Exhibit 10(a)

AGREEMENT AND PLAN OF MERGER

BY AND AMONG

PROGRESS RAIL SERVICES HOLDINGS CORP.,

PRSC ACQUISITION CORP.,

PMRC ACQUISITION CO.,

PROGRESS RAIL SERVICES CORPORATION,

PROGRESS METAL RECLAMATION COMPANY,

PROGRESS FUELS CORPORATION

AND

PROGRESS ENERGY, INC.

(WITH RESPECT TO ARTICLES III, VI, VIII AND IX)

FEBRUARY 17, 2005

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                                                 TABLE OF CONTENTS

                                                                                                             Page

ARTICLE I         DEFINITIONS....................................................................................1

         1.1      Abatement......................................................................................2

         1.2      ABCA...........................................................................................2

         1.3      Action.........................................................................................2

         1.4      Adjustment Amount..............................................................................2

         1.5      Affiliate......................................................................................2

         1.6      Agreement......................................................................................2

         1.7      Applicable Lease Agreements....................................................................2

         1.8      Asbestos.......................................................................................2

         1.9      Asbestos Abatement.............................................................................2

         1.10     Asbestos Abatement Proposal....................................................................2

         1.11     Asbestos Laws..................................................................................2

         1.12     Asbestos Matters...............................................................................3

         1.13     Audited Statements.............................................................................3

         1.14     Basket.........................................................................................3

         1.15     Benefit Plan...................................................................................3

         1.16     Business.......................................................................................3

         1.17     Business  Combination..........................................................................3

         1.18     Canadian Benefit Plan..........................................................................4

         1.19     Canadian Pacific Earnout.......................................................................4

         1.20     Claim..........................................................................................4

         1.21     Closing........................................................................................4

         1.22     Closing Date...................................................................................4

         1.23     Closing Financial Statements...................................................................4

         1.24     Closing Working Capital........................................................................4

         1.25     Code...........................................................................................4

         1.26     Companies......................................................................................4

         1.27     Company Transaction Expenses...................................................................4

         1.28     Consolidated Subsidiaries......................................................................5

         1.29     Contracts......................................................................................5

         1.30     Current Property...............................................................................5

         1.31     Dispute Notification...........................................................................5

         1.32     DOJ............................................................................................5

         1.33     Effective Time.................................................................................5

         1.34     Environmental Claim............................................................................5

         1.35     Environmental Laws.............................................................................5

         1.36     Environmental Matters..........................................................................5

         1.37     Environmental Response Action..................................................................6

         1.38     Environmental Response Action Proposal.........................................................6

         1.39     ERISA..........................................................................................6

         1.40     Final Determination............................................................................6

         1.41     Financial Statements...........................................................................7

         1.42     FTC............................................................................................7

         1.43     GAAP...........................................................................................7

         1.44     Georgetown Steel Bankruptcy....................................................................7

         1.45     Governmental Authority.........................................................................7

         1.46     Hazardous Materials............................................................................7

         1.47     Holdings.......................................................................................7

         1.48     Holdings Claim.................................................................................7

         1.49     Holdings Claim Notice..........................................................................7

         1.50     Holdings Controlled Environmental Response Action..............................................7

         1.51     HSR Act........................................................................................7

         1.52     Incentive Plan.................................................................................7

         1.53     Indebtedness...................................................................................8

         1.54     Independent Accountants........................................................................8

         1.55     Initial Written Notice.........................................................................8

         1.56     Intellectual Property..........................................................................8

         1.57     IRS............................................................................................8

         1.58     KBCA...........................................................................................8

         1.59     Knowledge of the Companies.....................................................................8

         1.60     Laws...........................................................................................8

         1.61     Leased Real Property...........................................................................8

         1.62     Least Stringent Abatement Remedy...............................................................9

         1.63     Least Stringent Standard.......................................................................9

         1.64     Liabilities....................................................................................9

         1.65     Licensed Rights................................................................................9

         1.66     Liens..........................................................................................9

         1.67     Losses.........................................................................................9

         1.68     Material Adverse Effect........................................................................9

         1.69     Mergers........................................................................................9

         1.70     Merger Consideration...........................................................................9

         1.71     Merger Subs....................................................................................9

         1.72     Notice of Disagreement.........................................................................9

         1.73     Open Source License............................................................................9

         1.74     Option........................................................................................10

         1.75     Ordinary Rework...............................................................................10

         1.76     Other Antitrust Regulations...................................................................10

         1.77     Other Tax Returns.............................................................................10

         1.78     Owned Real Property...........................................................................10

         1.79     PBO...........................................................................................10

         1.80     Pension Plan..................................................................................10

         1.81     Permits.......................................................................................10

         1.82     Permitted Liens...............................................................................10

         1.83     Person........................................................................................10

         1.84     Plan..........................................................................................11

         1.85     Plan Funding Statement........................................................................11

         1.86     Post-Closing Period...........................................................................11

         1.87     Pre-Closing Period............................................................................11

         1.88     Progress Controlled Environmental Response Action.............................................11

         1.89     Progress Energy...............................................................................11

         1.90     Progress Fuels................................................................................11

         1.91     Progress Fuels Claim..........................................................................11

         1.92     Progress Fuels Claim Notice...................................................................11

         1.93     Progress Fuels Group..........................................................................11

         1.94     Progress Metal................................................................................11

         1.95     Progress Metal Articles of Merger.............................................................11

         1.96     Progress Metal Merger.........................................................................11

         1.97     Progress Metal Merger Consideration...........................................................11

         1.98     Progress Metal Merger Sub.....................................................................11

         1.99     Progress Metal Plan...........................................................................11

         1.100    Progress Metal Shares.........................................................................11

         1.101    Progress Metal Surviving Corporation..........................................................12

         1.102    Progress Rail.................................................................................12

         1.103    Progress Rail Articles of Merger..............................................................12

         1.104    Progress Rail Merger..........................................................................12

         1.105    Progress Rail Merger Consideration............................................................12

         1.106    Progress Rail Merger Sub......................................................................12

         1.107    Progress Rail Surviving Corporation...........................................................12

         1.108    RCL...........................................................................................12

         1.109    Real Property.................................................................................12

         1.110    Real Property Leases..........................................................................12

         1.111    Release.......................................................................................12

         1.112    Relevant Group................................................................................12

         1.113    Required Consents.............................................................................12

         1.114    Retained Leasing Assets.......................................................................12

         1.115    Retained Leasing Liabilities..................................................................12

         1.116    Retained Real Property........................................................................13

         1.117    Retention Plan................................................................................13

         1.118    Shares........................................................................................13

         1.119    Software......................................................................................13

         1.120    State Income Tax..............................................................................13

         1.121    Subsidiary....................................................................................13

         1.122    Surviving Corporations........................................................................13

         1.123    Target Working Capital........................................................................13

         1.124    Tax Claim.....................................................................................13

         1.125    Tax Indemnitee................................................................................13

         1.126    Tax Returns...................................................................................13

         1.127    Taxes.........................................................................................14

         1.128    Taxing Authority..............................................................................14

         1.129    Trade Secrets.................................................................................14

         1.130    Transfer Taxes................................................................................14

         1.131    Unfunded PBO..................................................................................14

         1.132    WARN Act......................................................................................14

         1.133    Warranty Obligation...........................................................................14

         1.134    Working Capital...............................................................................14

ARTICLE II        THE MERGERS...................................................................................15

         2.1      The Mergers...................................................................................15

         2.2      Merger Consideration..........................................................................15

         2.3      Deliveries at Closing.........................................................................15

         2.4      Effective Time................................................................................16

         2.5      Effects of the Mergers........................................................................16

         2.6      Effect on Capital Stock.......................................................................17

         2.7      Adjustment Amount and Payment.................................................................18

         2.8      Adjustment Procedure..........................................................................18

         2.9      Further Assurances ...........................................................................19

ARTICLE III       REPRESENTATIONS AND WARRANTIES OF PROGRESS ENERGY AND PROGRESS FUELS..........................19

         3.1      Ownership of the Shares.......................................................................19

         3.2      Organization..................................................................................19

         3.3      Authorization; Execution and Delivery; Enforceability.........................................20

         3.4      No Violation or Conflict; Consents............................................................20

ARTICLE IV        ADDITIONAL REPRESENTATIONS AND WARRANTIES OF PROGRESS FUELS CONCERNING THE COMPANIES
                  AND THE SUBSIDIARIES..........................................................................20

         4.1      Organization; Capitalization of the Companies; Authorization; Execution and Delivery;
                  Enforceability................................................................................20

         4.2      Subsidiaries..................................................................................21

         4.3      No Violation or Conflict; Consents............................................................22

         4.4      Financial Statements..........................................................................22

         4.5      Absence of Change.............................................................................23

         4.6      Assets........................................................................................23

         4.7      Intellectual Property.........................................................................25

         4.8      Compliance with Law...........................................................................27

         4.9      Contracts, Agreements, etc....................................................................27

         4.10     Litigation....................................................................................29

         4.11     Insurance.....................................................................................29

         4.12     Employee Benefits.............................................................................30

         4.13     Employment Matters............................................................................32

         4.14     Taxes.........................................................................................33

         4.15     Transactions With Affiliates..................................................................35

         4.16     Accounts Receivable; Accounts Payable.........................................................35

         4.17     Environmental and Asbestos....................................................................36

         4.18     Books and Records.............................................................................38

         4.19     Real Property.................................................................................38

         4.20     Substantial Customers and Suppliers...........................................................39

         4.21     Entire Business...............................................................................40

         4.22     Warranty Obligations..........................................................................40

         4.23     Inventory.....................................................................................40

         4.24     Foreign Corrupt Practices Act.................................................................40

         4.25     No Broker.....................................................................................40

         4.26     Bank Accounts.................................................................................41

ARTICLE V         REPRESENTATIONS AND WARRANTIES OF HOLDINGS AND THE MERGER SUBS................................41

         5.1      Organization..................................................................................41

         5.2      Authorization; Execution and Delivery; Enforceability.........................................41

         5.3      No Violation or Conflict; Consents............................................................42

         5.4      No Broker.....................................................................................42

         5.5      Purchase for Investment.......................................................................42

ARTICLE VI        PRE-CLOSING COVENANTS.........................................................................42

         6.1      Conduct of Business...........................................................................42

         6.2      Employee Benefits Matters.....................................................................44

         6.3      Access to Information.........................................................................45

         6.4      Further Assurances; Consents; Waiver of Notices...............................................45

         6.5      Publicity.....................................................................................45

         6.6      Confidentiality...............................................................................46

         6.7      No Solicitations..............................................................................46

         6.8      Estoppel Certificates; Landlord Lien Waivers; Contract Notices; Termination of Liens..........46

         6.9      Cooperation with Debt Financing...............................................................47

         6.10     Insurance.....................................................................................47

         6.11     Company Transaction Expenses..................................................................47

         6.12     Antitrust Matters.............................................................................47

         6.13     Available Cash ...............................................................................48

         6.14     Title Insurance Affidavits, Indemnities and Information.......................................48

ARTICLE VII       CONDITIONS PRECEDENT TO CONSUMMATION OF THE MERGERS...........................................48

         7.1      Conditions Precedent to Each Party's Obligations to Effect the Mergers........................48

         7.2      Conditions Precedent to Obligations of Holdings to Effect the Mergers.........................49

         7.3      Conditions Precedent to Obligations of Progress Fuels, Progress Rail and Progress
                  Metal to Effect the Mergers...................................................................51

ARTICLE VIII  POST-CLOSING COVENANTS............................................................................51

         8.1      Access to Books and Records...................................................................52

         8.2      Tax Matters...................................................................................52

         8.3      Employee Benefits.............................................................................63

         8.4      WARN Act......................................................................................65

         8.5      Nonsolicitation; Noncompetition; Nondisclosure................................................65

         8.6      Insurance.....................................................................................66

         8.7      Directors' and Officers' Insurance............................................................67

         8.8      Recoveries....................................................................................67

ARTICLE IX        SURVIVAL; INDEMNIFICATION.....................................................................67

         9.1      Limitation on and Survival of Representations and Warranties..................................67

         9.2      Indemnification by Progress Energy and Progress Fuels.........................................68

         9.3      Indemnification by Holdings...................................................................71

         9.4      Limitation of Liability.......................................................................72

         9.5      Indemnity Amounts to be Computed on After Tax Basis...........................................73

         9.6      Exclusive Remedy..............................................................................73

         9.7      Procedures for Environmental Response Action..................................................74

         9.8      Standards for Environmental Response Actions..................................................80

         9.9      Insurance Proceeds............................................................................81

         9.10     Procedures and Standards for Asbestos Abatement...............................................81

ARTICLE X         TERMINATION...................................................................................83

         10.1     Termination...................................................................................83

         10.2     Effect of Termination.........................................................................84

ARTICLE XI        MISCELLANEOUS.................................................................................84

         11.1     Entire Agreement..............................................................................84

         11.2     Expenses......................................................................................84

         11.3     Amendment.....................................................................................84

         11.4     Extension; Waiver.............................................................................85

         11.5     Governing Law.................................................................................85

         11.6     Assignment....................................................................................85

         11.7     Notices.......................................................................................85

         11.8     Counterparts; Headings........................................................................86

         11.9     Specific Performance..........................................................................86

         11.10    Interpretation................................................................................86

         11.11    Severability..................................................................................86

         11.12    No Reliance...................................................................................86

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EXHIBITS Exhibit 6.8(a)
Exhibit 7.2(e)
Exhibit 7.2(g)
Exhibit 7.2(m)
Exhibit 7.3(e)
Exhibit 7.3(g) Form of Collateral Access Agreement
Form of Secretary's Certificate
Form of Opinion of Counsel of Progress Fuels and the Companies
Form of Employee Lease Agreement
Form of Opinion of Counsel of Holdings and the Merger Subs
Trademark Coexistence Agreement

SCHEDULES Schedule 1.81
Schedule 1.114
Schedule 1.115
Schedule 1.116
Schedule 2.8
Schedule 3.1
Schedule 4.1
Schedule 4.2(a)
Schedule 4.2(b)
Schedule 4.3
Schedule 4.4
Schedule 4.5
Schedule 4.7
Schedule 4.8
Schedule 4.9
Schedule 4.10
Schedule 4.11
Schedule 4.12
Schedule 4.13
Schedule 4.14
Schedule 4.15
Schedule 4.16
Schedule 4.17
Schedule 4.19(a)
Schedule 4.19(b)
Schedule 4.19(c)
Schedule 4.20
Schedule 4.21
Schedule 4.22
Schedule 4.26
Schedule 6.1(ix)
Schedule 6.2(c)
Schedule 7.2(j) Permits
Retained Leasing Assets
Exceptions to Retained Leasing Liabilities
Retained Real Property
Working Capital
Ownership of Shares
Organization
Subsidiaries; Ownership; Capitalization
Subsidiaries; Organization
Required Consents
Exceptions to Financial Statements
Absence of Change
Intellectual Property
Compliance with Law
Contracts, Agreements, etc.
Litigation
Insurance
Employee Benefits
Employment Matters
Taxes
Transactions With Affiliates
Accounts Receivable; Accounts Payable
Environmental and Asbestos
Owned Real Property
Condemnation Proceedings
Real Property Leases
Substantial Customers and Suppliers
Entire Business
Warranty Obligations
Bank Accounts
Capital Expenditure Budget
Management Plans
Debt Financing

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AGREEMENT AND PLAN OF MERGER

        This Agreement and Plan of Merger (“Agreement”) is made as of February
17, 2005 by and among Progress Rail Services Holdings Corp., a Delaware
corporation (“Holdings”), PRSC Acquisition Corp., an Alabama corporation
(“Progress Rail Merger Sub”), PMRC Acquisition Co., a Kentucky corporation
(“Progress Metal Merger Sub” and, together with Progress Rail Merger Sub, the
“Merger Subs”), Progress Rail Services Corporation, an Alabama corporation
(“Progress Rail”), Progress Metal Reclamation Company, a Kentucky corporation
(“Progress Metal” and, together with Progress Rail, the “Companies”), Progress
Fuels Corporation, a Florida corporation (“Progress Fuels”), and Progress
Energy, Inc., a North Carolina corporation (“Progress Energy”), with respect to
Articles III, VI, VIII and IX.

RECITALS

        WHEREAS, Holdings (as the sole shareholder of each of Progress Rail
Merger Sub and Progress Metal Merger Sub), the Boards of Directors of each of
Progress Rail Merger Sub and Progress Metal Merger Sub and the Boards of
Directors of each of the Companies have approved and declared advisable this
Agreement and the transactions contemplated hereby, pursuant to which Holdings
will acquire (i) Progress Rail by means of a merger of Progress Rail Merger Sub
with and into Progress Rail and (ii) Progress Metal by means of a merger of
Progress Metal Merger Sub with and into Progress Metal, in each case upon the
terms and subject to the conditions set forth herein;

        WHEREAS, concurrently with the execution hereof, Progress Fuels, the
sole holder of (i) all of the outstanding shares of common stock, par value
$1.00 per share, of Progress Rail (the “Progress Rail Shares”) and (ii) all of
the outstanding shares of common stock, no par value per share, of Progress
Metal (the “Progress Metal Shares” and, together with the Progress Rail Shares,
the “Shares”), has executed a written consent approving and adopting this
Agreement; and

        WHEREAS, the parties hereto desire to make certain representations,
warranties, covenants and agreements in connection with the Mergers and also to
prescribe various conditions to the Mergers.

        NOW, THEREFORE, in consideration of the foregoing premises and the
respective representations, warranties, covenants and agreements contained
herein, and intending to be legally bound hereby, the parties hereto agree as
follows:

ARTICLE I

DEFINITIONS

        When used in this Agreement, the following terms shall have the meanings
specified:

1.1 Abatement. “Abatement” when used with respect to Asbestos or an Asbestos
Abatement shall include any action to remove, abate or encapsulate the Asbestos
and mitigate or eliminate any risks associated with the Asbestos.

1.2 ABCA. "ABCA" shall have the meaning given in Schedule 2.1.

1.3 Action. "Action" shall mean any action, claim, suit, litigation, proceeding,
arbitration or governmental investigation or audit.

1.4 Adjustment Amount. "Adjustment Amount" shall have the meaning given in
Section 2.7.

1.5 Affiliate. “Affiliate” shall mean (i) any director, partner, officer, agent
or employee of any of the Companies, any Subsidiary or Progress Fuels, (ii) any
Person, firm or corporation that directly or indirectly controls, is controlled
by or is under common control with any of the Companies, any Subsidiary or
Progress Fuels or (iii) any other Person that owns or controls (A) 5% or more of
any class of equity securities of that Person or any of its Affiliates or (B) 5%
or more of any class of equity securities (including any equity securities
issuable upon the exercise of any option or convertible security) of that Person
or any of its Affiliates. For purposes of this definition, “control” (including
with correlative meanings, the terms “controlling”, “controlled by”, and “under
common control with”) as applied to any Person, means the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of that Person, whether through ownership of voting securities or
by contract or otherwise. Where the term “Affiliate” is used herein with respect
to Holdings, it shall have the meaning set forth above, except that “Holdings”
shall be substituted for “any of the Companies, any Subsidiary or Progress
Fuels.”

1.6 Agreement. “Agreement” shall mean this Agreement, together with the Exhibits
and Schedules attached hereto and the certificates delivered in connection
herewith, as the same may be amended from time to time in accordance with the
terms hereof.

1.7 Applicable Lease Agreements. “Applicable Lease Agreements” shall mean any
leases in effect as of the Closing Date pursuant to which the Companies or the
Subsidiaries lease Leased Real Property.

