Exhibit 10.1

 

EXECUTION COPY

 

PURCHASE AND SALE AGREEMENT

 

BY AND BETWEEN

 

ATLANTIC CITY ELECTRIC COMPANY

 

and

 

DUQUESNE LIGHT HOLDINGS, INC.

 

Dated as of November 14, 2005

 

Jointly Owned Stations

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LIST OF EXHIBITS AND SCHEDULES

 

EXHIBITS     

Exhibit A

   Form of Assignment and Assumption Agreement

Exhibit B

   Form of Bill of Sale

Exhibit C

   Form of FIRPTA Affidavit

Exhibit D

   Form of Deed- Conemaugh

Exhibit E

   Form of Deed- Keystone

Exhibit F

   Form of Seller’s Legal Opinion

Exhibit G

   Form of Buyer’s Legal Opinion SCHEDULES     

1.1(28)

   Description of Conemaugh Station

1.1(63)

   Description of Keystone Station

1.1(77)

   Permitted Encumbrances

2.1(d)

   Electrical Transmission Facilities

2.1(f)

   Emission Allowances to be Transferred to Buyer

2.6

   Inventories

4.3(a)

   Seller’s Defaults and Violations

4.3(b)

   Seller’s Required Regulatory Approvals

4.6

   Environmental Matters

4.7

   Real Property

4.9(a)

   Seller’s Agreements

4.9(b)

   Seller’s Agreements Exceptions

4.9(c)

   Seller’s Agreements Defaults and Violations

4.10

   Legal Proceedings

 

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4.12

   Brokers; Finders

5.3(a)

   Buyer’s Defaults and Violations

5.3(b)

   Buyer’s Required Regulatory Approvals

5.9

   Environmental Site Assessments

7.1(c)

   Certain Buyer’s Required Regulatory Approvals

7.2(c)

   Certain Seller’s Required Regulatory Approvals

 

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TABLE OF CONTENTS

 

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     ARTICLE I           DEFINITIONS      1.1.    Definitions    1 1.2.   
Construction    12 1.3.    U.S. Dollars    13 1.4.    Seller’s Interests in
Jointly Owned Stations    13      ARTICLE II           PURCHASE AND SALE     
2.1.    Transfer of Assets    13 2.2.    Excluded Assets    14 2.3.    Assumed
Liabilities    16 2.4.    Excluded Liabilities    17 2.5.    Control of
Litigation    18 2.6.    Inventories    18      ARTICLE III           THE
CLOSING      3.1.    Closing    18 3.2.    Payment of Purchase Price    18 3.3.
   Adjustment to Purchase Price    19 3.4.    Tax Reporting and Allocation of
Purchase Price    20 3.5.    Prorations    21 3.6.    Deliveries by Seller    22
3.7.    Deliveries by Buyer    23 3.8.    Post-Closing Excluded Asset Deliveries
   23      ARTICLE IV           REPRESENTATIONS AND WARRANTIES OF SELLER     
4.1.    Organization; Qualification    24 4.2.    Authority    24 4.3.   
Consents and Approvals; No Violation    24 4.4.    Insurance    25 4.5.    Title
and Related Matters    25 4.6.    Environmental Matters    25 4.7.    Real
Property    26 4.8.    Condemnation    26 4.9.    Contracts and Leases    26

 

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4.10.    Legal Proceedings    26 4.11.    Seller’s Permits    27 4.12.   
Brokers; Finders    27 4.13.    Special Purpose Financial Statements    27 4.14.
   Employees    27 4.15.    Disclosures    27 4.16.    Taxes    27      ARTICLE
V           REPRESENTATIONS AND WARRANTIES OF BUYER      5.1.    Organization;
Qualification    28 5.2.    Authority    28 5.3.    Consents and Approvals; No
Violation    28 5.4.    Buyer’s Permits    29 5.5.    Availability of Funds   
29 5.6.    Financial Statements    29 5.7.    Legal Proceedings    29 5.8.    No
Knowledge of Seller’s Breach    30 5.9.    Inspections    30 5.10.    Regulation
as a Utility    30 5.11.    Brokers; Finders    30      ARTICLE VI          
COVENANTS OF THE PARTIES      6.1.    Access to Information    30 6.2.    Public
Statements    32 6.3.    Further Assurances    32 6.4.    Consents and Approvals
   33 6.5.    Certain Tax Matters    34 6.6.    Advice of Changes    35 6.7.   
Risk of Loss    36 6.8.    PJM; MAAC    36 6.9.    Emission Allowances    36
6.10.    Certain Covenants    37 6.11.    Exclusivity    37      ARTICLE VII   
       CONDITIONS      7.1.    Conditions to Obligation of Buyer    38 7.2.   
Conditions to Obligation of Seller    39 7.3.    Separate Closings    40

 

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     ARTICLE VIII           INDEMNIFICATION AND ARBITRATION      8.1.   
Indemnification    41 8.2.    Defense of Claims    43 8.3.    Arbitration    44
     ARTICLE IX           TERMINATION      9.1.    Termination    45 9.2.   
Effect of Termination    46      ARTICLE X           MISCELLANEOUS PROVISIONS   
  10.1.    Amendment and Modification    47 10.2.    Expenses    47 10.3.   
Fees and Commissions    47 10.4.    Bulk Sales Laws    47 10.5.    Waiver of
Compliance; Consents    47 10.6.    Survival    47 10.7.    Disclaimers    48
10.8.    Notices    49 10.9.    Assignment    50 10.10.    Governing Law; Forum;
Service of Process    50 10.11.    Counterparts    51 10.12.    Interpretation
   51 10.13.    Schedules and Exhibits    51 10.14.    Disclosure    51 10.15.
   Entire Agreement    51

 

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PURCHASE AND SALE AGREEMENT

 

PURCHASE AND SALE AGREEMENT, dated as of November 14, 2005 (this “Agreement”),
by and between Atlantic City Electric Company, a New Jersey corporation (“ACE”
or “Seller”), and Duquesne Light Holdings, Inc., a Pennsylvania corporation
(“Buyer”). Seller and Buyer may each be referred to herein individually as a
“Party,” and together as the “Parties.”

 

WITNESSETH

 

WHEREAS, Seller owns minority interests in two fossil fuel-fired electric
generating stations, and certain properties and assets associated therewith and
ancillary thereto; and

 

WHEREAS, Seller possesses certain Emission Allowances (as defined below); and

 

WHEREAS, Buyer desires to purchase and assume, and Seller desires to sell and
assign, or cause to be sold and assigned, the Purchased Assets (as defined
below) and certain associated Liabilities (as defined below), upon the terms and
conditions hereinafter set forth in this Agreement.

 

NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants,
representations, warranties and agreements set forth herein, and intending to be
legally bound hereby, the Parties hereby agree as follows:

 

ARTICLE I

 

DEFINITIONS

 

1.1. Definitions. As used in this Agreement, the following capitalized terms
have the meanings specified in this Section 1.1.

 

(1) “ACE” has the meaning set forth in the preamble to this Agreement.

 

(2) “Additional Agreements” means the Special Warranty Deeds, the Assignment and
Assumption Agreements and the Bills of Sale.

 

(3) “Affiliate” has the meaning set forth in Rule 12b-2 of the General Rules and
Regulations promulgated under the Exchange Act.

 

(4) “Agreement” means this Purchase and Sale Agreement together with the
Schedules and Exhibits hereto.

 

(5) “Assignment and Assumption Agreements” means the assignment and assumption
agreements between Seller and Buyer, to be delivered at the Closing,
substantially in the form of Exhibit A hereto, pursuant to which Seller shall
assign the Seller’s Agreements,

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certain intangible assets and certain other Purchased Assets to Buyer, and Buyer
shall accept such assignment and assume the Assumed Liabilities.

 

(6) “Assumed Liabilities” has the meaning set forth in Section 2.3.

 

(7) “Authorized Agent” has the meaning set forth in Section 10.10.

 

(8) “Bills of Sale” means the bills of sale of Seller, to be delivered at the
Closing, substantially in the form of Exhibit B hereto.

 

(9) “Book Value” means, as of any date, original cost (including related capital
improvements, freight, commodity and handling (other than on-site handling) less
applicable depreciation and amortization, as reflected on Seller’s books and
records or the books and records of Conemaugh Fuels, LLC or Keystone Fuels, LLC,
in each case, through such date.

 

(10) “Business Day” means any day other than Saturday, Sunday and any day on
which banking institutions in the State of New York are authorized or required
by Law to close.

 

(11) “Buyer” has the meaning set forth in the preamble to this Agreement.

 

(12) “Buyer Material Adverse Effect” has the meaning set forth in
Section 5.3(a).

 

(13) “Buyer’s Financial Statements” has the meaning set forth in Section 5.6.

 

(14) “Buyer’s Indemnitee” has the meaning set forth in Section 8.1(b).

 

(15) “Buyer’s Permits” has the meaning set forth in Section 5.4.

 

(16) “Buyer’s Required Regulatory Approvals” has the meaning set forth in
Section 5.3(b).

 

(17) “Capital Expenditures” means the total amount of funds paid by Seller, or
Liabilities incurred and subsequently paid by Seller, in a manner consistent
with the Jointly Owned Stations Operating Agreements, in respect of the period
commencing on September 1, 2005 and ending on the Closing Date for those capital
projects identified from time to time in (a) the General Ledger for each of
Conemaugh Station and Keystone Station and (b) the Monthly Work Order Status
Reports for each of Conemaugh Station and Keystone Station.

 

(18) “CERCLA” means the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended.

 

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

 

(20) “Closing Adjustment Amount” means an amount equal to the amount by which
(a) the sum of (i) the Book Value of Seller’s right, title and interest in and
to the Inventories

 

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(which, for purposes of clarity, the Parties acknowledge to include, for
purposes of this definition, Inventories of Conemaugh Fuels, LLC and Keystone
Fuels, LLC, to the extent of the Seller’s Interests therein), as of the Closing
Date, determined in a manner consistent with the determination of the Target
Adjustment Amount, plus (ii) Capital Expenditures exceeds (b) the Electricity
Sales Reimbursement Amount.

 

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

 

(22) “Closing Payment” has the meaning set forth in Section 3.2(d).

 

(23) “Closing Statement” has the meaning set forth in Section 3.3(a).

 

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

 

(25) “Commercial Arbitration Rules” has the meaning set forth in Section 8.3(c).

 

(26) “Commercially Reasonable Efforts” means efforts which are reasonably within
the contemplation of the Parties at the time of entering into this Agreement and
which do not require the performing Party to expend funds other than
expenditures which 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 hereunder.

 

(27) “Conemaugh Interest” means Seller’s 3.83% undivided interest as tenant in
common in Conemaugh Station.

 

(28) “Conemaugh Station” means the generating station known as Conemaugh
Station, located in the County of Indiana, Commonwealth of Pennsylvania, and
related properties and assets, all as more fully identified on Schedule 1.1(28)
attached hereto.

 

(29) “Confidentiality Agreement” means the Confidentiality Agreement, dated
May 11, 2005, between Seller and Duquesne Power, LP.

 

(30) “Courts” has the meaning set forth in Section 10.10.

 

(31) “Direct Claim” has the meaning set forth in Section 8.2(c).

 

(32) “Easements” means, collectively, all easements, licenses, rights of way and
other access rights reserved by Seller, or any Affiliate thereof, in the Special
Warranty Deeds, including those that authorize access, use, maintenance,
construction, repair, replacement and other activities by Seller, or any
Affiliate thereof, or are otherwise necessary for Seller, or any Affiliate
thereof, to operate and maintain its electrical and gas transmission and
distribution facilities, or information technology and telecommunications
assets, or fulfill legal requirements applicable thereto.

 

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(33) “Electricity Sales Reimbursement Amount” means an amount equal to the sum
of all amounts actually paid to and received by Seller in respect of
(a) electric energy and capacity produced by the Jointly Owned Stations and sold
into the applicable PJM markets from the Closing Date through, but not
including, the PJM Transfer Date; and (b) any revenue in respect of ancillary
charges paid to and received by Seller less any applicable ancillary charges
incurred by Seller during the period from the Closing Date through, but not
including, the PJM Transfer Date and attributable to the Jointly Owned Stations.

 

(34) “Emission Allowances” means, collectively, NOx Allowances and SO2
Allowances.

 

(35) “Emission Budget Program” means, together, the NOx Budget Program and the
SO2 Budget Program.

 

(36) “Encumbrances” means any and all mortgages, pledges, liens, claims,
security interests, agreements, easements, activity and use limitations,
restrictions, defects of title or encumbrances of any kind.

 

(37) “Environmental Claims” has the meaning set forth in Section 8.1(c).

 

(38) “Environmental Condition” means the presence or Release to the environment,
including air, surface and subsurface water, groundwater, soil and sediments,
whether at the Sites or otherwise, of Hazardous Substances, including any
migration of Hazardous Substances through air, surface and subsurface water,
groundwater, soil and sediments at, to or from the Sites or at, to or from any
Off-Site Location, regardless of when such presence or Release occurred or is
discovered.

 

(39) “Environmental Laws” means all Laws, and judgments, orders and decrees of
any Government Authority, in each case, as amended from time to time,
(a) relating to pollution or protection of the environment, natural resources or
human health and safety, including Laws relating to Releases or threatened
Releases of Hazardous Substances or otherwise relating to the manufacture,
formulation, generation, processing, distribution, use, treatment, storage,
disposal, Release, transport, arrangement for transport for disposal or
treatment, arrangement for disposal or treatment, Remediation, abatement,
cleanup or handling of Hazardous Substances, (b) with regard to recordkeeping,
notification, disclosure and reporting requirements respecting Hazardous
Substances and (c) relating to the management, use, restoration, or compensation
for lost use of or damage to natural resources.

 

(40) “Environmental Permits” means all permits, certificates, licenses and
authorizations of all Governmental Authorities under Environmental Laws.

 

(41) “Estimated Adjustment Amount” has the meaning set forth in Section 3.2(c).

 

(42) “Exchange Act” means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.

 

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(43) “Excluded Assets” has the meaning set forth in Section 2.2.

 

(44) “Excluded Liabilities” has the meaning set forth in Section 2.4.

 

(45) “Federal Power Act” means the Federal Power Act, as amended, and the rules
and regulations promulgated thereunder.

 

(46) “FERC” means the U.S. Federal Energy Regulatory Commission, and any
successor agency thereto.

 

(47) “FIRPTA Affidavit” means the Foreign Investment in Real Property Tax Act
Certification and Affidavit of Seller, to be delivered at the Closing,
substantially in the form of Exhibit C hereto.

 

(48) “Fuels Working Funds” has the meaning set forth in Section 2.1(i).

 

(49) “Governmental Authority” means any executive, legislative, judicial,
regulatory, tribal or administrative agency, body, commission, department,
board, court, tribunal or authority of the U.S. or any foreign country, or any
state, local or other governmental subdivision thereof.

 

(50) “Hazardous Substances” means (a) any petrochemical or petroleum products,
oil or coal ash, coal slag, radioactive materials, radon gas, lead paint,
asbestos in any form that is or could become friable, urea formaldehyde foam
insulation and transformers or other equipment that contain dielectric fluid
which may contain polychlorinated biphenyls, (b) any chemicals, materials or
substances defined as or included in the definition of “hazardous substances,”
“hazardous wastes,” “hazardous materials,” “hazardous constituents,” “restricted
hazardous materials,” “extremely hazardous substances,” “toxic substances,”
“contaminants,” “pollutants,” “toxic pollutants” or words of similar meaning and
regulatory effect under any applicable Environmental Law and (c) any other
chemical, material or substance, exposure to which is prohibited, limited or
regulated by any applicable Environmental Law.

 

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

 

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

 

(53) “Indemnifiable Loss” has the meaning set forth in Section 8.1(a).

 

(54) “Indemnifying Party” has the meaning set forth in Section 8.1(e).

 

(55) “Indemnitee” has the meaning set forth in Section 8.1(b).

 

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(56) “Independent Accounting Firm” means such nationally recognized, independent
accounting firm as is mutually appointed by Seller and Buyer for purposes of
this Agreement.

 

(57) “Initial Amount” has the meaning set forth in Section 3.2(a).

 

(58) “Inspection” means all tests, reviews, examinations, inspections,
investigations, verifications, samplings and similar activities conducted by
Buyer or its Representatives.

 

(59) “Inventories” means coal, oil and other fuel inventories, limestone,
gypsum, materials, spare parts, capital spare parts, consumable supplies, and
chemical and gas inventories (together with related freight, commodity and
handling (other than on-site handling)) which are located at or in transit to
the Jointly Owned Stations for use in the operation of the Jointly Owned
Stations.

 

(60) “Jointly Owned Stations” means, together, Conemaugh Station and Keystone
Station.

 

(61) “Jointly Owned Stations Operating Agreements” means, together, (a) the
Operation and Maintenance Agreement, dated as of December 1, 2002, by and among
Reliant Energy Northeast Management Company, Atlantic City Electric Company,
Conemaugh Power LLC, Constellation Power Source Generation, Inc., Exelon
Generation Company, LLC, PPL Montour LLC, Allegheny Energy Supply Conemaugh,
LLC, PSEG Fossil LLC, Reliant Energy Mid-Atlantic Power Holdings, LLC and UGI
Development Company, with respect to the ownership and operation of Conemaugh
Station, and (b) the Operation and Maintenance Agreement, dated as of
December 1, 2002, by and among Reliant Energy Northeast Management Company,
Atlantic City Electric Company, Constellation Power Source Generation, Inc.,
Exelon Generation Company, LLC, Keystone Power LLC, PPL Montour LLC, PSEG Fossil
LLC and Reliant Energy Mid-Atlantic Power Holdings, LLC, with respect to the
ownership and operation of Keystone Station.

 

(62) “Keystone Interest” means Seller’s 2.47% undivided interest as tenant in
common in Keystone Station.

 

(63) “Keystone Station” means the generating station known as Keystone Station
located in Plumcreek Township, County of Armstrong, Commonwealth of
Pennsylvania, and related properties and assets, all as more fully identified on
Schedule 1.1(63) attached hereto.

 

(64) “Knowledge” means the actual knowledge, after due inquiry, of James Becker,
John Miller, Stuart Widom, Roland Miller, Randall Griffin and Betty Mincer.

