or authorize the
issuance, sale, pledge, disposition, grant or encumbrance of, any membership
interests, in the Company, or any options, warrants, convertible securities or
other rights of any kind to acquire any membership interests, or any other
ownership interest (including without limitation any phantom interest) in the
Company;

 

  (g) Acquire (including without limitation by merger, consolidation or
acquisition of stock or assets) any interest in any other Person or any division
thereof; incur any indebtedness for borrowed money (other than from the Seller
or its Affiliates and trade payable in the Ordinary Course of Business) or issue
any debt securities or assume, guarantee or endorse, or otherwise as an
accommodation become responsible for, the obligations of any Person, or make any
loans or advances; or enter into any transaction relating to the purchase of
assets other than in the Ordinary Course of Business;

 

  (h) Enter into any new employment, consulting or severance agreement with any
director, officer, employee or consultant of the Company, or establish, adopt,
enter into or amend any collective bargaining, bonus, profit sharing, thrift,
compensation, stock option, restricted stock, pension, retirement, deferred
compensation, employment, termination, severance or other plan, agreement,
trust, fund, policy or arrangement for the benefit of any director, officer,
employee or consultant, except pursuant to existing contractual arrangements or
existing compensation plans;

 

  (i) Enter into any material amendment to or material modification of or
terminate any Material Agreement;

 

  (j) Fail to maintain the Facility in accordance with Good Utility Practice, or
modify the Facility in any material respect; or

 

  (k) (i) change any financial or Tax accounting methods, policies or practices
of the Company or with respect to the assets or activities of the Company,
except as required by a change in GAAP or SEC rules, regulations or guidelines
or applicable law, (ii) make, revoke, or amend any Tax election of the Company
or with respect to the assets or activities of the Company, (iii) file any
amended Tax Return of the Company or with respect to the assets or activities of
the Company, (iv) enter into any closing agreement affecting any Tax liability
or refund of the Company or with respect to the assets or activities of the
Company, (v) settle or compromise any Tax liability or refund of the Company or
with respect to the assets or activities

 

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of the Company, or (vi) extend or waive the application of any statute of
limitations regarding the assessment or collection of any Tax of the Company or
with respect to the assets or activities of the Company; or

 

  (l) Enter into any agreement, contract, commitment or arrangement to do any of
the foregoing.

 

  6.4 Full Access.

 

  (a) The Seller will (and the Seller will cause the Company to) permit the
Buyers and their Representatives to have reasonable access during normal
business hours with reasonable notice, and in a manner so as not to interfere
with the normal business operations of the Company, to all premises, properties,
personnel, books, records (including Tax records), contracts and documents of or
pertaining to the Company and the Facility, which access will include the right
to conduct environmental due diligence, except that the Buyers will not be
entitled to conduct invasive testing, or sample or test surface waters, soil,
sediments, groundwater, emissions or discharges with respect to the Facility or
the Site. Any information obtained by any Buyer or its Representatives under
this Section 6.4 is subject to the Confidentiality Agreement.

 

  (b) Neither Buyer will, prior to the Closing Date, contact any customer,
vendor, supplier or employee of, or any other Person having business dealings
with, the Company with respect to any aspect of the Facility or the transactions
contemplated by this Agreement, without the consent of the Seller (not to be
unreasonably withheld or delayed).

 

  6.5 Notice of Developments.

 

  (a) Prior to the Closing, each Party will advise the others in writing with
respect to any matter arising after the date of this Agreement of which that
Party obtains Knowledge and that, if existing or occurring on or prior to the
date of this Agreement, would have been required to be set forth in the Buyers’
Disclosure Schedule or the Seller’s Disclosure Schedule, as applicable, or would
constitute a breach of any of its representations or warranties.

 

  (b) The Seller will, from time to time prior to the Closing, promptly
supplement or amend the Seller’s Disclosure Schedule with respect to any matter
that existed as of the date of this Agreement and should have been set forth or
described in the Seller’s Disclosure Schedule. No disclosure by the Seller
pursuant to this Section 6.5(b), however, will be deemed to amend or supplement
the Seller’s Disclosure Schedule or to have qualified the representations and
warranties contained in this Agreement, unless the Buyers expressly consent to
such supplement in writing.

 

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  (c) The Seller will, from time to time prior to the Closing, promptly
supplement or amend the Seller’s Disclosure Schedule with respect to any matter
arising after the date of this Agreement, which, if existing as of the date of
this Agreement, would have been required to be set forth or described in the
Seller’s Disclosure Schedule in order to make any representation or warranty set
forth in this Agreement true and correct as of such date. If the matters
disclosed on such supplemented or amended Seller’s Disclosure Schedule have or
could reasonably be expected to have a Material Adverse Effect, then Buyer may,
in accordance with Section 11.1(b), terminate this Agreement, within 10 calendar
days after receipt of the supplemented or amended Seller’s Disclosure Schedule,
by written notice thereof to Seller; provided, however, that if Buyer does not
exercise such right to terminate this Agreement within such 10 calendar day
period, then (i) Buyer will be deemed to have forever waived any right to
terminate this Agreement based upon such supplement or amendment, (ii) Buyer
will be deemed to have accepted such supplement or amendment, and (iii) such
supplement or amendment will be deemed to supplement or amend Seller’s
Disclosure Schedules. If Buyer does elect to terminate this Agreement pursuant
to Section 11.1(b) then Seller will have a 30 day period to cure the event
causing the amended or supplemented Seller’s Disclosure Schedule.

 

  (d) Each Buyer will, from time to time prior to the Closing, promptly
supplement or amend the Buyers’ Disclosure Schedule with respect to any matter
(i) that existed as of the date of this Agreement and should have been set forth
or described in the Buyers’ Disclosure Schedule, or (ii) arising after the date
of this Agreement, which, if existing as of the date of this Agreement, would
have been required to be set forth or described in the Buyers’ Disclosure
Schedule in order to make any representation or warranty set forth in this
Agreement true and correct as of such date. No disclosure by any Buyer pursuant
to this Section 6.5(d), however, will be deemed to amend or supplement the
Buyers’ Disclosure Schedule or to have qualified the representations and
warranties contained in this Agreement, unless the Seller expressly consents to
such supplement in writing.

 

  6.6 Exclusivity. The Seller will not, and the Seller will not cause or permit
the Company to, solicit, initiate or encourage the submission of, or participate
in negotiations or provide information in connection with, any proposal or offer
from any Person relating to the acquisition of all or substantially all of the
membership interests, partnership interests or capital stock or other voting
securities, or any substantial portion of the assets, of the Company (including
any acquisition structured as a merger, consolidation or share exchange).

 

  6.7

Guaranties of the Seller. The Buyer will use Commercially Reasonable Efforts to
arrange that the Seller and its Affiliates (other than the Company) be released,
as of the Closing, from their obligations to provide guaranties, letters of
credit,

 

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bonds, credit support or other security in connection with the Company or the
Facility set forth in Section 6.7 of the Seller’s Disclosure Schedule.

 

  6.8 Intercompany Obligations and Agreements. Prior to the Closing the Seller
will cause the following to occur:

 

  (a) the payment, satisfaction and discharge of all receivables and payables
outstanding between the Company, on the one hand, and any of the Seller or its
Affiliates (other than the Company), on the other hand;

 

  (b) the termination of all of the intercompany contracts and agreements
identified in Section 4.19 of the Seller’s Disclosure Schedule;

 

  (c) subject to receipt of Seller’s Required Consents where applicable, the
transfer to the Company of all real property and other assets of the Seller and
its Affiliates that the Seller’s Disclosure Schedule states are currently owned
by the Seller or any of its Affiliates but will be transferred to the Company at
or prior to the Closing; and

 

  (d) the full release, termination and discharge of the Encumbrances and other
obligations of the Company that the Seller’s Disclosure Schedule states will be
released, terminated or discharged at or prior to the Closing.