1.8 Asbestos. "Asbestos" shall mean any asbestos and any asbestos-containing
material or asbestos-containing product.

1.9 Asbestos Abatement. "Asbestos Abatement" shall have the meaning given in
Section 9.9(a).

1.10 Asbestos Abatement Proposal. "Asbestos Abatement Proposal" shall have the
meaning given in Section 9.9(c).

1.11 Asbestos Laws. “Asbestos Laws” shall mean all federal, national,
provincial, state or local statutes, laws, codes, common law rules (including,
without limitation, personal injury claims, premises liability claims and
product liability claims), regulations, ordinances, orders, standards, permits,
licenses or requirements (including consent decrees, judicial decisions and
administrative orders) pertaining to Asbestos, including, without limitation,
those relating to the protection, preservation, conservation or regulation of
the environment, the disposal, abatement, encapsulation, handling,
transportation, removal, storage, disturbance, dismantling, Release or exposure
to Asbestos or imposing requirements relating to public or employee health and
safety, including without limitation, any Environmental Laws to the extent that
they regulate, apply to or pertain to Asbestos.

1.12 Asbestos Matters. “Asbestos Matters” shall mean any and all Losses
(including, without limitation, any actual or alleged personal injury (including
death) or property damage) relating to, incurred in connection with or arising
out of: (i) the actual or alleged manufacture, processing, marketing,
distribution, sale, assembly, treatment, storage, transportation, disposal,
installation, removal, disturbance, dismantling, handling or use of Asbestos as
of or prior to the Closing Date, by or on behalf of the Companies, any of their
current or former Subsidiaries or Affiliates or any of their respective
predecessors, in each case regardless of when such actual or alleged exposure,
damage or injury occurs or occurred, when any such actual or alleged Losses
become or became known or manifest or when any claim accrues; or (ii) the actual
or alleged presence of or exposure of any Person to any Asbestos as of or prior
to the Closing Date at any real property currently owned, operated, leased or
occupied by the Companies, any of their current or former Subsidiaries or
Affiliates or any of their respective predecessors or the actual or alleged
presence of or exposure of any person to Asbestos prior to, as of, or after the
Closing Date with respect to any real property formerly owned, operated, leased
or occupied by the Companies, any of their current or former Subsidiaries or
Affiliates or any of their respective predecessors, in each case regardless of
when such actual or alleged exposure, damage or injury occurs or occurred, when
any such actual or alleged Losses become or became known or manifest or when any
claim accrues; provided, however, Asbestos Matters shall not include any costs
associated with the Abatement of any Asbestos contained in any building
materials or any other alleged property damage relating to Asbestos at any real
property currently owned, operated, leased or occupied by the Companies or any
Subsidiaries to the extent such Asbestos is in compliance with applicable
Asbestos Laws as of the Closing Date.

1.13 Audited Statements. "Audited Statements" shall have the meaning given in
Section 7.2(p).

1.14 Basket. "Basket" shall have the meaning given in Section 9.4.

1.15 Benefit Plan. "Benefit Plan" shall have the meaning given in Section
4.12(a).

1.16 Business. “Business” shall mean the business of, directly or indirectly,
providing products and services or advice with respect to rail, railcar or
transit systems, including, without limitation, railcar and locomotive repair,
trackwork, rail parts reconditioning and sales, scrap metal recycling, railcar
leasing and other rail-related products or services currently provided by any of
the Companies or the Subsidiaries.

1.17 Business Combination. “Business Combination” shall mean, with respect to
any Person, (i) any merger, consolidation or combination to which such Person is
a party, (ii) any sale, dividend, split or other disposition of any capital
stock or other equity interests of such Person, (iii) any tender offer
(including, without limitation, a self-tender), exchange offer,
recapitalization, liquidation, dissolution or similar transaction, (iv) any
sale, dividend or other disposition of all or a material portion of the assets
and properties of such Person or (v) the entering into of any agreement or
understanding, or the granting of any rights or options, with respect to any of
the foregoing.

1.18 Canadian Benefit Plan. "Canadian Benefit Plan" shall have the meaning given
in Section 4.12(a).

1.19 Canadian Pacific Earnout. "Canadian Pacific Earnout" shall mean the amounts
payable by Chemetron-Railway Products, Inc. to Canadian Pacific Railway Company
pursuant to that Conditional Sales Agreement, dated December 15, 1999, by and
between Canadian Pacific Railway Company and Chemetron-Railway Products, Inc.

1.20 Claim. “Claim” shall mean with respect to any Person, any and all suits,
sanctions, legal proceedings, claims, assessments, judgments, damages,
penalties, fines, assessments, awards, settlements or compromises related
thereto, liabilities (whether accrued, absolute, contingent, unliquidated or
otherwise), obligations, demands, payments, out-of-pocket costs, reasonable
out-of-pocket expenses of whatever kind (including reasonable attorneys’ and
consultants’ fees and expenses and disbursements in connection therewith) and
losses incurred or sustained by or against such Person.

1.21 Closing. “Closing” shall mean the consummation of the Mergers contemplated
herein which shall occur at 10:00 a.m., local time, on the Closing Date, at the
offices of Morgan, Lewis & Bockius LLP, New York, New York or at such other time
and place as shall be agreed by Progress Fuels and Holdings.

1.22 Closing Date. “Closing Date” shall mean the date that the Closing actually
occurs, which shall be (i) the third business day in each of the State of
Alabama and the State of Kentucky after the satisfaction or waiver of the
closing conditions set forth in Article VII, or (ii) such other date as Progress
Fuels and Holdings may mutually agree in writing.

1.23 Closing Financial Statements. "Closing Financial Statements" shall have the
meaning given in Section 2.8(b).

1.24 Closing Working Capital. "Closing Working Capital" shall have the meaning
given in Section 2.8(b).

1.25 Code. "Code" shall mean the Internal Revenue Code of 1986, as amended.

1.26 Companies. "Companies" shall have the meaning given in the preamble to this
Agreement.

1.27 Company Transaction Expenses. “Company Transaction Expenses” shall mean any
costs and expenses, other than Taxes, of the Companies or any of the
Subsidiaries relating to the transactions contemplated by this Agreement
incurred at or prior to the Closing, including, without limitation, (i) any
costs and expenses of any agent, broker, finder, investment banker, consultant,
financial, accounting or legal advisor or other similar Person which relate to
the transactions contemplated by this Agreement, (ii) the costs of any surveys,
whether updates or otherwise, with respect to Owned Real Property and the costs
of accountants’ comfort letters required by Holdings’ financing sources but
excluding other costs, if any, payable by the Companies pursuant to any
agreement entered into with Holdings’ debt financing sources, or (iii) any
payments which become due and payable as a result of the transactions
contemplated by this Agreement.

1.28 Consolidated Subsidiaries. "Consolidated Subsidiaries" shall have the
meaning given in Section 8.2(a).

1.29 Contracts. "Contracts" shall have the meaning given in Section 4.9.

1.30 Current Property. "Current Property" shall have the meaning given in
Section 1.36.

1.31 Dispute Notification. "Dispute Notification" shall have the meaning given
in Section 9.7(c).

1.32 DOJ. "DOJ" shall have the meaning given in Section 6.13(a).

1.33 Effective Time. "Effective Time" shall have the meaning given in Section
2.2.

1.34 Environmental Claim. "Environmental Claim" shall mean any Claim under any
Environmental Law.

1.35 Environmental Laws. “Environmental Laws” shall mean all federal, national,
provincial, state or local statutes, laws, codes, common law rules, regulations,
ordinances, orders, standards, permits, licenses or requirements (including
consent decrees, judicial decisions and administrative orders) pertaining to the
protection, preservation, conservation or regulation of the environment, the
disposal, Release or exposure to Hazardous Materials; or imposing requirements
relating to public or employee health and safety, including without limitation,
the Comprehensive Environmental Response, Compensation and Liability Act, 42
U.S.C. § 9601 et seq., the Resource Conservation and Recovery Act of 1976, 42
U.S.C. § 6901 et seq., the Emergency Planning and Community Right to Know Act,
42 U.S.C. § 11001 et seq., the Clean Air Act, 42 U.S.C. § 7401 et seq., the
Federal Water Pollution Control Act, 33 U.S.C. § 1251 et seq., the Toxic
Substances Control Act, 15 U.S.C. § 2601 et seq., the Safe Drinking Water Act,
42 U.S.C. § 300F et seq., and the Occupational Safety and Health Act, 29 U.S.C.
§ 651 et seq., and any statutory, regulatory or common law doctrine related to
the contamination or remediation of property (including, without limitation,
contribution, strict liability, negligence, trespass and nuisance).
Environmental Laws shall not include the applicability of the foregoing to
Asbestos other than when the term “Environmental Laws” is used in the definition
of Asbestos Laws.

1.36 Environmental Matters. “Environmental Matters” shall mean: (i) the
presence, Release, threatened Release or migration of any Hazardous Materials
existing or occurring at levels, concentrations, amounts or under conditions or
circumstances that exceed or do not satisfy the requirements or criteria of the
Least Stringent Standard (as described by Section 9.8(a)) as of or prior to the
Closing Date at, from, in, to, on, or under any real property owned, operated,
occupied or leased as of the Closing Date by the Companies or the Subsidiaries
(“Current Property”) but not to the extent of any Losses that result from any
negligent affirmative actions after the Closing Date by Holdings, or anyone
acting at the direction of Holdings, that exacerbate or worsen any such
condition; (ii) any Environmental Claim (including, without limitation, any
Environmental Claim relating to any Applicable Lease Agreement) arising out of
or relating to the presence, Release, threatened Release or migration of any
Hazardous Materials existing or occurring as of or prior to the Closing Date at,
from, in, to, on, or under any Current Property but not to the extent of any
Losses that result from any negligent affirmative actions after the Closing Date
by Holdings, or anyone acting at the direction of Holdings, that exacerbate or
worsen any such condition giving rise to the Environmental Claim; (iii) any
violation of any Environmental Law or Permit required pursuant to Environmental
Laws as of or prior to the Closing Date by the Companies or the Subsidiaries or
any of their respective actual or alleged corporate predecessors or other
Persons for whom the Companies or the Subsidiaries are held responsible;
(iv) the exposure or alleged exposure of any Person as of or prior to the
Closing Date to any Hazardous Materials present or Released at, from, in, to,
on, or under any Current Property; (v) any Environmental Claim arising out of
products or services provided or operations conducted by or on behalf of the
Companies, the Subsidiaries, any former Affiliates or any of their respective
corporate predecessors on or prior to the Closing Date; and (vi) the actual or
alleged transportation, treatment, storage, handling, or disposal or arrangement
for transportation, treatment, storage, handling or disposal of any Hazardous
Materials by or on behalf of the Companies, the Subsidiaries, any current or
former Affiliates, or any of their respective actual or alleged corporate
predecessors (or any other Persons for whom the Companies or the Subsidiaries
are held responsible) as of or prior to the Closing Date (“Off-Site Disposal
Activities”), any Releases of Hazardous Materials related to such Off-Site
Disposal Activities or the exposure or alleged exposure of any Person to any
Hazardous Materials related to any such Off-Site Disposal Activities.
Environmental Matters shall not include Asbestos Matters which are the subject
of Section 9.2(a)(vii) or matters covered by the indemnities provided in
Sections 9.2(a)(iv) or (vi)(A) which shall be covered by the indemnities in
those sections.

1.37 Environmental Response Action. "Environmental Response Action" shall have
the meaning given in Section 9.7(a).

1.38 Environmental Response Action Proposal. "Environmental Response Action
Proposal" shall have the meaning given in Section 9.7(d).

1.39 ERISA. "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.

1.40 Final Determination. “Final Determination” shall mean (i) a decision,
judgment, decree or other order by any court of competent jurisdiction, which
decision, judgment, decree or other order has become final after all allowable
appeals by either party to the action have been exhausted or the time for filing
such appeals has expired and is not subject to further review or modification,
(ii) a closing agreement entered into under Section 7121 of the Code or any
other settlement or other final agreement entered into in connection with an
administrative or judicial proceeding, (iii) execution of an Internal Revenue
Service Form 870-AD or (iv) the expiration of the time for instituting suit with
respect to a claimed deficiency.

1.41 Financial Statements. “Financial Statements” shall mean the combined
audited balance sheets of the Companies as of each of November 30, 2002 and 2003
and the combined unaudited balance sheet of the Companies as of November 30,
2004 and, in each case, the notes thereto and the related combined statements of
operations, shareholders’ equity and cash flows of the Companies for the years
then ended, all as previously provided to Holdings.

1.42 FTC. "FTC" shall have the meaning given in Section 6.13(a).

1.43 GAAP. “GAAP” shall mean generally accepted accounting principles as in
effect in the United States of America at the time of the preparation of the
subject financial statements, consistently applied.

1.44 Georgetown Steel Bankruptcy. “Georgetown Steel Bankruptcy” shall mean the
proceeding, In re Georgetown Steel Company, LLC, United States Bankruptcy Court,
District of South Carolina, Case No. 03-13156.

1.45 Governmental Authority. “Governmental Authority” shall mean any federal,
national, state, provincial, municipal or other governmental department,
commission, board, bureau, agency or instrumentality or any court or tribunal,
in each case whether of the United States, any of its possessions or territories
or of any foreign nation.

1.46 Hazardous Materials. “Hazardous Materials” shall mean any chemicals,
materials or substances which are now or hereafter become defined as or included
in the definition of “hazardous substances,” “hazardous wastes,” “hazardous
materials,” “extremely hazardous substances,” “restricted hazardous wastes,”
“toxic substances,” “solid wastes,” “pollutants” or “contaminants” or words or
similar meaning or regulatory effect, or any other chemical, material or
substances, exposure to which is prohibited, limited or regulated by any
applicable Environmental Law, including petroleum, petroleum hydrocarbons or
petroleum products, petroleum by-products, radioactive materials, radon, urea
formaldehyde, lead or lead-containing materials and polychlorinated biphenyls.

1.47 Holdings. "Holdings" shall have the meaning given in the preamble to this
Agreement.

1.48 Holdings Claim. "Holdings Claim" shall have the meaning given in Section
9.2(a).

1.49 Holdings Claim Notice. "Holdings Claim Notice" shall have the meaning given
in Section 9.2(b).

1.50 Holdings Controlled Environmental Response Action. "Holdings Controlled
Environmental Response Action" shall have the meaning given in Section
9.7(l)(i).

1.51 HSR Act. "HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements
Act of 1976 (15 U.S.C. ss. 18a), as amended.

1.52 Incentive Plan. "Incentive Plan" shall have the meaning given in Section
6.2(c).

1.53 Indebtedness. “Indebtedness” of any Person shall mean all obligations of
such Person (i) for borrowed money, (ii) evidenced by notes, bonds, debentures
or similar instruments, (iii) for reimbursement with respect to letters or
credit, banker’s acceptances and surety bonds, (iv) for the deferred revenue of
goods or services (other than trade payables or accruals incurred in the
ordinary course of business), (v) under capital leases, (vi) arising under
conditional sale or title retention agreements with respect to property acquired
by such Person, (vii) for deferred rental expenses and (viii) in the nature of
guarantees of the obligations described in clauses (i) through (vii) above of
any other Person.

1.54 Independent Accountants. "Independent Accountants" shall have the meaning
given in Section 2.8(d).

1.55 Initial Written Notice. "Initial Written Notice" shall have the meaning
given in Section 9.7(b).

1.56 Intellectual Property. “Intellectual Property” shall mean all United States
and foreign (i) patents and patent applications, patent disclosures awaiting
filing determination and patents subsequently issuing from patent applications
and design rights, (ii) trademarks, service marks, trade names, corporate names,
trade dress and domain names, including logos and slogans, and registrations and
applications for registrations for the foregoing and all goodwill of the
Companies and all Subsidiaries associated therewith, (iii) registered copyrights
and registrations, renewals and applications, (iv) Software, (v) Trade Secrets,
(vi) in connection with the foregoing clauses (i) through (v) above, causes of
action (including past infringement), damages and remedies relating thereto and
rights of protection of any interest therein under the laws of all jurisdictions
and (vii) copies and tangible embodiments thereof (in whatever form or medium,
including electronic media).

1.57 IRS. "IRS" shall have the meaning given in Section 4.12(b).

1.58 KBCA. "KBCA" shall have the meaning given in Section 2.1.

1.59 Knowledge of the Companies. “Knowledge of the Companies” shall mean the
actual knowledge or awareness of the following Persons and, with respect to all
of the following Persons except Donald K. Davis, David B. Fountain, Carol Nelson
and David J. Hatcher, matters which such Person should have known after due
inquiry: William P. Ainsworth, David R. Klementz, John R. Grace, Jackie A.
Nesmith, David R. Roeder, J. Duane Cantrell, Jimmy Lawley, Michael Vanden Bergh,
Glen Lehmann, Edward A. O’Neal, Thomas R. Sullivan, Laine H. Spruiell, Gary
Pickett, H. Michael Smith, Matthew I. Hart, Donald K. Davis, David B. Fountain,
Carol Nelson and David J. Hatcher.

1.60 Laws. “Laws” shall mean any national, federal, state, provincial, local or
other law or governmental requirement of any kind, and the rules, regulations
and orders promulgated thereunder.

1.61 Leased Real Property. "Leased Real Property" shall have the meaning given
in Section 4.19(c).

1.62 Least Stringent Abatement Remedy. "Least Stringent Abatement Remedy" shall
have the meaning given in Section 9.9(d).

1.63 Least Stringent Standard. "Least Stringent Standard" shall have the meaning
given in Section 9.8(a).

1.64 Liabilities. “Liabilities” shall mean any and all contingencies,
liabilities and obligations of any kind, character or description whatsoever,
known or unknown, contingent, fixed or otherwise, due or to become due, asserted
or unasserted.

1.65 Licensed Rights. "Licensed Rights" shall have the meaning given in Section
4.7(a).

1.66 Liens. “Liens” shall mean any and all liens, encumbrances, assignments,
claims, title and survey matters, mortgages, charges, deeds of trust, leases,
possessory rights, options, rights of first refusal, easements, rights of way,
claims, restrictions, pledges, security interests, impositions and any other
encumbrance of any kind or character.

1.67 Losses. "Losses" shall have the meaning given in Section 9.2(a).

1.68 Material Adverse Effect. “Material Adverse Effect” or “Material Adverse
Change” shall mean (i) with respect to any entity or group of entities, a
material adverse effect on or change in (or any development which, insofar as
reasonably can be foreseen, is reasonably likely to have a material adverse
effect on or change in) the business, operations, assets, Liabilities, financial
condition or results of operations of such entity or group of entities taken as
a whole, other than any change, circumstance or effect (A) relating to the
economy or securities markets in general or (B) relating generally to the
industries in which such entity or group of entities operates and not
specifically relating to it, in each case, which do not and will not have a
materially disproportionate effect on the Business or the Companies; or (ii) a
material adverse impairment of the ability of Progress Energy, Progress Fuels or
either of the Companies to perform its obligations under this Agreement and the
other agreements contemplated hereby.

1.69 Mergers. "Mergers" shall have the meaning given in Section 2.1.

1.70 Merger Consideration. "Merger Consideration" shall have the meaning given
in Section 2.2.

1.71 Merger Subs. "Merger Subs" shall have the meaning given in the preamble to
this Agreement.

1.72 Notice of Disagreement. "Notice of Disagreement" shall have the meaning
given in Section 8.3(b).

1.73 Open Source License. “Open Source License” shall mean the Companies’ and
the Subsidiaries’ license of any Software from a third party in accordance with
the terms and conditions of any version of the GNU General Public License, GNU
Lesser General Public License or any similar license (generally on a “point and
click” download basis from the World Wide Web) pursuant to which the licensee is
permitted, on a royalty-free basis, to freely distribute, modify, create
derivative works of or otherwise incorporate all or any portion of the relevant
Software into the Intellectual Property.