 

(65) “Laws” means all laws, statutes, rules, regulations and ordinances of any
Governmental Authority.

 

(66) “Liability” or “Liabilities” means any liability or obligation (whether
known or unknown, whether asserted or unasserted, whether absolute or
contingent, whether accrued or

 

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unaccrued, whether liquidated or unliquidated and whether due or to become due),
including any liability for Taxes.

 

(67) “MAAC” means the Mid-Atlantic Area Council of the North American Electric
Reliability Council, and any successor entity thereto.

 

(68) “Material Adverse Effect” means any change in or effect on the Purchased
Assets, taken as a whole, or either of the Jointly Owned Stations or the
operation of the Purchased Assets, taken as a whole, or either of the Jointly
Owned Stations after the date hereof that is materially adverse to the
properties, results of operations or financial condition of the Purchased
Assets, taken as a whole, or either of the Jointly Owned Stations, in each case,
other than (a) any change or effect affecting the international, national,
regional or local electric industry as a whole and not specific and exclusive to
the Purchased Assets, (b) any change or effect resulting from changes in the
international, national, regional or local wholesale or retail markets for
electricity, including any change in or effect on the structure, operating
agreements, operations or procedures of PJM or its control area, (c) any change
or effect resulting from changes in the international, national, regional or
local markets for any fuel type that may be used at each of the Jointly Owned
Stations, (d) any change or effect resulting from changes in the international,
national, regional or local electricity transmission or distribution systems or
operations thereof, (e) changes in general economic conditions, interest rates
or securities markets in the U.S. or worldwide, (f) changes in Law, or any
judgments, orders or decrees that apply generally to similarly situated Persons,
(g) any change or effect to the extent constituting or involving an Excluded
Asset or an Excluded Liability, (h) any change or effect resulting from any
condition imposed on any Party or the Purchased Assets by a Governmental
Authority in connection with the grant of such Governmental Authority’s consent
or approval of the transactions contemplated hereby and by the Additional
Agreements, (i) any acts of war or terrorist activities, (j) strikes, work
stoppages or other labor disturbances that are not specific to the Jointly Owned
Stations or Seller, (k) any matter to the extent that (i) it is disclosed in
reasonable detail in any Schedule delivered by Seller on the date hereof and
(ii) such disclosed matter does not worsen in a material manner, (l) any change
or effect arising solely by reason of or relating to the announcement of the
transactions provided for in this Agreement, and (m) any change in or effect on
the Purchased Assets which is cured (including by payment of money) before the
earlier of the Closing and the termination of this Agreement pursuant to
Section 9.1.

 

(69) “NJBPU” means the New Jersey Board of Public Utilities, and any successor
agency thereto.

 

(70) “NOx” means oxides of nitrogen.

 

(71) “NOx Allowance” means an allowance or authorization used to comply with a
NOx Budget Program, including: (a) a NOx Allowance as that term is defined in 25
Pa. Code § 145.2 as of the date hereof; (b) a NOx allowance or authorization (or
similar term) as set forth in the U.S. federal Clean Air Interstate Rule
published in the Federal Register on May 12, 2005, including allowances or
authorizations relating to NOx emissions during the ozone season and during a
calendar year; (c) a NOx allowance or authorization (or similar term) as set
forth in Laws that may be promulgated by the Commonwealth of Pennsylvania or the
PaDEP after the

 

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date hereof to implement such Clean Air Interstate Rule; and (d) a NOx allowance
or authorization (or similar term) promulgated pursuant to any future U.S.
federal or state Laws that amends or supersedes any of the foregoing.

 

(72) “NOx Budget Program” means a statutory or regulatory program promulgated by
the U.S. or a state pursuant to which the U.S. or state provides for a limit on
the NOx that can be emitted by all sources covered by the program and
establishes tradable allowances or authorizations as the means for ensuring
compliance with the limit.

 

(73) “Off-Site Location” means any real property other than the Sites.

 

(74) “PaDEP” means the Pennsylvania Department of Environmental Protection, and
any successor agency thereto.

 

(75) “PaPUC” means the Pennsylvania Public Utility Commission, and any successor
agency thereto.

 

(76) “Party” and “Parties” have the respective meanings set forth in the
preamble to this Agreement.

 

(77) “Permitted Encumbrances” means: (a) the Easements; (b) those exceptions to
title to the Purchased Assets listed on Schedule 1.1(77); (c) statutory liens
for Taxes or other charges or assessments of Governmental Authorities not yet
due or delinquent, or which are being contested in good faith by appropriate
proceedings; (d) mechanics’, carriers’, workers’, repairers’ and other similar
liens arising or incurred in the ordinary course of business; (e) zoning,
entitlement, conservation restriction and other land use and environmental
restrictions and regulations of Governmental Authorities; (f) Encumbrances
created by Buyer, or its successors and assigns; and (g) such other Encumbrances
as do not materially detract from the value of either the Jointly Owned Stations
or the Purchased Assets, taken as a whole, as currently used, or materially
interfere with the present use of either the Jointly Owned Stations or the
Purchased Assets, taken as a whole.

 

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

 

(79) “PJM” means PJM Interconnection, L.L.C., and any successor entity thereto.

 

(80) “PJM Agreement” means the Amended and Restated Operating Agreement of PJM
Interconnection, L.L.C., on file and effective at FERC as of June 22, 2005, as
it may be amended from time to time.

 

(81) “PJM Transfer Date” means such date as the transfer of the Jointly Owned
Stations from Seller to Buyer is reflected in all applicable PJM systems and
databases.

 

(82) “Prime Rate” has the meaning set forth in Section 3.3(c).

 

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(83) “Proprietary Information” of a Party means all information about any Party
or its properties or operations furnished to the other Party or its
Representatives by such Party or its Representatives, from and after the date
hereof, regardless of the manner or medium in which it is furnished. Proprietary
Information does not include information that: (a) is or becomes generally
available to the public, other than as a result of a disclosure by the other
Party or its Representatives; (b) was available to the other Party on a
non-confidential basis prior to its disclosure by the Party or its
Representatives; (c) is or becomes available to the other Party on a
non-confidential basis from a source other than such Party, provided that the
source of such information was not known by such Party or its Representatives,
after reasonable investigation, to be bound by a confidentiality agreement with
or other contractual, legal or fiduciary obligation of confidentiality to such
Party or any of its Representatives with respect to such material; (d) is
independently developed by the other Party; or (e) was disclosed pursuant to the
Confidentiality Agreement and remains subject to the terms and conditions of the
Confidentiality Agreement.

 

(84) “PUHCA” means the Public Utility Holding Company Act of 1935, as amended,
and the rules and regulations promulgated thereunder.

 

(85) “Purchase Price” has the meaning set forth in Section 3.2(a).

 

(86) “Purchased Assets” has the meaning set forth in Section 2.1.

 

(87) “Real Property” has the meaning set forth in Section 2.1(a).

 

(88) “Regulatory Material Adverse Effect” means, with respect to any Party, any
change in or effect resulting from any condition imposed by any Governmental
Authority in connection with the grant of such Governmental Authority’s consent
or approval of the transactions contemplated hereby or by the Additional
Agreements that either (a) is materially adverse to such Party, or its results
of operations, financial condition, business, properties, assets or liabilities,
(b) materially impairs such Party’s ability to operate its business, properties
or assets substantially in the manner operated on the date hereof,
(c) materially detracts from the value of such Party’s business, properties or
assets, or (d) materially affects the value of the transactions contemplated
hereby or by the Additional Agreements to such Party.

 

(89) “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, whether air, surface or subsurface water,
groundwater, soil or sediment.

 

(90) “Remediation” means an action of any kind to address an Environmental
Condition or a Release of Hazardous Substances, including the following
activities: (a) monitoring, investigation, assessment, treatment, cleanup,
containment, removal, mitigation, response or restoration work; (b) obtaining
any permits, consents, approvals or authorizations of any Governmental Authority
necessary to conduct any such activity; (c) preparing and implementing any plans
or studies for any such activity; (d) obtaining a written notice from a
Governmental Authority with jurisdiction over the Jointly Owned Stations or the
Sites or an Off Site Location under Environmental Laws that no material
additional work is required by such Governmental Authority; (e) the use,
implementation, application, installation, operation or

 

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maintenance of removal actions, remedial technologies applied to the surface or
subsurface soils, excavation and treatment or disposal of soils at an Off Site
Location, systems for long term treatment of surface water or groundwater,
engineering controls or institutional controls; and (f) any other activities
reasonably determined by a party to be necessary or appropriate or required
under Environmental Laws to address an Environmental Condition or a Release of
Hazardous Substances.

 

(91) “Representatives” of a Person means, collectively, such Person’s Affiliates
and 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.

 

(92) “SEC” means the U.S. Securities and Exchange Commission, and any successor
agency thereto.

 

(93) “Securities Act” means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.

 

(94) “Seller” has the meaning set forth in the preamble to this Agreement.

 

(95) “Seller’s Agreements” means, collectively, (a) the contracts, agreements,
arrangements, licenses and leases of any nature to which, as of the date hereof,
Seller is a party, or by or to which Seller or the Purchased Assets is bound or
subject, in each case, relating to the ownership, lease, maintenance or
operation of the Purchased Assets, (b) those contracts, agreements,
arrangements, licenses and leases of any nature entered into by Seller on or
after the date of this Agreement consistent with the terms of this Agreement, in
each case, relating to the ownership, lease, maintenance or operation of the
Purchased Assets, and (c) those contracts, agreements, arrangements, licenses
and leases entered into by any party to the Jointly Owned Stations Operating
Agreements, for and on behalf of Seller, with or without Seller’s Knowledge, and
by or to which Seller or the Purchased Assets are bound or subject as of the
date hereof, or by or to which Seller or the Purchased Assets become bound or
subject after the date hereof, in each case, relating to the ownership, lease,
maintenance or operation of the Purchased Assets.

 

(96) “Seller’s Indemnitee” has the meaning set forth in Section 8.1(a).

 

(97) “Seller’s Interests” means, together, the Conemaugh Interest and the
Keystone Interest.

 

(98) “Seller’s Permits” has the meaning set forth in Section 4.11.

 

(99) “Seller’s Required Regulatory Approvals” has the meaning set forth in
Section 4.3(b).

 

(100) “Sites” means the real property forming a part, or used or usable in
connection with the operation, of the Jointly Owned Stations, including any real
property used for the disposal of solid waste or Hazardous Substances that is
included in the Real Property. Any

 

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reference to the Sites shall include the surface and subsurface elements,
including the soil, surface water and groundwater present at the Sites.

 

(101) “SO2” means sulfur dioxide.

 

(102) “SO2 Allowance” means an allowance or authorization used to comply with a
SO2 Budget Program, including: (a) an Allowance as that term is defined in 40
CFR § 72.2; (b) a SO2 allowance or authorization (or similar term) as set forth
in the U.S. federal Clean Air Interstate Rule published in the Federal Register
on May 12, 2005; (c) a SO2 allowance or authorization (or similar term) as set
forth in Laws that may be promulgated by the Commonwealth of Pennsylvania or the
PaDEP after the date hereof to implement such Clean Air Interstate Rule; and
(d) a SO2 allowance or authorization (or similar term) promulgated pursuant to
any future U.S. federal or state Law that amends or supersedes any of the
foregoing.

 

(103) “SO2 Budget Program” means a statutory or regulatory program, promulgated
by the U.S. or a state pursuant to which the U.S. or state provides for a limit
on the SO2 that can be emitted by all sources covered by the program and
establishes tradable allowances or authorizations as the means for ensuring
compliance with the limit.

 

(104) “Special Purpose Financial Statements” means, collectively, (a) the
audited special purpose statements of owners’ assets, liabilities, and
investments in each of the Keystone Station and the Conemaugh Station for each
of their respective fiscal years ended December 31, 2004 and 2003, together with
the related reports of their independent accountants, KPMG LLP, as furnished by
the Keystone-Conemaugh Project Office, (b) the audited balance sheets,
statements of operations, statements of members’ equity and statements of cash
flow of each of Keystone Fuels, LLC and Conemaugh Fuels, LLC for each of their
respective fiscal years ended December 31, 2004 and 2003, together with the
related reports of their independent accountants, KPMG LLP, as furnished by the
Keystone-Conemaugh Project Office, and (c) the unaudited General Ledger for each
of the Keystone Station, Conemaugh Station, Keystone Fuels, LLC and Conemaugh
Fuels, LLC for each month during the period beginning January 1, 2005 and ending
September 30, 2005, as prepared by the Keystone-Conemaugh Project Office.

 

(105) “Special Warranty Deeds” means the special warranty deeds, to be delivered
at the Closing, substantially in the form of Exhibit D and Exhibit E hereto,
pursuant to which Seller will convey the Real Property to Buyer.

 

(106) “Station Working Funds” means, as of the date immediately preceding the
Closing Date, the amount of working funds, as reflected in the respective
General Ledgers of the Jointly Owned Stations, to the extent of the Seller’s
Interests.

 

(107) “Subsidiary”, when used in reference to any Person, means any entity of
which outstanding securities or interests having ordinary voting power to elect
a majority of the board of directors or other governing body performing similar
functions of such entity are owned directly or indirectly by such Person.

 

(108) “Tangible Personal Property” has the meaning set forth in Section 2.1(d).

 

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(109) “Target Adjustment Amount” means $2,151,869, which amount represents the
Book Value, as of August 31, 2005, of Seller’s right, title and interest in and
to the Inventories (which, for purposes of clarity, the Parties acknowledge to
include for purposes of this definition Inventories of Conemaugh Fuels, LLC and
Keystone Fuels, LLC, to the extent of the Seller’s Interests therein), as
determined by the Keystone-Conemaugh Project Office in accordance with the terms
of the Jointly Owned Stations Operating Agreements.

 

(110) “Tax” or “Taxes” means all taxes, charges, fees, levies, penalties and
other assessments imposed by any Governmental Authority, including income, gross
receipts, excise, property, sales, transfer, use, franchise, payroll,
withholding, social security and other taxes, together with any interest,
penalties or additions attributable thereto.

 

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

 

(112) “Third-Party Claim” has the meaning set forth in Section 8.2(a).

 

(113) “Transfer Taxes” has the meaning set forth in Section 6.5(a).

 

(114) “Transmission Assets” has the meaning set forth in Section 2.2(a).

 

(115) “U.S.” means the United States of America.

 

(116) “USEPA” means the U.S. Environmental Protection Agency, and any successor
agency thereto.

 

1.2. Construction. In construing this Agreement, together with the Schedules and
Exhibits hereto, the following principles shall be followed:

 

(a) the terms “herein,” “hereof,” “hereby,” “hereunder” and other similar terms
refer to this Agreement as a whole and not only to the particular Article,
Section or other subdivision in which any such terms may be employed;

 

(b) except as otherwise set forth herein, references to Articles, Sections,
Schedules, Exhibits and other subdivisions refer to the Articles, Sections,
Schedules, Exhibits and other subdivisions of this Agreement;

 

(c) a reference to any Person shall include such Person’s predecessors;

 

(d) all accounting terms not otherwise defined herein have the meanings assigned
to them in accordance with U.S. generally accepted accounting principles;

 

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(e) no consideration shall be given to the captions of the Articles, Sections,
Schedules, Exhibits, subdivisions, subsections or clauses, which are inserted
for convenience in locating the provisions of this Agreement and not as an aid
in its construction;

 

(f) examples shall not be construed to limit, expressly or by implication, the
matter they illustrate;

 

(g) the word “includes” and “including” and their syntactical variants mean
“includes, but is not limited to” and “including, without limitation,” and
corresponding syntactical variant expressions;

 

(h) a defined term has its defined meaning throughout this Agreement, regardless
of whether it appears before or after the place in this Agreement where it is
defined; and

 

(i) the plural shall be deemed to include the singular and vice versa.

 

1.3. U.S. Dollars. When used herein, the term “dollars” and the symbol “$” refer
to the lawful currency of the U.S.

 

1.4. Seller’s Interests in Jointly Owned Stations. The Parties acknowledge and
agree that Seller owns and holds (a) an undivided three and eighty-three
hundredths percent (3.83%) interest as tenant in common in the Conemaugh Station
and (b) an undivided two and forty-seven hundredths percent (2.47%) interest as
tenant in common in the Keystone Station. All references in this Agreement to
Seller’s right, title and interest in, to and under the Purchased Assets, and,
in each case, the rights, liabilities and obligations in connection therewith,
shall be construed in this context.

 

ARTICLE II

 

PURCHASE AND SALE

 

2.1. Transfer of Assets. Upon the terms and subject to the conditions set forth
in this Agreement, at the Closing, Seller shall sell, assign, convey, transfer
and deliver to Buyer, and Buyer shall purchase, assume and acquire from Seller,
free and clear of all Encumbrances, except for the Permitted Encumbrances, all
of Seller’s right, title and interest in, to and under the following assets and
properties, except as otherwise provided in Section 2.2, each as of the Closing
Date, but only to the extent of the Seller’s Interests (collectively, the
“Purchased Assets”):

 

(a) The real property (including all buildings and other improvements thereon
and all appurtenances thereto) described on Schedule 4.7 (the “Real Property”);

 

(b) The Inventories;

 

(c) The machinery, equipment, vehicles, furniture and other personal property
owned by Seller, in each case, located on the Real Property on the Closing Date,
other than the Transmission Assets;

 

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(d) The electrical transmission facilities set forth on Schedule 2.1(d)
(together with the Inventories and the personal property described in
Section 2.1(c), “Tangible Personal Property”);

 

(e) Subject to the receipt of necessary consents and approvals, the Seller’s
Agreements, including Seller’s rights to the Station Working Funds;

 

(f) The Emission Allowances set forth on Schedule 2.1(f);

 

(g) The names “Conemaugh Generating Station” and “Keystone Generating Station”;
provided, however, that Buyer expressly acknowledges and agrees that the
Purchased Assets do not include any right, title or interest in or to the names
“Atlantic City Electric Company”, “Atlantic Energy”, “ACE”, “Conectiv”, “Pepco”,
“Pepco Holdings” or any derivation thereof, as well as any related or similar
name, or any other trade names, trademarks, service marks, corporate names and
logos or any part, derivation, colorable imitation or combination thereof;

 

(h) All books, operating records, operating, safety and maintenance manuals,
engineering design plans, blueprints and as-built plans, specifications,
procedures and similar items relating specifically to the Jointly Owned Stations
(subject to the right of Seller to retain copies of same for its use), other
than such items as are proprietary to third parties and accounting records; and

 

(i) Seller’s membership interests in each of Conemaugh Fuels, LLC and Keystone
Fuels, LLC (it being understood that the sale, assignment, conveyance, transfer
and delivery by Seller to Buyer of such membership interests as Purchased Assets
shall, by operation of law, result in Buyer purchasing, acquiring and assuming
all assets, properties and Liabilities of Conemaugh Fuels, LLC and Keystone
Fuels, LLC, to the extent of the Seller’s Interests, including the amount of any
working funds, as reflected in the General Ledger of such entities on the date
immediately preceding the Closing Date (“Fuels Working Funds”)).