 

  6.9 Risk of Loss.

 

  (a) Between the date of this Agreement and the Closing Date, all risk of loss
or damage to the assets and properties of the Company will be borne by the
Seller, except that loss or damage caused by the acts or omissions of a Buyer or
its Representatives will be the responsibility of that Buyer.

 

  (b) If, after the date of this Agreement and prior to the Closing, all or any
portion of the assets and properties of the Company (i) is condemned or taken by
eminent domain or is the subject of a pending or threatened condemnation or
taking that has not been consummated, or (ii) is materially damaged or destroyed
by fire or other casualty, then the Seller will notify the Buyers promptly in
writing of such fact. If that condemnation, taking, damage, or destruction
results in the failure of any condition in Section 8.1 to be met, then Buyers
may terminate this Agreement pursuant to Section 11.1(h). If Buyers do not so
terminate this Agreement, the Seller shall procure that all proceeds of
insurance, condemnation awards and similar amounts are paid to the Company and,
if paid before the Closing, remain with the Company up to and including the time
of the Closing.

 

  6.10

Employee Matters. The Seller will, or as appropriate will cause the Company to,
perform such acts, execute such documents and provide such notices as are
necessary (a) to terminate the Employees’ active participation and, as
applicable, the Company’s participation as a participating employer, in the
Allegheny

 

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Employee Benefit Plans as of the Closing Date and (b) to cause the Company to
have no liability with respect to the Allegheny Employee Benefit Plans after the
Closing (whether for contributions, the payment of benefits or otherwise). The
Parties also shall take the actions required by Section 7.6 to occur before the
Closing.

 

7. Post-Closing Covenants. The Parties agree as follows with respect to the
period following the Closing.

 

  7.1 General. If after the Closing any further action is necessary to carry out
the purposes of this Agreement, the Transaction Documents and the contemplated
transactions, each of the Parties will take such further action (including the
execution and delivery of such further instruments and documents) as any other
Party reasonably may request, and the requesting Party will pay all reasonable
out-of-pocket costs and expenses of the requested Party (unless the requesting
Party is entitled to indemnification for the requested action under Section 9 of
this Agreement). No Party, however, will be required to take any action that, in
the opinion of counsel, could constitute a violation of any Law.

 

  7.2 Transition. The Seller and its Affiliates will not take any action that is
designed or intended to have the effect of discouraging any lessor, licensor,
customer, supplier or other business associate of the Company from maintaining
the same business relationships with the Company after the Closing as it
maintained with the Company prior to the Closing.

 

  7.3 Access to Information.

 

  (a) After the Closing, the Buyers will afford to the Seller and its
Representatives access during normal business hours with reasonable notice to
the books, records and personnel of the Company and the Facility, and to such
other information, and will furnish such cooperation relating to the Company, as
the Seller reasonably requests for financial, environmental and regulatory
reporting and accounting matters, the calculation of Net Working Capital, the
preparation and filing of any Tax Returns, the defense of Tax and indemnity
claims, and any other purposes related to this Agreement, the Transaction
Documents or the contemplated transactions. In addition, the Seller will afford
each Buyer and its Representatives similar access to any books, records or files
retained by the Seller relating to the business of the Company.

 

  (b)

Each Buyer and Seller will hold, and will use all commercially reasonable
efforts to cause its respective Affiliates and its respective officers,
employees, directors, counsel, accountants, financial advisors and other
representatives to hold, in strict confidence from any other Person all
information and documents obtained pursuant to Section 7.3(a), provided that
nothing in this sentence shall limit the disclosure by any party of any
information (a) to the extent required by statute, rule, regulation or judicial

 

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process (provided that if permitted by law, each party agrees to give the other
parties prior notice of such disclosure in sufficient time to permit any of such
other parties to obtain a protective Order should it so determine), (b) in
connection with any litigation to which such party is a party (provided that
such party has taken all reasonable actions to limit the scope and degree of
disclosure in any such litigation), (c) in an action or proceeding brought by a
party in pursuit of its rights or in the exercise of its remedies under this
Agreement, (d) to the extent that such documents or information can be shown to
have come within the public domain through no action or omission of the
disclosing party or its Affiliates and (e) to its Affiliates (but the party
shall be liable for any breach by its Affiliates).

 

  7.4 Transfer Taxes. The Buyers on the one hand and the Seller on the other
each will pay 50% of all sales, use, transfer, real property transfer,
recording, stock transfer and other similar Taxes and fees, if any, arising out
of or in connection with the sale of the Interests pursuant to this Agreement,
and will indemnify, defend and hold harmless the other and its Representatives
with respect to its share of any such Taxes. The Buyers and the Seller shall
cooperate in the preparation, execution and filing of all necessary
documentation and Tax Returns with respect to such Taxes.

 

  7.5 Securities Law Covenant. No Buyer will transfer or otherwise dispose of
any of the Interests, or any interest in the Interests, in such manner as to
cause the Seller or its Affiliates to be in violation of the registration
requirements of the Securities Act, or applicable federal or state securities or
blue sky Laws.

 

  7.6 Employment Matters.

 

  (a)

Not later than 14 days before the Closing Date, the Buyers shall cause the New
Operator to offer employment to each Employee, effective immediately following
the Closing provided that the Closing occurs, at an initial rate of base pay not
less than that in effect with respect to the Employee immediately before the
Closing and initially at the same location and in a capacity substantially
equivalent to the capacity of the Employee immediately before the Closing. The
Seller shall, and shall cause the Company and their Affiliates to cooperate with
the reasonable requests of Buyers and the New Operator for access to the
Employees before Closing for purposes of making such employment offers. Any
Employee who accepts such offer of employment shall be referred to herein as a
“Transferred Employee.” The Buyers shall cause the Company to terminate,
effectively immediately following the Closing, the employment of all Employees
and to pay to each Employee who is not a Transferred Employee the cash severance
that the Employee would have received from the Seller or its Affiliates had such
termination of employment occurred immediately before the Closing. The Buyers
also shall, or shall cause the Company to, notify the Seller, on or before the

 

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third Business Day following the Closing Date, of the names of the Employees (if
any) who are not Transferred Employees. Except as otherwise required by
applicable Law, the New Operator shall not be required to continue the
employment of any Transferred Employee after the Closing or, except as otherwise
provided in this Section 7.6, to continue such employment on any particular
terms and conditions.

 

  (b) The Buyers shall procure that the New Operator agrees to (i) provide each
Transferred Employee with employee benefits under plans maintained by New
Operator (“Post-Closing Benefit Plans”) that are no less favorable in the
aggregate than the benefits provided by the New Operator from time to time to
its other similarly situated employees, (ii) upon receiving proof of prior
creditable coverage, waive all health care plan pre-existing condition
requirements, actively at work exclusions, and waiting periods applicable to the
Transferred Employees under the Post-Closing Benefit Plans (except to the extent
that the requirements, exclusions, or periods applied with respect to the
Transferred Employees immediately before the Closing), (iii) credit under the
Post-Closing Benefit Plans all health care expenses incurred by the Transferred
Employees under the Allegheny Employee Benefit Plans during the year in which
the Closing Date occurs and prior to the Closing Date for the purposes of
satisfying annual and lifetime deductibles and out of pocket limits, (iv) credit
each Transferred Employee with service before the Closing Date for all purposes
under the Post-Closing Benefit Plans (other than for purposes of benefit accrual
under any defined benefit pension plan) to the extent that such service was
credited under the Allegheny Employee Benefit Plans immediately before the
Closing, (v) fulfill all obligations for accrued vacation and sick leave earned
or accrued by the Transferred Employees as of the Closing Date, including all
unused earned, banked and accrued vacation and sick leave that Transferred
Employees have earned as of the Closing Date, and (vi) cause the trustee of any
Post-Closing Benefit Plan that is a defined contribution plan in which a
Transferred Employee participates, as directed by the Employee, to accept as a
contribution any distribution to the Transferred Employee from the Allegheny
Energy Employee Stock Ownership and Savings Plan that constitutes an “eligible
rollover distribution” within the meaning of section 401(a)(31)(D) of the Code
and complies with the provisions of both the Allegheny Energy Employee Stock
Ownership and Savings Plan and the applicable receiving Post-Closing Benefit
Plan; provided, however, that such Post-Closing Benefit Plan shall not be
required to accept any distribution from the Allegheny Energy Employee Stock
Ownership and Savings Plan in the form of securities of Seller or its
Affiliates.