1.74 Option. “Option” shall mean, with respect to any Person, any security,
right, subscription, warrant, option, “phantom” stock right or other contract
that gives the right to (i) purchase or otherwise receive or be issued any
shares of capital stock or other equity interests of such Person or any security
of any kind convertible into or exchangeable or exercisable for any shares of
capital stock or other equity interests of such Person or (ii) receive any
benefits or rights similar to any rights enjoyed by or accruing to the holder of
shares of capital stock or other equity interests of such Person, including,
without limitation, any rights to participate in the equity, income or election
of directors or officers of such Person.

1.75 Ordinary Rework. “Ordinary Rework” shall mean ordinary reworking of product
in connection with all or any part of a product shipment returned by a customer
within 90 days from the shipping date or the subject of a notice of
dissatisfaction received within 90 days from the shipping date where the
aggregate cost to the Companies and the Subsidiaries of such reworking is less
than an aggregate of two hundred fifty thousand dollars ($250,000) with respect
to the entire shipment.

1.76 Other Antitrust Regulations. "Other Antitrust Regulations" shall mean any
foreign antitrust or competition laws.

1.77 Other Tax Returns. "Other Tax Returns" shall have the meaning given in
Section 8.2(f)(i).

1.78 Owned Real Property. "Owned Real Property" shall have the meaning given in
Section 4.19(a).

1.79 PBO. "PBO" shall have the meaning given in Section 8.3(b).

1.80 Pension Plan. "Pension Plan" shall have the meaning given in Section
8.3(b).

1.81 Permits. “Permits” shall mean all written permits, licenses and
governmental authorizations, registrations and approvals required, as of the
date hereof, to be obtained in the conduct of the business of the Companies or
the Subsidiaries, including, without limitation, those Permits listed on
Schedule 1.81

.

1.82 Permitted Liens. “Permitted Liens” shall mean (i) liens for Taxes not yet
due and payable and (ii) title defects that do not materially interfere with the
existing use or enjoyment of the assets of the Companies or any Subsidiary
subject thereto or affected thereby, do not, individually or in the aggregate,
materially detract from the value of the assets subject thereto or affected
thereby, and do not materially and adversely affect the marketability thereof or
render title to any real property unmarketable.

1.83 Person. “Person” shall mean any natural person, corporation, general
partnership, limited partnership, limited liability company or partnership,
proprietorship, other business organization, trust, union, association or
governmental or regulatory authority.

1.84 Plan. "Plan" shall have the meaning given in Section 4.12(a).

1.85 Plan Funding Statement. "Plan Funding Statement" shall have the meaning
given in Section 8.3(b).

1.86 Post-Closing Period. "Post-Closing Period" shall have the meaning given in
Section 8.2(g)(iii)(b).

1.87 Pre-Closing Period. "Pre-Closing Period" shall have the meaning given in
Section 8.2(g)(iii)(b).

1.88 Progress Controlled Environmental Response Action. "Progress Controlled
Environmental Response Action" shall have the meaning given in Section 9.7(a).

1.89 Progress Energy. "Progress Energy" shall have the meaning given in the
preamble to this Agreement.

1.90 Progress Fuels. "Progress Fuels" shall have the meaning given in the
preamble to this Agreement.

1.91 Progress Fuels Claim. "Progress Fuels Claim" shall have the meaning given
in Section 9.3(a).

1.92 Progress Fuels Claim Notice. "Progress Fuels Claim Notice" shall have the
meaning given in Section 9.3(b).

1.93 Progress Fuels Group. "Progress Fuels Group" shall have the meaning given
in Section 8.2(a).

1.94 Progress Metal. "Progress Metal" shall have the meaning given in the
preamble of to this Agreement.

1.95 Progress Metal Articles of Merger. "Progress Metal Articles of Merger"
shall have the meaning given in Section 2.4.

1.96 Progress Metal Merger. "Progress Metal Merger" shall have the meaning given
in Section 2.1.

1.97 Progress Metal Merger Consideration. "Progress Metal Merger Consideration"
shall have the meaning given in Section 2.2.

1.98 Progress Metal Merger Sub. "Progress Metal Merger Sub" shall have the
meaning given in the preamble to this Agreement.

1.99 Progress Metal Plan. "Progress Metal Plan" shall have the meaning given in
Section 8.3(b).

1.100 Progress Metal Shares. "Progress Metal Shares" shall have the meaning
given in the Recitals to this Agreement.

1.101 Progress Metal Surviving Corporation. "Progress Metal Surviving
Corporation" shall have the meaning given in Section 2.1.

1.102 Progress Rail. "Progress Rail" shall have the meaning given in the
preamble to this Agreement.

1.103 Progress Rail Articles of Merger. "Progress Rail Articles of Merger" shall
have the meaning given in Section 2.4.

1.104 Progress Rail Merger. "Progress Rail Merger" shall have the meaning given
in Section 2.1.

1.105 Progress Rail Merger Consideration. "Progress Rail Merger Consideration"
shall have the meaning given in Section 2.2.

1.106 Progress Rail Merger Sub. "Progress Rail Merger Sub" shall have the
meaning given in the preamble to this Agreement.

1.107 Progress Rail Surviving Corporation. "Progress Rail Surviving Corporation"
shall have the meaning given in Section 2.1.

1.108 RCL. "RCL" shall mean Railcar, Ltd., a Georgia corporation.

1.109 Real Property. "Real Property" shall have the meaning given in Section
4.19(c).

1.110 Real Property Leases. "Real Property Leases" shall have the meaning given
in Section 4.9(c).

1.111 Release. “Release” shall mean any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, dumping or
disposing of Hazardous Materials into the environment.

1.112 Relevant Group. “Relevant Group” shall mean any affiliated, combined,
consolidated, unitary or similar group of which any of the Companies or any of
their Subsidiaries is or was a member.

1.113 Required Consents. “Required Consents” shall mean those consents required
from parties to the Contracts and Permits that are necessary or required in
order to give effect to the transactions contemplated herein and that are
specifically identified on Schedule 4.3 attached hereto.

1.114 Retained Leasing Assets. “Retained Leasing Assets” shall mean those assets
which are set forth in Schedule 1.114 attached hereto.

1.115 Retained Leasing Liabilities. “Retained Leasing Liabilities” shall mean
any and all Liabilities, including, without limitation, those Liabilities,
whenever asserted, arising out of events occurring or facts existing prior to
the Closing which, directly or indirectly, relate to or arise from RCL or
otherwise from the railcar leasing business of Progress Rail and excluding those
specified Liabilities which are set forth in Schedule 1.115 attached hereto.

1.116 Retained Real Property. “Retained Real Property” shall mean each of the
following parcels of real property owned by the Companies or the Subsidiaries:
(i) real property located in Augusta, Georgia, (ii) real property located in
Louisville, Kentucky, and (iii) real property located in Lake City,
Pennsylvania, in each case as more fully described on Schedule 1.116 attached
hereto.

1.117 Retention Plan. "Retention Plan" shall have the meaning given in Section
6.2(c).

1.118 Shares. "Shares" shall have the meaning given in the Recitals to this
Agreement.

1.119 Software. “Software” shall mean all computer software owned, licensed,
leased or otherwise used by the Companies and the Subsidiaries, of any nature
whatsoever (including system software, application software, utility software,
web sites, security software, programming software, middleware and firmware,
modules, data files and upload software), in object and/or source code form as
applicable, including, without limitation, the software described on Schedule
4.7.

1.120 State Income Tax. "State Income Tax" shall have the meaning given in
Section 8.2(b)(i).

1.121 Subsidiary. “Subsidiary” shall mean, with respect to any Company, any
corporation or other entity of which more than fifty percent (50%) of the total
voting power of shares of capital stock entitled to vote in the election of
directors or others performing similar functions is at the time owned or
controlled, directly or indirectly, by such Company or a Subsidiary thereof.

1.122 Surviving Corporations. "Surviving Corporations" shall have the meaning
given in Section 2.1.

1.123 Target Working Capital. "Target Working Capital" shall be two hundred
twenty one million dollars ($221,000,000).

1.124 Tax Claim. “Tax Claim” shall mean any written notice or claim made by any
Taxing Authority or other Person with respect to Taxes or examination of any Tax
Return, that if pursued successfully, could serve as the basis for a claim for
indemnification of a Tax Indemnitee or Progress Fuels under this Agreement.

1.125 Tax Indemnitee. “Tax Indemnitee” shall mean Holdings and its Subsidiaries
and Affiliates (including, following the Closing, the Companies and the
Subsidiaries of the Companies).

1.126 Tax Returns. “Tax Returns” shall mean any report, return, amended return,
refund claim, information statement, payee statement or other information
provided or required to be provided to any Governmental Authority (including any
schedule or attachment thereto, and any amendment thereof), with respect to
Taxes, including any return of an affiliated, combined or unitary group.

1.127 Taxes. “Taxes” shall mean any and all federal, state, local, or foreign
net or gross income, gross receipts, net proceeds, sales, use, ad valorem, value
added, franchise, bank shares, withholding, payroll, employment, excise,
property, deed, stamp, alternative or add-on minimum, environmental, profits,
windfall profits, transaction, license, lease, service, service use, occupation,
severance, energy, unemployment, social security, worker’s compensation,
capital, premium and other taxes, levies, imposts, duties, assessments, charges
and withholdings of any nature whatever, whether disputed or not, imposed or
required to be collected by or paid over to a Governmental Authority including
any interest, penalties, fines, assessments or additions imposed in respect of
the foregoing, or in respect of any failure to comply with any requirement
regarding Tax Returns.

1.128 Taxing Authority. “Taxing Authority” shall mean any Governmental Authority
having jurisdiction with respect to any Tax.

1.129 Trade Secrets. “Trade Secrets” shall mean confidential information
including trade secrets, designs, business processes, customer lists, sales and
profit figures, distribution and sales methods, financial and marketing plans,
supplier lists, technology rights and licenses, specifications and other
technical information, data, process technology, processes, proposals, plans,
formulae, innovations, inventions (whether patentable or unpatenable and whether
or not reduced to practice), discoveries, ideas, databases and all other
proprietary information, in each case to the extent confidential or protectable
as a trade secret to the extent protectable under the laws of the relevant
jurisdiction.

1.130 Transfer Taxes. “Transfer Taxes” shall mean sales, use, transfer, real
property transfer, recording, documentary, stamp, registration and stock
transfer Taxes and fees.

1.131 Unfunded PBO. "Unfunded PBO" shall have the meaning given in Section
8.3(b).

1.132 WARN Act. "WARN Act" shall mean the Worker Adjustment and Retraining
Notification Act, 29 U.S.C.ss. 2101 et seq.

1.133 Warranty Obligation. "Warranty Obligation" shall have the meaning given in
Section 4.22.

1.134 Working Capital. "Working Capital" shall have the meaning given in Section
2.8(a).

        Unless the context of this Agreement otherwise requires, (i) words of
any gender include each other gender; (ii) words using the singular or plural
number also include the plural or singular number, respectively; (iii) the terms
“hereof,” “herein,” “hereby” and derivative or similar words refer to this
entire Agreement; (iv) the terms “Article” or “Section” refer to the specified
Article or Section of this Agreement; (v) the phrases “ordinary course of
business” and “ordinary course of business consistent with past practice” refer
to the practice of the Business; (vi) the phrase “including” shall mean
“including, without limitation”; (vii) the word “or” shall not be exclusive;
(viii) all references to “$” shall be deemed to mean United States dollars; (ix)
all accounting terms used herein and not expressly defined herein shall have the
meanings given to them under GAAP; and (x) the phrases “the transactions
contemplated hereby” or “the transactions contemplated by this Agreement” when
used in Articles III and IV, Section 7.2(l) and (except as explicitly provided
otherwise) Section 8.2 shall not include the debt financings contemplated by
Holdings to finance the Mergers.

ARTICLE II

THE MERGERS

2.1 The Mergers. Upon the terms and subject to the satisfaction or waiver of the
conditions of this Agreement and (a) in accordance with the Alabama Business
Corporation Act (the “ABCA”), at the Effective Time, Progress Rail Merger Sub
shall be merged with and into Progress Rail and the separate corporate existence
of Progress Rail Merger Sub shall thereupon cease (the “Progress Rail Merger”)
and (b) in accordance with the Kentucky Business Corporation Act (the “KBCA”),
at the Effective Time, Progress Metal Merger Sub shall be merged with and into
Progress Metal and the separate corporate existence of Progress Metal Merger Sub
shall thereupon cease (the “Progress Metal Merger” and, together with the
Progress Rail Merger, the “Mergers”). As a result of the Progress Rail Merger,
(i) the outstanding shares of capital stock of Progress Rail Merger Sub and
Progress Rail shall be converted or canceled in the manner provided in Section
2.6, the separate corporate existence of Progress Rail Merger Sub shall cease
and Progress Rail shall be the surviving corporation following the Progress Rail
Merger and (ii) the outstanding shares of capital stock of Progress Metal Merger
Sub and Progress Metal shall be converted or canceled in the manner provided in
Section 2.6, the separate corporate existence of Progress Metal Merger Sub shall
cease and Progress Metal shall be the surviving corporation following the
Progress Metal Merger. Progress Rail as the surviving corporation following the
Progress Rail Merger is sometimes referred to herein as the “Progress Rail
Surviving Corporation” and Progress Metal as the surviving corporation following
the Progress Metal Merger is sometimes referred to herein as the “Progress Metal
Surviving Corporation” or, together with the Progress Rail Surviving
Corporation, the “Surviving Corporations.”

2.2 Merger Consideration. The aggregate merger consideration (the “Merger
Consideration”) shall be four hundred five million dollars ($405,000,000). The
merger consideration for the Progress Metal Shares (the “Progress Metal Merger
Consideration”) shall be an amount not less than twenty million dollars
($20,000,000) and not more than thirty million dollars ($30,000,000) and the
merger consideration for the Progress Rail Shares (the “Progress Rail Merger
Consideration”) shall be an amount equal to the Merger Consideration minus the
Progress Metal Merger Consideration. At least three (3) days prior to the
Closing, Holdings shall determine the amount of the Progress Metal Merger
Consideration and shall provide notice to Progress Fuels of the amount so
determined. The Merger Consideration shall be increased or decreased by the
Adjustment Amount in accordance with Sections 2.7 and 2.8.

2.3 Deliveries at Closing. At the Effective Time, in addition to the deliveries
required to be made at or prior to the Closing pursuant to Article VII hereof,
(a) Progress Fuels shall deliver to Holdings certificates which represented the
Shares immediately prior to the Effective Time and (b) Holdings shall deliver,
or cause to be delivered, to Progress Fuels the Merger Consideration in
immediately available funds by wire transfer to an account specified by Progress
Fuels.

2.4 Effective Time. Subject to the provisions of this Agreement, as soon as
practicable on the Closing Date, (a) Progress Rail shall file the articles of
merger (the “Progress Rail Articles of Merger”), including a plan of merger,
executed in accordance with the relevant provisions of the ABCA with the
Secretary of State of Alabama and, as soon as practicable on or after the
Closing Date, shall make all other filings or recordings required under the ABCA
and (b) Progress Metal shall file the articles of merger (the “Progress Metal
Articles of Merger”), including a plan of merger, executed in accordance with
the relevant provisions of the KBCA with the Secretary of State of the State of
Kentucky and, as soon as practicable on or after the Closing Date, shall make
all other filings or recordings required under the KBCA. The Progress Rail
Merger shall become effective at such time as is set forth in the Progress Rail
Articles of Merger and the Progress Metal Merger shall become effective at such
time as is set forth in the Progress Metal Articles of Merger, which designated
times with respect to Progress Rail and Progress Metal shall be the same and
which time is hereinafter referred to as the “Effective Time.”

2.5 Effects of the Mergers.

(a)     At and after the Effective Time, the Mergers shall have the effects set
forth in Section 10-2B-11.06 of the ABCA and Section 271B.11-060(1) of the KBCA,
as applicable.

(b)     At the Effective Time, (i) the Articles of Incorporation of Progress
Rail as the Progress Rail Surviving Corporation shall be amended and restated in
its entirety to be identical to the Articles of Incorporation of Progress Rail
Merger Sub as in effect immediately prior to the Effective Time, except Article
First of the Articles of Incorporation of the Progress Rail Surviving
Corporation shall read as follows: “The name of the corporation is Progress Rail
Services Corporation (the “Corporation”).”, and (ii) the Articles of
Incorporation of Progress Metal as the Progress Metal Surviving Corporation
shall be amended and restated in its entirety to be identical to the Articles of
Incorporation of Progress Metal Merger Sub as in effect immediately prior to the
Effective Time, except Article 1 of the Articles of Incorporation of the
Progress Rail Surviving Corporation shall read as follows: “The Corporation’s
name shall be Progress Metal Reclamation Company.”, in each case until amended
thereafter in accordance with applicable Law.

(c)     At the Effective Time, (i) the Bylaws of Progress Rail as the Progress
Rail Surviving Corporation shall be amended and restated in their entirety to be
identical to the Bylaws of Progress Rail Merger Sub as in effect immediately
prior to the Effective Time, except that all references to “Progress Rail Merger
Sub” in the Bylaws of the Progress Rail Surviving Corporation shall be changed
to refer to “Progress Rail Services Corporation”, and (ii) the Bylaws of
Progress Metal as the Progress Metal Surviving Corporation shall be amended and
restated in their entirety to be identical to the Bylaws of Progress Metal
Merger Sub as in effect immediately prior to the Effective Time, except that all
references to “Progress Metal Merger Sub” in the Bylaws of the Progress Metal
Surviving Corporation shall be changed to refer to “Progress Metal Reclamation
Company”, in each case until amended thereafter in accordance with applicable
Law.

(d)     At the Effective Time, (i) the directors and officers of Progress Rail
Merger Sub immediately prior to the Effective Time shall be the directors and
officers of the Progress Rail Surviving Corporation, each to hold office until
their respective death, permanent disability, resignation or removal or until
their respective successors are duly elected and qualified, all in accordance
with the Articles of Incorporation and Bylaws of the Progress Rail Surviving
Corporation and applicable Law, and (ii) the directors and officers of Progress
Metal Merger Sub immediately prior to the Effective Time shall be the directors
and officers of the Progress Metal Surviving Corporation, each to hold office
until their respective death, permanent disability, resignation or removal or
until their respective successors are duly elected and qualified, all in
accordance with the Articles of Incorporation and Bylaws of the Progress Metal
Surviving Corporation and applicable Law.

2.6 Effect on Capital Stock. At the Effective Time, by virtue of the Mergers and
without any action on the part of Holdings, Progress Rail Merger Sub, Progress
Metal Merger Sub, Progress Rail, Progress Metal or Progress Fuels, the following
shall occur:

(a)     The Progress Rail Shares shall be converted into the right to receive
and become exchangeable for the Progress Rail Merger Consideration in cash,
without interest thereon, subject to adjustment as provided in Section 2.7. All
such Progress Rail Shares shall no longer be outstanding and shall automatically
be canceled and retired and shall cease to exist, and Progress Fuels, as the
sole shareholder of the Progress Rail Shares, shall cease to have any rights
with respect thereto except the right to receive the Progress Rail Merger
Consideration, as set forth herein.