 

2.2. Excluded Assets. Notwithstanding any provision to the contrary in this
Agreement, nothing in this Agreement shall constitute or be construed as
requiring Seller to sell, assign, convey, transfer or deliver, and Buyer shall
not be entitled to purchase, assume or acquire, any right, title or interest in,
to or under any property, asset, business, operation or division of Seller, or
any Affiliate thereof, not expressly set forth in Section 2.1, including the
following assets and properties which are hereby specifically excluded from the
definition of Purchased Assets (collectively, the “Excluded Assets”):

 

(a) The right, title and interest of Seller and its successors, assigns and
Representatives in, to and under all electrical transmission or distribution
facilities (as opposed to generation facilities) or information technology and
telecommunications assets of Seller or any of its Affiliates located at or
forming a part of either of the Jointly Owned Stations (whether or not regarded
as a “transmission” or “generation” asset for regulatory or accounting
purposes), including all switchyard facilities, substation facilities and
support equipment, as well as all permits, contracts and warranties, to the
extent they relate to such transmission and distribution assets or information
technology and telecommunications assets (other than the electrical

 

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transmission facilities set forth on Schedule 2.1(d), all of which are included
as Purchased Assets) (collectively, the “Transmission Assets”);

 

(b) All certificates of deposit, shares of stock, securities, bonds, debentures,
evidences of indebtedness, and interests (other than Seller’s membership
interests in Conemaugh Fuels, LLC and Keystone Fuels, LLC) in partnerships and
other entities;

 

(c) All cash (other than the Station Working Funds), cash equivalents, bank
deposits, accounts and notes receivable (trade or otherwise), and prepaid
expenses, including such as relate to any Excluded Assets or the operation of
the Purchased Assets, and any income, sales, payroll or other Tax receivables
(in each case, whether held by Seller or any third party, including under any
Jointly Owned Stations Operating Agreement);

 

(d) The right, title and interest of Seller and its successors, assigns and
Representatives in, to and under all intellectual property, including the names
“Atlantic City Electric Company”, “Atlantic Energy”, “ACE”, “Conectiv”, “Pepco”,
“Pepco Holdings” or any derivation thereof, as well as any related or similar
name, or any other trade names, trademarks, service marks, corporate names and
logos, or any part, derivation, colorable imitation or combination thereof
(other than “Conemaugh Generating Station” and “Keystone Generating Station”);

 

(e) All tariffs, agreements and arrangements to which Seller or its
Representatives is a party for the purchase or sale of electric capacity or
energy, or for the purchase of transmission, distribution or ancillary services;

 

(f) The right, title and interest of Seller and its successors, assigns and
Representatives in, to and under all claims against third parties, if any,
relating to the ownership, lease, maintenance or operation of any Purchased
Assets by Seller prior to the Closing Date, whether accruing prior to, on or
after the Closing Date, including all claims for refunds, prepayments, offsets,
recoupment, insurance proceeds, insurance distributions, dividends or other
proceeds, condemnation awards, judgments and the like, whether received as
payment or credit against future Liabilities;

 

(g) All Tax refunds or credits (including refunds or credits of real property
Taxes paid or due with respect to the Jointly Owned Stations or any related real
property), which refunds or credits are with respect to periods prior to the
Closing Date, whether directly or indirectly, under the Jointly Owned Stations
Operating Agreements or otherwise, regardless of when actually paid;

 

(h) All employment agreements and personnel records of Seller and its
successors, assigns and Representatives;

 

(i) The minute books, stock transfer books, corporate seal and other corporate
records of Seller and its successors, assigns and Representatives;

 

(j) The right, title and interest of Seller and its successors, assigns and
Representatives in, to and under all contracts, agreements, arrangements,
licenses and leases of any nature, other than the Seller’s Agreements;

 

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(k) All insurance policies relating to the ownership, lease, maintenance or
operation of the Purchased Assets;

 

(l) All other assets and properties owned or leased by Seller or its successors,
assigns and Representatives which are not used in the operation of the Jointly
Owned Stations;

 

(m) The right, title and interest of Seller and its successors, assigns and
Representatives under this Agreement and the Additional Agreements; and

 

(n) The right, title and interest of Seller and its successors, assigns and
Representatives in, to and under all Emission Allowances of Seller or any of its
Affiliates (other than the Emission Allowances set forth on Schedule 2.1(f)).

 

2.3. Assumed Liabilities. On the Closing Date, Buyer shall assume and agree to
pay, perform and otherwise discharge when due, without recourse to Seller or its
Affiliates, all of the Liabilities of Seller and its Affiliates, successors,
assigns or Representatives, which relate, directly or indirectly, to the
Purchased Assets, the Jointly Owned Stations or the Sites (collectively, the
“Assumed Liabilities”), including the following such Liabilities:

 

(a) All Liabilities of Seller under the Seller’s Agreements, including the
Jointly Owned Stations Operating Agreements in accordance with the respective
terms thereof, including (i) the contracts, agreements, arrangements, licenses
and leases of any nature entered into by Seller with respect to the Purchased
Assets, the Jointly Owned Stations or the Sites on or after the date hereof
consistent with the terms of this Agreement and (ii) those contracts,
agreements, arrangements, licenses and leases entered into by any party to the
Jointly Owned Stations Operating Agreements, for and on behalf of Seller, with
or without Seller’s Knowledge, and by or to which Seller or the Purchased Assets
are bound or subject as of the date hereof, or by or to which Seller or the
Purchased Assets become bound or subject after the date hereof, in each case,
relating to the ownership, lease, maintenance or operation of the Purchased
Assets, except, in each case, to the extent such Liabilities, but for a breach
or default by Seller, would have been paid, performed or otherwise discharged
prior to the Closing Date;

 

(b) All Liabilities of Seller which relate to the Purchased Assets, the Jointly
Owned Stations and the Sites in respect of Taxes for which Buyer is liable
pursuant to Section 3.5 or 6.5;

 

(c) All Liabilities relating to or resulting from the following: (i) any
violation of or alleged violation, or non-compliance with, Environmental Laws or
Environmental Permits whether prior to, on or after the Closing Date, with
respect to the ownership, lease, maintenance, construction, modification or
operation of the Purchased Assets, the Jointly Owned Stations or the Sites,
including the cost of correcting any such violations or non-compliance, but
excluding any fines or penalties arising out of the ownership, maintenance,
lease, construction, modification or operation of the Purchased Assets, Jointly
Owned Stations or the Sites prior to the Closing Date; (ii) Environmental
Conditions or exposure to Hazardous Substances at, on, in, under or adjacent to,
or migrating or discharged to or from, the Purchased Assets, the Jointly Owned
Stations or the Sites prior to, on or after the Closing Date, including loss of
life, injury to persons or property (including from exposure to
asbestos-containing materials) and damage to

 

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natural resources (whether or not such loss, injury or damage arose or was made
manifest before the Closing Date or arises or becomes manifest after the Closing
Date) and Remediation of Environmental Conditions (whether or not such
Remediation commenced before or after the Closing Date); and (iii) Remediation,
loss of life, injury to persons or property and damage to natural resources
arising from the storage, transportation, treatment, disposal, discharge
recycling or Release, at any Off-Site Location, or arising from the arrangement
for such activities, on or after the Closing Date, of Hazardous Substances
generated in connection with the ownership, lease, maintenance, construction,
modification or operation of the Purchased Assets, the Jointly Owned Stations or
the Sites; and

 

(d) All Taxes that may be imposed by any federal, state or local government on
the ownership, lease, maintenance, operations, use or sale of the Purchased
Assets, the Jointly Owned Stations or the Sites for tax periods commencing on or
after the Closing Date, except for any Income Taxes attributable to income
received by Seller.

 

2.4. Excluded Liabilities. Notwithstanding Section 2.3, other than, to the
extent of the Seller’s Interests, Liabilities of Conemaugh Fuels, LLC and
Keystone Fuels, LLC, Buyer shall not assume or be obligated to pay, perform or
otherwise discharge the following Liabilities of Seller (the “Excluded
Liabilities”):

 

(a) Any Liabilities of Seller in respect of any Excluded Assets or other assets
of Seller which are not Purchased Assets, except to the extent caused by the
acts or omissions of Buyer or its Representatives or Buyer’s ownership, lease,
maintenance or operation of the Purchased Assets;

 

(b) Any Liabilities of Seller in respect of Taxes attributable to the Purchased
Assets for taxable periods ending before the Closing Date, except for Taxes for
which Buyer is liable pursuant to Section 3.5 or 6.5;

 

(c) Any Liabilities of Seller arising from the breach prior to the Closing Date
by Seller of any of the Seller’s Agreements;

 

(d) Any Liabilities of Seller to third parties for personal injury or tort, or
similar causes of action to the extent arising out of the ownership, lease,
maintenance or operation of the Purchased Assets prior to the Closing Date,
other than the Liabilities assumed by Buyer under Section 2.3(c);

 

(e) Any fines or penalties imposed by any Governmental Authority resulting from
any violation of Law by Seller that occurred prior to the Closing Date, it being
understood that costs associated with correcting such violations shall not be
deemed to be fines or penalties for purposes hereof;

 

(f) Any payment obligations of Seller for services rendered prior to the Closing
Date;

 

(g) Any Liabilities of Seller relating to Remediation, loss of life, injury to
persons or property and damage to natural resources arising from the storage,
transportation, treatment, disposal, discharge recycling or Release of Hazardous
Substances at any Off-Site

 

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Location, or arising from the arrangement for such activities, prior to the
Closing Date, which Hazardous Substances were generated in connection with the
ownership, lease, maintenance, construction, modification or operation of the
Purchased Assets, the Jointly Owned Stations or the Sites, provided, for
purposes of this Section, “Off-Site Location” does not include any adjacent or
nearby location to which Hazardous Substances, disposed, discharged or Released
at the Purchased Assets, the Jointly Owned Stations or the Sites have migrated
or come to be located; and

 

(h) Any Liability under or related to Environmental Laws arising as a result of
the operation by Seller or its Affiliates of the Transmission Assets, except to
the extent arising out of or relating to Buyer’s ownership, lease, maintenance,
construction, modification or operation of any Purchased Asset.

 

2.5. Control of Litigation. Seller shall be entitled exclusively to control,
defend and settle any suit, action or proceeding, and any investigation solely
arising out of or relating to any Excluded Assets or Excluded Liabilities, and
Buyer shall reasonably cooperate with Seller in connection therewith.

 

2.6. Inventories. Schedule 2.6 sets forth the categories of Inventories relating
to the Jointly Owned Stations that will be transferred to Buyer at the Closing
(which, for purposes of clarity, the Parties acknowledge to include for purposes
of this Section 2.6 Inventories of Conemaugh Fuels, LLC and Keystone Fuels,
LLC), to the extent located at or in transit to any Jointly Owned Station on the
Closing Date, and only to the extent of the Seller’s Interest, together with the
Book Value of such Inventories, in each case, as of August 31, 2005.

 

ARTICLE III

 

THE CLOSING

 

3.1. Closing. The sale, assignment, conveyance, transfer and delivery of the
Purchased Assets by Seller to Buyer, and the purchase, assumption and
acquisition by Buyer of the Purchased Assets and the Assumed Liabilities, and
the consummation of the other transactions contemplated hereby, shall take place
at a closing (the “Closing”) to be held at the offices of Blank Rome LLP, Chase
Manhattan Centre, 1201 Market Street, Suite 800, Wilmington, DE 19801, within
five (5) Business Days after the date on which the last of the conditions
precedent to the Closing set forth in Sections 7.1(a) and (c), and Sections
7.2(a) and (c) of this Agreement shall have been satisfied or, to the extent
permitted by applicable Law, waived by the Party for whose benefit such
conditions precedent exist, or at such other date, time and location as may be
agreed upon in writing between Buyer and Seller. The date on which the Closing
actually occurs is hereinafter called the “Closing Date.” The Closing shall be
effective for all purposes as of 12:01 a.m., New York City time, on the Closing
Date.

 

3.2. Payment of Purchase Price.

 

(a) Upon the terms and subject to the conditions set forth in this Agreement, in
consideration of the aforesaid sale, assignment, conveyance, transfer and
delivery of the Purchased Assets, Buyer shall (i) pay to Seller cash in an
aggregate amount equal to

 

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(A) $173,100,000 (as may be adjusted pursuant to Section 3.2(b), the “Initial
Amount”) plus (B) the amount, if any, by which the Closing Adjustment Amount
exceeds the Target Adjustment Amount, or minus (C) the amount, if any, by which
the Target Adjustment Amount exceeds the Closing Adjustment Amount (the
“Purchase Price”), and (ii) assume and agree to pay, perform and otherwise
discharge the Assumed Liabilities. For the avoidance of doubt, Buyer
acknowledges that its assumption of, and agreement to pay, perform or otherwise
discharge, the Assumed Liabilities constitutes an integral part of the
consideration to be received by Seller in respect of the sale, assignment,
conveyance, transfer and deliver of the Purchased Assets hereunder, and that, in
the absence of such assumption and agreement by Buyer, Seller would not enter
into this Agreement.

 

(b) Notwithstanding any provision hereof to the contrary, the Initial Amount
shall be (i) increased at the rate of $32,877 per day for each day that the
Closing Date occurs before September 1, 2006 and (ii) decreased at the rate of
$32,877 per day for each day that the Closing Date occurs after September 1,
2006.

 

(c) At least three (3) Business Days prior to the Closing Date, Seller shall
provide to Buyer its good faith estimate of the Closing Adjustment Amount, which
estimate shall be certified in writing by an appropriate officer of Seller (the
“Estimated Adjustment Amount”).

 

(d) At the Closing, in furtherance but not in duplication of Section 3.2(a),
Buyer shall pay to Seller cash in an aggregate amount equal to (A) the Initial
Amount plus (B) the amount, if any, by which the Estimated Adjustment Amount
exceeds the Target Adjustment Amount, or minus (C) the amount, if any, by which
the Target Adjustment Amount exceeds the Estimated Adjustment Amount (the
“Closing Payment”). The Closing Payment shall be paid to Seller by Buyer at the
Closing by wire transfer of immediately available funds to the account
designated by Seller to Buyer at least two (2) Business Days prior to the
Closing Date.

 

3.3. Adjustment to Purchase Price.

 

(a) Within sixty (60) days after the Closing Date, Seller shall deliver to
Buyer, at Seller’s sole cost and expense, a statement setting forth the Closing
Adjustment Amount (the “Closing Statement”). Contemporaneously, Seller shall
deliver to Buyer a schedule setting forth a calculation of the Purchase Price
and the amount of any payment to be made, and by whom, pursuant to
Section 3.3(c).

 

(b) In the event that Buyer is in disagreement with the Closing Statement, Buyer
shall, within ten (10) Business Days after receipt of the Closing Statement,
notify Seller of such disagreements setting forth with specificity the nature
and amounts thereof. In the event that Buyer is in disagreement with only a
portion of the Closing Statement, Buyer or Seller, as the case may be, shall pay
all undisputed amounts in the manner set forth in Section 3.3(c); and all other
amounts shall be paid at such time as all disagreements are resolved in
accordance with this Section 3.3(b). If Buyer is in disagreement with the
Closing Statement, and Buyer notifies Seller within such ten (10) Business Day
period in accordance with this Agreement, then the Parties shall promptly
attempt to resolve such disagreements by negotiation. If the Parties are unable
to resolve such disagreements within thirty (30) days following such notice of
disagreement by Buyer, then the Parties shall appoint an Independent Accounting
Firm within

 

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forty-five (45) days following such notice, which shall review the Closing
Statement and determine the Closing Adjustment Amount. In the event that Buyer
and Seller cannot promptly agree on the selection of an accounting firm to act
as the Independent Accounting Firm, either Party may request the American
Arbitration Association to appoint a nationally recognized independent
accounting firm, and such appointment shall be final, binding and conclusive on
Buyer and Seller. Resolution of any disagreements shall be made by the
Independent Accounting Firm in a writing addressed to all Parties within thirty
(30) days following referral to it by the Parties of such disagreements in
accordance with this Agreement. The findings of such Independent Accounting Firm
shall be final, binding and conclusive on the Parties. All costs, fees and
expenses of the Independent Accounting Firm in resolving the disagreement shall
be split equally between Seller and Buyer.

 

(c) No later than the fifth (5th) Business Day following the determination of
the Closing Adjustment Amount pursuant to Section 3.3(b), either (i) Seller
shall pay Buyer the amount, if any, by which the Closing Payment exceeds the
Purchase Price, or (ii) Buyer shall pay Seller the amount, if any, by which the
Purchase Price exceeds the Closing Payment, in either case, together with simple
interest accruing on such payment at the Prime Rate from and after the Closing
Date through but not including the date of payment, by wire transfer of
immediately available funds to an account designated by the receiving Party. As
used herein, “Prime Rate” means, as of any date, the prime rate as published in
The Wall Street Journal on such date or, if not published on such date, on the
most recent date of publication.

 

3.4. Tax Reporting and Allocation of Purchase Price.

 

(a) Buyer and Seller hereby acknowledge and agree that: (i) $110,600,000 of the
Initial Amount shall be attributable to the Purchased Assets relating to the
Conemaugh Station, including the Emission Allowances relating thereto and the
membership interests in Conemaugh Fuels, LLC; and (ii) $62,500,000 of the
Initial Amount shall be attributable to the Purchased Assets relating to the
Keystone Station, including the Emission Allowances relating thereto and the
membership interests in Keystone Fuels, LLC, it being understood that each of
the attributions set forth in clauses (i) and (ii) of this Section 3.4(a) shall
be adjusted in a manner consistent with the determination of the Purchase Price
pursuant to Section 3.3.