 

  (c)

The Seller shall, or shall cause an appropriate Affiliate of the Seller to, be
responsible for complying with the requirements of Part 6 of Subtitle B of Title
I of ERISA, section 4980B of the Code, and any similar applicable state law,
including the notice requirements thereof, with respect to any

 

40

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Employee (or any person who is a qualified beneficiary in respect of an
Employee) who has a “qualifying event” (within the meaning of the foregoing
statutes) that occurs on or before the Closing Date.

 

  (d) The Buyers acknowledge that the Company does not own any pension assets
and that no pension assets of the Seller, if any, will be transferred to the
Company or the Buyers.

 

  (e) Nothing contained in this Section 7.6, whether express or implied, is
intended to confer upon any Employee or former employee of the Company any right
or remedy, including without limitation any right as a third-party beneficiary.

 

  7.7 Non-Use of Allegheny Marks.

 

  (a) The Allegheny Marks appear on some of the properties and assets of the
Company, including on signage at the Facility, and on supplies, materials,
stationery, brochures, advertising materials, manuals and similar consumable
items of the Company. The Buyers acknowledge and agree that they do not have
and, upon consummation of the transactions contemplated by this Agreement, will
not have, any right, title, interest, license or other right to use the
Allegheny Marks.

 

  (b) The Buyers will (i) within 60 days after the Closing Date, remove the
Allegheny Marks from, or cover or conceal the Allegheny Marks on, the properties
and assets of the Company, including signage at the Facility, and provide
written verification thereof to the Seller promptly after completing such
removal, (ii) within 14 days after the Closing Date, return or destroy (with
proof of destruction) all other assets of the Company that contain any Allegheny
Marks that are not removable, and (iii) within 30 days after the Closing Date,
file amendments to the certificate, charter, bylaws or other governing
documents, or submit notifications or amendments with respect to any Permits, of
the Company that use any Allegheny Marks.

 

  (c) Each Buyer agrees never to challenge Parent’s or its Affiliates’ ownership
of the Allegheny Marks or any application for registration thereof or any
registration thereof or any rights of the Seller or its Affiliates therein as a
result, directly or indirectly, of its ownership of the Company.

 

  (d) No Buyer will conduct any business or offer any goods or services under
any Allegheny Marks, except as expressly permitted during the transaction period
pursuant to Section 7.7(b) above or as permitted pursuant to Parent’s written
consent.

 

  (e)

No Buyer will send, or cause to be sent, any correspondence or other materials
to any Person on any stationery that contains any Allegheny Marks or otherwise
operate the Company in any manner that would or

 

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might reasonably be expected to confuse any Person into believing that such
Buyer has any right, title, interest or license to use any Allegheny Marks.

 

8. Conditions to Obligation to Close.

 

  8.1 Conditions to Obligation of the Buyers. The obligation of each Buyer to
consummate the transactions to be performed by it in connection with the Closing
is subject to satisfaction of the following conditions:

 

  (a) The representations and warranties of the Seller set forth in Sections 3
and 4 of this Agreement will be true and correct in all material respects
(except that those representations and warranties qualified by reference to
Material Adverse Effect shall be true and correct in all respects) at and as of
the Closing Date;

 

  (b) The Seller will have performed and complied with all of its covenants
contained in this Agreement in all material respects through the Closing;

 

  (c) There will not be any injunction, judgment, Order or decree of any
Governmental Authority in effect preventing the consummation of any of the
transactions contemplated by this Agreement;

 

  (d) The Seller will have executed and delivered to the Buyers a certificate to
the effect that each of the conditions specified in Section 8.1(a) to (c) above
is satisfied in all respects;

 

  (e) All applicable waiting periods (and any extensions) under the HSR Act will
have expired or otherwise been terminated;

 

  (f) The Buyers will have procured all of the Buyers’ Required Consents, in
form and substance reasonably satisfactory to that Buyer, the Exelon Consent
shall have been executed and delivered by all parties to it, and Exelon shall
have delivered such consents and agreements with Persons to which the Buyers or
the Company pledge, assign, or grants a security interest in its right, title,
and interest in and to the Exelon Agreements (as defined in the Exelon Consent)
in customary form that such Persons reasonably may request in connection with
any financing that will close at or promptly after the Closing and that do not
adversely affect Exelon’s rights under the Exelon Agreements;

 

  (g) The Buyers will have procured all of the Buyers’ Required Regulatory
Approvals, in form and substance reasonably satisfactory to that Buyer;

 

  (h) There will not have occurred any Material Adverse Effect between the date
of this Agreement and the Closing;

 

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  (i) The Seller will have delivered a certificate of incumbency, dated as of
the Closing Date, as to the officers and other personnel of the Seller executing
this Agreement and any certificate, instrument or document to be delivered by
the Seller at the Closing;

 

  (j) The Seller will have delivered a certified copy of resolutions authorizing
the execution and delivery of this Agreement and the consummation of the
transactions contemplated by this Agreement;

 

  (k) The Seller will have executed and delivered to each of the Buyers a
non-foreign affidavit as described in Section 1445(b)(2) of the Code and the
regulations thereunder, in form and substance reasonably satisfactory to the
Buyers;

 

  (l) The Seller will have delivered to the Buyers written resignations of all
of the incumbent officers, directors or individuals holding similar positions of
the Company;

 

  (m) The Seller shall have provided to the Buyers, at its sole cost and
expense; the Updated Title Policy and (ii) an update and recertification of the
survey of the Owned Real Property dated February 27, 2003 by Bock & Clark Corp.
to a date not more than 30 days prior to the Closing Date with such
certification addressed to the Company, Chicago Title Insurance Company and any
lenders or other parties as the Buyers may designate by notice to the Seller no
later than five days prior to the Closing;

 

  (n) The Seller will have delivered to the Buyers the documents and agreements
contemplated by this Agreement to be delivered by the Seller at the Closing;

 

  (o) The Seller shall have delivered an opinion of Gray, Plant, Mooty, Mooty &
Bennett, P.A., and Winston & Strawn LLP to the effect of Sections 3.1, 3.2, 3.3,
3.4, 4.1, 4.2, 4.3, 4.4 and 4.20, subject to customary assumptions, officer’s
certificates and exceptions;

 

  (p) Exelon shall have a credit rating of at least BBB from Standard & Poor’s
Rating Service, a division of The McGraw-Hill Companies, Inc., and at least Baa2
from Moody’s Investors Service, Inc.;

 

  (q) The Seller shall have delivered evidence of compliance with Section 6.8
reasonably satisfactory in form and substance to that Buyer;

 

  (r)

The Seller shall have delivered evidence, reasonably satisfactory in form and
substance to that Buyer, of the full and irrevocable release of the Company from
any and all obligations under the Existing Debt Documents and of the Interests,
the Site, the Facility, the Energy Services Conversion Agreement and all other
assets of the Company from all Encumbrances arising under or relating to the
Existing Debt Documents, including the

 

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releases described in Section 9.08(a) of the Security and Intercreditor
Agreement; and

 

  (s) All actions to be taken by the Seller in connection with consummation of
the contemplated transactions and all certificates, instruments and other
documents required to effect these transactions will be reasonably satisfactory
in form and substance to that Buyer.

 

  Each Buyer may waive any condition specified in this Section 8.1 by providing
a written waiver at or prior to the Closing.