(b)     The Progress Metal Shares shall be converted into the right to receive
and become exchangeable for the Progress Metal Merger Consideration in cash,
without interest thereon, subject to adjustment as provided in Section 2.7. All
such Progress Metal Shares shall no longer be outstanding and shall
automatically be canceled and retired and shall cease to exist, and Progress
Fuels, as the sole shareholder of the Progress Metal Shares, shall cease to have
any rights with respect thereto except the right to receive the Progress Metal
Merger Consideration, as set forth herein.

(c)     Each share of capital stock of Progress Rail and Progress Metal that is
owned by Progress Rail and Progress Metal, respectively, as treasury stock, if
any, and any such shares of capital stock owned by any direct or indirect
subsidiary of Progress Fuels, if any, shall be canceled and retired and shall
cease to exist and no cash, securities or other consideration shall be delivered
in exchange therefor.

(d)     (i) Each share of common stock, par value $1.00 per share, of Progress
Rail Merger Sub issued and outstanding immediately prior to the Effective Time
shall be converted into and become one fully paid and nonassessable share of
common stock of the Progress Rail Surviving Corporation, and (ii) each share of
common stock, no par value per share, of Progress Metal Merger Sub issued and
outstanding immediately prior to the Effective Time shall be converted into and
become one fully paid and nonassessable share of common stock of the Progress
Metal Surviving Corporation.

2.7 Adjustment Amount and Payment. The “Adjustment Amount” (which may be a
positive or negative number) will be equal to the amount determined by
subtracting the Target Working Capital from the Closing Working Capital. The
Adjustment Amount shall be paid by wire transfer by Progress Fuels to an account
specified by Holdings (if the Adjustment Amount is negative) or wire transfer by
Holdings to an account specified by Progress Fuels (if the Adjustment Amount is
positive). All such payments shall be made together with interest at the rate of
three percent (3%) per annum, which interest shall begin accruing on the Closing
Date and end on the date the payment is made. Within three (3) business days
after the calculation of the Closing Working Capital becomes binding and
conclusive on the parties pursuant to Section 2.8 of this Agreement, Progress
Fuels or Holdings, as the case may be, shall make the wire transfer payment
provided for in this Section 2.7. Progress Fuels and Holdings shall mutually
agree upon the allocation of the Adjustment Amount between the Progress Rail
Merger Consideration and the Progress Metal Merger Consideration. If Progress
Fuels and Holdings cannot reach agreement, then they shall submit the dispute to
the Independent Accountants for resolution in accordance with the procedures set
forth in Section 2.8.

2.8 Adjustment Procedure.

(a)     “Working Capital” as of a given date shall mean the amount calculated in
accordance with Schedule 2.8.

(b)     Holdings shall prepare, or cause to be prepared, a combined balance
sheet (the “Closing Financial Statements”) of the Companies as of the Closing
Date on the same basis and applying the accounting principles, policies and
practices set forth in Schedule 2.8. Holdings shall then determine the Working
Capital as of the Closing Date (the “Closing Working Capital”) based on the
Closing Financial Statements and using the same methodology as was used to
calculate the Target Working Capital as described on Schedule 2.8, which
Schedule 2.8 shall also describe any differences between such principles,
policies and practices and GAAP. Holdings shall deliver the Closing Financial
Statements and its determination of the Closing Working Capital to Progress
Fuels within seventy five (75) days following the Closing Date.

(c)     If within thirty (30) business days following delivery of the Closing
Financial Statements and the Closing Working Capital calculation, Progress Fuels
has not given Holdings written notice of its objection to the Closing Working
Capital calculation (which notice must state the basis of Progress Fuels’
objection in reasonable detail and include supporting documentation for such
objection), then the Closing Working Capital calculated by Holdings shall be
binding and conclusive on the parties and be used in computing the Adjustment
Amount.

(d)     If Progress Fuels duly gives Holdings such notice of objection, and if
Progress Fuels and Holdings fail to resolve the issues outstanding with respect
to the Closing Financial Statements and the calculations of the Closing Working
Capital within thirty (30) days of Holdings’ receipt of Progress Fuels’
objection notice, Progress Fuels and Holdings shall submit the issues remaining
in dispute to KPMG, certified public accountants (the “Independent
Accountants”), for resolution applying the principles, policies and practices
described on Schedule 2.8. If issues remaining in dispute are submitted to the
Independent Accountants for resolution, (i) Progress Fuels and Holdings shall
promptly furnish or cause to be furnished to the Independent Accountants such
work papers and other documents and information relating to the disputed issues
as the Independent Accountants may request and are available to that party or
its agents and shall be afforded the opportunity to present to the Independent
Accountants any material relating to the disputed issues and to discuss the
issues with the Independent Accountants; (ii) the Independent Accountants may
only make a determination with respect to the disputed items by deciding that
the position of Progress Fuels or Holdings or a position in between (but not
higher or lower) is correct, and the determination by the Independent
Accountants, as set forth in a notice to be delivered to both Progress Fuels and
Holdings within sixty (60) days of the submission to the Independent Accountants
of the issues remaining in dispute, shall be final, binding and conclusive on
the parties and shall be used in the calculation of the Closing Working Capital;
and (iii) Progress Fuels and Holdings will each bear fifty percent (50%) of the
fees and costs of the Independent Accountants for such determination.

        2.9 Further Assurances. If, at any time after the Effective Time, either
of the Surviving Corporations shall consider or be advised that any deeds, bills
of sale, assignments or assurances or any other acts or things are necessary,
desirable or proper (a) to vest, perfect or confirm, of record or otherwise, in
such Surviving Corporation its right, title and interest in, to or under any of
the rights, privileges, powers, franchises, properties or assets of either of
the constituent corporations, or (b) otherwise to carry out the purposes of this
Agreement, such Surviving Corporation and its proper officers and directors or
their designees shall be authorized to execute and deliver, in the name and on
behalf of either constituent corporation, all such deeds, bills of sale,
assignments and assurances and to do, in the name and on behalf of either
constituent corporation, all such other acts and things as may be necessary,
desirable or proper to vest, perfect or confirm such Surviving Corporation’s
right, title and interest in, to and under any of the rights, privileges,
powers, franchises, properties or assets of such constituent corporation and
otherwise to carry out the purposes of this Agreement.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF

PROGRESS ENERGY AND PROGRESS FUELS

        Progress Energy and Progress Fuels, jointly and severally, hereby
represent and warrant to Holdings and the Merger Subs that:

        3.1 Ownership of the Shares. Progress Fuels owns of record and
beneficially the Shares, free and clear of any and all Liens. Schedule 3.1 sets
forth the number of Shares.

        3.2 Organization. Progress Energy is duly incorporated, validly existing
and in good standing under the laws of the State of North Carolina and has all
requisite power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated herein. Progress Fuels is duly
incorporated, validly existing and in good standing under the laws of the State
of Florida and has all requisite power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated herein. Each of
Progress Energy and Progress Fuels is duly qualified as a foreign corporation in
good standing in each jurisdiction in which the conduct of its business requires
such qualification, except where the failure to be so qualified would not
prevent or materially delay consummation of the transactions contemplated
hereby.

        3.3 Authorization; Execution and Delivery; Enforceability. Each of
Progress Energy and Progress Fuels has full corporate power and authority to
enter into, deliver and perform this Agreement, and each agreement or instrument
(to which it is a party) executed in connection herewith or delivered pursuant
hereto and to consummate the transactions contemplated hereby. Each of Progress
Energy’s and Progress Fuels’ execution, delivery and performance of this
Agreement and all agreements and instruments executed in connection herewith or
delivered pursuant hereto and the transactions contemplated hereby have been
duly authorized by all requisite corporate action. This Agreement and all
agreements or instruments executed by Progress Energy and Progress Fuels in
connection herewith or delivered by Progress Energy and Progress Fuels pursuant
hereto have been duly executed and delivered thereby, and this Agreement and all
agreements and instruments executed by Progress Energy and Progress Fuels in
connection herewith or delivered thereby pursuant hereto constitute the legal,
valid and binding obligations thereof, enforceable in accordance with their
respective terms except to the extent that enforcement may be affected by
applicable bankruptcy, reorganization, insolvency and similar laws affecting
creditors’ rights and remedies generally and by general principles of equity
(regardless of whether enforcement is sought at law or in equity).

        3.4 No Violation or Conflict; Consents. The execution, delivery and
performance by Progress Energy and Progress Fuels of this Agreement and all of
the other documents and instruments contemplated hereby and the consummation of
the transactions contemplated herein do not and will not conflict with, violate
or breach any Laws, judgment, order or decree binding on Progress Energy or
Progress Fuels or their respective properties, or the articles of incorporation
or bylaws of Progress Energy or Progress Fuels. Except for such filings and
consents as may be required pursuant to the HSR Act or any Other Antitrust
Regulations, all of which will have been made or obtained, as the case may be,
prior to the Closing, no consent of any other Person, and no notice to, filing
or registration with, or authorization, consent or approval of, any
governmental, regulatory or self-regulatory agency is necessary or is required
to be made or obtained by Progress Energy or Progress Fuels in connection with
the execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby.

ARTICLE IV

ADDITIONAL REPRESENTATIONS AND WARRANTIES OF PROGRESS FUELS CONCERNING THE
COMPANIES AND THE SUBSIDIARIES

        Progress Fuels hereby represents and warrants to Holdings and the Merger
Subs that:

4.1 Organization; Capitalization of the Companies; Authorization; Execution and
Delivery; Enforceability.

(a)     Organization. Progress Rail is duly organized, validly existing and in
good standing under the laws of the State of Alabama. Progress Metal is duly
organized, validly existing and in good standing under the laws of the State of
Kentucky. The Companies have full corporate power and authority to conduct their
businesses as they are now being conducted and to own their properties and to
lease those properties leased by them. The Companies are duly qualified,
licensed or admitted to do business as foreign corporations and are in good
standing in each jurisdiction in which such qualification, license or admission
is necessary under applicable law as a result of the conduct of their business
or the ownership of their properties, except where the failure to be so
qualified, licensed or admitted and in good standing would not have a Material
Adverse Effect on the Companies and the Subsidiaries, taken as a whole. Each of
the jurisdictions in which each of the Companies is qualified, licensed or
admitted to do business as a foreign corporation is listed on Schedule 4.1.
Progress Fuels has delivered to Holdings true, correct and complete copies of
the Companies’ Articles of Incorporation and Bylaws (in each case, as amended to
date). The Companies are not in default under or in violation of any provisions
of their Articles of Incorporation or Bylaws.

(b)     Capitalization. The authorized capital stock of Progress Rail consists
of 7,500 shares of common stock, $1.00 par value per share, of which 1,000
shares are issued and outstanding as of the date hereof. The authorized capital
stock of Progress Metal consists of 1,000 shares of common stock, no par value,
of which 1,000 shares are issued and outstanding as of the date hereof. All of
the outstanding Shares have been duly and validly authorized and issued, are
fully paid and nonassessable, and were not issued in violation of any Laws or
the preemptive rights of any shareholder. Except for the Shares, no shares of
capital stock of the Companies have been issued, are held in treasury or are
reserved for issuance. There are no outstanding Options with respect to the
Companies or agreements, arrangements or understandings to issue Options with
respect to the Companies and there are no preemptive rights or agreements,
arrangements or understandings to issue preemptive rights with respect to the
issuance or sale of the Companies’ capital stock. There are no shareholder
agreements, voting trusts, proxies or other agreements or understandings with
respect to or concerning the capital stock of any of the Companies.

(c)     Authorization; Execution and Delivery; Enforceability. Each of the
Companies has full corporate power and authority to enter into, deliver and
perform this Agreement, and each agreement or instrument (to which it is a
party) executed in connection herewith or delivered pursuant hereto and to
consummate the transactions contemplated hereby. Each of the Companies’
execution, delivery and performance of this Agreement and all agreements and
instruments executed in connection herewith or delivered pursuant hereto and the
transactions contemplated hereby have been duly authorized by all requisite
corporate action. This Agreement and all agreements or instruments executed by
the Companies in connection herewith or delivered by the Companies pursuant
hereto have been duly executed and delivered thereby, and this Agreement and all
agreements and instruments executed by the Companies in connection herewith or
delivered thereby pursuant hereto constitute the legal, valid and binding
obligations thereof, enforceable in accordance with their respective terms
except to the extent that enforcement may be affected by applicable bankruptcy,
reorganization, insolvency and similar laws affecting creditors’ rights and
remedies generally and by general principles of equity (regardless of whether
enforcement is sought at law or in equity).

4.2 Subsidiaries.

(a)     Ownership; Capitalization. Each Subsidiary of the Companies is set forth
in Schedule 4.2(a) attached hereto. Except as set forth in Schedule 4.2(a), the
Companies have no equity investments or other similar interests, including any
interest that would be required to be consolidated with either of the Companies
under FASB Interpretation No. 46, Consolidation of Variable Interest Entities,
in any other Person. Except as set forth in Schedule 4.2(a), the Companies are
the direct, indirect or beneficial owners of all of the outstanding shares of
capital stock or other equity interests of any kind of each of their respective
Subsidiaries, in each case, free and clear of any and all Liens. The authorized,
issued and outstanding capital stock, and the record ownership of all such
shares of capital stock, of each Subsidiary of the Companies are as set forth in
Schedule 4.2(a). All of the shares of capital stock of each Subsidiary of the
Companies have been duly and validly authorized and issued, are fully paid and
nonassessable, and were not issued in violation of any Laws or the preemptive
rights of any shareholder. Except as set forth in Schedule 4.2(a), (i) no
capital stock of any Subsidiary of the Companies is outstanding, (ii) there are
no outstanding Options with respect to any Subsidiary of the Companies or
agreements, arrangements or understandings to issue Options with respect to any
Subsidiary of the Companies and (iii) there are no preemptive rights or
agreements, arrangements or understandings to issue preemptive rights with
respect to the issuance or sale of any Subsidiary of the Companies’ capital
stock. There are no shareholder agreements, voting trusts, proxies or other
agreements or understandings with respect to or concerning the capital stock of
any Subsidiary of the Companies.

(b)     Organization. Each Subsidiary of the Companies is duly organized,
validly existing and in good standing under the laws of its respective state
jurisdiction of incorporation or organization and has full corporate or other
power and authority to conduct its business as it is presently being conducted
and to own its properties and lease those properties leased by it. Each
Subsidiary of the Companies is duly qualified, licensed or admitted to do
business as a foreign corporation or business entity and is in good standing in
each jurisdiction in which such qualification, license or admission is necessary
under applicable law as a result of the conduct of its business or the ownership
of its properties, except where the failure to be so qualified, licensed or
admitted and in good standing would not have a Material Adverse Effect on the
Companies and the Subsidiaries, taken as a whole. Each jurisdiction in which
each Subsidiary of the Companies is qualified, licensed or admitted to do
business as a foreign corporation or other business entity is listed on Schedule
4.2(b). Progress Fuels has delivered to Holdings true, correct and complete
copies of the certificate or articles of incorporation or organization and
bylaws or operating agreements (in each case, as amended to the date hereof) of
each Subsidiary of the Companies. No Subsidiary of the Companies is in default
under or in violation of any provisions of its certificate or articles of
incorporation or organization and bylaws or operating agreements.

4.3 No Violation or Conflict; Consents. Except as set forth in Schedule 4.3, the
execution, delivery and performance of this Agreement and all of the other
documents and instruments contemplated hereby to which the Companies or any of
the Subsidiaries are a party and the consummation of the transactions
contemplated hereby and thereby do not and will not (a) conflict with, violate
or breach any Laws, judgment, order or decree binding on the Companies or any of
the Subsidiaries or their respective properties or the articles of incorporation
or bylaws of the Companies or any of the Subsidiaries, or (b)(i) conflict with
or result in a violation or breach of, (ii) constitute (with or without notice
or lapse of time or both) a default under, (iii) result in or give any Person
any right of termination, cancellation, acceleration or modification in or with
respect to, (iv) result in or give any Person any additional rights or
entitlement to increased, additional, accelerated or guaranteed payments under,
or (v) result in the creation or imposition of any Lien upon the Companies or
any of the Subsidiaries or any of their respective properties under, any
material contract, Real Property Lease or other agreement to which the Companies
or any of the Subsidiaries is a party or by which they or any of their
respective properties is bound. Except for the Required Consents which are set
forth in Schedule 4.3, and such filings and consents as may be required pursuant
to the HSR Act or any Other Antitrust Regulations, all of which will have been
made or obtained, as the case may be, prior to the Closing, no consent of any
other Person, and no notice to, filing or registration with, or authorization,
consent or approval of, any governmental, regulatory or self-regulatory agency
is necessary or is required to be made or obtained by the Companies or any of
the Subsidiaries in connection with the execution and delivery of this Agreement
or the consummation of the transactions contemplated hereby, except where the
failure to get such consent of any other Person would not have a Material
Adverse Effect on the Companies and the Subsidiaries, taken as a whole, and
would not prevent or materially delay consummation of the transactions
contemplated hereby.

4.4 Financial Statements.

(a)     Progress Fuels has delivered to Holdings copies of the Financial
Statements. The Financial Statements present fairly in all material respects the
combined financial condition, results of operations and cash flows of the
Companies and the Subsidiaries, taken as a whole, as of the dates and for the
periods indicated, and have been prepared in accordance with GAAP applied on a
basis consistent with past practice (subject, in the case of unaudited financial
statements, to footnotes and normal year end audit adjustments). Except for the
potential impact of the matter described in Schedule 4.4 (in the amount
described in Schedule 4.4), all intercompany activity has been eliminated in the
Financial Statements.

(b)     The Companies and the Subsidiaries do not have any Liabilities except
Liabilities (i) reflected on or accrued or reserved against in the combined
balance sheet included in the Financial Statements, or reflected in the notes
thereto, (ii) set forth in Schedule 4.4, or (iii) pursuant to contracts
disclosed on Schedule 4.9 or entered into in the ordinary course of business and
consistent with past practices, in each case, other than for tort or breach of
contract (with notice, lapse of time or both), (iv) pursuant to any Benefit Plan
disclosed on Schedule 4.12, (v) with respect to Taxes, (vi) for which
indemnification is available pursuant to Section 9.2(a), or (vii) pursuant to
litigation, claims or environmental matters disclosed on Schedules 4.8, 4.10 or
4.17.