 

(b) Buyer and Seller shall use their respective reasonable best efforts to agree
in good faith upon an allocation among the Purchased Assets of the sum of the
Purchase Price and the Assumed Liabilities consistent with Section 1060 of the
Code and the Treasury Regulations thereunder within sixty (60) days after the
determination of the Closing Adjustment Amount pursuant to Section 3.3(b). In
the event that the Parties cannot agree on a mutually satisfactory allocation
within such sixty (60) day period, the Parties shall appoint an Independent
Accounting Firm that shall, at Seller’s and Buyer’s joint expense, determine the
appropriate allocation. In the event that Buyer and Seller cannot promptly agree
on the selection of an accounting firm to act as the Independent Accounting
Firm, either Party may request the American Arbitration Association to appoint a
nationally recognized independent accounting firm, and such appointment shall be
final, binding and conclusive on Buyer and Seller. Resolution of any
disagreements shall be made by the Independent Accounting Firm in a writing
addressed to all Parties within thirty (30) days following referral to it by the
Parties of such disagreements in accordance with this Agreement. The finding of
such Independent Accounting

 

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Firm shall be final, binding and conclusive on the Parties. After determination
of the allocation by agreement of the Parties or by binding determination of the
Independent Accounting Firm, Buyer and Seller shall file, for the tax year in
which the Closing occurs, Internal Revenue Service Form 8594, and all Tax
Returns, in accordance with such allocation. Buyer and Seller shall report the
transactions contemplated by this Agreement for U.S. federal Income Tax and all
other Tax purposes in a manner consistent with the allocation determined
pursuant to this Section 3.4. Buyer and Seller shall provide the other promptly
with any information required to complete Form 8594. Buyer and Seller shall
notify and provide the other with reasonable assistance in the event of an
examination, audit or other proceeding regarding the agreed-upon allocation of
the Purchase Price and the Assumed Liabilities.

 

3.5. Prorations.

 

(a) Except as otherwise provided in this Agreement, all of the items customarily
prorated relating to the ownership, lease, maintenance or operation of the
Purchased Assets, including those listed below (but expressly excluding Income
Taxes), shall be prorated as of the Closing Date, with Seller liable to the
extent such items relate to any period prior to the Closing Date, and Buyer
liable to the extent such items relate to any period on or after the Closing
Date (measured in the same units used to compute the item in question, and
otherwise measured by calendar days):

 

(i) Personal property, real estate and occupancy Taxes, assessments and other
charges, if any, on or with respect to the ownership, lease, maintenance or
operation of the Purchased Assets;

 

(ii) Rent, Taxes (other than those governed by clause (i) above) and all other
items (including prepaid services and goods not included in Inventory), in each
case, payable by or to Seller under any of the Seller’s Agreements;

 

(iii) Any permit, license, registration, compliance assurance fees or other fees
with respect to any Seller’s Permit;

 

(iv) Sewer rents and charges for water, telephone, electricity and other
utilities;

 

(v) Insurance premiums paid on or with respect to the ownership, lease,
maintenance or operation of the Purchased Assets to the extent payable under any
policy or other arrangement included among the Seller’s Agreements; and

 

(vi) Prepaid operating and maintenance expenses, whether arising under the
Jointly Owned Stations Operating Agreements or otherwise.

 

(b) Seller or Buyer, as the case may be, shall promptly reimburse the other
Party that portion of any amount paid by such other Party to the extent relating
to the period for which Seller or Buyer, as the case may be, is liable under
Section 3.5(a), in each case, upon presentation of a statement setting forth in
reasonable detail the nature and amount of any such payment. In connection with
the prorations set forth in Section 3.5(a), if actual figures are not available
on the Closing Date, the proration shall be calculated based upon the respective

 

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amounts accrued through the Closing Date or paid for the most recent year or
other appropriate period for which such amounts paid are available. All prorated
amounts shall be recalculated and paid to the appropriate Party within sixty
(60) days after the date that the previously unavailable actual figures become
available. Seller and Buyer shall furnish each other with such documents and
other records as may be reasonably requested in order to confirm all proration
calculations made pursuant to this Section 3.5. Notwithstanding anything to the
contrary herein, no proration shall be made under this Section 3.5 with respect
to (i) real property Tax refunds that are Excluded Assets under Section 2.2(g)
or (ii) Taxes payable by Buyer pursuant to Section 6.5(a).

 

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

 

(a) One or more Special Warranty Deeds, duly executed by Seller and in
recordable form;

 

(b) The Bills of Sale, duly executed by Seller;

 

(c) The Assignment and Assumption Agreements, duly executed by Seller;

 

(d) Evidence, in form and substance reasonably satisfactory to Buyer,
demonstrating that Seller has obtained the Seller’s Required Regulatory
Approvals set forth on Schedule 7.2(c);

 

(e) A FIRPTA Affidavit, duly executed by Seller;

 

(f) Copies, certified by the Secretary or Assistant Secretary of Seller, of
resolutions authorizing the execution, delivery and performance of this
Agreement, each Additional Agreement to which Seller is a party and all of the
other agreements and instruments, in each case, to be executed, delivered and
performed by Seller in connection herewith;

 

(g) A certificate of the Secretary or Assistant Secretary of Seller identifying
the name and title and bearing the signatures of the officers of Seller
authorized to execute and deliver this Agreement, each Additional Agreement to
which Seller is a party and the other agreements and instruments contemplated
hereby;

 

(h) All such other agreements, documents, instruments and writings as shall, in
the reasonable opinion of Buyer and its counsel, be necessary to sell, assign,
convey, transfer and deliver to Buyer the Purchased Assets, in accordance with
this Agreement and, where necessary or desirable, in recordable form, provided
that Seller shall not be required to prepare or obtain any survey, abstract,
title opinion or title insurance policy with respect to the Real Property; and

 

(i) Such other agreements, documents, instruments and writings as are reasonably
required to be delivered by Seller at or prior to the Closing Date pursuant to
this Agreement or otherwise reasonably required in connection herewith.

 

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

 

(a) The Closing Payment, by wire transfer of immediately available funds in
accordance with Seller’s instructions to the account of Seller as designated by
Seller at least two (2) Business Days prior to the Closing Date;

 

(b) Cash in an amount equal to the lesser of (i) $100,000 and (ii) the amount of
all out-of-pocket costs and expenses incurred by Seller for the title reports
and surveys in connection with the transactions contemplated hereby or surveys
relating to the Real Property, by wire transfer of immediately available funds
in accordance with Seller’s instructions to the account of Seller to be
designated by Seller at least two (2) Business Days prior to the Closing Date;

 

(c) Cash in an amount equal to the sum of (i) the Station Working Funds and
(ii) the Fuels Working Funds, by wire transfer of immediately available funds in
accordance with Seller’s instructions to the account of Seller to be designated
by Seller at least two (2) Business Days prior to the Closing Date;

 

(d) The Assignment and Assumption Agreements, duly executed by Buyer;

 

(e) Evidence, in form and substance reasonably satisfactory to Seller,
demonstrating that Buyer has obtained the Buyer’s Required Regulatory Approvals
set forth on Schedule 7.1(c);

 

(f) Copies certified by the Secretary or Assistant Secretary of Buyer, of
resolutions authorizing the execution, delivery and performance of this
Agreement, each Additional Agreement to which Buyer is a party, and all of the
other agreements and instruments, in each case, to be executed, delivered and
performed by Buyer in connection herewith;

 

(g) A certificate of the Secretary or Assistant Secretary of Buyer identifying
the name and title and bearing the signatures of the officers of Buyer
authorized to execute and deliver this Agreement, each Additional Agreement to
which Buyer is a party and the other agreements contemplated hereby;

 

(h) All such other permits, agreements, documents, instruments and writings as
shall, in the reasonable opinion of Seller and its counsel, be necessary for
Buyer to purchase and acquire the Purchased Assets, and to assume the Assumed
Liabilities, in each case, in accordance with this Agreement and, where
necessary or desirable, in recordable form; and

 

(i) Such other permits, agreements, documents, instruments and writings as are
reasonably required to be delivered by Buyer at or prior to the Closing Date
pursuant to this Agreement or otherwise reasonably required in connection
herewith.

 

3.8. Post-Closing Excluded Asset Deliveries. In the event that Seller or Buyer,
or any of their respective Representatives, shall determine after the Closing
that any Excluded Asset is in the possession of Buyer or any of its
Representatives, Buyer shall, or shall cause any such

 

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Representative to, promptly, but in no event later than five (5) Business Days
following such determination, pay or deliver, or cause to be paid or delivered,
to Seller such Excluded Asset, at Seller’s sole cost and expense.

 

ARTICLE IV

 

REPRESENTATIONS AND WARRANTIES OF SELLER

 

As an inducement to Buyer to enter into this Agreement and consummate the
transactions contemplated hereby, Seller hereby represents and warrants to Buyer
as follows (all such representations and warranties, except those set forth in
Sections 4.1, 4.2 and 4.5, being made to the Knowledge of the Seller):

 

4.1. Organization; Qualification. Seller is a corporation validly existing and
in good standing under the laws of the State of New Jersey and has all requisite
corporate power and authority to own, lease and operate its properties and to
carry on its business as it is now being conducted. Seller is duly qualified to
do business as a foreign corporation and is in good standing under the laws of
each jurisdiction in which its business as now being conducted requires it to be
so qualified, except to the extent that the failure to be so qualified would
not, individually or in the aggregate, have a Material Adverse Effect.

 

4.2. Authority. Seller has full corporate power and authority to execute and
deliver this Agreement and each Additional Agreement to which it is a party and
to consummate the transactions contemplated hereby and thereby. The execution
and delivery by Seller of this Agreement and each Additional Agreement to which
it is a party and the consummation by Seller of the transactions contemplated
hereby and thereby have been duly authorized by all necessary corporate action
required on the part of Seller. This Agreement has been duly executed and
delivered by Seller; and this Agreement constitutes, and upon the execution and
delivery by Seller of each Additional Agreement to which it is a party, each
such Additional Agreement will constitute, the valid and binding obligation of
Seller, enforceable against Seller in accordance with its terms, except that
(a) such enforceability may be subject to any bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or other Laws now or hereafter
in effect affecting or relating to enforcement of creditors’ rights generally
and (b) the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to the discretion of
the court before which any proceeding therefor may be brought.

 

4.3. Consents and Approvals; No Violation.

 

(a) Except as set forth on Schedule 4.3(a), subject to obtaining or making all
Seller’s Required Regulatory Approvals, neither the execution and delivery by
Seller of this Agreement and the Additional Agreements to which it is a party
nor the consummation by Seller of the transactions contemplated hereby and
thereby will (i) conflict with or result in any breach of any provision of the
certificate of incorporation or bylaws of Seller; (ii) result in a default (or
give rise to any right of termination, cancellation or acceleration) under any
of the terms, conditions or provisions of any note, bond, mortgage, indenture,
material agreement or other instrument or obligation to which Seller is a party
or by which it, or any of the Purchased Assets,

 

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may be bound, except for such defaults (or rights of termination, cancellation
or acceleration) as to which requisite consents, approvals or waivers have been,
or will be prior to the Closing obtained, or which would not, individually or in
the aggregate, have a Material Adverse Effect; or (iii) constitute a violation
of any Law, order, judgment or decree applicable to Seller which violation,
individually or in the aggregate, would have a Material Adverse Effect.

 

(b) Except for consents, approvals, filings and notices (i) required under the
HSR Act or (ii) set forth on Schedule 4.3(b) (the consents, approvals, filings
and notices referred to in clause (ii) of this sentence are collectively
referred to herein as the “Seller’s Required Regulatory Approvals”), no consent
or approval of, filing with, or notice to, any Governmental Authority is
necessary for the execution and delivery by Seller of this Agreement and the
Additional Agreements to which it is a party or the consummation by Seller of
the transactions contemplated hereby or thereby, other than (i) such consents,
approvals, filings and notices which, if not obtained or made, would not
materially impair Seller’s ability to perform its material obligations under
this Agreement or such Additional Agreements or to own the Purchased Assets;
(ii) such consents, approvals, filings and notices which become applicable to
Seller or the Purchased Assets as a result of the status of Buyer (or any of its
Affiliates) or as a result of any other facts that specifically relate to the
business or activities in which Buyer (or any of its Affiliates) is or proposes
to be engaged; and (iii) such consents, approvals, filings and notices, the
failure of which to obtain or make would not, individually or in the aggregate,
have a Material Adverse Effect.

 

4.4. Insurance. All material policies of fire, liability, workers’ compensation
and other forms of insurance owned or held by, or on behalf of, Seller and
insuring any Purchased Assets are in full force and effect, all premiums with
respect thereto covering all periods up to and including the date hereof have
been paid (other than retroactive premiums which may be payable with respect to
comprehensive general liability and workers’ compensation insurance policies),
and no written notice of cancellation or termination has been received by Seller
with respect to any such policy which was not replaced on substantially similar
terms prior to the date of such cancellation or termination. Since January 1,
2003, Seller has not been refused any such insurance with respect to any
Purchased Assets.

 

4.5. Title and Related Matters. Except for Permitted Encumbrances, Seller has
good, valid and marketable title to the Real Property included in the Purchased
Assets and has good and valid title to all other Purchased Assets, free and
clear of all Encumbrances.

 

4.6. Environmental Matters. Except as set forth on Schedule 4.6:

 

(a) All Environmental Permits that Seller requires in order to own, lease,
maintain and operate the Purchased Assets are held by or on behalf of Seller,
and Seller is otherwise in compliance with applicable Environmental Laws with
respect to the ownership, lease, maintenance or operation of the Purchased
Assets, except for such failures to hold or comply with required Environmental
Permits, and such failures to be in compliance with applicable Environmental
Laws, as would not, individually or in the aggregate, have a Material Adverse
Effect.

 

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(b) Since January 1, 2003, Seller has not received any written request for
information, or been notified in writing that it is a potentially responsible
party under CERCLA or any similar state law, with respect to any of the Sites,
or any written notice relating to any Governmental Authority’s allegation or
investigation of any violations by Seller of any Environmental Laws relating to
the Purchased Assets or the Jointly Owned Stations.

 

(c) Since January 1, 2003, Seller has not entered into or agreed to any decree,
order or judgment under any Environmental Law relating to the Purchased Assets
or the Jointly Owned Stations, and Seller is not subject to any outstanding
decrees, orders or judgments relating to compliance with any Environmental Law
or to the Remediation of Hazardous Substances under any Environmental Law, in
each case, relating to the Purchased Assets or the Jointly Owned Stations.

 

(d) Notwithstanding any provision to the contrary in this Agreement, including
Sections 4.6(a), (b) and (c) hereof, Seller makes no representation or warranty
with respect to Seller’s compliance with Environmental Laws relating to the
construction of new, or modification of existing, sources of air emissions.

 

4.7. Real Property. Schedule 4.7 sets forth a description of the Real Property.
True and correct copies of all current surveys, abstracts, title opinions and
policies of title insurance currently in force, in each case, in Seller’s
possession and relating to the Real Property, have been previously delivered or
otherwise made available to Buyer.

 

4.8. Condemnation. Since January 1, 2003, Seller has not received any written
notice of any pending or threatened proceedings or actions by any Governmental
Authority to condemn or take by power of eminent domain all or any material part
of the Purchased Assets.

 

4.9. Contracts and Leases.

 

(a) Schedule 4.9(a) sets forth a list of all written Seller’s Agreements, other
than such contracts, licenses, agreements, arrangements and leases as
(i) constitute Excluded Assets or Excluded Liabilities, (ii) may be terminated
after the Closing by Buyer upon notice of no more than ninety (90) days,
(iii) involve future annual expenditures by Buyer after the Closing of $50,000
or less, (iv) are expected to expire or terminate prior to the Closing or
(v) are entered into by or on behalf of Seller after the date hereof consistent
with the terms of this Agreement.

 

(b) Except as set forth on Schedule 4.9(b), each Seller’s Agreement set forth on
Schedule 4.9(a) constitutes the valid and binding obligation of Seller and the
other parties thereto.

 

(c) Except as set forth on Schedule 4.9(c), there is not under any Seller’s
Agreement set forth on Schedule 4.9(a) any default or event which, with notice
or lapse of time or both, would constitute a material default on the part of
Seller or any other party thereto.

 

4.10. Legal Proceedings. There are no suits, actions or proceedings pending or
threatened against Seller by or before any Governmental Authority, which would,
individually or in the aggregate, impair Seller’s ability to consummate the
transactions contemplated hereby or

 

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by any Additional Agreement to which it is a party. Seller is not subject to any
judgment, order or decree of any Governmental Authority which would,
individually or in the aggregate, impair Seller’s ability to consummate the
transactions contemplated hereby or by any Additional Agreement to which it is a
party. Except as set forth on Schedule 4.10, there are no suits, actions or
proceedings pending or threatened as of the date hereof against Seller by or
before any Governmental Authority relating to the Purchased Assets or the
Jointly Owned Stations, other than such as would not, individually or in the
aggregate, have a Material Adverse Effect if adversely determined.

 

4.11. Seller’s Permits. All material permits, certificates, licenses and other
authorizations of all Governmental Authorities (collectively, “Seller’s
Permits”) that Seller requires in order to own, lease, maintain and operate the
Purchased Assets, are held by or on behalf of Seller except for Environmental
Permits (which are governed by Section 4.6).

 

4.12. Brokers; Finders. Except as set forth on Schedule 4.12, Seller has not,
and none of Seller’s Affiliates have, retained any financial advisor, broker,
agent, or finder or paid or agreed to pay any financial advisor, broker, agent,
or finder on account of this Agreement or the transactions contemplated hereby.
Buyer shall not have any responsibility or liability with respect to any Person
set forth on Schedule 4.12.

 

4.13. Special Purpose Financial Statements. The audited Special Purpose
Financial Statements present fairly, in all material respects, (i) in the case
of Conemaugh Fuels, LLC and Keystone Fuels, LLC, the financial position of such
entities as of the dates of the respective balance sheets included therein, and
the results of operations and cash flows of such entities for the respective
periods ended on such dates in conformity with accounting principles generally
accepted in the U.S. and (ii) in the case of the Jointly Owned Stations, the
owners’ assets, liabilities, and investment in such Jointly Owned Stations as of
the dates of such statements included therein, and the charges to such Jointly
Owned Stations’ operations for the periods ended on such dates, on the basis of
accounting described in note 1 to each thereof. Seller has provided or made
available to Buyer true and correct copies of the Special Purpose Financial
Statements.