 

  8.2 Conditions to Obligation of the Seller. The obligation of the Seller to
consummate the transactions to be performed by it in connection with the Closing
is subject to satisfaction of the following conditions:

 

  (a) The representations and warranties of the Buyers set forth in Section 5 of
this Agreement will be true and correct in all respects at and as of the Closing
Date;

 

  (b) Each Buyer will have performed and complied with all of its covenants
contained in this Agreement in all material respects through the Closing;

 

  (c) There will not be any injunction, judgment, Order or decree of any
Governmental Authority in effect preventing the consummation of any of the
transactions contemplated by this Agreement;

 

  (d) Each Buyer will have delivered to the Seller a certificate to the effect
that each of the conditions specified in Section 8.2(a) through (c) above is
satisfied in all respects to the extent applicable to that Buyer;

 

  (e) All applicable waiting periods (and any extensions) under the HSR Act will
have expired or otherwise been terminated;

 

  (f) Exelon shall have executed and delivered to the Seller and the Company the
Exelon Consent, and the Seller will have made or obtained, as applicable, all of
the other Seller’s Required Consents, in form and substance reasonably
satisfactory to the Seller;

 

  (g) The Seller will have procured all of the Seller’s Required Regulatory
Approvals, in form and substance reasonably satisfactory to the Seller;

 

  (h) There will not have occurred any change or effect since the date of this
Agreement that is reasonably likely to be materially adverse to the business,
operation, properties, financial condition, assets or Liabilities (including
contingent Liabilities) of the Buyers;

 

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  (i) The Seller will have been unconditionally released from its obligation to
provide the guaranties or other obligations pursuant to Section 6.7 of this
Agreement;

 

  (j) Each Buyer will have delivered a certificate of incumbency, dated as of
the Closing Date, as to the officers and other personnel of such Buyer executing
this Agreement and any certificate, instrument or document to be delivered by
such Buyer at the Closing;

 

  (k) Each Buyer will have delivered a certified copy of corporate resolutions
authorizing the execution and delivery of this Agreement and the consummation of
the transactions contemplated by this Agreement;

 

  (l) Each Buyer will have delivered to the Seller the documents and agreements
contemplated by this Agreement to be delivered by that Buyer at the Closing; and

 

  (n) All actions to be taken by the Buyers in connection with consummation of
the contemplated transactions and all certificates, instruments and other
documents required to effect the contemplated transactions will be reasonably
satisfactory in form and substance to the Seller.

 

The Seller may waive any condition specified in this Section 8.2 by providing a
written waiver at or prior to the Closing.

 

9. Remedies for Breaches of this Agreement.

 

  9.1 Survival of Representations, Warranties and Covenants.

 

  (a) The representations and warranties of the Seller contained in (a) Sections
3.1 through 3.6, 4.1, 4.3 through 4.6, 4.10 and 4.18 of this Agreement will
survive the Closing and will continue in full force and effect for a period of
five years after the Closing, (b) Sections 4.8, 4.9, 4.11 through 4.17 and 4.19
through 4.27 of this Agreement will survive the Closing and will continue in
full force and effect until the date occurring 18 months after the Closing Date,
(c) Section 4.7 will survive the Closing and will continue in full force and
effect until 120 days following the expiration of the applicable statute of
limitations (giving effect to any extensions thereof), and (d) Section 4.2,
which will survive the Closing and will continue in full force and effect
indefinitely. The representations and warranties of each Buyer contained in (a)
Sections 5.1 through 5.5 of this Agreement will survive the Closing and will
continue in full force and effect for a period of five years after the Closing
and (b) Sections 5.6 through 5.9 of this Agreement will survive the Closing and
will continue in full force and effect until the date occurring 18 months after
the Closing Date.

 

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  (b) The covenants of the Parties contained in this Agreement will survive the
Closing in accordance with their respective terms.

 

  9.2 Indemnification Provisions for Benefit of the Buyers. In the event the
Seller breaches (or in the event any third party alleges facts that, if true,
would mean the Seller has breached) any of its representations, warranties or
covenants contained in this Agreement (other than Section 4.7, which is
addressed in Section 10.3), or any statement in the certificate delivered under
Section 8.1(d) is inaccurate, provided that a Buyer makes a written claim for
indemnification against the Seller with respect to such breach (or alleged
breach) within the applicable survival period, and subject to the limitations
set forth in Section 9.5 of this Agreement, then the Seller is obligated to
indemnify and hold harmless each Buyer and its respective Representatives (each,
a “Buyers’ Indemnitee”) from and against the entirety of any Adverse
Consequences any Buyers’ Indemnitee may suffer through and after the date of the
claim for indemnification resulting from, arising out of, relating to, in the
nature of, or caused by such breach (or alleged breach).

 

  9.3 Indemnification Provisions for Benefit of the Seller. In the event a Buyer
breaches (or in the event any third party alleges facts that, if true, would
mean such Buyer has breached) any of its representations, warranties or
covenants contained in this Agreement, or any statement in the certificate
delivered by that Buyer under Section 8.2(d) is inaccurate, provided that a
Seller makes a written claim for indemnification against that Buyer with respect
to such breach (or alleged breach) within such applicable survival period, then
that Buyer is obligated to indemnify and hold harmless each Seller and its
respective Representatives (each, a “Seller’s Indemnitee”) from and against the
entirety of any Adverse Consequences any Seller’s Indemnitee may suffer through
and after the date of the claim for indemnification resulting from, arising out
of, relating to, in the nature of, or caused by such breach (or alleged breach).
Nothing in this Agreement shall require a Buyer to indemnify Seller in respect
of any breach by the other Buyer.

 

  9.4 Matters Involving Third Parties.

 

  (a) If any third party notifies any Party (the “Indemnified Party”) with
respect to any matter (a “Third Party Claim”) that may give rise to a claim for
indemnification against any other Party (the “Indemnifying Party”) under this
Section 9, then the Indemnified Party will promptly notify each Indemnifying
Party in writing. Delay on the part of the Indemnified Party in notifying any
Indemnifying Party will not relieve the Indemnifying Party from its obligation
unless (and then solely to the extent) the Indemnifying Party is actually
prejudiced.

 

  (b)

Any Indemnifying Party will have the right to defend the Indemnified Party
against the Third Party Claim with counsel of its choice reasonably satisfactory
to the Indemnified Party so long as (i) the Indemnifying Party notifies the
Indemnified Party in writing within 15 days after the

 

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Indemnified Party has given notice of the Third Party Claim that the
Indemnifying Party will indemnify the Indemnified Party from and against the
entirety of any Adverse Consequences the Indemnified Party may suffer resulting
from, arising out of, relating to, in the nature of or caused by the Third Party
Claim, (ii) the Indemnifying Party provides the Indemnified Party with evidence
reasonably acceptable to the Indemnified Party that the Indemnifying Party will
have the financial resources to defend against the Third Party Claim and fulfill
its indemnification obligations, (iii) the Third Party Claim involves only money
damages and does not seek an injunction or other equitable relief, (iv)
settlement of, or an adverse judgment with respect to, the Third Party Claim is
not, in the good faith judgment of the Indemnified Party, likely to establish a
precedential custom or practice materially adverse to the continuing business
interests of the Indemnified Party, and (v) the Indemnifying Party conducts the
defense of the Third Party Claim actively and diligently.

 

  (c) So long as the Indemnifying Party is conducting the defense of the Third
Party Claim in accordance with Section 9.4(b) of this Agreement, (i) the
Indemnified Party may retain separate co-counsel at its sole cost and expense
and participate in the defense of the Third Party Claim, (ii) the Indemnified
Party will not consent to the entry of any judgment or enter into any settlement
with respect to the Third Party Claim without the prior written consent of the
Indemnifying Party (which consent may not be withheld, conditioned or delayed
unreasonably), and (iii) the Indemnifying Party will not consent to the entry of
any judgment or enter into any settlement with respect to the Third Party Claim
without the prior written consent of the Indemnified Party (which consent may
not be withheld, conditioned or delayed unreasonably).