4.5 Absence of Change. Except as set forth in Schedule 4.5, since December 1,
2004, the Companies and the Subsidiaries have conducted their business only in
the ordinary course of business consistent with past practice, and have not
suffered any change in business, financial condition or results of operations
that has had or, insofar as can reasonably be foreseen, is likely to have a
Material Adverse Effect on the Companies and the Subsidiaries, taken as a whole.
None of the other representations or warranties set forth in this Agreement
shall be deemed to limit the foregoing. In addition, without limiting the
foregoing, except as expressly contemplated hereby and except as set forth in
Schedule 4.5, there has not occurred since December 1, 2004:

(a) any declaration, setting aside or payment of any dividend or other
distribution in respect of the capital stock (or equity interests) of the
Companies, or any direct or indirect redemption, purchase or other acquisition
by the Companies of any such capital stock (or equity interests) of the
Companies;

(b) any authorization, issuance, sale or other disposition by the Companies of
any shares of capital stock (or equity interests) of the Companies, or any
modification or amendment of any right of any holder of any outstanding shares
of capital stock (or equity interests) of the Companies;

(c) (i) any increase of more than five percent (5%) (A) in salary of any current
or former officer, director, stockholder, employee or consultant of the
Companies or the Business with salary of greater than $125,000 in the fiscal
year ended November 30, 2004 with respect to any period beginning after November
30, 2004 or (B) in the aggregate salaries for all current or former officers,
directors, stockholders, employees or consultants of the Companies or the
Business with respect to any period beginning after November 30, 2004; (ii) any
payment of consideration of any nature whatsoever (other than salary,
commissions or consulting fees paid to any current or former officer, director,
stockholder, employee or consultant of the Companies or the Business) to any
current or former officer, director, stockholder, employee or consultant of the
Companies or the Business; (iii) any establishment or modification of (A)
targets, goals, pools or similar provisions under any benefit plan, employment
contract or other employee compensation arrangement or (B) salary ranges,
increase guidelines or similar provisions in respect of any benefit plan,
employment contract or other employee compensation arrangement; or (iv) any
adoption, entering into, amendment, modification or termination (partial or
complete) of any Benefit Plan, except as necessary to comply with changes in
applicable Law and with the written consent of Holdings, not to be unreasonably
withheld;

(d) (i) any incurrence by the Companies or any Subsidiary of Indebtedness, other
than Indebtedness incurred in the ordinary course of business consistent with
past practice, or (ii) any voluntary purchase, cancellation, prepayment or
complete or partial discharge in advance of a scheduled payment date with
respect to, or waiver of any right of the Companies under any Indebtedness of or
owing to the Companies or of any Subsidiary under any Indebtedness of or owing
to such Person with respect to the conduct of the Business;

(e) any physical damage, destruction or other casualty loss (whether or not
covered by insurance) affecting any of the Real Property, personal property or
equipment of the Companies or of any Subsidiary used or held for use in the
conduct of the Business in an aggregate amount exceeding $1,000,000;

(f) other than in the ordinary course of business consistent with past practice,
any material change in (i) any investment, accounting, financial reporting,
inventory, credit, allowance or tax practice or policy of the Companies or the
Business or (ii) any method of calculating any bad debt, contingency or other
reserve of the Companies or the Business for accounting, financial reporting or
tax purposes;

(g) any entering into, any material amendment or modification or termination
(partial or complete) or granting of a waiver under or giving any material
consent with respect to (i) any contract which is required (or had it been in
effect on the date hereof would have been required) to be disclosed pursuant to
Section 4.9, (ii) any license held by the Companies or any Subsidiary used or
held for use in connection with the Business or (iii) any Intellectual Property;

(h) any commencement or termination by the Companies of any line of business;

(i) any settlement or consent to the entry of judgement with respect to any
proceeding involving a material amount of Taxes of either of the Companies or
any of the Subsidiaries; or

(j) any entering into of an agreement to do or engage in any of the foregoing,
including, without limitation, with respect to any Business Combination not
otherwise restricted by the foregoing paragraphs.

4.6 Assets.

(a)     The Companies and the Subsidiaries have good title to, or sufficient
leasehold interest in, all their properties and assets, whether tangible or
intangible, real, personal or mixed, to permit the operation of their businesses
as currently conducted, free and clear of all Liens, except for Permitted Liens.
Any such leasehold interest is pursuant to a lease that is (i) valid, binding,
and enforceable in accordance with its terms (subject to any applicable
bankruptcy, insolvency, reorganization, moratorium, or other laws affecting
creditors’ rights generally, and subject to general equitable principles), and
(ii) in full force and effect.

(b)     Subject to ordinary wear and tear and to scheduled or necessary repairs
in the ordinary course of business, all tangible capital assets of the Companies
and the Subsidiaries necessary to conduct their businesses as currently
conducted are in operating condition and repair consistent with prudent industry
practice in businesses similar to the Business.

4.7 Intellectual Property.

(a)     Schedule 4.7 attached hereto contains a complete and accurate list of
all the Intellectual Property described in clauses (i) through (iv) of Section
1.56, owned or licensed by and used in the business of the Companies or such
Subsidiary. As to the Intellectual Property, the Companies or a Subsidiary
either (i) own the entire rights, title, and interest thereto, or (ii) hold such
Intellectual Property pursuant to a valid, subsisting and enforceable license
(“Licensed Rights”). All Intellectual Property is owned free and clear of any
Lien and is valid, subsisting, and enforceable. All registered Intellectual
Property owned by the Companies or such Subsidiary remain in good standing with
all fees and filings due as of the Closing Date paid in full. Except as set
forth in Schedule 4.7, no Intellectual Property has been cancelled or abandoned
since November 30, 2004. The Companies or such Subsidiary have taken
commercially reasonable actions to maintain and protect the Intellectual
Property.

(b)     Except as set forth in Schedule 4.7 or Schedule 4.10, there are no
claims, demands or proceedings instituted, pending or, to the Knowledge of the
Companies, proposed or threatened by any third party pertaining to, or
challenging the Companies’ or such Subsidiary’s use of or right to use, any of
the Intellectual Property. Except as set forth in Schedule 4.7, to the Knowledge
of the Companies, the conduct of the business of the Companies and the
Subsidiaries does not infringe upon, misappropriate, dilute or violate any
intellectual property owned or controlled by any third party. Except as set
forth in Schedule 4.7, to the Knowledge of the Companies, no third party is
misappropriating, infringing, diluting or violating any Intellectual Property
owned or used by the Companies and such Subsidiaries. Except as set forth in
Schedule 4.7, to the Knowledge of the Companies, none of the Intellectual
Property is subject to any outstanding judgment restricting the use thereof by
the Companies and such Subsidiaries.

(c)     Except as disclosed in Schedule 4.7, the Companies and such Subsidiaries
use commercially reasonable measures to protect the Trade Secrets, no such Trade
Secrets have been disclosed or permitted to be disclosed to any person (except
in the ordinary and normal course of business and under an obligation of
confidence), and all such information held outside the Companies and such
Subsidiaries is subject to contractual confidentiality obligations to which one
or more of the Companies and such Subsidiaries are party and able to enforce.

(d)     All licenses, sublicenses or other rights of use under the Licensed
Rights are valid and authorized by the terms under which the Companies and such
Subsidiaries license or otherwise use such Licensed Rights and no such license,
sublicense or other Licensed Rights shall terminate or be forfeited as a result
of the execution and performance of this Agreement. To the Knowledge of the
Companies and such Subsidiaries, the licensors of any Intellectual Property
licensed to the Companies and such Subsidiaries own and are entitled to license
the subject matter of such licenses.

(e)     All Software used internally by the Companies and such Subsidiaries is
owned by the Companies and such Subsidiaries or used pursuant to a valid license
or other enforceable right and is not a “bootleg” version or copy. The Companies
and such Subsidiaries possess such working copies of all of the Software,
including, object and source codes and all related manuals, licenses and other
documentation, as are necessary for the current conduct of the business of the
Companies and such Subsidiaries consistent with prudent business practices in
businesses similar to the Business. The Software and other information
technology used to operate the business, to the Knowledge of the Companies and
consistent with prudent business practices in businesses similar to the
Business, (i) are in satisfactory working order and are scalable to meet current
and reasonably anticipated capacity; (ii) have appropriate security, back ups,
disaster recovery arrangements and hardware and software support and maintenance
to minimize the risk of material error, breakdown, failure or security breach
occurring and to ensure if such event does occur it does not cause a material
disruption to the business of the Companies or such Subsidiary; (iii) are
configured and maintained to minimize the effects of viruses and do not contain
trojan horses and other malicious code; and (iv) have not suffered any material
error, breakdown, failure or security breach in the last twelve months which has
caused disruption or damage to the business of any of the Companies or such
Subsidiary.

(f)     All open source Software used by the Companies and the Subsidiaries,
including that set forth in Schedule 4.7, is fully segregable and independent
from the Companies’ and the Subsidiaries’ proprietary software and no open
source code, including any general public license source code, is or has been
incorporated or otherwise integrated into, aggregated or compiled with the
Companies’ and the Subsidiaries’ proprietary software. Except as set forth in
Schedule 4.7, the Companies and the Subsidiaries have not made any improvements
or changes to any such open source code, including any general public license
source code, that would constitute improvements that the Companies and the
Subsidiaries would be obligated to share with the open source community under
any applicable Open Source License, nor have the Companies and the relevant
Subsidiaries based any proprietary software on open source software.

4.8 Compliance with Law. Except as reflected on Schedule 4.8 and Schedule 4.17
attached hereto, each of the Companies and the Subsidiaries have obtained all
Permits required under, and is in compliance with, all applicable Laws and
Permits, except where absence of or noncompliance with would not, individually
or in the aggregate, have a Material Adverse Effect on the Companies and the
Subsidiaries, taken as a whole.

4.9 Contracts, Agreements, etc. Schedule 4.9 attached hereto contains a correct
and complete list of the following contracts, agreements, or arrangements to
which the Companies or any Subsidiary are a party (not including “Benefit Plans”
described in Section 4.12) (the “Contracts”):

(a) notes, mortgages, indentures, loan or credit agreements, security agreements
each of which secures Indebtedness, and other agreements and instruments
reflecting obligations for borrowed money or other monetary Indebtedness or
otherwise relating to the borrowing of money by, or the extension of credit to
the Companies or any Subsidiary, in each case creating an actual or potential
obligation of the Companies or any Subsidiary of not less than $1,000,000, or
commitments to enter into any such agreements or commitments;

(b) management, consulting and employment agreements and written agreements,
commitments, representations, promises or communications to enter into the same
other than as previously approved by Holdings where such agreement is terminable
upon not more than sixty (60) days’ prior notice without further Liability of
the Companies or the Subsidiaries thereunder;

(c) (i) with respect to real property, option agreements, purchase and sale
agreements, lease agreements or other agreements involving any real property
(the “Real Property Leases”), and (ii) with respect to equipment, machinery,
personal property or other assets, tangible or intangible, option agreements,
purchase and sale agreements, lease agreements or other agreements involving
amounts payable by or to the Companies or any Subsidiary of $1,000,000 or more;

(d) agreements and purchase orders for the purchase or sale of goods, services,
supplies or capital assets that have continuing obligations to perform and (i)
have terms of more than one year, are subject to automatic renewal or are
indefinite and (ii) involved an annual payment of more than $2,500,000 during at
least one of the last three fiscal years or, to the Knowledge of the Companies,
would reasonably be expected to involve the payment of more than $2,500,000
during any fiscal year in the future;

(e) partnership, joint venture, stockholders’ or other similar agreements with
any Person;

(f) contracts or agreements between or among the Companies or any Subsidiary or
Affiliate thereof, on the one hand, and any current or former director, officer
or Affiliate of the Companies or any Subsidiary, on the other hand, with respect
to the Business except for contracts and agreements between the Companies and
Subsidiaries;

(g) outstanding guarantees, subordination agreements, indemnity agreements and
other similar types of agreements, whether or not entered into in the ordinary
course of business, which the Companies or any Subsidiary is or may become
liable for or obligated to discharge, or any asset of the Companies or any
Subsidiary is or may become subject to the satisfaction of, any Indebtedness,
obligation, performance or undertaking of any other Person, except for (i)
indemnification agreements contained in any of the instruments listed in the
Schedules hereto or any other customary indemnity provisions included in
agreements for the purchase or sale of goods, services or supplies and (ii) any
of the foregoing in which, in each case, the aggregate obligation of either
Company or any Subsidiary thereunder is less than $1,000,000;

(h) contracts, orders, decrees or judgments preventing or restricting the
Companies or any Subsidiary from carrying on any business activity or competing
with any Person or prohibiting or limiting disclosure of confidential or
proprietary information;

(i) agreements, contracts or commitments relating to the acquisition by the
Companies or any Subsidiary of the outstanding capital stock or equity interest
of any business enterprise or the disposition of any assets or properties of the
Companies or any Subsidiary (excluding dispositions of real property) within the
last five fiscal years;

(j) agreements, contracts or commitments with independent contractors,
distributors, dealers, manufacturers’ representatives or sales agencies that
involved the payment of commissions during at least one of the last three fiscal
years of more than $1,000,000 or, to the Knowledge of the Companies, would
reasonably be expected to involve the payment of more than $1,000,000 during any
fiscal year in the future;

(k) all contracts that (i) limit or contain restrictions on the ability of the
Companies or any Subsidiary to declare or pay dividends on, to make any other
distribution in respect of or to issue or purchase, redeem or otherwise acquire
its capital stock, to incur Indebtedness, to incur or suffer to exist any Lien,
to purchase or sell any assets or properties, to change the lines of business in
which it participates or engages or to engage in any Business Combination, or
(ii) require the Companies or any Subsidiary to maintain specified financial
ratios or levels of net worth or other indicia of financial condition;

(l) all agreements, contracts or commitments to which a Governmental Authority
is a party under which any obligations are still outstanding and that involved
the payment during at least one of the last three fiscal years of more than
$1,000,000 or, to the Knowledge of the Companies, would reasonably be expected
to involve the payment of more than $1,000,000 during any fiscal year in the
future; and

(m) contracts, commitments or obligations not made in the ordinary course of
business and having unexpired terms in excess of one year or requiring aggregate
future payments or receipts in excess of $1,000,000 or otherwise material to the
business or operations of the Companies or any Subsidiary.

        Progress Fuels has provided Holdings with access to true and complete
copies of all Contracts, including all amendments, modifications, waivers and
elections applicable thereto.

        Except as set forth in Schedule 4.9, as to the Companies and the
Subsidiaries, such Contracts are valid and binding obligations of the identified
Company or Subsidiary, subject to no Liens, except Permitted Liens, enforceable
in accordance with their respective terms (subject to any applicable bankruptcy,
insolvency, reorganization, moratorium or other laws affecting generally the
enforcement of creditors’ rights and subject to general principles of equity),
and are in full force and effect. Except as set forth in Schedule 4.9, there are
no contracts, agreements or arrangements which would have been required to be
disclosed under Section 4.9(d) but were terminated or expired by their terms
since December 1, 2003. Except as disclosed in Schedule 4.9, there is not under
any such Contract any existing material breach or material default (or event or
condition, which after notice or lapse of time, or both, would constitute a
material breach or material default) by the Companies or any Subsidiary with
respect thereto and neither of the Companies nor any Subsidiary has received
written notice of any such breach or default. The identified Company or
Subsidiary has performed, and, to the Knowledge of the Companies, every other
party has performed, each material term, covenant and condition of each of the
Contracts that is to be performed at or before the date hereof. No event has
occurred that would, with the passage of time or compliance with any applicable
notice requirements or both, constitute a default by the identified Company or
Subsidiary or, to the Knowledge of the Companies, any other party under any of
the Contracts and, to the Knowledge of the Companies, no party to any of the
Contracts intends or has a reasonable basis upon which to cancel or terminate
any of such Contracts.

4.10 Litigation. Except as set forth in Schedule 4.10 or Schedule 4.8, there is
no claim, legal action, suit, litigation, arbitration, dispute or investigation,
judicial, administrative or otherwise, or any order, decree or judgment, now
pending or in effect, or, to the Knowledge of the Companies, threatened or
contemplated against the Companies or the Subsidiaries.

4.11 Insurance. Attached hereto as Schedule 4.11 is a list of all insurance
policies now or ever held for the benefit of the Companies and the Subsidiaries
showing for each the policy limits and coverages and the expiration dates of
each such policy. The premiums due thereon have been timely paid. Except as set
forth in Schedule 4.11, such policies are in such amounts, against such risks
and losses, and on such terms and conditions as are consistent with industry
practice in the business of the Companies and its Subsidiaries. Neither Progress
Energy, Progress Fuels nor the Companies or any Subsidiary has received any
written notice or cancellation or termination in respect of any such policies,
is in default thereunder nor knows of any reason or state of facts that could
lead to the cancellation of such policies. None of Progress Fuels, the Companies
or the Subsidiaries have received (and have no knowledge of) any written notice
or request from any insurance company or the Board of Fire Underwriters (or
organization exercising functions similar thereto) requiring the performance of
any work or alteration or canceling or threatening to cancel any of said
policies if such work is not performed. Except as set forth in Schedule 4.11,
none of the Progress Fuels, the Companies or the Subsidiaries have made any
claims under any casualty insurance policy during the past five (5) years.
Progress Fuels has not received any reservation of rights or declination of
coverage from insurers on any claim. With respect to any casualty that has
occurred, all claims have been reported to the appropriate insurance carrier in
connection with the policies listed on Schedule 4.11.

4.12 Employee Benefits.

(a)     Progress Fuels has made available to Holdings true and complete copies
of each plan, agreement or arrangement providing for compensation or benefits,
including any employee benefit plan within the meaning of Section 3(3) of ERISA
(whether or not subject to ERISA), and each pension, retirement, supplemental
pension, savings, retirement savings, profit-sharing, bonus, incentive, deferred
compensation, severance pay, stock option, stock bonus, or other stock-based
compensation plan, change of control, life insurance, medical, hospital, dental
care, vision care, drug, sick leave, short-term or long-term disability, salary
continuation, unemployment benefits, vacation, incentive, compensation or other
employee benefit plan, program, arrangement, policy or practice, formal or
informal, funded or unfunded, registered or unregistered, insured or
self-insured (any of the foregoing, a “Plan”) that covers any current or former
employee of the Companies or any of the Subsidiaries (individually, a “Benefit
Plan” and, collectively, the “Benefit Plans”). All Benefit Plans are set forth
in Schedule 4.12, and are sponsored or maintained solely by the Companies or any
of the Subsidiaries.