 

4.14. Employees. Seller has no employees employed at either the Conemaugh
Station or the Keystone Station, and the Seller is not transferring to Buyer any
employees of the Conemaugh Station or the Keystone Station.

 

4.15. Disclosures. To the extent relating to Seller’s Interests in the
respective membership interests of Keystone Fuels, LLC and Conemaugh Fuels, LLC,
none of the representations and warranties of Seller contained herein and none
of the information contained in the Schedules hereto is false or misleading in
any material respect or omits to state a fact herein or therein necessary to
make the statements herein or therein not misleading in any material respect.

 

4.16. Taxes. Seller has timely filed all Tax Returns required to be filed by
Seller with respect to the conduct of the Jointly Owned Stations and ownership
of the Purchased Assets, including Tax Returns for all applicable federal, state
and local income, franchise, sales, use, property, excise and other Taxes, and
such Tax Returns are accurate, complete and correct. The

 

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Seller has paid all Taxes required to be paid pursuant to such Tax Returns or
otherwise required by Law to be paid by it, and there are no other Taxes payable
on account of the ownership of the Purchased Assets from the date of the
inception of the Seller’s investment in the Purchased Assets to the date hereof,
except for Taxes not yet due in the ordinary course of business (for which
adequate reserves have been established). All other federal, state and local
Taxes which the Seller was or is required by Law to withhold or collect have
been and are being withheld or collected by it and have been and are being paid
over to the proper Governmental Authorities or are being held by the Seller in
accordance with Law for such payment.

 

ARTICLE V

 

REPRESENTATIONS AND WARRANTIES OF BUYER

 

As an inducement to Seller to enter into this Agreement and consummate the
transactions contemplated hereby, Buyer hereby represents and warrants to Seller
as follows: all such representations and warranties, except those set forth in
Sections 5.1, 5.2 and 5.5, being made to the actual knowledge of the Buyer.

 

5.1. Organization; Qualification. Buyer is a corporation, validly existing and
in good standing under the laws of the Commonwealth of Pennsylvania and has all
requisite corporate power and authority to own, lease and operate its properties
and to carry on its business as it is now being conducted. Buyer has heretofore
delivered to Seller true and correct copies of its articles of incorporation and
bylaws as currently in effect.

 

5.2. Authority. Buyer has full corporate power and authority to execute and
deliver this Agreement and each Additional Agreement to which it is a party and
to consummate the transactions contemplated hereby and thereby. The execution
and delivery of this Agreement and each such Additional Agreement by Buyer and
the consummation by Buyer of the transactions contemplated hereby and thereby
have been duly authorized by all necessary corporate action required on the part
of Buyer. This Agreement has been duly executed and delivered by Buyer; and this
Agreement constitutes, and upon the execution and delivery by Buyer of each
Additional Agreement to which it is a party, each such Additional Agreement will
constitute, the valid and binding obligation of Buyer, enforceable against Buyer
in accordance with its terms, except that (a) such enforceability may be subject
to any bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium
or other Laws now or hereafter in effect affecting or relating to enforcement of
creditors’ rights generally and (b) the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought.

 

5.3. Consents and Approvals; No Violation.

 

(a) Except as set forth on Schedule 5.3(a), and subject to obtaining or making
all Buyer’s Required Regulatory Approvals, neither the execution and delivery by
Buyer of this Agreement and the Additional Agreements to which it is a party nor
the consummation by Buyer of the transactions contemplated hereby and thereby
will (i) conflict with or result in any breach of any provision of the articles
of incorporation or bylaws of Buyer or any of its Subsidiaries; (ii) result in a
default (or give rise to any right of termination, cancellation or acceleration)
under any

 

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of the terms, conditions or provisions of any note, bond, mortgage, indenture,
material agreement or other instrument or obligation to which Buyer or any of
its Subsidiaries is a party or by which Buyer, any such Subsidiary or any of
their respective properties and assets may be bound, except for such defaults
(or rights of termination, cancellation or acceleration) as to which requisite
consents, approvals or waivers have been or will be prior to the Closing
obtained, or which would not, individually or in the aggregate, have a Material
Adverse Effect or materially impair Buyer’s ability to consummate the
transactions contemplated hereby or by any Additional Agreement, or to perform
its material obligations hereunder or thereunder (a “Buyer Material Adverse
Effect”); or (iii) constitute a violation of any Law, order, judgment or decree
applicable to Buyer or any of its Subsidiaries, which violation, individually or
in the aggregate, would have a Material Adverse Effect or a Buyer Material
Adverse Effect.

 

(b) Except for consents, approvals, filings and notices (i) required under the
HSR Act or (ii) set forth on Schedule 5.3(b) (the consents, approvals, filings
and notices referred to in clause (ii) of this sentence are collectively
referred to herein as the “Buyer’s Required Regulatory Approvals”), no consent
or approval of, filing with, or notice to, any Governmental Authority is
necessary for the execution and delivery by Buyer of this Agreement and the
Additional Agreements to which it is a party or the consummation by Buyer of the
transactions contemplated hereby or thereby, other than such consents,
approvals, filings or notices, which, if not obtained or made, would not have a
Material Adverse Effect or a Buyer Material Adverse Effect.

 

5.4. Buyer’s Permits. All permits, certificates, licenses and other
authorizations of all Governmental Authorities that Buyer requires in order to
own, lease, maintain and operate the Purchased Assets (collectively, “Buyer’s
Permits”) are, or will be at or prior to the Closing, held by or on behalf of
Buyer. Buyer is qualified to obtain and, after the Closing, shall retain all
Buyer Permits, including Environmental Permits, necessary for Buyer to own,
lease, maintain and operate the Purchased Assets.

 

5.5. Availability of Funds. Buyer has sufficient funds on hand or available to
it pursuant to existing lines of credit to permit Buyer on the Closing Date to
pay the Purchase Price, all other amounts payable by Buyer hereunder or under
any Additional Agreement, and all fees and expenses incurred by Buyer in
connection with the transactions contemplated hereby and by the Additional
Agreements, and to permit Buyer to timely pay or perform all of its other
obligations under this Agreement and the Additional Agreements.

 

5.6. Financial Statements. Buyer has provided Seller with true and correct
copies of its balance sheet, income statement and statement of changes in cash
flows for each of its fiscal years ended December 31, 2004 and 2003, together
with the related reports of its independent accountants, Deloitte & Touche, LLP,
and for its most recently completed fiscal quarter (collectively, “Buyer’s
Financial Statements”). Buyer’s Financial Statements have been prepared in
accordance with U.S. generally accepted accounting principles consistently
applied and fairly reflect, in all material respects, the financial position,
results of operations and cash flows of Buyer at and for the periods stated
therein.

 

5.7. Legal Proceedings. There are no suits, actions or proceedings pending or
threatened against Buyer by or before any Governmental Authority, which would,
individually or

 

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in the aggregate, have a Buyer Material Adverse Effect or would materially
impair Buyer’s ability to consummate the transactions contemplated hereby or by
any Additional Agreement to which it is a party. Buyer is not subject to any
judgments, orders or decrees of any Governmental Authority which would,
individually or in the aggregate, have a Material Adverse Effect or a Buyer
Material Adverse Effect.

 

5.8. No Knowledge of Seller’s Breach. On the date hereof, Buyer has no actual
knowledge, without duty of inquiry, of any breach by Seller of any
representation or warranty made by Seller in this Agreement or in any form of
Additional Agreement attached hereto as an Exhibit that would excuse Buyer from
the timely performance of its obligations hereunder or under the Additional
Agreements.

 

5.9. Inspections. Buyer has, prior to the execution and delivery of this
Agreement, (a) reviewed the environmental site assessments prepared for Seller
and set forth on Schedule 5.9, (b) had full opportunity to conduct to its
satisfaction Inspections of the Purchased Assets, including the Sites, and
(c) fully completed and approved the results of all Inspections of the Purchased
Assets. Buyer acknowledges, after such review and Inspections, that no further
investigation of the Sites is necessary for purposes of acquiring the Purchased
Assets for Buyer’s intended use, and Buyer hereby irrevocably and
unconditionally waives any and all objections to or claims with respect to all
physical characteristics and existing conditions at the Sites, including
existing Environmental Conditions and the presence of any Hazardous Substances
at the Sites.

 

5.10. Regulation as a Utility. Buyer is not subject to regulation as a public
utility or public service company (or similar designation) by any Governmental
Authority. Buyer is a holding company exempt from registration under PUHCA.

 

5.11. Brokers; Finders. Buyer has not, and none of Buyer’s Affiliates have,
retained any financial advisor, broker, agent, or finder or paid or agreed to
pay any financial advisor, broker, agent, or finder on account of this Agreement
or the transactions contemplated hereby.

 

ARTICLE VI

 

COVENANTS OF THE PARTIES

 

6.1. Access to Information.

 

(a) Between the date of this Agreement and the Closing Date, Seller shall:
(i) give Buyer and its Representatives, during normal business hours and upon
reasonable notice, reasonable access to all books, records, plans, offices and
other facilities and properties in the possession of Seller included in the
Purchased Assets (it being understood that Seller shall have the right to have a
Representative present at all times during any such access); (ii) furnish Buyer
with such financial and operating data and other information in the possession
of Seller with respect to the Purchased Assets as Buyer may from time to time
reasonably request; and (iii) furnish Buyer with all such other information in
the possession of Seller as shall be reasonably necessary to enable Buyer, at
its request, to verify the accuracy of the representations and warranties of
Seller contained in this Agreement; provided, however, that (A) any such

 

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access or requests shall be conducted in such manner as not to interfere
unreasonably with the operation of the Purchased Assets, (B) Seller shall not be
required to take any action which would constitute a waiver of the
attorney-client or other privilege, (C) Seller need not supply Buyer with any
information which Seller is under a legal or contractual obligation not to
supply, and (D) Seller shall not be required to supply Buyer with any
information with respect to the Jointly Owned Stations to which Seller is not
entitled pursuant to the terms of the Jointly Owned Stations Operating
Agreements. Notwithstanding anything herein to the contrary, prior to the
Closing Date, Buyer shall not have the right to perform or conduct, or cause to
be performed or conducted, any environmental sampling or testing at, in, on or
underneath the Jointly Owned Stations.

 

(b) All information furnished to or obtained by Buyer and Buyer’s
Representatives pursuant to this Section 6.1 shall be Proprietary Information
and shall be kept confidential in accordance with the terms of the
Confidentiality Agreement. Nothing in this Section 6.1 is intended to or shall
be deemed to amend, supplement or otherwise modify the obligations of Buyer, its
Representatives or its Affiliates under the Confidentiality Agreement, all of
which remain in effect until termination of such agreement in accordance with
its terms. Buyer shall be subject to and bound by all obligations of Duquesne
Power, LP under the Confidentiality Agreement as though Buyer were a party
thereto.

 

(c) For a period of seven (7) years from and after the Closing Date, each Party
and its Representatives shall have reasonable access during normal business
hours to all of the books and records of the Purchased Assets in the possession
of the other Party to the extent that such access may reasonably be required by
such Party in connection with the Assumed Liabilities or the Excluded
Liabilities, or other matters relating to or affected by the ownership, lease,
maintenance or operation of the Purchased Assets or the Excluded Assets. Such
access shall be afforded by the Party in possession of any such books and
records upon receipt of reasonable advance notice and during normal business
hours. The Party exercising this right of access shall be solely responsible for
any costs or expenses incurred by it or the other Party with respect to such
access pursuant to this Section 6.1(c). If the Party in possession of such books
and records shall desire to dispose of any books and records upon or prior to
the expiration of such seven-year period, such Party shall, prior to such
disposition, give the other Party a reasonable opportunity, at such other
Party’s cost and expense, to segregate and remove such books and records as such
other Party may select.

 

(d) Buyer shall not, prior to the Closing Date, contact any customer, vendor,
supplier of, or director, officer, partner, member or employee of (other than as
contemplated by Section 6.10(c)), or any other Person having business dealings
with, Seller or its Affiliates with respect to any aspect of the Purchased
Assets or the transactions contemplated hereby or by any Additional Agreement,
including any Governmental Authority, without the prior written consent of
Seller, which shall not be unreasonably withheld or delayed. Other than the
NJBPU and PaPUC, Seller shall not, prior to the Closing Date, contact any
director, officer, partner, member or employee of (other than as contemplated by
Section 6.10(c)), or any other Person having business dealings with, Buyer or
its Affiliates with respect to any aspect of the transactions contemplated
hereby or by any Additional Agreement, including any Governmental Authority,
without the prior written consent of Buyer, which shall not be unreasonably
withheld or delayed. Without limiting the generality of the foregoing, (i) prior
to Closing, Buyer shall not investigate

 

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or inquire as to any matter with any Governmental Authority having jurisdiction
over any aspect of the Purchased Assets, unless and until the written consent of
Seller (not to be unreasonably withheld or delayed) to the making of such
investigation or inquiry has been received by Buyer and after consultation with
Seller as to the scope and manner of the investigation or inquiry, and
(ii) Buyer’s right of examination and access pending the Closing with respect to
environmental matters relating to the Purchased Assets shall be limited to an
examination of existing records and interviews with personnel as authorized in
writing by Seller, and in no event shall include physical testing of or
collection of samples from the Real Property or the Purchased Assets or
contacting staff or officials of any Governmental Authority or any other third
party.

 

6.2. Public Statements. Subject to Section 6.1(d), except as required by
applicable Law or by applicable rules of any national securities exchange, the
Parties shall consult with each other in advance, in the manner contemplated by
Section 10.8, prior to the Closing Date, with respect to any press release or
other public announcement, statement or comment relating to the transactions
contemplated by this Agreement; provided, however, that, notwithstanding the
provisions of Section 6.1(d) relating to any other Person having business
dealings with any Party, the Parties shall be permitted, subject to applicable
Law and the Confidentiality Agreement, to discuss with members of the investment
and financing community the transactions contemplated hereby, and the financial
and operational effects of consummating such transactions, in connection with
bona fide financing and credit-related endeavors.

 

6.3. Further Assurances.

 

(a) Subject to the terms and conditions of this Agreement, each of the Parties
hereto shall use its reasonable best efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, all things necessary, proper or
advisable under applicable Laws to consummate and make effective the purchase
and sale of the Purchased Assets pursuant to this Agreement and the assumption
of the Assumed Liabilities, including using its reasonable best efforts to
ensure satisfaction of the conditions precedent to each Party’s obligations
hereunder, including obtaining all necessary consents, approvals and
authorizations of, and making all required notices or filings with, third
parties required to be obtained or made in order to consummate the transactions
hereunder. Without limiting the generality of the foregoing, Seller shall use
its reasonable best efforts to take, or cause to be taken, all actions, and to
do, or cause to be done, all things necessary, proper or advisable under
applicable Laws to release the Purchased Assets from the Encumbrance under the
Indenture, dated January 15, 1937, by and between ACE and The Bank of New York,
as Trustee, as amended. Seller shall use Commercially Reasonable Efforts to
cooperate with Buyer in its efforts to obtain all Buyer’s Permits, Environmental
Permits and Buyer’s Required Regulatory Approvals necessary for Buyer to operate
the Purchased Assets substantially in the manner operated by Seller prior to the
Closing Date. Buyer shall use Commercially Reasonable Efforts to cooperate with
Seller in its efforts to obtain all of Seller’s Required Regulatory Approvals.
No Party shall, without prior written consent of the other Party, take or fail
to take any action which might reasonably be expected to prevent or materially
impede, interfere with or delay the transactions contemplated by this Agreement
or any Additional Agreement.

 

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(b) Without limiting the generality of Section 6.3(a):

 

(i) In the event that any Purchased Asset shall not have been conveyed to Buyer
at the Closing, Seller shall, subject to Section 6.3(b)(ii), use Commercially
Reasonable Efforts after the Closing to convey such asset to Buyer as promptly
as practicable.

 

(ii) To the extent that Seller’s right, title and interest in, to and under any
material Seller’s Agreement may not be assigned without the consent, approval or
authorization of any third party which consent, approval or authorization has
not been obtained by the Closing Date, this Agreement shall not constitute an
agreement to assign such right, title and interest if an attempted assignment
would constitute a breach of such Seller’s Agreement or violate any applicable
Law. If any consent, approval or authorization to such assignment of any
material Seller’s Agreement shall not be obtained, or if any attempted
assignment would be ineffective or would materially impair Buyer’s rights and
obligations under such Seller’s Agreement, such that Buyer would not acquire and
assume the benefit and detriment of all such rights and obligations, Seller, at
its option and to the fullest extent permitted by applicable Law and such
Seller’s Agreement, shall, from and after the Closing Date, appoint Buyer to be
Seller’s agent with respect to such Seller’s Agreement, or, to the fullest
extent permitted by applicable Law and such Seller’s Agreement, enter into such
reasonable arrangements with Buyer or take such other actions as are necessary
to provide Buyer with the same or substantially similar rights and obligations
under such Seller’s Agreement.

 

6.4. Consents and Approvals. Without limiting the generality of Section 6.3(a):

 

(a) As promptly as practicable, but in no event later than forty-five (45) days
after the date of this Agreement, Seller and Buyer shall each file or cause to
be filed with the Federal Trade Commission and the U.S. Department of Justice
all notifications required to be filed under the HSR Act and the rules and
regulations promulgated thereunder, as amended, with respect to the transactions
contemplated hereby and by the Additional Agreements. The Parties shall use
their respective Commercially Reasonable Efforts to respond promptly to any
requests for additional information made by such agencies, and to cause the
applicable waiting period under the HSR Act to terminate or expire at the
earliest possible date after the date of filing. Buyer shall pay all filing fees
payable under the HSR Act but each Party shall bear its own costs and expenses
of the preparation of any such filing and any such response.