 

  (d) If any of the conditions in Section 9.4(b) of this Agreement is not or is
no longer satisfied, (i) the Indemnified Party may defend against, and consent
to the entry of any judgment or enter into any settlement with respect to, the
Third Party Claim in any manner it reasonably may deem appropriate (and the
Indemnified Party need not consult with, or obtain any consent from, any
Indemnifying Party), (ii) the Indemnifying Parties will reimburse the
Indemnified Party promptly and periodically for the costs of defending against
the Third Party Claim (including reasonable attorneys’ fees and expenses), and
(iii) the Indemnifying Parties will remain responsible for any Adverse
Consequences the Indemnified Party may suffer resulting from, arising out of,
relating to, in the nature of, or caused by the Third Party Claim to the fullest
extent provided in this Section 9.

 

  9.5 Limitations on Seller’s Indemnification Obligations.

 

  (a)

Subject to Section 9.5(c), the Seller will have no obligation to indemnify any
Buyers’ Indemnitee from and against any Adverse Consequences resulting from,
arising out of, relating to, in the nature of or caused by the

 

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breach or alleged breach by the Seller of its representations or warranties
contained in this Agreement or any inaccuracy in its certificate delivered under
Section 8.1(d) until the Buyers’ Indemnitees have suffered Adverse Consequences
by reason of all such breaches (or alleged breaches) in excess of a $1,000,000
aggregate deductible, at which point the Seller will be obligated only to
indemnify the Buyers’ Indemnitees from and against such further Adverse
Consequences.

 

  (b) Subject to Section 9.5(c), the Seller will not be obligated to pay more
than $86,000,000 in the aggregate on account of its obligation to indemnify the
Buyers’ Indemnitees from and against all Adverse Consequences resulting from,
arising out of, relating to, in the nature of or caused by the breach or alleged
breach by the Seller of its representations, warranties or covenants contained
in this Agreement or any inaccuracy in its certificate delivered under Section
8.1(d), including with respect to the matters set forth in Section 9.6(a) of
this Agreement.

 

  (c) The provisions of Sections 9.5(a) and (b) shall not apply to any breaches
of representations and warranties in Sections 3.1 through 3.5, 4.1 through 4.5,
4.7, 4.18, and 5.1 through 5.8; provided, however, the Seller will not be
obligated to pay more than the Purchase Price in the aggregate on account of its
obligation to indemnify the Buyers’ Indemnitees from and against all Adverse
Consequences resulting from, arising out of, relating to, in the nature of or
caused by the breach or alleged breach by the Seller of such representations or
warranties or any inaccuracy in its certificate delivered under Section 8.1(d).

 

  9.6 Environmental Indemnification.

 

  (a) The Seller is obligated to indemnify and hold harmless the Buyers’
Indemnitees from and against the entirety of any Adverse Consequences any
Buyers’ Indemnitee may suffer resulting from, arising out of, relating to, in
the nature of, or caused by Third Party Claims for:

 

  (i) Any Liability under or related to Environmental Laws arising as a result
of or in connection with loss of life, injury to persons or property, or damage
to natural resources (whether such loss, injury or damage arose or was made
manifest before or after the Closing Date) caused (or allegedly caused) by the
disposal of Hazardous Substances at an Off-Site Location in connection with the
ownership or operation of the Facility prior to the Closing Date;

 

  (ii)

Any Liability under or related to Environmental Laws arising as a result of or
in connection with a Response Action (whether such Response Action commenced
before or after the Closing Date) for Hazardous Substances that are disposed at
any Off-Site Location in

 

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connection with the ownership or operation of the Facility prior to the Closing
Date; or

 

  (iii) Third Party Claims by a Governmental Authority or other Person relating
to the storage, transportation, treatment, disposal, discharge, recycling or
Release of any Hazardous Substances at any Off-Site Location, including, without
limitation, former properties owned or operated by the Company, prior to the
Closing Date, or the arrangement by the Company for any storage, transportation,
treatment, disposal, discharge, recycling or Release of any such Hazardous
Substances at any Off-Site Location, including, without limitation, former
properties owned or operated by the Company, prior to the Closing Date.

 

  (b) Each Buyer, for itself and on behalf of its Representatives, hereby
irrevocably releases and forever discharges the Seller’s Indemnitees from any
and all Adverse Consequences of any kind or character, whether known or unknown,
contingent or accrued, arising under or relating to Environmental Laws,
including Environmental Laws enacted or amended after the Closing Date, or
relating to any claim in respect of any Environmental Condition or Hazardous
Substance, with respect to any of the Company, the Facility (other than as
provided in Sections 9.2 and 9.6(a) of this Agreement) (collectively,
“Environmental Claims”).

 

  9.7 Employment Indemnification. The Buyers shall cause the Company to
indemnify and hold harmless the Seller’s Indemnitees from and against the
entirety of any Adverse Consequences any Seller’s Indemnitee may suffer through
and after the date of the claim for indemnification resulting from, arising out
of, relating to, in the nature of, or caused by (a) any Liability related to all
unemployment fund contributions concerning the Employees with respect to periods
after the Closing Date; or (b) any Liability relating to the Employees arising
out of or attributable to acts or omissions of the Company or any Buyer
occurring after the Closing Date, including without limitation all claims
asserted under the Fair Labor Standards Act, the Family and Medical Leave Act,
Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act,
the Age Discrimination in Employment Act, the Worker Adjustment and Retraining
Notification Act, the National Labor Relations Act, ERISA, the Occupational
Health and Safety Act, or any other federal, state or local discrimination,
civil rights, health and safety, wage and hour or worker’s compensation laws, or
the common law doctrines of breach of contract, breach of covenant of good faith
and fair dealing, promissory estoppel, violation of public policy, fraud or
misrepresentation, defamation, intentional or negligent infliction of emotional
distress, negligence, wrongful termination of employment, or any other
employment-related doctrines under the common law of any state.

 

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  9.8 Other Indemnification Provisions.

 

  (a) The Parties will make appropriate adjustments for Tax benefits, Tax
burdens, insurance coverage and third-party indemnification rights in
determining Adverse Consequences for purposes of this Section 9. All
indemnification payments under this Agreement will, to the maximum extent
permitted by Law, be treated by the Parties as adjustments to the Purchase
Price.

 

  (b) The Seller’s Indemnitees and the Buyers’ Indemnitees, as appropriate, will
use Commercially Reasonable Efforts to mitigate all Adverse Consequences
relating to claims for indemnification pursuant to this Section 9, including
availing itself of any defenses, limitations, rights of contribution, claims
against third parties and other rights at law or equity. For purposes of this
Section 9.7(b), Commercially Reasonable Efforts will include the reasonable
expenditure of money to mitigate or otherwise reduce or eliminate any loss or
expenses for which indemnification would otherwise be due (which reasonable
expenditures will be included as Adverse Consequences suffered by the Party
incurring such expenditures).

 

  9.9 Exclusive Remedy. EXCEPT AS PROVIDED IN SECTION 12.14 OF THIS AGREEMENT,
OR IN THE CASE OF FRAUD, THE RIGHT OF THE PARTIES AND THEIR RESPECTIVE
REPRESENTATIVES TO ASSERT INDEMNIFICATION CLAIMS AND RECEIVE INDEMNITY PAYMENTS
UNDER THIS AGREEMENT IS THE SOLE AND EXCLUSIVE RIGHT AND REMEDY EXERCISABLE BY
THE PARTIES AND THEIR RESPECTIVE REPRESENTATIVES WITH RESPECT TO ANY ADVERSE
CONSEQUENCES ARISING OUT OF ANY BREACH BY ANY PARTY OF ANY REPRESENTATION,
WARRANTY, COVENANT OR AGREEMENT OF SUCH PARTY SET FORTH IN THIS AGREEMENT OR
OTHERWISE RELATING TO THIS AGREEMENT AND THE CONTEMPLATED TRANSACTIONS. NO PARTY
OR THEIR RESPECTIVE REPRESENTATIVES WILL HAVE ANY OTHER REMEDY (STATUTORY,
EQUITABLE, COMMON LAW OR OTHERWISE) AGAINST ANY OTHER PARTY WITH RESPECT TO SUCH
MATTERS, AND ALL SUCH OTHER REMEDIES ARE HEREBY WAIVED. WITHOUT LIMITING THE
FOREGOING, EACH OF THE PARTIES ACKNOWLEDGES AND AGREES THAT NEITHER IT NOR ITS
REPRESENTATIVES WILL HAVE ANY REMEDY AFTER THE CLOSING FOR ANY BREACH OF THE
REPRESENTATIONS AND WARRANTIES CONTAINED IN THIS AGREEMENT, EXCEPT AS EXPRESSLY
PROVIDED IN SECTION 9 OF THIS AGREEMENT OR IN THE CASE OF FRAUD.