(b)     Except as set forth in Schedule 4.12, (i) each Benefit Plan that is an
“employee pension benefit plan” within the meaning of Section 3(2) of ERISA that
is intended to qualify under Section 401(a) of the Code or other applicable Law
has at all times within the past six (6) years been so qualified and has
received a favorable determination letter from the Internal Revenue Service (the
“IRS”), or it is being requested or the remedial amendment period for requesting
such determination letter has not expired, or if required under other Law is
otherwise duly registered with the relevant Governmental Authority; (ii) all
required employer contributions or premiums to each Benefit Plan have been made
when due (or, in the case of contributions not yet due, as of the date hereof
have been accrued on the Companies’ and the Subsidiaries’ financial statements
and records to the extent required by GAAP or the generally accepted accounting
principles applicable in the country under which the financial statements and
records are prepared); (iii) Progress Fuels has made available to Holdings as to
each Benefit Plan, if applicable, a true and correct copy of (A) the most recent
annual report (Form 5500) filed with the IRS, if applicable, or with any other
applicable Governmental Authority, (B) the most recent actuarial valuation
report and the most recent accounting and certified financial statement, if
applicable, of each Benefit Plan for which such statement is made (it being
understood that, to the Knowledge of the Companies, there has been no event or
occurrence which could affect, to any material extent, the information described
in (A) and (B)), (C) each current plan document, trust agreement, group annuity
contract and insurance contract, if any, relating to such Benefit Plan, (D) the
most recent summary plan description, (E) the most recent forms filed with the
PBGC, DOL or IRS (other than for premium payments), or other relevant non-US
Governmental Authority, (F) the most recent determination letter issued by the
IRS, (G) any Form 5310 or Form 5330 filed with the IRS, and (H) the most recent
nondiscrimination tests performed under ERISA and the Code (including 401(k) and
401(m) tests); (iv) each Benefit Plan has been administered in substantial
compliance with the applicable provisions of ERISA and the Code or of the
applicable Laws and the terms of such Benefit Plan; (v) there are no pending or,
to the Knowledge of the Companies, threatened investigations or claims by the
Internal Revenue Service, Department of Labor, Pension Benefit Guaranty
Corporation or any other Governmental Authority, relating to any of the Benefit
Plans; (vi) there are no pending or, to the Knowledge of the Companies,
threatened termination proceedings, pending claims (except claims for benefits
payable in the normal operation of the Benefit Plans), suits or proceedings
against or involving any Benefit Plan or asserting any rights to or claims for
benefits under any Benefit Plan and, to the Knowledge of the Companies, there
are not any facts that could reasonably be expected to give rise to any such
investigation, claim, suit or proceeding; (vii) no Benefit Plan is, or has been
within the past 6 years, a “multiemployer plan” within the meaning of Section
3(37) of ERISA, or of any applicable Law, or is a multiemployer pension or
benefit plan in Canada, is described in Section 401(a)(1) of ERISA, or provides
post retirement, or health or death benefit coverage beyond the termination of
an employee’s employment, except as required by Part 6 of Subtitle B of Title I
of ERISA or Section 4980B of the Code or any state or other applicable Laws
requiring continuation of benefits coverage following termination of employment;
(viii) with respect to each Benefit Plan that is an “employee benefit pension
plan” within the meaning of Section 3(2) of ERISA, the Companies have not
incurred any “accumulated funding deficiency” within the meaning of Section 302
of ERISA or Section 412 of the Code, and no “reportable event” (within the
meaning of Section 4043 of ERISA) has occurred that is reasonably likely to
result in a material liability to the Companies or the Subsidiaries; (ix) the
tax deductibility of any amount paid or payable as compensation or under any
Benefit Plan as a result of the transactions contemplated by this Agreement,
whether alone or in combination with any other event (e.g., termination of
employment), will not be limited by operation of Section 280G of the Code; (x)
no liability for any tax imposed under Section 4971 through 4980G of the Code,
under Section 502(i) or (l) of ERISA, or under Title IV of ERISA, has been
imposed against the Companies or the Subsidiaries and, to the Knowledge of the
Companies, no circumstances exist which could give rise to any such liability;
(xi) neither the Companies nor the Subsidiaries participate in any Benefit Plan
that is sponsored or maintained by Progress Fuels or any Affiliate of Progress
Fuels (other than the Companies or the Subsidiaries) and each Benefit Plan
covers only employees or former employees of the Companies or the Subsidiaries;
(xii) the only Benefit Plan that provides benefits to employees located in
Canada (a “Canadian Benefit Plan”) that is a registered pension plan as defined
under the applicable pension Laws of Canada (a “Canadian Pension Plan”) is a
defined contribution plan; (xiii) no promises or commitments have been made by
any of the Companies or the Subsidiaries to amend any Canadian Benefit Plan, to
provide increased benefits thereunder or to establish any new benefit plan,
except as required by applicable Law; and (xiv) to the Knowledge of the
Companies, no event has occurred and there has been no failure to act on the
part of either Progress Fuels, the Companies or any Subsidiary that could
reasonably be expected to subject the Companies or the Subsidiaries, the
Canadian Pension Plan or any successor plan to the imposition of any tax,
penalty, penalty tax or other liability, whether by way of indemnity or
otherwise.

(c)     Except as set forth in Schedule 4.12, no employee of the Companies or
the Subsidiaries will be entitled to any additional benefits or any acceleration
of the time of payment or vesting of any benefits under any Benefit Plan or
agreement as a result of the transactions contemplated by this Agreement either
alone or in conjunction with another event (e.g. termination of employment).

(d)     Neither Company nor any Subsidiary is subject to any liability with
respect to any employee benefit plan, program or arrangement sponsored or
contributed to by Progress Fuels or any of its Affiliates (other than the
Companies and the Subsidiaries).

4.13 Employment Matters.

(a)     Except as set forth in Schedule 4.13(a), all directors, employees,
contractors and consultants of the Companies and their Subsidiaries may be
terminated by the Companies or the relevant Subsidiary at any time with or
without cause and without any severance or other Liability to the Companies or
such Subsidiary, except for those directors, employees, contractors or
consultants who are employed or engaged on an indefinite basis in Canada
requiring notice of termination or severance pay under applicable Laws.

(b)     Except as set forth in Schedule 4.13(b):

(i)     No Company or Subsidiary is party to, bound by, or negotiating in
respect of any collective bargaining agreement or any other agreement with any
labor union, association or other employee group. No Company or Subsidiary is a
party to or has any obligation under any white paper or side agreement with any
labor union or organization, or any obligation to recognize or deal with any
labor union or organization, and there are no such contracts, white papers or
side agreements pertaining to or which determine the terms or conditions of
employment of any employee of the Companies or its Subsidiaries, nor, is any
employee of the Companies or the Subsidiaries represented by any labor union or
similar association.

(ii)     No labor union or employee organization has been certified or
recognized as the collective bargaining representative of any employees of the
Companies or the Subsidiaries.

(iii)     To the Knowledge of the Companies, there are no pending union
organizing campaigns or representation proceedings underway or threatened with
respect to any employees of the Companies or the Subsidiaries nor are there any
existing or threatened labor strikes, lockouts, work stoppages, slowdowns,
disputes, grievances, unfair labor practice charges, labor arbitration
proceedings or other disturbances affecting any employee of the Companies or the
Subsidiaries.

(iv)     Each Company and Subsidiary has paid or properly accrued in the
ordinary course of business all wages and compensation due to employees,
including all vacations or vacation pay, holiday or holiday pay, sick days or
sick pay, and bonuses.

(v)     As of November 30, 2004, there are no outstanding assessments,
penalties, fines, levies, charges, surcharges or other amounts due or owing
pursuant to any applicable workers’ compensation and employment Laws in respect
of the Business or of the employee, in each case, which are in excess of the
amounts reserved for on the unaudited balance sheet of the Companies dated
November 30, 2004 included in the Financial Statements and, to the Knowledge of
the Companies, there are no audits currently being performed pursuant to any
applicable workers’ compensation and employment Laws.

4.14 Taxes. Except as set forth in Schedule 4.14:

(a)     All Tax Returns required to have been filed by or with respect to any of
the Companies or the Subsidiaries or a Relevant Group have been duly and timely
filed, taking into account valid extensions (or, if due between the date hereof
and the Closing Date, will be duly and timely filed, taking into account valid
extensions), and each such Tax Return correctly reflects or will, upon timely
filing, correctly reflect, in all material respects, liability for Taxes and all
other information required to be reported thereon. All material amounts of Taxes
owed by any of the Companies or the Subsidiaries (whether or not shown on any
Tax Return) have been timely paid (or, if due between the date hereof and the
Closing Date, will be duly and timely paid). The Companies and the Subsidiaries
have adequately provided for, in their books of account and related records,
liability for all current Taxes not yet due and payable.

(b)     There is no action or audit now pending or, to the Knowledge of the
Companies, proposed or threatened against, or with respect to, the Companies or
any Subsidiary in respect of any Taxes. Neither Company nor any Subsidiary is
the beneficiary of any current extension of time within which to file any Tax
Return, nor has either Company or any Subsidiary made (or had made on their
behalf) any requests for such extensions, other than extensions of time with
respect to the filing of federal income Tax Returns, State Income Tax Returns,
state franchise Tax Returns or foreign income Tax Returns due after the date of
this Agreement. No claim has ever been made by a Taxing Authority in a
jurisdiction where either Company or any Subsidiary does not file Tax Returns
that any of them is or may be subject to taxation by that jurisdiction or that
any of them must file Tax Returns in that jurisdiction. There are no Liens
(except Permitted Liens) on any of the stock or assets of any the Companies and
the Subsidiaries with respect to Taxes.

(c)     Each of the Companies and the Subsidiaries (i) has withheld and timely
paid all material amounts of Taxes required to have been withheld and paid, (ii)
will, as of the Closing, have withheld all material amounts of Taxes required to
have been withheld as of Closing and have paid all material amounts of
withholding Taxes required to have been paid as of Closing, (iii) has complied
in all material respects with all information reporting and backup withholding
requirements, including maintenance of required records with respect thereto and
(iv) will, as of the Closing, have complied in all material respects with all
information reporting and backup withholding requirements, including maintenance
of required records with respect thereto.

(d)     There is no dispute or claim concerning any liability for Taxes with
respect to either Company or any Subsidiary for which written notice has been
provided, or which is asserted or threatened in writing, or which is otherwise
known to Progress Fuels or the Companies or any Subsidiary. No issues have been
raised in any examination relating to Taxes with respect to either Companies or
any Subsidiary which, by application of similar principles, reasonably could be
expected to result in liability for Taxes for any other period not so examined.
Schedule 4.14 (i) lists all federal, state, local, and foreign income Tax
Returns filed with respect to the Companies and the Subsidiaries for taxable
periods ended on or after January 1, 2001, and (ii) indicates those Tax Returns
that have been audited. Progress Fuels has delivered or made available in a
reasonable manner to Holdings correct and complete copies of all federal income
Tax Returns, examination reports, and statements of deficiencies assessed
against or agreed to by any the Companies and the Subsidiaries since January 1,
2000. Neither Company nor any Subsidiary has waived (or is subject to a waiver
of) any statute of limitations in respect of Taxes or has agreed to (or is
subject to) any extension of time with respect to a Tax assessment or
deficiency.

(e)     None of the assets or properties of any of the Companies or the
Subsidiaries constitutes tax-exempt bond financed property or tax-exempt use
property within the meaning of the Section 168 of the Code. Neither Company nor
any Subsidiary is a party to any “safe harbor lease” within the meaning of
Section 168(f)(8) of the Code, as in effect prior to amendment by the Tax Equity
and Fiscal Responsibility Act of 1982, or to any “long-term contract” within the
meaning of Section 460(f) of the Code. No foreign Subsidiary holds a “United
States real property interest” within the meaning of Section 897(c)(1) of the
Code. Progress Fuels is not a “foreign person” within the meaning of Section
1445 of the Code. Neither Company nor any Subsidiary has participated in or
cooperated with an international boycott as defined in Section 999 of the Code.

(f)     Neither Company nor any Subsidiary has agreed to or is required to make
by reason of a change in accounting method or otherwise, or reasonably could be
required to make by reason of a proposed or threatened change in accounting
method or otherwise, any adjustment under Section 481(a) of the Code. Neither
Company nor any Subsidiary has been the “distributing corporation” (within the
meaning of Section 355(c)(2) of the Code) with respect to a transaction
described in Section 355 of the Code within the five-year period ending as of
the date of this Agreement. Neither Company nor any Subsidiary has received (or
is subject to) any ruling from any Taxing Authority that will be effective at
any time after the Closing or has entered into (or is subject to) any agreement
with a Taxing Authority that will be effective at any time after the Closing.
Each of the Companies and the Subsidiaries has disclosed on its federal income
Tax Returns all positions taken therein that reasonably could give rise to a
substantial understatement of federal income Tax within the meaning of Section
6662 of the Code.

(g)     Neither Company nor any Subsidiary is a party to any Tax allocation or
sharing agreement with any Person other than a Company, a Subsidiary or member
of a group of which Progress Fuels is a member. Neither Company nor any
Subsidiary has any liability for the Taxes (excluding property taxes payable
pursuant to a lease or similar contract) of any Person, other than under Section
1.1502-6 of the Treasury regulations (or any similar provision of state, local,
or foreign law) with respect to any Relevant Group of which such Company or
Subsidiary currently is a member, (i) as a transferee or successor, (ii) by
contract, (iii) to the Knowledge of the Companies under Section 1.1502-6 of the
Treasury regulations (or any similar provision of state, local or foreign law),
or (iv) otherwise. Neither Company nor any Subsidiary is a party to any joint
venture, partnership or other arrangement that is treated as a partnership for
federal income Tax purposes.

(h)     Except as specifically so identified on the Closing Financial
Statements, neither the Company nor any Subsidiary will be required to include
any item of income in, or exclude any item of deduction from, taxable income for
any taxable period beginning after the Closing Date or (under the principles of
Section 8.2(g)(iii)) the portion following the Closing Date of any taxable
period that includes but does not end on the Closing Date as a result of any:
(i) intercompany transactions or excess loss accounts described in Treasury
regulations under Section 1502 of the Code (or any similar provision of state,
local, or foreign Tax law) and occurring or arising prior to the Closing Date,
(ii) installment sale or open transaction disposition made on or prior to the
Closing Date or (iii) prepaid amount received on or prior to the Closing Date.

(i)     Neither Company nor any Subsidiary has net operating losses or other tax
attributes presently subject to limitation under Sections 279, 382, 383, or 384
of the Code, or the federal consolidated return regulations.

(j)     No Subsidiary of either Company that is incorporated in a non-U.S.
jurisdiction has an investment in “United States property” within the meaning of
Section 956(c) of the Code. No Subsidiary of either Company is, or at any time
has been, a passive foreign investment company within the meaning of Section
1297 of the Code and neither Company nor any Subsidiary is a shareholder,
directly or indirectly, in a passive foreign investment company. No Subsidiary
of either Company that is incorporated in a non-U.S. jurisdiction is engaged in
the conduct of a trade or business within the United States, or considered under
applicable law to be so engaged.

(k)     Neither Company nor any Subsidiary is, as a matter of fact, subject to
(i) the dual consolidated loss provisions of Section 1503(d) of the Code, (ii)
the overall foreign loss provisions of Section 904(f) of the Code or (iii) the
recharacterization provisions of Section 952(c)(2) of the Code.

(l)     The Progress Rail Shares, the Progress Metal Shares and the stock of
each Subsidiary that is a domestic corporation (for federal income Tax purposes)
and is owned by a Company or another such Subsidiary constitutes, in each case,
stock meeting the requirements of Section 1504(a)(2) of the Code.

4.15 Transactions With Affiliates. Except as set forth in Schedule 4.15, since
December 1, 2004, the Companies and the Subsidiaries have not, in the ordinary
course of business or otherwise, purchased, leased or otherwise acquired any
material property or assets or obtained any material services from, or sold,
leased or otherwise disposed of any material property or assets or provided any
material services to (except with respect to remuneration for services rendered
as a director, officer or employee of the Companies and the Subsidiaries) any
Affiliate. Except as set forth in Schedule 4.9 or 4.16(f), (a) the Contracts do
not include any obligation or commitment between the Companies or the
Subsidiaries and any Affiliate, and (b) the assets of the Companies or the
Subsidiaries do not include any receivable or other obligation or commitment
from an Affiliate of the Companies or the Subsidiaries.

4.16 Accounts Receivable; Accounts Payable. Except as set forth in Schedule
4.16, the accounts of the Companies and the Business reflected on the combining
statement of assets and liabilities included in the Financial Statements and all
accounts arising subsequent to December 1, 2004, (a) arose from bona fide sales
transactions in the ordinary course of business consistent with past practice
and are payable on ordinary trade terms, (b) are legal, valid and binding
obligations of the respective debtors enforceable in accordance with their
respective terms (subject to any applicable bankruptcy, insolvency,
reorganization, moratorium or other laws affecting generally the enforcement of
creditor’s rights and subject to general principles of equity), (c) are not
subject to any valid set-off, counterclaim defense or material dispute or any
Liens (other than Permitted Liens), (d) do not represent obligations for goods,
licenses or other provision of products or services sold on consignment, on
approval or on a sale-or-return basis, (e) are collectible in the ordinary
course of business consistent with past practice (including past practice
regarding maintenance of customer relationships and goodwill) in the aggregate
recorded amounts thereof, net of any applicable reserve reflected on the
combining statement of assets and liabilities included in the Financial
Statements, (f) do not arise from a sale to an Affiliate, and (g) are not
evidenced by a note, instrument or chattel paper. All of the accounts and notes
payable and accrued expenses of the Companies and the Subsidiaries arising after
November 30, 2004 have been incurred or have arisen in bona fide transactions.

4.17 Environmental and Asbestos.

(a) Except as set forth in Schedule 4.17:

(i) the Companies and the Subsidiaries comply and have complied with all
applicable Environmental Laws and Asbestos Laws except for any past
non-compliance for which there are no remaining obligations or liabilities;

(ii) each Company and each Subsidiary has obtained all Permits required pursuant
to Environmental Laws and Asbestos Laws for the conduct of its business, all
such Permits are in full force and effect, and the applicable Company or
Subsidiary is and has been in material compliance with the terms and conditions
of the Permits except for any past non-compliance or failure to hold such
Permits for which there are no remaining obligations or liabilities;

(iii) to the Knowledge of Companies, neither of the Companies, any Subsidiary
nor any of their respective corporate predecessors has received any notice of
present or past Environmental Claim for which there are remaining obligations or
liabilities asserting that: (A) any of the Companies or Subsidiaries is
currently not in compliance with, has liability under or is in violation of, any
Environmental Laws, Asbestos Laws or Permits required thereunder; (B) any
currently existing circumstances are likely to result in a failure of any of the
Companies or Subsidiaries to comply with or constitute a violation of or
liability under any Environmental Laws, Asbestos Laws or Permits required
thereunder by or with respect to any Company or Subsidiary or any of their
respective corporate predecessors; (C) it has liability or potential liability
based upon (i) any actual or claimed transportation, treatment, storage,
handling or disposal of a Hazardous Material or Asbestos; (ii) the actual or
claimed arrangement for transportation, treatment, storage, handling or disposal
of a Hazardous Material or Asbestos; or (iii) the Release of any Hazardous
Material or Asbestos by or on behalf of either Company, any Subsidiary or any of
their respective corporate predecessors, including with respect to any past or
present operations or properties currently owned, leased, occupied or operated
or formerly owned, operated, leased or occupied or by either of the Companies,
any Subsidiary or any of their respective corporate predecessors; or (D) any
material unfulfilled remedial obligations or ongoing monitoring and reporting
obligations exist;

(iv) to the Knowledge of the Companies, neither of the Companies nor any
Subsidiary nor any of their respective corporate predecessors owns, operates,
occupies or leases or formerly owned, operated, occupied or leased any real
property at which any Hazardous Materials or Asbestos are present or have been
Released (with respect to formerly owned, operated, occupied or leased, during
or prior to such period of ownership, operation, occupancy or lease) from, to,
on, in, at, around or under in concentrations, levels, conditions, circumstances
or amounts that could give rise to any liability or requirements under any
Environmental Laws or Asbestos Laws (such as a regulatory requirement for
investigation, abatement, remediation, sampling, testing, monitoring, modeling
or other affirmative requirements arising out of the presence or Release of any
Hazardous Materials or Asbestos) or an Environmental Claim or Claim with respect
to Asbestos; nor is either Company, any Subsidiary or any of their respective
corporate predecessors liable or potentially liable for any such Release or
condition off-site by virtue of Releases or conditions arising on real property
currently or formerly owned, operated, occupied or leased by either Company, any
Subsidiary or any of their respective corporate predecessors (other than real
property currently owned, operated, occupied or leased by any such corporate
predecessors); nor has either Company, any Subsidiary or any of their respective
corporate predecessors engaged in any activity that has caused or contributed to
any such condition at any other location; nor is either Company or any
Subsidiary aware of any pending or contemplated future investigation that would
lead to such an Environmental Claim as described by this Subsection against the
Companies, its Subsidiaries or any Person with respect to which the Companies or
the Subsidiaries has responsibility;

(v) to the Knowledge of the Companies, the Companies and the Subsidiaries have
furnished to Holdings all material environmental and Asbestos safety and health
investigations, studies, audits, tests and other analyses of currently owned,
operated and leased properties in the respective possession of Progress Fuels,
Progress Energy, the Companies or the Subsidiaries or their respective
Affiliates or in the possession of their representatives, insurers, lenders or
consultants;

(vi) to the Knowledge of the Companies, no real property currently or formerly
owned, operated, occupied or leased by the Companies, the Subsidiaries or any of
their respective predecessors is listed or proposed for listing on the National
Priorities List, the Comprehensive Environmental Response, Compensation and
Liability Information System or on any similar state list of sites requiring
investigation or cleanup;

(vii) to the Knowledge of the Companies, there are no (A) underground storage
tanks (active or abandoned); (B) polychlorinated biphenyl containing equipment;
or (C) Asbestos located at real property owned, operated, occupied or leased by
the Companies or the Subsidiaries, in each case, other than such tanks,
equipment or materials that are in compliance with applicable Environmental Laws
or Asbestos Laws, respectively;

(viii) neither the Companies nor its Subsidiaries (or any of their respective
predecessors) has, either expressly or by operation of law, assumed or
undertaken, or agreed to assume or undertake, responsibility for any liability
or obligation of any other Person, arising under or relating to Environmental
Laws or Asbestos Laws, including, without limitation, any obligation for
investigation, corrective or remedial action; and

(ix) to the Knowledge of Companies, no Persons have been exposed to any
Hazardous Materials or Asbestos at, from, in, to, on, or under any real property
currently or formerly owned, operated, occupied or leased by the Companies, any
Subsidiaries, any former Affiliates or any of their respective corporate
predecessors or at any other location at which the foregoing entities have
conducted operations or provided services or arranged for the treatment,
storage, transportation, handling or disposal of a Hazardous Material or
Asbestos, in each case, that could give rise to an Environmental Claim or a
Claim with respect to Asbestos against the Companies, its Subsidiaries or any
Person with respect to which the Companies or the Subsidiaries has
responsibility.