 

(b) As promptly as practicable, but in no event later than forty-five (45) days
after the date of this Agreement, Seller and Buyer shall take, or cause to be
taken, all actions, and do, or cause to be done, all things necessary, proper or
advisable under applicable Laws to obtain all required consents and approvals of
all other Governmental Authorities, including the NJBPU and the PaPUC, and make
all other filings and give all other notices required to be made prior to the
Closing with respect to the transactions contemplated hereby and by the
Additional Agreements, including with respect to the Seller’s Required
Regulatory Approvals and Buyer’s Required Regulatory Approvals. The Parties
shall respond promptly to any requests for additional information made by such
Persons, and use their respective Commercially Reasonable Efforts to cause all
such consents and approvals, without conditions, to be obtained or waived at the
earliest possible date after the date of filing. Each Party shall bear its own
costs and expenses of the preparation of any such filing or notice.

 

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(c) Without limiting the generality of Section 6.4(b), as promptly as
practicable, but in no event later than forty-five (45) days after the date of
this Agreement, each Party shall make all filings required by such Party under
the Federal Power Act. Prior to filing any application with the FERC, both
Parties shall prepare such application and shall incorporate into such
application all revisions reasonably requested by the other Party. Each Party
shall be solely responsible for its own cost of preparing and filing such
application, as well as all petitions for rehearing and all reapplications,
provided, however, that Buyer shall bear all costs and expenses associated with
experts and consultants reasonably necessary for the preparation of any required
market power study or report. If any filing is rejected by the FERC, the Parties
shall petition the FERC for rehearing or permission to re-submit an application
with the FERC.

 

6.5. Certain Tax Matters.

 

(a) All transfer, sales and similar Taxes (“Transfer Taxes”) incurred in
connection with this Agreement and the Additional Agreements, and the
transactions contemplated hereby and thereby (including (i) sales and use Tax on
the sale or purchase of the Purchased Assets imposed by Pennsylvania and
(ii) transfer Tax on conveyances of interests in real property imposed by
Pennsylvania or any political subdivision thereof) shall be borne by Buyer (and,
to the extent paid by Seller, Buyer shall reimburse Seller upon request). Buyer,
at its expense, shall prepare and file, to the extent required by, or
permissible under, applicable Law, all necessary Tax Returns and other
documentation with respect to all such Transfer Taxes, and, if required by
applicable Law, Seller shall join in the execution of all such Tax Returns and
other documentation; provided, however, that prior to the Closing Date, to the
extent applicable, Buyer shall provide to Seller appropriate certificates of Tax
exemption from each applicable Governmental Authority.

 

(b) With respect to Taxes to be prorated in accordance with Section 3.5, Buyer
shall prepare and timely file all Tax Returns required to be filed after the
Closing Date with respect to the Purchased Assets, if any, and shall timely pay
all Taxes shown to be due on such Tax Returns. Buyer’s preparation of such Tax
Returns shall be subject to Seller’s approval, which approval shall not be
unreasonably withheld or delayed. Buyer shall make each such Tax Return
available for Seller’s review and approval no later than fifteen (15) Business
Days prior to the due date for filing such Tax Return, it being understood that
Seller’s failure to approve any such Tax Return shall not limit Buyer’s
obligation to timely file such Tax Return and timely pay all Taxes shown to be
due thereon.

 

(c) Buyer and Seller shall provide the other with such assistance as may
reasonably be requested by the other Party in connection with the preparation of
any Tax Return, audit or other examination, or any proceeding, by or before any
Governmental Authority relating to Liability for Taxes, and each Party shall
retain and provide the requesting Party with all books and records or other
information which may be relevant to such Tax Return, audit, examination or
proceeding. All books, records and information obtained pursuant to this
Section 6.5(c) or pursuant to any other Section that provides for the sharing of
books, records and information or review of any Tax Return or other instrument
relating to Taxes shall be kept confidential by the parties hereto in accordance
with the terms and conditions set forth in the Confidentiality Agreement.

 

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(d) In the event that a dispute arises between Seller and Buyer regarding Taxes
or any amount due under this Section 6.5, the Parties shall attempt in good
faith to resolve such dispute and any agreed-upon amount shall be promptly paid
to the appropriate Party. If any such dispute is not resolved within thirty
(30) days after notice thereof is given to any Party, the Parties shall submit
the dispute to an Independent Accounting Firm for resolution, which resolution
shall be final, binding and conclusive on the Parties. In the event that Buyer
and Seller cannot promptly agree on the selection of an accounting firm to act
as the Independent Accounting Firm, either Party may request the American
Arbitration Association to appoint a nationally recognized independent
accounting firm, and such appointment shall be final, binding and conclusive on
Buyer and Seller. Notwithstanding anything in this Agreement to the contrary,
the costs, fees and expenses of the Independent Accounting Firm in resolving the
dispute shall be borne equally by Seller and Buyer. Any payment required to be
made as a result of the resolution by the Independent Accounting Firm of any
such dispute shall be made within five (5) Business Days after such resolution,
together with any interest determined by the Independent Accounting Firm to be
appropriate.

 

(e) To the extent that any Party receives a Tax refund or credit with respect to
a Tax that was paid or incurred, in whole or in part, by the other Party, such
receiving Party shall promptly pay the allocable portion of the amount of such
Tax refund or credit to the other Party.

 

6.6. Advice of Changes. Prior to the Closing, each Party shall advise the other
in writing with respect to any matter arising after the date of this Agreement
of which that Party obtains Knowledge and which, if existing or occurring on or
prior to the date of this Agreement, would have been required to be set forth in
this Agreement, including any of the Schedules hereto. Seller shall promptly
notify Buyer of any fact, event, circumstance or condition that constitutes or
results in a breach of any of its representations and warranties in Article IV.
Seller may, from time to time prior to the Closing, promptly supplement or amend
the Schedules to this Agreement with respect to (a) any matter that existed as
of the date of this Agreement and should have been set forth in any of the
Schedules hereto and (b) any matter hereafter arising which, if existing as of
the date of this Agreement, would have been required to be set forth in any of
the Schedules hereto in order to make any representation or warranty set forth
in this Agreement true and correct as of such date; provided, however, that,
with respect to clause (a) above, any such supplemental or amended disclosure
shall not be deemed to have been disclosed as of the date of this Agreement
unless expressly consented to in writing by Buyer in Buyer’s sole and absolute
discretion; and provided further, that, with respect to clause (b) above, any
such supplemental or amended disclosure shall be deemed to have been disclosed
as of the date of this Agreement other than for purposes of Section 7.1(f) or
(g). Buyer shall promptly notify Seller of (i) any breach by Seller of any
representation or warranty of Seller, and (ii) any other event, fact,
circumstance or condition that would excuse Buyer from the timely performance of
its obligations hereunder. In the event that Buyer fails to so notify Seller
within ninety (90) days of such information coming to Buyer’s attention, then
Buyer shall be deemed to have irrevocably and unconditionally waived the breach
of such representation and warranty or the performance of such obligations, as
the case may be.

 

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6.7. Risk of Loss.

 

(a) From the date hereof to but not including the Closing Date, all risk of loss
or damage to the Tangible Personal Property included in the Purchased Assets
shall be borne by Seller, other than loss or damage caused by the negligent acts
or omissions of Buyer or any Buyer Representative, which loss or damage shall be
the responsibility of Buyer.

 

(b) Notwithstanding any provision hereof to the contrary, subject to
Section 9.1(g), if, before the Closing Date, all or any portion of the Purchased
Assets at any Jointly Owned Station is (i) condemned or taken by eminent domain
or is the subject of a pending or threatened condemnation or taking which has
not been consummated, or (ii) materially damaged or destroyed by fire or other
casualty, Seller shall notify Buyer promptly in writing of such fact, and (x) in
the case of a condemnation or taking, Seller shall assign or pay, as the case
may be, any net proceeds thereof to Buyer at the Closing relating to such
Purchased Assets and (y) in the case of a fire or other casualty, Seller shall
either restore such damage or assign the insurance proceeds therefor to Buyer at
such Closing. Notwithstanding the foregoing, if such condemnation, taking,
damage or destruction results in a Material Adverse Effect, Buyer and Seller
shall negotiate to resolve the loss resulting from such condemnation, taking,
damage or destruction (and such negotiation shall include the negotiation of a
fair and equitable adjustment to the Purchase Price for such Purchased Assets).
If no such resolution can be agreed upon prior to the earlier to occur of
(i) the date that is ninety (90) days after Seller has notified Buyer of such
loss, and (ii) the date on which the Closing, pursuant to Section 3.1, would
otherwise occur, then Buyer, on the one hand, or Seller, on the other hand, may
terminate this Agreement with respect to such Purchased Assets pursuant to
Section 9.1(g).

 

6.8. PJM; MAAC. From and after the Closing Date, Buyer shall maintain membership
in good standing in PJM and MAAC, and shall submit to the governance of the
independent system operator established and administered under the PJM Agreement
and related agreements entered into among PJM and its members. Seller and Buyer
shall cooperate to prepare applications to PJM to obtain PJM approval of the
establishment of all settlement accounts and other authorizations necessary for
Buyer to become a member of PJM. Such applications shall be filed with PJM as
promptly as practicable, but in no event later than sixty (60) days after the
date of this Agreement.

 

6.9. Emission Allowances.

 

(a) Prior to, on and after the Closing Date, Buyer and Seller shall take all
necessary actions, including executing any required forms or providing
appropriate notices to Governmental Authorities, in a timely fashion, to ensure
that (i) Buyer will obtain all, or the rights to all, Emission Allowances that
are to be transferred to it pursuant to Section 2.1(f) and as set forth on
Schedule 2.1(f), including the right to receive such Emission Allowances that
are to be allocated or issued by any Governmental Authority in the future and
(ii) Seller will retain or obtain all, or the rights to all, Emission Allowances
that are defined as Excluded Assets pursuant to Section 2.2(n), including the
right to receive such Emission Allowances that are to be allocated or issued by
any Governmental Authority in the future.

 

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(b) For purposes of compliance with the NOx Budget Program and SO2 Budget
Program during the year in which the Closing Date occurs, the Party owning the
Seller’s Interests as of the date that an owner of the Seller’s Interests is
obligated to transfer additional NOx Allowances or SO2 Allowances (which date
shall be as set forth in any requests for Emissions Allowances by the authorized
representative or the designated representative of the Keystone Station and the
Conemaugh Station) shall be responsible for transferring such Emission
Allowances to the authorized representative or the designated representative.

 

6.10. Certain Covenants.

 

(a) From and after the date hereof and until the Closing Date, unless Buyer
shall otherwise consent in writing (which consent shall not be unreasonably
withheld or delayed), other than the periodic revision and adoption of
Keystone-Conemaugh Owners Committee Administrative Procedures in the ordinary
course of business consistent with past practice, Seller shall not enter into
any contract, agreement, commitment or arrangement relating to the Purchased
Assets or the Jointly Owned Stations that provides for future annual payments by
Seller in excess of $50,000 unless such contract, agreement, commitment or
arrangement is (i) terminable by Seller prior to the Closing or by Buyer at or
after the Closing, without payment of penalty or premium, upon no more than
ninety (90) days’ notice, (ii) constitutes an Excluded Asset and Excluded
Liability or (iii) has been executed by all co-owners of any Jointly Owned
Station (other than Seller), it being understood that this Section 6.10(a) is
not intended to, and shall not, restrict in any manner the ability of Keystone
Fuels, LLC, Conemaugh Fuels, LLC or the operator of any Jointly Owned Station
from entering into any contract, agreement, commitment or arrangement without
such consent.

 

(b) From and after the date hereof and until the Closing Date, except to the
extent prohibited by applicable Law or any contract, agreement, commitment or
arrangement relating to the Purchased Assets to which Seller is a party or by or
to which the Purchased Assets are bound or subject, Seller shall (i) keep Buyer
reasonably informed of the status and progress of meetings and actions by the
Keystone-Conemaugh Owners, Operations and Administrative Committees, including
providing to Buyer, if practicable in advance of any such meeting, copies of
agendas for such meetings, and (ii) prior to casting its vote with respect to
any action of any such Keystone-Conemaugh Committee, use Commercially Reasonable
Efforts to inform Buyer of the pendency of such action, consult with Buyer with
respect to such action and take into account the views of Buyer stated during
such consultation in determining whether to approve such action, it being
understood that, subject to Section 6.10(a), Seller may make such determination
in its sole and absolute discretion.

 

(c) All communications and consultations contemplated by Sections 6.1(a), 6.3,
6.4 and 6.10(b) shall take place between the respective designated
representatives of Seller and Buyer, as may be designated from time to time by
Seller and Buyer in the manner contemplated by Section 10.8. Seller’s initial
designated representatives shall be James P. Becker and Leslie Zimberg, and
Buyer’s initial designated representatives shall be James E. Wilson and Gary A.
Jack.

 

6.11. Exclusivity. From the date hereof through the earlier to occur of the
Closing and the termination of this Agreement pursuant to Article IX, Seller
shall immediately cease, and

 

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shall take such actions, if any, necessary to terminate, any existing
solicitation, initiation, encouragement, activity, discussion or negotiation
with any parties conducted heretofore by Seller or its Representatives with
respect to the sale of the Jointly Owned Stations and the Purchased Assets, and
Seller shall not accept any proposed acquisition of the Jointly Owned Stations
and the Purchased Assets.

 

ARTICLE VII

 

CONDITIONS

 

7.1. Conditions to Obligation of Buyer. The obligation of Buyer to effect the
transactions contemplated by this Agreement with respect to the Purchased Assets
at any Jointly Owned Station shall be subject to the satisfaction (or the
waiver, to the extent permitted by applicable Law, by Buyer) at or prior to the
Closing of the following conditions:

 

(a) The waiting period with respect to such Purchased Assets under the HSR Act
applicable to the consummation of the transactions contemplated hereby shall
have expired or been terminated;

 

(b) No preliminary or permanent injunction, order or decree by any Governmental
Authority which prevents the consummation of the transactions contemplated
hereby or by the Additional Agreements with respect to such Purchased Assets
shall have been issued and remain in effect (Buyer agreeing to use Commercially
Reasonable Efforts to have any such injunction, order or decree lifted), and no
applicable Law shall be in effect which prohibits the consummation of the
transactions contemplated hereby or thereby with respect to such Purchased
Assets;

 

(c) Buyer shall have obtained the Buyer’s Required Regulatory Approvals set
forth on Schedule 7.1(c) to the extent relating to such Purchased Assets, which
shall be final and non-appealable, and Buyer shall have received evidence
thereof, in form and substance reasonably satisfactory to Buyer, and all
conditions to the effectiveness thereof prescribed therein or otherwise by Law
shall have been satisfied or waived, it being understood that the imposition by
any Governmental Authority of any such condition to the grant or issuance of any
such consent or approval requiring any action or omission by Buyer shall not
affect Buyer’s obligation to consummate the transactions contemplated hereby or
by the Additional Agreements unless such condition would, individually or in the
aggregate, have a Regulatory Material Adverse Effect on Buyer;

 

(d) Seller shall have obtained the Seller’s Required Regulatory Approvals set
forth in Schedule 7.2(c) to the extent relating to such Purchased Assets, which
shall be final and non-appealable, and which shall not include any condition
requiring any action or omission by Buyer which condition would, individually or
in the aggregate, have a Regulatory Material Adverse Effect on Buyer; and Buyer
shall have received evidence thereof;

 

(e) Seller shall have performed and complied with the covenants and agreements
contained in this Agreement which are required to be performed and complied with
by Seller at or prior to the Closing and which relate to such Purchased Assets;

 

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(f) The representations and warranties of Seller set forth in this Agreement
which relate to such Purchased Assets shall be true and correct in all material
respects as though made at and as of the Closing Date (other than such
(i) representations and warranties that are made as of a specific date which
shall have been true and correct as of such date and (ii) representations and
warranties that are qualified by reference to materiality or Material Adverse
Effect which shall be true and correct in all respects);

 

(g) Between the date hereof and the Closing Date, no Material Adverse Effect
with respect to such Purchased Assets or such Jointly Owned Station shall have
occurred and be continuing;

 

(h) Buyer shall have received a certificate from an authorized officer of
Seller, dated the Closing Date, to the effect that, to Seller’s Knowledge, the
conditions set forth in Sections 7.1(e), (f) and (g) have been satisfied; and

 

(i) Buyer shall have received an opinion from Seller’s counsel, which counsel
shall be reasonably acceptable to Buyer, dated the Closing Date, substantially
in the form of Exhibit F hereto.

 

7.2. Conditions to Obligation of Seller. The obligation of Seller to effect the
transactions contemplated by this Agreement with respect to the Purchased Assets
at any Jointly Owned Station shall be subject to the satisfaction (or the
waiver, to the extent permitted by applicable Law, by Seller) at or prior to the
Closing of the following conditions:

 

(a) The waiting period with respect to such Purchased Assets under the HSR Act
applicable to the consummation of the transactions contemplated hereby shall
have expired or been terminated;

 

(b) No preliminary or permanent injunction or other order or decree by any
Governmental Authority which prevents the consummation of the transactions
contemplated hereby or by the Additional Agreements with respect to such
Purchased Assets shall have been issued and remain in effect (Seller agreeing to
use its reasonable best efforts to have any such injunction, order or decree
lifted), and no applicable Law shall be in effect which prohibits the
consummation of the transactions contemplated hereby or thereby with respect to
such Purchased Assets;

 

(c) Seller shall have obtained the Seller’s Required Regulatory Approvals set
forth on Schedule 7.2(c) to the extent relating to such Purchased Assets, which
shall be final and non-appealable, and Seller shall have received evidence
thereof, in form and substance reasonably satisfactory to Seller, and all
conditions to the effectiveness thereof prescribed therein or otherwise by Law
shall have been satisfied or waived, it being understood that the imposition by
any Governmental Authority of any such condition to the grant or issuance of any
such consent or approval requiring any action or omission by Seller shall not
affect Seller’s obligation to consummate the transactions contemplated hereby or
by the Additional Agreements unless such condition would, individually or in the
aggregate, have a Regulatory Material Adverse Effect on Seller;

 

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(d) Buyer shall have obtained the Buyer’s Required Regulatory Approvals set
forth in Schedule 7.1(c) to the extent relating to such Purchased Assets, which
shall be final and non-appealable, and which shall not include any condition
requiring any action or omission by Seller which condition would, individually
or in the aggregate, have a Regulatory Material Adverse Effect on Seller; and
Seller shall have received evidence thereof;

 

(e) Buyer shall have performed and complied with the covenants and agreements
contained in this Agreement which are required to be performed and complied with
by Buyer at or prior to the Closing and which relate to such Purchased Assets;

 

(f) The representations and warranties of Buyer set forth in this Agreement
which relate to such Purchased Assets shall be true and correct in all material
respects as though made at and as of the Closing Date (other than such
(i) representations and warranties that are made as of a specific date which
shall have been true and correct as of such date and (ii) representations and
warranties that are qualified by reference to materiality, Material Adverse
Effect or Buyer Material Adverse Effect which shall be true and correct in all
respects);

 

(g) Seller shall have received a certificate from an authorized officer of
Buyer, dated the Closing Date, to the effect that, to Buyer’s knowledge, the
conditions set forth in Sections 7.2(e) and (f) have been satisfied;

 

(h) Buyer shall have executed and delivered to Seller a joinder to the Jointly
Owned Stations Operating Agreement relating to such Purchased Assets;

 

(i) Seller shall have received an opinion from Buyer’s counsel, which counsel
shall be reasonably acceptable to Seller, dated the Closing Date, substantially
in the form of Exhibit G hereto; and

 

(j) Seller shall have received a certificate of the Chief Financial Officer of
Buyer to the effect that (i) after giving effect to the consummation of the
transactions contemplated by this Agreement and the Additional Agreements,
including any assignment by Buyer to any of its direct or indirect wholly owned
subsidiaries of all or any portion of its rights, interests, obligations or
remedies hereunder pursuant to Section 10.9, (A) the debts of Buyer, and of each
such wholly owned subsidiary of Buyer, will not be greater than the assets of
such Person, at a fair valuation, and (B) Buyer and each such subsidiary will be
able to pay its debts as they become due, and (ii) no such transaction was
effected with the intent to hinder, delay or defraud current or future creditors
of Buyer.