 

10. Tax Matters. The following provisions will govern the allocation of
responsibility as among the Buyers and the Seller for certain Tax matters
following the Closing Date:

 

  10.1

Tax Periods Ending on or Before the Closing Date. The Seller will prepare or
cause to be prepared and file or cause to be filed when due all Tax Returns of
the Company or with respect to the assets or activities of the Company for all
periods ending on or prior to the Closing Date that are filed after the Closing
Date and will remit all Taxes shown due on such Tax Returns to the extent such
Tax liability is not included as a Liability in the determination of Net Working
Capital under Section

 

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2.3. All such Tax Returns shall be prepared in a manner consistent with past
practice.

 

  10.2 Straddle Periods . The Buyers will prepare or cause to be prepared and
file or cause to be filed when due any Tax Returns of the Company or with
respect to the assets or activities of the Company for Straddle Periods and will
remit all Taxes shown due on such Tax Returns. The Buyers will permit the Seller
to review and comment on each such Tax Return described in the preceding
sentence prior to filing and will make such revisions to such Tax Returns unless
the Buyers reasonably determine that a proposed revision is not appropriate. The
Seller will pay to the Buyers no later than two days prior to the date on which
the Buyers pay the Taxes shown due on the Tax Returns an amount equal to the
portion of such Taxes for which the Seller is liable pursuant to this Section 10
to the extent such Tax Liability is not included as a Liability in the
determination of Net Working Capital under Section 2.3. To the extent permitted
or required by law or administrative practice, the taxable year of the Company
which includes the Closing Date shall be treated as closing on (and including)
the Closing Date. Where it is necessary for purposes of this Section 10 to
apportion between the Seller and the Buyers the Taxes of the Company or with
respect to the assets or activities of the Company for a Straddle Period (which
is not treated under the immediately preceding sentence as closing on the
Closing Date), such liability shall be apportioned between the period deemed to
end at the close of the Closing Date, and the period deemed to begin at the
beginning of the day following the Closing Date on the basis of an interim
closing of the books, except that in the case of any Taxes that are imposed on a
periodic basis, the portion of such Tax that shall be allocated to the portion
of such Straddle Period ending on the Closing Date will be deemed to be the
amount of such Tax for the entire Straddle Period multiplied by a fraction the
numerator of which is the number of days in the Straddle Period ending on the
Closing Date and the denominator of which is the number of days in the entire
Straddle Period. For purposes of this Section 10, if any transaction occurs on
the Closing Date but after the Closing has occurred, and that transaction is
outside the Ordinary Course of Business or otherwise is with respect to assets
and activities of the Company, that transaction shall be treated as having
occurred on the day following the Closing Date.

 

  10.3

Tax Indemnification. Except for Taxes included as a Liability in the
determination of Net Working Capital under Section 2.3, and not paid over to the
Seller in accordance with Section 10.4, the Seller shall indemnify the Buyers
from and against and in respect of any and all losses incurred by the Buyers,
which may be imposed on, sustained, incurred, or suffered by or assessed against
the Buyers, directly or indirectly, to the extent relating to or arising out of
(i) any liability for Taxes of the Company or with respect to the assets or
activities of the Company for any taxable year or period that ends on or before
the Closing Date and, with respect to any Straddle Period, the portion of such
Straddle Period deemed to end on and include the Closing Date, (ii) any breach
of or inaccuracy in the representations and warranties set forth in Section 4.7,
or (iii) any liability for Taxes of any Person (other than the Company) imposed
on the Company as transferee, successor or otherwise (including any liability
arising under Treasury

 

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Regulation Section 1.1502-6 or any comparable provisions of foreign, state or
local law), which Taxes relate to an event or transaction occurring before the
Closing, except that this Section 10.3 shall not apply to Taxes to the extent
such Taxes would not have been incurred but for the Buyer or its Affiliates
(including the Company) making Tax elections, Tax accounting, or Tax reporting
determinations for the Company (or with respect to the assets or activities of
the Company on the Closing Date) for a Tax period ending after the Closing Date
that are inconsistent with the Tax elections, Tax accounting, or Tax reporting
of the Company for Tax periods ending on or prior to the Closing Date, unless
such elections or determinations for Tax periods ending after the Closing Date
are required by applicable Tax law or such elections or determinations for Tax
periods ending on or prior to the Closing Date violate applicable Tax law.
Except as set forth in this Section 10.3, the procedures governing
indemnification claims under this section 10.3 shall be the same as set forth in
Section 9.4 and 9.8 (except that clauses (iii) and (iv) of Section 9.4(b) shall
not apply). With respect to any audit or other proceeding for Taxes for Straddle
Period under Section 10.2, Buyer shall not consent to any entry of judgment or
enter into any settlement of such claim that would increase the Tax liability
for the portion of the Straddle Period ending on and including the Closing Date
without the prior written consent of Seller (which consent may not be withheld,
conditioned or delayed unreasonably).

 

  10.4 Refunds and Tax Benefits; Amended Tax Returns. Any Tax refunds that are
received by the Buyers or the Company, and any amounts credited against Tax to
which the Buyers or the Company become entitled, that relate to Tax periods
ending on or before the Closing Date, or to the portion of the Straddle Period
ending on or before the Closing Date, will be for the account of the Seller, and
the Buyers will pay over to the Seller any such refund or the amount of any such
credit within 15 days after receipt or entitlement thereto. In addition, to the
extent that any amount accrued as a Liability for Taxes in the determination of
the Net Working Capital under Section 2.3 turns out to be greater than the
actual Tax liability as of the Closing Date, the Buyers will pay over to the
Seller such excess within 15 days after the actual amount of the Tax liability
has been determined. No amended Tax Return or claim for Tax refund may be filed
for any Tax Returns for tax periods ending on or prior to the Closing Date
without the advance written consent of the Seller. No amended Tax Return or
claim for Tax refund may be filed for any Tax Returns for any Straddle Periods
under Section 10.2 without the advance written consent of the Seller (which
consent may not be withheld, conditioned or delayed unreasonably).

 

  10.5 Cooperation on Tax Matters.

 

  (a)

The Parties will cooperate fully, as and to the extent reasonably requested by
the other Party, in connection with the filing of Tax Returns pursuant to this
Section 10 and any audit, litigation or other proceeding with respect to Taxes.
Such cooperation will include the retention and (upon the other Party’s request)
the provision of records and information that are reasonably relevant to any
such audit, litigation or other proceeding and making

 

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employees available on a mutually convenient basis to provide additional
information and explanation of any material provided hereunder. The Company and
the Seller agree (i) to retain all books and records with respect to Tax matters
pertinent to the Company relating to any taxable period beginning before the
Closing Date until the expiration of the statute of limitations (and, to the
extent notified by the Buyers or the Seller, any extensions thereof) of the
respective taxable periods, and to abide by all record retention agreements
entered into with any taxing authority, and (ii) to give the other Party
reasonable notice prior to transferring, destroying or discarding any such books
and records and, if the other party so requests, the Company or the Seller, as
the case may be, will allow the other Party to take possession of such books and
records.