(b) This Section 4.17 contains the sole and exclusive representation and
warranty of Progress Fuels with respect to Environmental Laws and Asbestos Laws.

4.18 Books and Records. The books and records of the Companies have been made
available to Holdings prior to the execution of this Agreement, are complete and
correct in all material respects and have been maintained in accordance with
sound business practices. The minute books contain a true and complete record,
in all material respects, of all action taken at all meetings and by all written
consents in lieu of meetings of directors, stockholders, subcommittees and
committees of the boards of directors of the Companies.

4.19 Real Property.

(a)     Schedule 4.19(a) contains a true, correct and complete list (including,
without limitation, legal descriptions) of all real property owned by the
Companies or the Subsidiaries (together with all buildings, improvements and
structures thereon and all easements, rights of way and appurtenances relating
thereto, the “Owned Real Property”). The applicable Company or its Subsidiary
owns good and marketable title to the Owned Real Property in fee subject to no
Liens except the Permitted Liens. Neither of the Companies nor the Subsidiaries
currently lease all or any part of any Owned Real Property.

(b)     The Companies and the Subsidiaries are not in default with respect to
any monies owed to any contractor, subcontractor or materialman for labor or
materials performed, rendered or supplied to or in connection with any parcel of
Real Property for which such person could claim a lien. Each parcel of Real
Property, including, without limitation, all buildings, building systems,
structural components, roofs, and building equipment, is in condition and repair
consistent with prudent industry practice in the Business, suitable for its
intended purposes and the operation of the business of the applicable Company or
its Subsidiaries thereon, and there exist no material defects in the same.
Private utilities located within each parcel of Real Property or public
utilities adequately serve all utility requirements of each parcel of Real
Property and such public utilities enter directly through adjoining public
streets or enter through adjoining private lands under appurtenant perpetual
easements benefiting the applicable Real Property (which easements (i) did not
impose material obligations on the owner of such Real Property and are
(ii) reasonable in form and substance for the operation and ownership of such
Real Property). To the Knowledge of the Companies, there are no unrecorded
easements affecting the Real Property. Neither the Companies nor the
Subsidiaries have assigned, pledged, mortgaged, hypothecated or otherwise
transferred any such easement. Neither the Companies nor the Subsidiaries are in
default under the terms of such easements. No building or other improvement not
included in a parcel of Real Property relies on any part of the same to fulfill
any zoning, building code or other municipal or governmental requirement or for
structural support or the furnishing to such building or improvement of access,
any essential building systems, facilities or utilities, except, with respect to
such structural support, such access or such systems, facilities or utilities
which rely upon such Real Property pursuant to an agreement terminable upon not
more than 30 days’ prior notice without further Liability of the Companies or
Subsidiaries thereunder. Except as set forth in Schedule 4.19(b), there are no
condemnation or appropriation proceedings, lawsuits or administrative actions
pending or threatened against any parcel of Owned Real Property and, to the
Knowledge of the Companies, Leased Real Property. Each parcel of Real Property
has adequate rights of ingress and egress.

(c)     Subject to the terms of the respective Real Property Leases, the
applicable Company or Subsidiary (if the tenant) has a valid and subsisting
leasehold estate in and the right to quiet enjoyment to each parcel of real
property demised under a Real Property Lease (the “Leased Real Property” and,
together with the Owned Real Property but excluding the Retained Real Property,
the “Real Property”) for the full term of the respective Real Property Lease.
True and correct copies of each Real Property Lease have been delivered to
Holdings. Each Real Property Lease was negotiated at arms length and neither
Progress Fuels, the Companies nor the Subsidiaries are affiliated with any
landlord or tenant, as the case may be, under any Real Property Lease. Neither
the Companies nor the Subsidiaries have assigned, pledged, mortgaged,
hypothecated or otherwise transferred any Real Property Lease or sublet all or
any portion of any Leased Real Property. The applicable Company or Subsidiary is
in possession of the Leased Real Property. Except as set forth in Schedule
4.19(c), no security deposit has been used and no penalties are accrued and
unpaid under any Real Property Lease and no landlord or tenant under any Real
Property Lease has exercised any option or right to cancel or terminate such
Real Property Lease or shorten the term thereof, lease additional premises,
reduce or relocate the premises demised by such Real Property Lease or purchase
any property. Except as set forth in Schedule 4.19(c), neither the Companies nor
the Subsidiaries are a party to any oral lease of real property (which oral
leases (i) do not impose material obligations on the Companies or the
Subsidiaries and (ii) are terminable upon not more than thirty (30) days’ prior
notice without further Liability of the Companies or the Subsidiaries
thereunder).

(d)     With respect to the Retained Real Property, the aggregate fair market
value of such Retained Real Property does not exceed $2,500,000.

4.20 Substantial Customers and Suppliers. Schedule 4.20 lists the fifteen (15)
largest customers of the Business on the basis of revenues for goods sold or
services provided for the most recent fiscal year. Schedule 4.20 lists the
fifteen (15) largest suppliers of the Business on the basis of cost of goods or
services purchased for the most recent fiscal year. Except as set forth in
Schedule 4.20, no such customer or supplier which is party to an agreement or
purchase order (i) with a term of more than one year, are subject to automatic
renewal or indefinite and (ii) that involved an annual payment of more than
$2,500,000 during at least one of the last three fiscal years or, to the
Knowledge of the Companies, would have reasonably been expected to involve the
payment of more than $2,500,000 during any fiscal year in the future, has ceased
its purchases from or sales or provision of services to the Business since
December 1, 2004, or, to the Knowledge of the Companies, have threatened to
cease such purchases or sales or provision of services after the date hereof.
Except as disclosed in Schedule 4.20, to the Knowledge of the Companies, no such
customer or supplier is the subject of bankruptcy or insolvency proceedings.

4.21 Entire Business. The Mergers consummated pursuant to this Agreement will
effectively convey to Holdings the entire Business and all of the assets and
properties (other than the Retained Real Property) used by the Companies and the
Subsidiaries (whether owned, leased or held under license by the Companies, any
Subsidiary, by any of their respective Affiliates or by others) in connection
with the conduct of the Business as heretofore conducted by Progress Energy and
Progress Fuels. Except as disclosed in Schedule 4.21, there are no shared
facilities or services which are used in connection with any business or other
operations of the Companies, any Subsidiary or any of their respective
Affiliates other than the Business.

4.22 Warranty Obligations. Schedule 4.22 sets forth (a) copies of all written
general warranty policies given by the Companies or any Subsidiary with respect
to the Business, which are currently in effect or may hereinafter become
effective (the “Warranty Obligations”), and the duration of each such Warranty
Obligation, and (b) each of the Warranty Obligations (or warranty obligations
contained in purchase orders or other agreements for the sale of goods or
services) which is subject to any material dispute or, to the best of the
Knowledge of the Companies, threatened material dispute.

4.23 Inventory. All inventory of the Companies and any Subsidiary consists of a
quality and quantity usable and salable in the ordinary course of business
consistent with past practice, subject to the allowances contained in the
Financial Statements for damage and outdated items. All items included in such
inventory are the property of the Companies or the Subsidiaries, free and clear
of any Liens, have not been pledged as collateral, are not held by the Companies
or any Subsidiary on consignment from others and conform in all material
respects to all standards applicable to such inventory or its use or sale
imposed by Governmental Authorities.

4.24 Foreign Corrupt Practices Act. Neither the Companies, any Subsidiary, any
director or officer of the Companies or any Subsidiary nor, to the Knowledge of
the Companies, any agent, employee or other Person associated with or acting on
behalf of the Companies or any Subsidiary, or the Business has, directly or
indirectly, used any corporate funds for unlawful contributions, gifts,
entertainment, or other unlawful expenses relating to political activity, made
any unlawful payment to foreign or domestic government officials or employees or
to foreign or domestic political parties or campaigns from corporate funds,
violated any provision of the Foreign Corrupt Practices Act of 1977, as amended,
or made any bribe, rebate, payoff, influence payment, kickback, or other
unlawful payment.

4.25 No Broker. None of Progress Energy, Progress Fuels nor either of the
Companies or any Subsidiary (i) have had any dealings, negotiations or
communications with or retained any broker or other intermediary in connection
with the transactions contemplated by this Agreement or (ii) is committed to any
Liability for any brokers’ or finders’ fees or any similar fees in connection
with the transactions contemplated by this Agreement, other than Morgan Stanley
and Co., Incorporated, whose fees and expenses that are unpaid as of the Closing
shall be paid by Progress Fuels.

4.26 Bank Accounts. Schedule 4.26 sets forth (a) a true and complete list of the
names and locations of all banks, trust companies, securities brokers and other
financial institutions at which the Companies or the Subsidiaries (to the extent
related to the Business) have an account or safe deposit box or maintains a
banking, custodial, trading or other similar relationship; and (b) a true and
complete list and description of each such account, box and relationship,
indicating in each case the account number and the names of the respective
officers, employees, agents or other similar representatives of the Companies or
the Subsidiaries having signatory power with respect thereto.

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF HOLDINGS AND THE MERGER SUBS

        Holdings hereby represents and warrants to Progress Fuels:

5.1 Organization. Holdings and the Merger Subs are duly incorporated, validly
existing and in good standing under the laws of its respective jurisdiction of
incorporation and has the requisite corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated herein.
Each of Holdings and the Merger Subs are duly qualified as a foreign corporation
in good standing in each jurisdiction in which the conduct of its business
requires such qualification, except where the failure to be so qualified would
not prevent or materially delay consummation of the transactions contemplated
hereby.

5.2 Authorization; Execution and Delivery; Enforceability. Each of Holdings and
the Merger Subs has full corporate power and authority to enter into, deliver
and perform this Agreement, and each agreement or instrument (to which it is a
party) executed in connection herewith or delivered pursuant hereto and to
consummate the transactions contemplated hereby. The execution, delivery and
performance of this Agreement by each of Holdings and the Merger Subs and all
agreements and instruments executed in connection herewith or delivered pursuant
hereto by each of Holdings and the Merger Subs and the transactions contemplated
hereby have been duly authorized by all requisite corporate action on the part
of each of Holdings and the Merger Subs. This Agreement and all agreements or
instruments executed by each of Holdings and the Merger Subs in connection
herewith or delivered by each of Holdings and the Merger Subs pursuant hereto
have been duly executed and delivered by each of Holdings and the Merger Subs,
as the case may be, and this Agreement and all agreements and instruments
executed by each of Holdings and the Merger Subs in connection herewith or
delivered by each of Holdings and the Merger Subs pursuant hereto constitute the
legal, valid and binding obligations of by each of Holdings and the Merger Subs,
enforceable against Holdings and the Merger Subs, as the case may be, in
accordance with their respective terms except to the extent that enforcement may
be affected by applicable bankruptcy, reorganization, insolvency and similar
laws affecting creditors’ rights and remedies generally and by general
principles of equity (regardless of whether enforcement is sought at law or in
equity).

5.3 No Violation or Conflict; Consents. The execution, delivery and performance
by each of Holdings and the Merger Subs of this Agreement and all of the other
documents and instruments contemplated hereby and the consummation of the
transactions contemplated herein do not and will not conflict with, violate or
breach any Laws, judgment, order or decree binding on Holdings or the Merger
Subs, as the case may be, or the respective articles of incorporation or bylaws
of each of Holdings and the Merger Subs. Except for such filings and consents as
may be required pursuant to the HSR Act or any Other Antitrust Regulations, all
of which will have been made or obtained, as the case may be, prior to the
Closing, no consent of any other Person, and no notice to, filing or
registration with, or authorization, consent or approval of, any governmental,
regulatory or self-regulatory agency is necessary or is required to be made or
obtained by Holdings or the Merger Subs, as the case may be, in connection with
the execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby.

5.4 No Broker. Neither Holdings nor the Merger Subs has had any dealings,
negotiations or communications with any broker or other intermediary in
connection with the transactions contemplated by this Agreement and is not
committed to any Liability for any brokers’ or finders’ fees or any similar fees
in connection with the transactions contemplated by this Agreement.

5.5 Purchase for Investment. Holdings is acquiring the Shares for its own
account for the purpose of investment and not with a view to or for sale in
connection with any distribution thereof, except in accordance with applicable
federal and state securities laws.

ARTICLE VI

PRE-CLOSING COVENANTS

6.1 Conduct of Business. Except as provided in this Agreement, Progress Energy
and Progress Fuels shall (a) cause each of the Companies and each of the
Subsidiaries to conduct its business in the ordinary course and use its
reasonable efforts to preserve its properties, business and relationships with
its employees, suppliers and customers, including maintaining in full force and
effect until the Closing substantially the same levels of coverage of the
insurance policies currently maintained by each of the Companies and each of the
Subsidiaries, and (b) cause the Companies and the Subsidiaries to advise
Holdings promptly in writing of any development that has or could reasonably be
expected to have a Material Adverse Effect on the Companies and the
Subsidiaries, taken as a whole. Without limiting the generality of the
foregoing, until the Closing, except as provided in this Agreement, Progress
Energy and Progress Fuels shall cause the Companies and the Subsidiaries to not
and Progress Energy and Progress Fuels shall not, as agent for either of the
Companies or a Subsidiary, without the written consent of Holdings, not be
unreasonably withheld:

(i) declare, set aside or pay any non-cash dividend or other non-cash
distribution with respect to its capital stock;

(ii) except for transactions in the ordinary course of business and consistent
with its past practice, (A) create, incur or assume any Indebtedness (other than
any Indebtedness described in clause (iv) of the definition thereof) for
borrowed money, except pursuant to credit agreements in existence on the date of
this Agreement, (B) mortgage, pledge or otherwise encumber any of its properties
or assets (other than Real Property), except for Permitted Liens or (C) create
or assume any other Indebtedness except accounts payable and other Liabilities
incurred in the ordinary course of business;

(iii) issue any shares of capital stock of any class or grant any warrants,
options or rights to subscribe for any shares of capital stock of any class or
securities convertible into or exchangeable for, or which otherwise confer on
the holder any right to acquire, any shares of capital stock of any class, or
split, combine or reclassify any shares of its capital stock;

(iv) fail to comply, in all material respects with all applicable Laws and
Permits and with all orders of any court or of any federal, state, municipal or
other governmental department, non-compliance with which could cause a Material
Adverse Change in its assets or properties or a material impairment to its
business;

(v) amend their Articles or Certificates of Incorporation, Bylaws or other
organizational documents, or merge or consolidate with or into any other
corporation;

(vi) acquire or dispose of any assets or properties used or held for use in the
conduct of the Business, other than in the ordinary course of business
consistent with past practice, or creating or incurring any Lien, other than a
Permitted Lien, on any assets or properties used or held for use in the conduct
of the Business;

(vii) engage with any Person in any Business Combination;

(viii) engage in any transaction with respect to the Business with any officer,
director or Affiliate of the Companies or any Subsidiary, or any associate of
any such officer, director or Affiliate, either outside the ordinary course of
business consistent with past practice or other than on an arm’s-length basis;

(ix) make capital expenditures or commitments for additions to property, plant
or equipment constituting capital assets on behalf of the Business in an
aggregate amount exceeding $1,000,000 which were not approved under the capital
expenditure budget set forth in Schedule 6.1(ix);

(x) with respect to Real Property, (A) exercise any right or option under any
Real Property Lease or extend or renew any Real Property Lease; (B) waive any
rights or grant any material consent under, mortgage or hypothecate any Real
Property Lease or sublet or encumber all or any portion of any Leased Real
Property; (C) sell, dispose of, lease, transfer, mortgage, hypothecate or
encumber all or any portion of the Owned Real Property; (D) demolish or make any
material alteration (other than as permitted under the capital expenditure
budget set forth in Schedule 6.1(ix)) to any Real Property; (E) fail to operate,
repair and maintain the Real Property in the ordinary course of business; and
(F) fail to perform all covenants and obligations under the Real Property
Leases, Permits and Permitted Liens;

(xi) make (except as consistent with past practice) or rescind any material
election relating to Taxes, change any material method of accounting for Tax
purposes or settle or consent to the entry of judgment with respect to any
proceeding relating to Taxes of either of the Companies or any of the
Subsidiaries, except, in each such case, where such act would not increase the
Tax liability of a Company or any of the Subsidiaries (or any consolidated,
unitary or similar Tax group that includes a Company or any of the Subsidiaries)
for any Post-Closing Period; or

(xii) enter into any agreement to do or engage in any of the foregoing or take
other action which would cause the representations and warranties in Article IV
to be untrue.

6.2 Employee Benefits Matters.

    (a)        Contracts. Except as set forth in Schedule 4.12, or with
Holdings’ written consent, the Companies and the Subsidiaries will not enter
into, amend, modify, renew or terminate any employment, consulting, severance or
similar contracts with any director, officer, or employee of the Companies and
the Subsidiaries, or grant any salary, wage or other increase or increase any
employee benefit, except (i) for changes that are required by applicable law,
(ii) to satisfy Contracts existing on the date hereof or to deliver the intended
benefits thereunder, or (iii) for merit-based or annual salary increases in the
ordinary course of business and in accordance with past practice.

    (b)        Plans. Except as set forth in Schedule 4.12, or with Holdings’
written consent, the Companies and the Subsidiaries will not enter into,
establish, adopt, amend, modify or terminate any pension, retirement, stock
option, stock purchase, savings, profit sharing, employee stock ownership,
deferred compensation, consulting, bonus, group insurance or other employee
benefit, incentive or welfare contract, plan or arrangement, or any trust
agreement (or similar arrangement) related thereto, in respect of any current or
former director, officer, or employee, of the Companies and the Subsidiaries (or
any dependent or beneficiary of any of the foregoing Persons), including taking
any action that accelerates the vesting or exercisability of or the payment or
distribution with respect to, stock options, restricted stock or other
compensation or benefits payable thereunder, except in each such case, (i) as
may be required by applicable law, (ii) to satisfy Contracts or Benefit Plans
existing on the date hereof or to deliver the intended benefit thereunder, (iii)
to establish separate, but substantially similar plans for the Companies’ and
the Subsidiaries’ employees who currently participate in any benefit plans of
Progress Fuels or (iv) to renew any such insurance or administrative services
contract relating to any of the above mentioned benefit plans if such renewal
term comes due in the ordinary course of business.