 

7.3. Separate Closings. For the avoidance of doubt, it is the intention of the
Parties that, notwithstanding any provision hereof to the contrary, provided
that the conditions to the obligations of both Parties to effect the
transactions contemplated by this Agreement are satisfied or waived with respect
to all of the Purchased Assets at any Jointly Owned Station, Seller shall sell,
assign, convey, transfer and deliver such Purchased Assets to Buyer, Buyer shall
purchase, assume and acquire such Purchased Assets, and Buyer shall assume and
agree to pay, perform or otherwise discharge when due the Assumed Liabilities
relating to such Purchased Assets, all in the manner contemplated by Articles II
and III.

 

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ARTICLE VIII

 

INDEMNIFICATION AND ARBITRATION

 

8.1. Indemnification.

 

(a) From and after the Closing Date, Buyer shall indemnify, defend and hold
harmless Seller and its Representatives (each, a “Seller’s Indemnitee”), from
and against any and all claims, demands, suits, losses, liabilities, penalties,
damages, obligations, payments, costs and expenses (including reasonable
attorneys’ fees and expenses in connection therewith) (each, an “Indemnifiable
Loss”), asserted against or suffered by any Seller’s Indemnitee relating to,
resulting from or arising out of (i) any breach by Buyer of any
(A) representation and warranty set forth in Article V, or (B) covenant or
agreement of Buyer contained in this Agreement, (ii) the Assumed Liabilities,
(iii) any Inspection, (iv) the failure by Buyer to comply with any Law, with
respect to the Purchased Assets that are subject thereto or (v) any Third-Party
Claim against any Seller’s Indemnitee in connection with Buyer’s ownership,
lease, maintenance, construction, modification or operation of any of the
Purchased Assets on or after the Closing Date (other than to the extent such
Third-Party Claim constitutes an Excluded Liability); provided, however, that
Buyer shall be liable to the Seller’s Indemnitees pursuant to clause (i) of this
Section 8.1(a) only for Indemnifiable Losses for which any Seller’s Indemnitee
gives written notice to Buyer (setting forth with reasonable specificity the
nature and amount of the Indemnifiable Loss) during the period for which such
representations, warranties, covenants or agreements survive the Closing in
accordance with Section 10.6; and provided further that Buyer shall be liable to
the Seller’s Indemnitees pursuant to clause (i)(A) of this Section 8.1(a) for
breaches of representations and warranties (y) only after Indemnifiable Losses
for such breaches, in the aggregate, exceed $2,000,000 (provided, however, that
once such threshold amount is exceeded, Seller’s Indemnitees may recover all
Indemnifiable Losses for such breaches incurred from and after the Closing Date
without regard to such threshold amount), and (z) only for Indemnifiable Losses
for such breaches, in the aggregate, up to, but not in excess of, $17,500,000
(other than for breaches of the representations and warranties set forth in
Sections 5.1, 5.2 and 5.5, as to which no such limitations shall be applicable).

 

(b) From and after the Closing, Seller shall indemnify, defend and hold harmless
Buyer and its Representatives (each, a “Buyer’s Indemnitee” and, together with
Seller’s Indemnitees, an “Indemnitee”), from and against any and all
Indemnifiable Losses asserted against or suffered by any Buyer’s Indemnitee
relating to, resulting from or arising out of (i) any breach by Seller of any
(A) representation and warranty set forth in Article IV, or (B) covenant or
agreement of Seller set forth in this Agreement, (ii) the Excluded Assets and
the Excluded Liabilities or (iii) any Third-Party Claim against any Buyer’s
Indemnitee in connection with Seller’s ownership, lease, maintenance,
construction, modification or operation of any of the Purchased Assets prior to
the Closing Date (other than to the extent such Third-Party Claim constitutes an
Assumed Liability); provided, however, that Seller shall be liable to the
Buyer’s Indemnitees pursuant to clause (i) of this Section 8.1(b) only for
Indemnifiable Losses for which any Buyer’s Indemnitee gives written notice to
Seller (setting forth with reasonable specificity the nature and amount of the
Indemnifiable Loss) during the period for which such representations,
warranties, covenants or agreements survive the Closing in accordance with
Section 10.6; and provided further that Seller shall be liable to the Buyer’s
Indemnitees pursuant

 

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to clause (i)(A) of this Section 8.1(b) for breaches of representations and
warranties (y) only after Indemnifiable Losses for such breaches, in the
aggregate, exceed $2,000,000 (provided, however, that once such threshold amount
is exceeded, Buyer’s Indemnitees may recover all Indemnifiable Losses for such
breaches incurred from and after the Closing Date without regard to such
threshold amount), and (z) only for Indemnifiable Losses for such breaches, in
the aggregate, up to, but not in excess of, $17,500,000 (other than for breaches
of the representations and warranties set forth in Sections 4.1, 4.2 and 4.5, as
to which no such limitations shall be applicable).

 

(c) In furtherance, and not in limitation, of the provisions set forth in
Section 8.1(a), Buyer, for itself and on behalf of its Representatives, hereby
irrevocably releases, holds harmless and forever discharges Seller from any and
all Indemnifiable Losses of any kind or character, whether known or unknown,
contingent or accrued, arising under or relating to Environmental Laws, or
relating to any claim in respect of any Environmental Condition or Hazardous
Substance, whether based on common law or Environmental Laws, relating to the
Purchased Assets, other than Excluded Liabilities (collectively, “Environmental
Claims”). In furtherance of the foregoing, Buyer, for itself and on behalf of
its Representatives, hereby irrevocably waives any and all rights and benefits
with respect to such Environmental Claims that it now has, or in the future may
have conferred upon it by virtue of any Law or common law principle, which
provides that a general release does not extend to claims which a party does not
know or suspect to exist in its favor at the time of executing the release, if
knowledge of such claims would have materially affected such party’s settlement
with the obligor. In this connection, Buyer hereby acknowledges that it is aware
that factual matters now unknown to it may have given, or hereafter may give,
rise to Environmental Claims that have not been made prior to the date of this
Agreement, and will not be made prior to the Closing Date, and Buyer further
agrees that this release set forth in this Section 8.1(c) has been negotiated
and agreed upon in light of that awareness, and Buyer, for itself and on behalf
of its Representatives, nevertheless hereby intends irrevocably to release, hold
harmless and forever discharge Seller from all such Environmental Claims.

 

(d) The rights and remedies of Seller and Buyer set forth in this Article VIII
are exclusive and in lieu of any and all other rights and remedies which Seller
and Buyer may have under this Agreement, under applicable Law, whether at common
law or in equity, including for declaratory, injunctive or monetary relief, in
each case, with respect to any Indemnifiable Loss.

 

(e) Notwithstanding anything to the contrary herein, no Person (including an
Indemnitee) shall be entitled to recover from any other Person (including any
Party required to provide indemnification under this Agreement (an “Indemnifying
Party”)) any amount in excess of the actual compensatory damages, court costs
and reasonable attorneys’ fees suffered by such Party. In furtherance of the
foregoing, Buyer and Seller hereby irrevocably waive any right to recover
punitive, indirect, special, exemplary and consequential damages arising in
connection with or with respect to this Agreement (other than with respect to
indemnification for a Third- Party Claim).

 

(f) Any Indemnitee shall use Commercially Reasonable Efforts to mitigate all
losses, damages and the like relating to a claim under the indemnification
provisions in this

 

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Section 8.1, including availing itself of any defenses, limitations, rights of
contribution, claims against third Persons and other rights at law or equity.
For purposes of this Section 8.1(f), the Indemnitee’s Commercially Reasonable
Efforts shall include the reasonable expenditure of money to mitigate or
otherwise reduce or eliminate any Indemnifiable Loss for which indemnification
would otherwise be due, and, in addition to its other obligations hereunder,
provided that the Indemnifying Party shall reimburse the Indemnitee for the
Indemnitee’s reasonable costs and expenses incurred in undertaking such
mitigation, reduction or elimination.

 

8.2. Defense of Claims.

 

(a) If any Indemnitee receives notice of the assertion of any Indemnifiable Loss
or of the commencement of any suit, action or proceeding made or brought by any
Person who is not an Indemnitee (a “Third-Party Claim”) with respect to which
indemnification is to be sought from an Indemnifying Party, the Indemnitee shall
give such Indemnifying Party reasonably prompt written notice thereof, but in no
event later than twenty (20) Business Days after the Indemnitee’s receipt of
notice of such Third-Party Claim. Such notice shall describe the nature of the
Third-Party Claim in reasonable detail and shall indicate the estimated amount,
if practicable, of the Indemnifiable Loss that has been or may be incurred by
the Indemnitee. The Indemnifying Party shall have the right to participate in
or, by giving written notice to the Indemnitee, to elect to assume the defense
of any Third-Party Claim at such Indemnifying Party’s expense and by such
Indemnifying Party’s own counsel. If an Indemnifying Party elects not to assume
the defense of any Third-Party Claim, the Indemnitee may defend, compromise or
settle such Third-Party Claim with counsel selected by it, provided that,
without the prior written consent of the Indemnifying Party, the Indemnitee
shall not agree to the entry of any judgment with respect to, or any compromise
or settlement of, any Third-Party Claim.

 

(b) If the Indemnifying Party undertakes, conducts and controls the conduct and
settlement of such action or suit, (i) the Indemnifying Party shall not thereby
permit to exist any Encumbrance upon any asset of the Indemnitee; (ii) the
Indemnifying Party shall not consent to any settlement that does not include as
an unconditional term thereof the giving of a complete release from Liability
with respect to such action or suit to the Indemnitee; and (iii) the
Indemnifying Party shall permit the Indemnitee to participate in such conduct or
settlement at such Indemnitee’s expense and by such Indemnitee’s counsel.

 

(c) Subject to Section 8.3, any claim by an Indemnitee on account of an
Indemnifiable Loss which does not constitute a Third-Party Claim (a “Direct
Claim”) shall be asserted by giving the Indemnifying Party reasonably prompt
written notice thereof, in no event later than forty (40) Business Days after
the Indemnitee becomes aware of such Direct Claim, stating the nature of such
claim in reasonable detail and indicating the estimated amount, if practicable,
of such Indemnifiable Loss. The Indemnifying Party shall have a period of forty
(40) Business Days within which to respond to such Direct Claim. If the
Indemnifying Party fails to respond during such forty (40) Business Day period,
the Indemnifying Party shall be deemed to have accepted such claim and, subject
to this Article VIII, shall promptly reimburse the Indemnitee for the
Indemnifiable Losses set forth in the Indemnitee’s notice.

 

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(d) A failure to give timely notice as provided in this Section 8.2 shall not
affect the rights or obligations of any Party hereunder except to the extent
that the Party which was entitled to receive such notice was actually prejudiced
as a result of such failure.

 

8.3. Arbitration.

 

(a) Notwithstanding any provision hereof to the contrary, in the event of any
dispute between Seller and Buyer arising after the Closing (whether relating to
facts, events or circumstances occurring or existing prior to, on or after the
Closing Date) and relating to, resulting from or arising out of any provision of
this Agreement (other than disputes arising under Article II or Section 3.2,
3.3, 3.4, 6.5, 8.1(a)(ii) or 8.1(b)(ii)), including with respect to Direct
Claims and Third Party Claims, the Party asserting such dispute shall give
written notice to the other of the fact that a dispute has arisen pursuant
hereto. Such notice shall include (i) a statement setting forth in reasonable
detail the facts, events, circumstances, evidence and arguments underlying such
dispute and (ii) proposed arrangements for a meeting to attempt to resolve the
dispute to be held within sixty (60) days after such notice is given. Within
thirty (30) days after such notice is given, the other Party hereto shall submit
to the Party giving such notice a written summary responding to such statement
of facts, events, circumstances, evidence and arguments contained in the notice
and an acceptance of or proposed alternative to the meeting arrangements set
forth in the initial notice.

 

(b) The chief executive officers (or any other executive officer or officers
directly reporting to, or duly designated by, such chief executive officers) of
each of the Parties shall meet at a mutually acceptable time and place to
attempt to settle any dispute in good faith; provided, however, that such
meeting shall be held at the principal offices of the Party receiving the notice
of dispute unless otherwise agreed; and provided further, that any such meeting
shall be held no later than sixty (60) days after the written notice of dispute
is given pursuant to Section 8.3(a). Each Party shall bear its own costs and
expenses with respect to preparation for, attendance at and participation in
such meeting.

 

(c) In the event that (i) a meeting has been held in accordance with
Section 8.3(b), (ii) any such dispute of the kind referred to in Section 8.3(a)
shall not have been resolved at such meeting and (iii) the aggregate amount in
dispute exceeds $100,000, then either Party may submit such dispute to binding
arbitration pursuant to the Commercial Arbitration Rules of the American
Arbitration Association (the “Commercial Arbitration Rules”). In the event that
such dispute is submitted to arbitration pursuant to the Commercial Arbitration
Rules, then the arbitration tribunal shall be composed of three arbitrators (one
arbitrator selected by each Party within thirty (30) days after the meeting held
in accordance with Section 8.3(b) with the third selected by the other two
arbitrators or, in the absence of agreement between them, the American
Arbitration Association), the venue of the arbitration shall be Wilmington,
Delaware, the language of the arbitration shall be English and the arbitration
shall commence no later than sixty (60) days after the meeting held in
accordance with Section 8.3(b). The decision, judgment and order of the
arbitration tribunal shall be final, binding and conclusive as to the Parties
and their respective Representatives, and may be entered in any court of
competent jurisdiction. Other than the fees and expenses of the arbitrators,
which shall be shared equally by the Parties, each Party shall bear its own
costs and expenses (including attorneys’ fees and expenses) relating to the
arbitration.

 

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ARTICLE IX

 

TERMINATION

 

9.1. Termination.

 

(a) This Agreement may be terminated at any time prior to the Closing by mutual
written consent of the Parties.

 

(b) This Agreement may be terminated by Seller, on the one hand, or Buyer, on
the other hand, with respect to the Purchased Assets at any Jointly Owned
Station upon written notice to the other Party, (i) at any time prior to the
Closing if any court of competent jurisdiction shall have issued an order,
judgment or decree permanently restraining, enjoining or otherwise prohibiting
the Closing with respect to such Purchased Assets, and such order, judgment or
decree shall have become final and non-appealable; provided that the Party
seeking to terminate this Agreement pursuant to this Section 9.1(b)(i) shall
have used its Commercially Reasonable Efforts to seek relief from such order,
judgment or decree; (ii) at any time prior to the Closing if any Law shall have
been enacted or issued by any Governmental Authority which prohibits the
consummation of the transactions contemplated by this Agreement or by any
Additional Agreement with respect to such Purchased Assets; or (iii) at any time
after the first anniversary of the date of this Agreement if the Closing with
respect to such Purchased Assets shall not have occurred on or before such date;
provided, however, that the right to so terminate this Agreement under this
Section 9.1(b)(iii) shall not be available to any Party whose breach of this
Agreement has caused, or resulted in, the failure of the Closing to occur on or
before such date; and provided, further, that if on such date, any Buyer’s
Required Regulatory Approval set forth in Schedule 7.1(c) or any Seller’s
Required Regulatory Approval set forth in Schedule 7.2(c), in each case, with
respect to such Purchased Assets shall not have been obtained, or shall not be
then final and non-appealable, but all other conditions to the Closing with
respect to such Purchased Assets shall be satisfied or shall be capable of being
satisfied, then no Party shall be entitled to terminate this Agreement pursuant
to this Section 9.1(b)(iii) prior to the date that is 180 days after such date.

 

(c) This Agreement may be terminated by Buyer with respect to the Purchased
Assets at any Jointly Owned Station, upon written notice to Seller, if any of
Buyer’s Required Regulatory Approvals to the extent relating to such Purchased
Assets , the receipt of which is a condition to the obligation of Buyer to
consummate the Closing with respect to such Purchased Assets as set forth in
Section 7.1(c), shall have been denied and a petition for rehearing or refiling
of an application initially denied without prejudice shall also have been
denied, and such denial was not caused by or the result of a breach of this
Agreement by Buyer.

 

(d) This Agreement may be terminated by Seller with respect to the Purchased
Assets at any Jointly Owned Station, upon written notice to Buyer, if any of the
Seller’s Required Regulatory Approvals to the extent relating to such Purchased
Assets, the receipt of which is a condition to the obligation of Seller to
consummate the Closing as set forth in Section 7.2(c) with respect to such
Purchased Assets, shall have been denied and a petition for rehearing or
refiling of an application initially denied without prejudice shall also have
been denied, and such denial was not caused by or the result of a breach of this
Agreement by Seller.