 

  (b) The Parties further agree, upon request, to use Commercially Reasonable
Efforts to obtain any certificate or other document from any Governmental
Authority or any other Person as may be necessary to mitigate, reduce or
eliminate any Tax that could be imposed (including without limitation with
respect to the transactions contemplated by this Agreement).

 

  10.6 Survival of Obligations. For the avoidance of doubt, notwithstanding any
other provision of this Agreement, the obligations of the Parties set forth in
this Section 10 shall not be subject to any restrictions or limitations other
than those expressly set forth in this Section 10 and shall survive the Closing.

 

  10.7 Tax Treatment. For purposes of all Income Tax Returns, the Buyers and the
Seller will each report the acquisition of all of the Interests pursuant to this
Agreement as a taxable purchase and sale, respectively, of all of the assets of
the Company in exchange for the Purchase Price and the assumption of any
liabilities of the Company that are deemed to be assumed for United States
federal Income Tax purposes. The Buyers and the Seller shall (i) be bound by
such treatment for purposes of determining any Income Taxes, (ii) prepare and
file their Income Tax Returns on a basis consistent with each such treatment,
and (iii) take no position inconsistent with such treatment on any applicable
Income Tax Return or in any proceeding before any tax authority. In the event
that such treatment is disputed by any tax authority, the Party receiving notice
of the dispute shall promptly notify the other Parties of such dispute.

 

11. Termination.

 

  11.1 Termination of Agreement. The Parties may terminate this Agreement as
provided below:

 

  (a) The Buyers and the Seller may terminate this Agreement by mutual written
consent at any time prior to the Closing;

 

  (b)

The Buyers may terminate this Agreement by giving notice to the Seller at any
time prior to the Closing in the event (i) the Seller has breached any
representation, warranty or covenant contained in this Agreement and such

 

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breach causes a Material Adverse Effect, (ii) a Buyer has notified the Seller of
the breach (specifying in reasonable detail such breach), and (iii) the breach
has continued without cure or written waiver by the Buyers for a period of 30
days after the notice of breach;

 

  (c) The Buyers may terminate this Agreement by giving notice to the Seller at
any time prior to the Closing if the Closing does not occur on or before March
27, 2005, by reason of the failure of any condition precedent under Section 8.1
of this Agreement (unless the failure results primarily from a Buyer breaching
any representation, warranty or covenant contained in this Agreement);

 

  (d) The Buyers may terminate this Agreement by giving notice to the Seller at
any time prior to the Closing if any of the Buyers’ Required Regulatory
Approvals, the receipt of which is a condition to the obligation of the Buyers
to consummate the Closing as set forth in Section 8.1 of this Agreement, will
have been denied (and a petition for rehearing or re-filing of an application
initially denied without prejudice will also have been denied), and such denial
was not caused by or the result of a breach of this Agreement by a Buyer;

 

  (e) The Seller may terminate this Agreement by giving notice to each Buyer at
any time prior to the Closing in the event (i) a Buyer has breached any material
representation, warranty or covenant contained in this Agreement in any material
respect, (ii) the Seller has notified each Buyer of the breach (specifying in
reasonable detail such breach), and (iii) the breach has continued without cure
or written waiver by the Seller for a period of 30 days after the notice of
breach;

 

  (f) The Seller may terminate this Agreement by giving notice to each Buyer at
any time prior to the Closing if the Closing does not occur on or before March
27, 2005, by reason of the failure of any condition precedent under Section 8.2
of this Agreement (unless the failure results primarily from the Seller itself
breaching any representation, warranty or covenant contained in this Agreement);

 

  (g) The Seller may terminate this Agreement by giving notice to each Buyer at
any time prior to the Closing if any of the Seller’s Required Regulatory
Approvals, the receipt of which is a condition to the obligation of the Seller
to consummate the Closing as set forth in Section 8.2 of this Agreement, will
have been denied (and a petition for rehearing or re-filing of an application
initially denied without prejudice will also have been denied), and such denial
was not caused by or the result of a breach of this Agreement by the Seller;

 

  (h) The Buyers may terminate this Agreement in the circumstances described in
Section 6.9(b);

 

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  (i) The Seller may terminate this Agreement in the circumstances described in
Section 6.2(a); and

 

  (j) Any Party may terminate this Agreement in the event that any Law or Order
becomes effective and continues in effect for 90 days restraining, enjoining or
otherwise prohibiting or making illegal the consummation of any of the
contemplated transactions.

 

  11.2 Effect of Termination. If any Party terminates this Agreement pursuant to
Section 11.1 of this Agreement, all rights and obligations of the Parties under
this Agreement will terminate without any Liability of any Party to any other
Party (except for any Liability of any Party then in breach). No termination of
this Agreement, however, will affect the obligations of the Parties pursuant to
the Confidentiality Agreement, except to the extent specified in such
Confidentiality Agreement.

 

12. Miscellaneous.

 

  12.1 Press Releases and Public Announcements. No Party will issue any press
release or make any public announcement relating to the subject matter of this
Agreement prior to the Closing without the prior written approval of the other
Parties. Any Party, however, may make any public disclosure it believes in good
faith is required by Law or any listing or trading agreement concerning its
publicly-traded securities (in which case the disclosing Party will use
Commercially Reasonable Efforts to advise the other Parties prior to making the
disclosure).

 

  12.2 No Third-Party Beneficiaries. This Agreement will not confer any rights
or remedies upon any Person other than the Parties, their respective successors
and permitted assigns, the Seller’s Indemnitees (solely in their capacity as
such) and the Buyers’ Indemnitees (solely in their capacity as such).

 

  12.3 Entire Agreement. This Agreement (including the Schedules and Exhibits),
together with the Confidentiality Agreement and the Transaction Documents,
embodies the entire agreement and understanding of the Parties with respect to
the transactions contemplated by this Agreement and the Transaction Documents,
and supersedes all prior agreements and understandings between or among the
Parties with respect to such transactions. There are no representations,
warranties, covenants or agreements between or among the Parties with respect to
the subject matter set forth in this Agreement and the Transaction Documents,
other than those expressly set forth in this Agreement and the Transaction
Documents. Without limiting the foregoing, each Buyer acknowledges and agrees
that there are no representations, warranties, covenants or agreements between
or among the Parties with respect to any material made available to such Buyer
pursuant to the terms of the Confidentiality Agreement (including the Due
Diligence Materials).

 

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  12.4 Succession and Assignment. This Agreement will be binding upon and inure
to the benefit of the Parties and their respective successors and permitted
assigns. No Party may assign either this Agreement or any of its rights,
interests or obligations under this Agreement without the prior written approval
of the other Parties. No permitted assignment, however, will release the
assigning party from primary liability under this Agreement. Notwithstanding the
foregoing, before the Closing the ArcLight Buyer may assign its rights under
this Agreement with respect to up to 10% of the Interests to one or more Persons
it may designate. To effect such an assignment, the assignee must execute and
deliver to the Seller an instrument agreeing to be bound by this Agreement as a
Buyer with respect to that percentage Interest, whereupon (a) that assignee
shall become a Buyer with a Percentage equal to the percentage specified in the
assignment and have all rights of the Buyers with respect to its Percentage of
the Interests and (b) ArcLight Buyer shall be released from its obligations
under this Agreement in respect of the new Buyer’s Percentage of the Interests
and its Percentage shall be reduced by an amount equal to the new Buyer’s
Percentage; provided, however, that no such assignment shall relieve ArcLight
Energy Partners Fund II, L.P. of its obligations under the guaranty provided
above its signature on the signature page of this Agreement.

 

  12.5 Counterparts and Facsimile Signatures. This Agreement may be executed in
one or more counterparts, each of which will be deemed an original but all of
which together will constitute one and the same instrument, and by facsimile.

 

  12.6 Headings. The section headings contained in this Agreement are inserted
for convenience only and do not affect in any way the meaning or interpretation
of this Agreement.

 

  12.7 Notices. All notices, requests, demands, claims and other communications
under this Agreement will be in writing. Any notice, request, demand, claim or
other communication under this Agreement will be deemed duly given two Business
Days after it is sent by registered or certified mail, return receipt requested,
postage prepaid and addressed to the intended recipient as set forth below:

 

If to the Seller:

 

Allegheny Energy, Inc.

800 Cabin Hill Drive

Greensburg, Pennsylvania 15601-1689

Attn: President

Fax: (724) 830-5151

 

with a copy, which does not constitute notice, to:

 

Allegheny Energy Supply Company, LLC

4350 Northern Pike - 4 North

Monroeville, PA 15146-2841

Attn: Deputy General Counsel

Fax: (412) 856-2789

 

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If to the ArcLight Buyer:

 

Grant Peaking Power, LLC

c/o ArcLight Capital Partners LLC

200 Clarendon Street, 55th Floor

Boston, MA 02117

Attn: General Counsel

Fax: (617) 867-4698

 

with a copy, which does not constitute notice, to:

 

Skadden, Arps, Slate, Meagher & Flom LLP

1600 Smith Street, Suite 4400

Houston, TX 77002

Attn: John C. Ale

Fax: (713) 655-5200

 

Any Party may send any notice, request, demand, claim or other communication to
the intended recipient at the address set forth above using any other means
(including personal delivery, expedited courier, messenger service, telecopy,
telex, ordinary mail or electronic mail), but no such notice, request, demand,
claim or other communication will be deemed to have been duly given unless and
until it actually is received by the intended recipient. Any Party may change
the address to which notices, requests, demands, claims and other communications
hereunder are to be delivered by giving the other Parties notice in the manner
set forth in this Agreement.

 

  12.8 Governing Law; Jurisdiction.

 

  (a) This Agreement has been negotiated under and will be governed by and
construed in accordance with the domestic laws of the State of New York without
giving effect to any choice or conflict of law provision or rule (whether of the
State of New York or any other jurisdiction) that would cause the application of
the laws of any jurisdiction other than the State of New York.

 

  (b)

Any action, suit or proceeding arising out of or relating to this Agreement or
any of the transactions contemplated hereby may be brought, if at all, only in
the United States District Court for the Southern District of New York and the
courts of the State of New York located in New York County. Each party hereby
irrevocably submits to the jurisdiction of each such court with respect to any
such action, suit or proceeding; provided, however, that such consent to
jurisdiction is solely for the purpose referred to in this section and shall not
be deemed to be a general submission to the

 

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jurisdiction of said courts or in the State of New York other than for such
purpose. Each party hereby irrevocably waives, to the fullest extent permitted
by law, any objection that it may now or hereafter have to the laying of the
venue of any such action, suit or proceeding brought in such a court and any
claim that any such action, suit or proceeding brought in such a court has been
brought in an inconvenient forum.

 

  (c) EACH OF THE PARTIES HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE TRANSACTIONS
CONTEMPLATED HEREBY.

 

  12.9 Amendments and Waivers. No amendment of any provision of this Agreement
will be valid unless the same is in writing and signed by each Buyer and the
Seller. No waiver by any Party of any provision of this Agreement or any
default, misrepresentation or breach of warranty or covenant under this
Agreement, whether intentional or not, will be deemed to extend to any prior or
subsequent default, misrepresentation or breach of warranty or covenant under
this Agreement or affect in any way any rights arising by virtue of any prior or
subsequent such default, misrepresentation or breach of warranty or covenant.

 

  12.10  Severability. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction will not affect the
validity or enforceability of the remaining terms and provisions of this
Agreement or the validity or enforceability of the offending term or provision
in any other situation or in any other jurisdiction.

 

  12.11  Expenses. Except as otherwise provided in this Agreement, each Party
will bear its own costs and expenses (including legal fees and expenses)
incurred in connection with this Agreement and the contemplated transactions.

 

  12.12  Construction. The Parties have participated jointly in the negotiation
and drafting of this Agreement. In the event an ambiguity or question of intent
or interpretation arises, this Agreement must be construed as if drafted jointly
by the Parties, and no presumption or burden of proof will arise favoring or
disfavoring any Party by virtue of the authorship of any of the provisions of
this Agreement. Except where otherwise indicated, all references to Laws
(including Environmental Laws, the Code and Treasury Regulations) means such
Laws as in existence and as interpreted on the date of this Agreement or any
amendment hereto. The word “or” is not exclusive, and the words “including,”
“includes” and “include” are not limiting.

 

  12.13 

Incorporation of Exhibits and Schedules. The Exhibits and the Schedules
identified in this Agreement are incorporated in this Agreement by reference and
are made a part of this Agreement. In the event of any conflict between the
provisions of this Agreement (exclusive of the exhibits and Schedules to this

 

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Agreement) and any Exhibit or Schedule, the provisions of this Agreement will
govern.

 

  12.14  Specific Performance. Each of the Parties acknowledges and agrees that
the other Party would be damaged irreparably in the event any of the provisions
of this Agreement is not performed in accordance with its specific terms or
otherwise is breached. Accordingly, each of the Parties agrees that the other
Party is entitled to an injunction or injunctions to prevent breaches of the
provisions of this Agreement and to enforce specifically this Agreement, in
addition to any other remedy to which it may be entitled, at law or in equity.

 

  12.15  Waiver of Consequential Damages. IN NO EVENT WILL ANY PARTY OR THEIR
RESPECTIVE REPRESENTATIVES BE LIABLE TO ANY OTHER PARTY OR THEIR RESPECTIVE
REPRESENTATIVES UNDER THIS AGREEMENT AT ANY TIME FOR PUNITIVE, CONSEQUENTIAL,
SPECIAL, OR INDIRECT LOSS OR DAMAGE, INCLUDING LOSS OF PROFIT, LOSS OF REVENUE
OR ANY OTHER SPECIAL OR INCIDENTAL DAMAGES, WHETHER IN CONTRACT, TORT (INCLUDING
NEGLIGENCE), STRICT LIABILITY OR OTHERWISE; PROVIDED, HOWEVER, THAT FOR PURPOSES
OF THIS SENTENCE ANY DAMAGES AWARDED OR CLAIMED ON ACCOUNT OF A THIRD PARTY
CLAIM SHALL BE DEEMED TO BE ACTUAL DAMAGES EVEN IF CONSTITUTING ANY OF THE
FOREGOING. EACH PARTY HEREBY EXPRESSLY RELEASES THE OTHER PARTIES AND THEIR
RESPECTIVE REPRESENTATIVES FROM ALL SUCH DAMAGES.

 

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The Parties have executed this Agreement as of the date first above written.

 

ARCLIGHT BUYER: GRANT PEAKING POWER, LLC

By:

 

ArcLight Energy Partners Fund II, L.P., its sole member

   

By:

 

ArcLight PEF GP II, LLC, its general partner

       

By:

 

ArcLight Capital Holdings, LLC, its Manager

           

By:

                    Daniel R. Revers, its Managing Partner SELLER: ALLEGHENY
ENERGY SUPPLY COMPANY, LLC

By:

        John P. Campbell, President

 

The undersigned hereby (i) agrees to cause the Buyers to perform all of their
obligations arising prior to the Closing under this Agreement to the extent of
the Buyers’ obligations under this Agreement, and (ii) shall cause the payment
when due of the Buyers’ obligation to pay the Purchase Price, if, as and when
provided in this Agreement. In no event shall the undersigned have any greater
liability than the Buyers pursuant to this Agreement.

 

ARCLIGHT ENERGY PARTNERS FUND II, L.P. By:  

ArcLight PEF GP II, LLC, its general partner

    By:  

ArcLight Capital Holdings, LLC, its Manager

        By:                 Daniel R. Revers, its Managing Partner

 

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