 

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(e) This Agreement may be terminated by Buyer with respect to the Purchased
Assets at any Jointly Owned Station, upon written notice to Seller, if there has
been a material breach by Seller of any covenant, agreement, representation or
warranty contained in this Agreement which relates to such Purchased Assets,
which breach has had a Material Adverse Effect and such breach is not cured by
the earlier of the Closing Date or the date that is thirty (30) days after
receipt by Seller of notice specifying in reasonable detail the nature of such
breach, unless Buyer shall have previously waived such breach.

 

(f) This Agreement may be terminated by Seller with respect to the Purchased
Assets at any Jointly Owned Station, upon written notice to Buyer, if there has
been a material breach by Buyer of any covenant, agreement, representation or
warranty contained in this Agreement which relates to such Purchased Assets,
which breach has had a Material Adverse Effect or a Buyer Material Adverse
Effect, and such breach is not cured by the earlier of the Closing Date or the
date that is thirty (30) days after receipt by Buyer of notice specifying in
reasonable detail the nature of such breach, unless Seller shall have previously
waived such breach.

 

(g) This Agreement may be terminated by Seller, on the one hand, or Buyer, on
the other hand, with respect to the Purchased Assets at any Jointly Owned
Station upon written notice to the other Party, in accordance with the
provisions of Section 6.7(b), provided that the Party seeking to so terminate
shall have complied with its obligations under Section 6.7.

 

(h) This Agreement may be terminated by either Party with respect to the
Purchased Assets at any Jointly Owned Station, upon written notice to the other
Party, if any final and non-appealable injunction, order or decree by any
Governmental Authority, which prohibits the consummation of the transactions
contemplated hereby or by the Additional Agreements to the extent relating to
such Purchased Assets, shall have been issued and remain in effect, provided
that the Party seeking to terminate this Agreement pursuant to this
Section 9.1(h) shall have used its Commercially Reasonable Efforts to have any
such injunction, order or decree lifted.

 

9.2. Effect of Termination.

 

(a) Upon termination of this Agreement prior to the Closing in accordance with
and pursuant to Section 9.1 with respect to the Purchased Assets at any Jointly
Owned Station, this Agreement shall be of no further force or effect with
respect to such Purchased Assets (except that the provisions set forth in
Section 6.1(b), Section 6.2, this Section 9.2 and Article X, and the
Confidentiality Agreement, shall remain in full force and effect in accordance
with their respective terms); and no Party shall have any further Liability
under this Agreement (other than for any breach of any of its covenants and
agreements set forth herein).

 

(b) In the event that Buyer terminates this Agreement pursuant to
Section 9.1(b)(iii) solely by reason of Seller’s inability to obtain the release
of the Purchased Assets from the Encumbrance under the Indenture, dated
January 15, 1937, by and between ACE and the Bank of New York, as Trustee, as
amended, then, upon delivery by Buyer of statements setting forth with
reasonable specificity the nature and amount of out-of-pocket costs and expenses
(including reasonable attorneys’ fees and expenses) actually incurred by Buyer
in connection

 

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with the transactions contemplated by this Agreement, Seller shall promptly
reimburse the amount of such costs and expenses up to, but not in excess of,
$500,000.

 

ARTICLE X

 

MISCELLANEOUS PROVISIONS

 

10.1. Amendment and Modification. This Agreement may be amended, supplemented or
otherwise modified only by written agreement entered into by both Parties.

 

10.2. Expenses. Except to the extent provided herein, whether or not the
transactions contemplated hereby are consummated, all costs, fees and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be borne by the Party incurring such costs, fees and expenses,
including the fees and commissions referred to in Section 10.3.

 

10.3. Fees and Commissions. Seller, on the one hand, and Buyer, on the other
hand, represent and warrant to the other that, except for Concentric Energy
Advisors, Inc., which is acting for and at the expense of Seller, no broker,
finder or other Person is entitled to any brokerage fees, commissions or
finder’s fees in connection with the transactions contemplated hereby by reason
of any action taken by such Party or its Representatives. Seller shall pay or
otherwise discharge all such brokerage fees.

 

10.4. Bulk Sales Laws. Notwithstanding any provision in this Agreement to the
contrary, neither Buyer nor Seller shall have any obligation to comply with the
provisions of the bulk sales laws of any jurisdiction in connection with the
transactions contemplated by this Agreement; and Buyer hereby irrevocably waives
compliance by Seller with the provisions of the bulk sales laws of all
applicable jurisdictions.

 

10.5. Waiver of Compliance; Consents. To the extent permitted by applicable Law,
any failure of any of the Parties to comply with any representation, warranty,
covenant, agreement or condition set forth herein may be waived by the Party
entitled to the benefit thereof only by a written instrument signed by such
Party, but any such waiver shall not operate as a waiver of, or estoppel with
respect to, any prior or subsequent failure to comply therewith or of any other
provision set forth herein.

 

10.6. Survival. Other than (a) the representations and warranties of Seller set
forth in Sections 4.1, 4.2 and 4.5, and the representations and warranties of
Buyer set forth in Sections 5.1, 5.2 and 5.5, each of which shall survive the
delivery of the Special Warranty Deeds and the Closing indefinitely, and (b) the
representations and warranties of Seller set forth in Section 4.16, each of
which shall survive the delivery of the Special Warranty Deeds and the Closing
until expiration of the applicable statutes of limitations, the representations
and warranties of Seller set forth in Article IV and the representations and
warranties of Buyer set forth in Article V shall survive the delivery of the
Special Warranty Deeds and the Closing until the first anniversary of the
Closing Date. The covenants and agreements of the Parties set forth in this
Agreement shall survive the Closing in accordance with their respective terms.

 

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10.7. Disclaimers. EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES, COVENANTS AND
AGREEMENTS SET FORTH HEREIN AND IN THE ADDITIONAL AGREEMENTS, THE PURCHASED
ASSETS ARE SOLD “AS IS, WHERE IS”, AND SELLER EXPRESSLY DISCLAIMS ALL OTHER
REPRESENTATIONS AND WARRANTIES OF ANY KIND OR NATURE, EXPRESS OR IMPLIED, AS TO
SELLER AND THE PURCHASED ASSETS. WITHOUT LIMITING THE GENERALITY OF THE
FOREGOING, EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES SET FORTH IN THIS
AGREEMENT AND IN THE ADDITIONAL AGREEMENTS: SELLER EXPRESSLY DISCLAIMS ALL OTHER
REPRESENTATIONS AND WARRANTIES REGARDING LIABILITIES, OWNERSHIP, LEASE,
MAINTENANCE OR OPERATION OF THE PURCHASED ASSETS, THE TITLE, CONDITION, VALUE OR
QUALITY OF THE PURCHASED ASSETS OR THE PROSPECTS (FINANCIAL AND OTHERWISE),
RISKS AND OTHER INCIDENTS OF THE PURCHASED ASSETS; AND SELLER EXPRESSLY
DISCLAIMS ALL REPRESENTATIONS AND WARRANTIES OF MERCHANTABILITY, USAGE,
SUITABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE WITH RESPECT TO THE PURCHASED
ASSETS, OR ANY PART THEREOF, OR AS TO THE WORKMANSHIP THEREOF, OR THE ABSENCE OF
ANY DEFECTS THEREIN, WHETHER LATENT OR PATENT, OR COMPLIANCE WITH ENVIRONMENTAL
REQUIREMENTS, OR THE APPLICABILITY OF ANY GOVERNMENTAL AUTHORITY, INCLUDING ANY
ENVIRONMENTAL LAWS, OR WHETHER SELLER POSSESSES SUFFICIENT REAL PROPERTY OR
PERSONAL PROPERTY TO OPERATE THE PURCHASED ASSETS. EXCEPT AS OTHERWISE EXPRESSLY
PROVIDED HEREIN AND IN THE ADDITIONAL AGREEMENTS, SELLER FURTHER EXPRESSLY
DISCLAIMS ALL REPRESENTATIONS AND WARRANTIES REGARDING THE ABSENCE OF HAZARDOUS
SUBSTANCES OR LIABILITY OR POTENTIAL LIABILITY ARISING UNDER ENVIRONMENTAL LAWS
WITH RESPECT TO THE PURCHASED ASSETS. WITHOUT LIMITING THE GENERALITY OF THE
FOREGOING, EXCEPT AS OTHERWISE EXPRESSLY PROVIDED HEREIN AND IN THE ADDITIONAL
AGREEMENTS, SELLER EXPRESSLY DISCLAIMS ALL REPRESENTATIONS AND WARRANTIES OF ANY
KIND REGARDING THE CONDITION OF THE PURCHASED ASSETS OR THE SUITABILITY OF THE
PURCHASED ASSETS FOR OPERATION AS A POWER PLANT OR AS A FUEL PROCESSING
FACILITY, AS APPLICABLE, AND NO SCHEDULE OR EXHIBIT TO THIS AGREEMENT, NOR ANY
OTHER MATERIAL OR INFORMATION PROVIDED, OR COMMUNICATIONS MADE, BY SELLER OR ITS
REPRESENTATIVES, INCLUDING ANY BROKER OR INVESTMENT BANKER, SHALL CONSTITUTE OR
CREATE ANY SUCH REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE TITLE,
CONDITION, VALUE OR QUALITY OF THE PURCHASED ASSETS.

 

SELLER EXPRESSLY DISCLAIMS ALL REPRESENTATIONS AND WARRANTIES WITH RESPECT TO
THE NAMES “CONEMAUGH STATION” AND “KEYSTONE STATION”, INCLUDING ALL
REPRESENTATIONS AND WARRANTIES OF (1) TITLE; (2) LENGTH, NATURE, EXCLUSIVITY AND
CONTINUITY OF USE; (3) STRENGTH OR FAME; AND (4) NONINFRINGEMENT AND NONDILUTION
OF TRADEMARK, SERVICE MARK, TRADE NAME OR OTHER PROPRIETARY RIGHTS OF ANY THIRD
PARTY. BUYER HEREBY ACKNOWLEDGES THAT THE NAMES

 

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“CONEMAUGH STATION” AND “KEYSTONE STATION” EACH HAS A GEOGRAPHIC CONNOTATION
ASSOCIATED WITH THE LOCATION OF THE PURCHASED ASSETS.

 

10.8. Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given on the day when delivered personally or by
facsimile transmission (with confirmation), on the next Business Day when
delivered to a nationally recognized overnight courier or five (5) Business Days
after deposited as registered or certified U.S. mail (return receipt requested),
in each case, postage prepaid, addressed to the recipient Party at its address
set forth below (or at such other address or facsimile number for a Party as
shall be specified by like notice; provided, however, that any such notice of a
change of address or facsimile number shall be effective only upon receipt
thereof):

 

  (a) If to Seller, to:

 

Atlantic City Electric Company

800 King Street

P.O. Box 231

Wilmington, Delaware 19899

Attention: President

Facsimile: (302) 429-3367

 

with a copy (which shall not constitute notice) to:

 

Pepco Holdings, Inc.

Suite 1100, 10th Floor

701 Ninth Street, NW

Washington, D.C. 20068

Attention: Vice President, Legal Services

Facsimile: (202) 872-3281

 

and a copy (which shall not constitute notice) to:

 

Blank Rome LLP

One Logan Square

Philadelphia, Pennsylvania 19103

Attention: Ronald Fisher, Esquire

Facsimile: (215) 832-5479

 

  (b) If to Buyer, to:

 

Duquesne Light Holdings, Inc.

411 Seventh Avenue

Pittsburgh, PA 15219

Attention: James E. Wilson, Vice President

Facsimile: 412-393-1070

 

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with a copy (which shall not constitute notice) to:

 

Duquesne Light Company

411 Seventh Avenue

Pittsburgh, PA 15219

Attention: Gary A. Jack, Assistant General Counsel

Facsimile: 412-393-1418

 

10.9. Assignment. This Agreement shall be binding upon and inure solely to the
benefit of the Parties and their respective successors and permitted assigns,
but neither this Agreement nor any of the rights, interests, obligations or
remedies hereunder shall be assigned by any Party hereto, including by operation
of law, without the prior written consent of the other Party, nor is this
Agreement intended to confer upon any other Person any rights, interests,
obligations or remedies hereunder. Without limiting the generality of the
foregoing, no provision of this Agreement shall create any third-party
beneficiary rights in any Employee or former employee of Seller (including any
beneficiary or dependent thereof), including with respect to continued
employment or resumed employment, and no provision of this Agreement shall
create any rights in any such Persons in respect of any benefits that may be
provided, directly or indirectly, under any employee benefit plan or arrangement
except as expressly provided for thereunder. Notwithstanding the foregoing,
either Party may, without the prior written consent of the other Party, assign
all or any portion of its rights, interests, obligations and remedies hereunder,
pursuant to instruments of transfer in form and substance reasonably
satisfactory to the other Party, to one or more direct or indirect wholly owned
subsidiaries of such Party; provided, however, that (i) no such assignment shall
relieve such Party of any of its Liabilities hereunder, (ii) Buyer shall
guarantee the obligations of its assignee, which guarantee shall be in form and
substance reasonably satisfactory to Seller, (iii) no such assignment shall
result in any Party requiring any additional consent, approval, filing, or
notice of, with or to, any third party, including any Governmental Authority, to
consummate the transactions contemplated by this Agreement or any Additional
Agreement, and (iv) such assignment does not otherwise prevent or materially
impede, interfere with or delay the transactions contemplated by this Agreement
or any Additional Agreement.

 

10.10. Governing Law; Forum; Service of Process. This Agreement shall be
governed by and construed in accordance with the laws of the State of Delaware
(without giving effect to conflicts of law principles) as to all matters,
including validity, construction, effect, performance and remedies. Venue in any
and all suits, actions and proceedings related to the subject matter of this
Agreement shall be in the state and federal courts located in and for the State
of Delaware (the “Courts”), which shall have exclusive jurisdiction for such
purpose, and the Parties hereby irrevocably submit to the exclusive jurisdiction
of such courts and irrevocably waive the defense of an inconvenient forum to the
maintenance of any such suit, action or proceeding. Service of process may be
made in any manner recognized by such Courts. Each of the Parties hereby
irrevocably waives its right to a jury trial arising out of any dispute in
connection with this Agreement or the transactions contemplated hereby. Buyer
has irrevocably appointed Corporation Service Company, 2711 Centerville Road,
Suite 400, Wilmington, DE 19808, as its authorized agent (the “Authorized
Agent”) upon which process may be served in any suit, action or proceeding based
on this Agreement which may be instituted in the Courts by Seller, and Buyer
expressly accepts the jurisdiction of any such Court in respect of any such
suit, action or

 

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proceeding. Buyer represents and warrants that the Authorized Agent has agreed
to act as such agent for service of process, and Buyer shall take any and all
actions, including the filing of any and all documents and instruments, which
may be necessary or appropriate to continue such appointment in full force and
effect. Service of process upon the Authorized Agent and written notice of such
service to Buyer shall be deemed, in every respect, effective service of process
upon Buyer.

 

10.11. Counterparts. This Agreement may be executed by facsimile transmission
(with confirmation) and in counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.

 

10.12. Interpretation. The Article and Section headings contained in this
Agreement are solely for the purpose of reference, are not part of the agreement
of the parties and shall not in any way affect the meaning or construction of
this Agreement. Ambiguities and uncertainties in the wording of this Agreement
shall not be construed for or against any Party, but shall be construed in the
manner that most accurately reflects the Parties’ intent as of the date of this
Agreement. Each Party acknowledges that it has been represented by counsel in
connection with the review and execution of this Agreement, and, accordingly,
there shall be no presumption that this Agreement or any provision hereof be
construed against the Party that drafted this Agreement. Notwithstanding any
provision of any Additional Agreement to the contrary, the provisions of this
Agreement shall govern and control any conflict or inconsistency between or
among the provisions of this Agreement and the provisions of any such Additional
Agreement.

 

10.13. Schedules and Exhibits. Except as otherwise provided in this Agreement,
all Exhibits and Schedules referred to herein are intended to be and hereby are
made a part of this Agreement.

 

10.14. Disclosure. Each Schedule to this Agreement shall be deemed to include
and incorporate all information set forth on the other Schedules. Information
disclosed in documents set forth on a Schedule shall be deemed to be disclosed
on the Schedules. Certain information set forth on the Schedules is included
solely for informational purposes, is not an admission of liability or
materiality with respect to the matters covered by the information, and may not
be required to be disclosed pursuant to this Agreement. The specification of any
Dollar amount in the representations and warranties contained in this Agreement
or the inclusion of any specific item in the Schedules is not intended to imply
that such amounts (or higher or lower amounts) or such items are or are not
material, and no Party shall use the fact of the setting of such amounts or the
fact of the inclusion of any such item in the Schedules in any dispute or
controversy among the Parties as to whether any obligation, item or matter not
described herein or included in a Schedule is or is not material for purposes of
this Agreement.

 

10.15. Entire Agreement. This Agreement (including the Schedules and Exhibits),
together with the Additional Agreements (when executed and delivered by the
Parties) and the Confidentiality Agreement, constitute a single integrated
agreement between the Parties and, together, embody the entire agreement and
understanding of the Parties hereto in respect of the transactions contemplated
hereby and thereby, and supersede all prior agreements and understandings
between the Parties with respect to such transactions. There are no
representations, warranties, covenants or agreements between the Parties with
respect to the

 

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subject matter set forth in such agreements, other than those expressly set
forth or referred to herein or therein. Without limiting the generality of the
foregoing, Buyer hereby acknowledges and agrees that there are no
representations, warranties, covenants or agreements between the Parties with
respect to the subject matter set forth in such agreements contained in any
material made available to Buyer pursuant to the terms of the Confidentiality
Agreement (including the Offering Memorandum dated June 15, 2005, previously
provided to Buyer by or on behalf of Seller and Concentric Energy Advisors,
Inc.).

 

SIGNATURE PAGE FOLLOWS

 

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IN WITNESS WHEREOF, Seller and Buyer have caused this Purchase and Sale
Agreement to be duly executed and delivered by their respective duly authorized
officers as of the date first above written.

 

ATLANTIC CITY ELECTRIC COMPANY

By:

  /s/    JOSEPH M. RIGBY        

Name:

  Joseph M. Rigby

Title:

  Chief Financial Officer

 

DUQUESNE LIGHT HOLDINGS, INC.

By:

  /s/    JAMES E. WILSON        

Name:

  James E. Wilson

Title:

  Vice President