    (c)        Certain Agreements. Prior to the Closing, Progress Fuels shall
assume the obligations of the Companies under the Companies Change of Control
Retention Plan (the “Retention Plan”) related to the transactions contemplated
by this Agreement and the Progress Rail Services Corporation Management
Incentive Compensation Plan (the “Incentive Plan”) with respect to bonuses
accrued as of the Closing Date as detailed in Schedule 6.2(c), and Progress
Fuels agrees to (i) amend the Retention Plan to provide for an additional $1.65
million in benefits, and (ii) to satisfy those obligations in accordance with
their terms and, other than as permitted in Section 6.2(c)(i), without further
amendment or modification. Other than as described in this Section 6.2(c),
Holdings will assume the obligations under the Retention Plan and the Incentive
Plan.

6.3 Access to Information. As of the Closing Date, any books, records,
contracts, information and documents of either of the Companies or any of the
Subsidiaries or relating to the real properties currently owned, operated,
leased or occupied by the Companies or the Subsidiaries, including with respect
to Tax Returns, only Tax Returns (excluding federal income Tax Returns, State
Income Tax Returns, and state franchise Tax Returns) filed after January 1,
2001, true and complete copies of federal income tax Returns, State Income Tax
Returns and state franchise Tax Returns filed after January 1, 2004 (or pro
formas for the Companies or the Subsidiaries, in the case of Tax Returns
prepared on a consolidated or similar basis with Progress Fuels or other
Progress Fuels Affiliates other than the Companies and the Subsidiaries) and
associated workpapers (or true and complete copies thereof) and environmental
reports which are not located on the premises of either the Companies or the
Subsidiaries shall be relocated to such premises. Prior to the Closing Date, at
Holdings’ expense, Holdings and its authorized agents, officers and
representatives shall have reasonable access to the properties, books, records,
contracts, information and documents of the Companies and each of the
Subsidiaries or relating to the real properties currently owned, operated,
leased or occupied by the Companies or the Subsidiaries, whether held by the
Companies, the Subsidiaries, Progress Fuels, Progress Energy or their respective
Affiliates, to conduct such examinations and investigations of the Companies and
the Subsidiaries as Holdings deems necessary; provided, however, that such
examinations and investigations: (a) shall be conducted during the normal
business hours of the Companies and the Subsidiaries, (b) shall not unreasonably
interfere with the operations and activities of the Companies or any of the
Subsidiaries, and (c) shall be subject to the prior approval of the Companies
and the Subsidiaries or Progress Fuels if the information or documents requested
are, in the reasonable opinion of the Companies, the Subsidiaries or Progress
Fuels, of a nature which may materially compromise the competitive position of
the Companies or any of the Subsidiaries. The Companies shall cooperate, and
shall cause each of the Subsidiaries to cooperate, in all reasonable respects
with Holdings’ examinations and investigations.

6.4 Further Assurances; Consents; Waiver of Notices. Each of the parties hereto
hereby agrees to (a) use all commercially reasonable efforts to obtain, and to
cause the Companies and the Subsidiaries to obtain, any and all approvals of
Governmental Authorities and third party consents, approvals, notations and
authorizations required in connection with the consummation of the transactions
contemplated by this Agreement, (b)  comply, and cause the Companies and the
Subsidiaries to comply, with all conditions and covenants applicable or related
to it as contemplated by this Agreement and (c)  take all such commercially
reasonable other actions as are necessary or advisable in order to cause the
consummation of the transactions contemplated hereby.

6.5 Publicity. All general notices, releases, statements and communications to
employees, suppliers, distributors and customers of the Companies and to the
general public and the press relating to the transactions covered by this
Agreement shall be made only at such times and in such manner as may be agreed
upon in advance by Progress Fuels and Holdings; provided, however, that any
party hereto shall be entitled to make a public announcement of the foregoing
if, in the opinion of its legal counsel, such announcement is required to comply
with Laws or any listing agreement with any national securities exchange or
inter-dealer quotation system and if it first gives prior written notice to the
other parties hereto of its intention to make such public announcement.

6.6 Confidentiality. Notwithstanding any other provision of this Agreement to
the contrary, Holdings agrees that unless and until the transactions
contemplated herein are consummated, Holdings shall remain subject to all of the
terms and conditions of the Confidentiality Agreement, dated May 6, 2004, by and
between Progress Energy and Holdings, the terms of which Confidentiality
Agreement are incorporated herein by reference; provided, however, the
provisions of the Confidentiality Agreement shall be waived as and to the extent
necessary to permit public announcements to the extent provided in Section 6.5
hereof. Further, at or prior to the Closing, Progress Energy shall assign to
Holdings all confidentiality agreements executed for the benefit of Progress
Energy, Progress Fuels, the Companies or any Subsidiary with respect to the
Business in connection with the proposed sale of the Companies.

6.7 No Solicitations. Neither Progress Energy nor Progress Fuels will take, nor
will they permit the Companies or any Affiliate of Progress Energy or Progress
Fuels (or authorize or permit any investment banker, financial advisor,
attorney, accountant or other Person retained by or acting for or on behalf of
Progress Fuels, the Companies or any such Affiliate) to take, directly or
indirectly, any action to initiate, assist, solicit, receive, negotiate,
encourage or accept any offer or inquiry from any Person (a) to reach any
agreement or understanding (whether or not such agreement or understanding is
absolute, revocable, contingent or conditional) for, or otherwise attempt to
consummate, a Business Combination with respect to the Business (or any part
thereof), the Companies or the Subsidiaries with any Person other than Holdings
or its Affiliates or (b) to furnish or cause to be furnished any information
with respect to the Business or any of the Companies or Subsidiaries to any
Person (other than Holdings or its Affiliates) who Progress Energy, Progress
Fuels, the Companies or such Affiliate (or any such Person acting for or on
their behalf) knows or has reason to believe is in the process of considering
any Business Combination with respect to the Business (or any part thereof), any
of the Companies or Subsidiaries. If Progress Energy, Progress Fuels, the
Companies or any such Affiliate (or any such Person acting for or on their
behalf) receives from any Person (other than Holdings or its Affiliates) any
offer, inquiry or informational request referred to above, Progress Fuels will
promptly advise such Person, by written notice, of the terms of this Section 6.8
and will promptly, orally and in writing, advise Holdings of such offer, inquiry
or request and deliver a copy of such notice to Holdings.

6.8 Estoppel Certificates; Landlord Lien Waivers; Contract Notices; Termination
of Liens. As soon as practicable after execution of this Agreement, Progress
Fuels shall (a) use all commercially reasonable efforts to cause the Companies
to obtain from each of the other parties under a Real Property Lease and each
tenant under a Company Lease if either of the Companies or any Subsidiary has
leased any of its Real Property to others estoppel certificates and landlord
lien waivers, in each case pursuant to a Collateral Access Agreement
substantially in the form attached as Exhibit 6.8(a); provided; however, that
such commercially reasonable efforts shall not include payment to such other
parties or tenants of any sums of money; (b) cause the Companies to promptly
deliver to Holdings a copy of any notice sent or received under any Contract;
and (c) cause the Companies to take all necessary actions to cause the
termination, release and removal of record, on or prior to the Closing Date, of
all Liens other than Permitted Liens.

6.9 Cooperation with Debt Financing. In addition to the other obligations set
forth in this Agreement, Progress Energy, Progress Fuels, the Companies and the
Subsidiaries will cooperate with Holdings in connection with its arrangement of,
and negotiation of agreements with respect to, the debt financing contemplated
by Holdings, including (a) by making available to Holdings and such financing
sources and their representatives, personnel (including for participation in
road shows), documents and information of the Companies and the Subsidiaries as
may reasonably be requested by Holdings or such financing sources, (b) by
instructing the independent accountants of the Companies to deliver a comfort
letter in customary form in connection with any public debt, and (c) if
applicable, by similarly cooperating with financing sources in connection with
the offering and/or syndication of any such financing. In connection with any
such debt financing, Holdings will notify its financing sources that neither
Progress Energy nor Progress Fuels is making any representations or warranties
in connection with such financing or otherwise taking responsibility for the
information presented.

6.10 Insurance. Progress Energy and Progress Fuels shall keep, or cause to be
kept, all material insurance policies that provide coverage for the Companies
and the Subsidiaries in full force and effect through the close of business on
the Closing Date, and shall provide for the renewal of all such policies that
are expiring by their own terms prior to such date.

6.11 Company Transaction Expenses. At or prior to the Closing, Progress Fuels
shall, or shall cause the Companies or the Subsidiaries to, pay all Company
Transaction Expenses.

6.12 Antitrust Matters.

(a)     Progress Fuels and Holdings shall, as promptly as practicable and before
the expiration of any relevant legal deadline, but in no event later than ten
(10) days following the execution and delivery of this Agreement, file with (i)
the United States Federal Trade Commission (the “FTC”) and the United States
Department of Justice (“DOJ”), the notification and report form required for the
transactions contemplated hereby and any supplemental information requested in
connection therewith pursuant to the HSR Act, which forms shall specifically
request any early termination of the waiting period prescribed by the HSR Act
and (ii) any other Governmental Authority, any other filings, reports, requests
for advance ruling, information and documentation required for the transactions
contemplated hereby pursuant to any Other Antitrust Regulations. Each of
Progress Fuels and Holdings shall furnish to each other’s counsel such necessary
information and reasonable assistance as the other may request in connection
with its preparation of any filing or submission that is necessary under the HSR
Act and any Other Antitrust Regulations.

(b)     Progress Fuels and Holdings shall use their commercially reasonable
efforts to promptly obtain any clearance required under the HSR Act and any
Other Antitrust Regulations for the consummation of this Agreement and the
transactions contemplated hereby and shall keep each other apprised of the
status of any communications with, and any inquiries or requests for additional
information from, the FTC and the DOJ and other Governmental Authorities and
shall comply promptly with any such inquiry or request; provided, however, that
Progress Fuels and Holdings shall both promptly respond to the DOJ, the FTC or
any other Governmental Authority to a Request for Additional Information.

(c)     The parties hereto commit to instruct their respective counsel to
cooperate with each other and use commercially reasonable efforts to facilitate
and expedite the identification and resolution of any such issues and,
consequently, the expiration of the applicable HSR Act waiting period and the
waiting periods under any Other Antitrust Regulations at the earliest
practicable dates. Said commercially reasonable efforts and cooperation include,
but are not limited to, counsel’s undertaking (i) to keep each other
appropriately informed of communications from and to personnel of the reviewing
antitrust authority, and (ii) to confer with each other regarding appropriate
contacts with and response to personnel of said antitrust authority.

6.13 Available Cash. At the Closing, the Companies will have available net cash
on hand in excess of any undrawn checks and other amounts that can be drawn from
the respective bank accounts of the Companies and the Subsidiaries of not less
than $1,000,000 in the aggregate.

6.14 Title Insurance Affidavits, Indemnities and Information. Prior to the
Closing, Progress Fuels shall have delivered to Holdings and Holdings’ title
insurance company such affidavits, indemnities and information as Holdings’
title insurance company shall reasonably require in order to insure Holdings’
title to the Real Property in accordance with this Agreement (including, without
limitation, an affidavit that the Real Property is not subject to leases,
occupancy agreements, possessory rights, options or rights of first refusal and
a non-imputation affidavit and indemnity).

ARTICLE VII

CONDITIONS PRECEDENT TO CONSUMMATION OF THE MERGERS

7.1 Conditions Precedent to Each Party’s Obligations to Effect the Mergers. The
respective obligations of each party to consummate the transactions contemplated
by this Agreement on the Closing Date are subject to the satisfaction at or
prior to the Closing of the following conditions precedent:

(a) no order, decree, injunction or Law shall have been enacted, entered,
promulgated, enforced or shall be in effect by any court of competent
jurisdiction or any Governmental Authority which prohibits or makes illegal the
consummation of the transactions contemplated by this Agreement; provided,
however, that the parties hereto shall use their reasonable best efforts to have
any such order, decree or injunction vacated or reversed;

(b) all applicable requirements under state securities or takeover laws shall
have been satisfied; and

(c) (i) all applicable waiting periods under the HSR Act or Other Antitrust
Regulations have expired or been terminated or waived or the required approvals
have been otherwise obtained and the terms and conditions, if any, attached to
such approval shall not have a material effect on the affairs, operations,
liabilities or prospects of Holdings after the consummation of the transactions
contemplated by this Agreement and (ii) neither the Federal Trade Commission nor
the Department of Justice nor any other Governmental Authority shall have
advised the parties hereto that it opposes any of the transactions contemplated
by this Agreement or any material part thereof or have instituted, or threatened
to institute, either before or after the expiration of such waiting period, a
proceeding concerning this Agreement or the consummation of the transactions
contemplated hereby.

7.2 Conditions Precedent to Obligations of Holdings to Effect the Mergers. The
obligation of Holdings to consummate the transactions contemplated by this
Agreement on the Closing Date is subject to the satisfaction or waiver at or
prior to the Closing of the following conditions precedent:

(a) there shall have occurred no Material Adverse Change in the financial
condition or results of operations of the Companies and the Subsidiaries, taken
as a whole, from December 1, 2004 to the Closing Date;

(b) the representations and warranties of Progress Energy and Progress Fuels
contained in Article III and Article IV shall be true and correct in all
material respects (when read without exception for materiality or Material
Adverse Effect) at and as of the Closing Date with the same force and effect as
if those representations and warranties had been made at and as of such time
(with such exceptions, if any, necessary to give effect to events or
transactions expressly permitted in Sections 7.2(n) and 7.2(o));

(c) there shall have been obtained all consents, approvals and authorizations,
including the Required Consents, reasonably satisfactory in form and substance
to Holdings, there shall have been given all notices and there shall have been
made all registrations and filings under all laws, statutes, rules, regulations,
judgments, orders, injunctions, contracts or other instruments to which a
Company or Subsidiary is a party or by which it or any of its properties are
bound or subject, in each case that are required to permit the consummation of
the transactions contemplated by this Agreement without contravention, violation
or breach by such Company or Subsidiary, of any of the terms thereof, except
where the failure to obtain or make any such consent approval, authorization,
notice, registration or filing would not have a Material Adverse Effect on the
Companies and Subsidiaries, taken as a whole, following the Closing;

(d) Progress Energy, Progress Fuels and the Companies shall have performed, in
all material respects, all obligations and complied with all covenants contained
herein that are necessary to be performed or complied with by it on or before
the Closing Date;

(e) Holdings shall have received certificates, dated the Closing Date, from
authorized officers of Progress Energy, Progress Fuels and the Companies
certifying the satisfaction of the conditions set forth in this Section 7.2
(other than Section 7.2(j)) and certificates, dated the Closing Date, from the
Secretary or Assistant Secretary of Progress Energy, Progress Fuels and the
Companies, substantially in the form and to the effect of Exhibit 7.2(e);

(f) Holdings shall have received the resignations (effective as of the Closing
Date) of all of the directors of the Companies and the Subsidiaries;

(g) Holdings shall have received an opinion of counsel to Progress Energy and
Progress Fuels, dated the Closing Date, substantially in the form and to the
effect of Exhibit 7.2(g);

(h) Holdings shall have received all of the books, records and other materials
of the Companies and the Subsidiaries required under Section 6.3, including all
stock registers, corporate seals and related materials;

(i) all proceedings, corporate or other, to be taken by Progress Fuels in
connection with the transactions contemplated by this Agreement, and all
documents incident thereto, shall be reasonably satisfactory in form and
substance to Holdings and Holdings’ counsel;

(j) Holdings shall have received the proceeds of, or shall otherwise have
available for immediate borrowing the entire principal amount of, all debt
financings as described in Schedule 7.2(j) (which, for purposes of clarity, with
respect to the senior secured debt facility, means that there will be borrowing
base sufficient to access the entire committed amount);

(k) (i) all Indebtedness of the Companies and the Subsidiaries shall have been
paid in full (other than the Canadian Pacific Earnout and any Indebtedness
described in clause (iv) of the definition thereof) and the Companies or the
Subsidiaries, as the case may be, shall have received on or prior to the Closing
Date all pay-off letters from all holders of Indebtedness to be paid and
discharged at the Closing and all recordable form lien releases, canceled notes,
trademark and patent assignments and other documents reasonably requested by
Holdings, and shall have provided to Holdings copies thereof and (ii) there
shall be no Indebtedness owing from any of the Companies or the Subsidiaries to
Progress Energy, Progress Fuels or any of their Affiliates (other than the
Companies or the Subsidiaries);

(l) Progress Fuels shall have delivered to Holdings such other documents and
instruments as Holdings may reasonably request to facilitate the consummation or
performance of the transactions contemplated by this Agreement;

(m) Progress Fuels shall have executed the Employee Lease Agreement, dated the
Closing Date, substantially in the form and to the effect of Exhibit 7.2(m);

(n) the Retained Real Property shall have been transferred to Progress Fuels or
its designee at Progress Fuels’ cost and expense and in a manner reasonably
acceptable to Holdings with none of the Companies or Subsidiaries having any
further Liability in connection with the Retained Real Property;

(o) 3079936 Nova Scotia Company shall have been dissolved or, if such
dissolution has not occurred, the Companies shall have distributed all of the
shares of 3079936 Nova Scotia Company to Progress Fuels or its designee; and

(p) Progress Fuels shall have delivered to Holdings no later than March 4, 2005
the final audited and combined unaudited balance sheets of the Companies and
related combined statements of operations, shareholders’ equity and cash flows
for the fiscal year 2004 (the “Audited Statements”) and the combined unaudited
balance sheets of the Companies and related combined statements of operations,
shareholders’ equity and cash flows for the fiscal year 2004 shall be the same
in all material respects to the Audited Statements.

7.3 Conditions Precedent to Obligations of Progress Fuels, Progress Rail and
Progress Metal to Effect the Mergers. The obligation of Progress Fuels to
consummate the transactions contemplated by this Agreement on the Closing Date
is subject to the satisfaction or waiver at or prior to the Closing of the
following conditions precedent:

(a) the representations and warranties of Holdings and the Merger Subs contained
in Article V shall be true and correct in all material respects (when read
without exception for materiality) at and as of the Closing Date with the same
force and effect as if those representations and warranties had been made at and
as of such time;

(b) Holdings shall have performed, in all material respects, all obligations and
complied with all covenants contemplated herein that are necessary to be
performed or complied with by it on or before the Closing Date;

(c) there shall have been obtained all consents, approvals and authorizations
reasonably satisfactory in form and substance to Progress Fuels, there shall
have been given all notices and there shall have been made all registrations and
filings under all laws, statutes, rules, regulations, judgments, orders,
injunctions, contracts or other instruments to which Holdings is a party or by
either is bound or subject, in each case that are required to permit the
consummation of the transactions contemplated by this Agreement without
contravention, violation or breach by Holdings, or of any of the terms thereof;

(d) Progress Fuels shall have received a certificate, dated the Closing Date,
from an authorized officer of Holdings certifying the satisfaction of the
conditions set forth in this Section 7.3;

(e) Progress Fuels shall have received an opinion of counsel to Holdings and the
Merger Subs, dated the Closing Date, substantially in the form and effect of
Exhibit 7.3(e);

(f) all proceedings, corporate or other, to be taken by Holdings in connection
with the transactions contemplated by this Agreement, and all documents incident
thereto, shall be reasonably satisfactory in form and substance to the Companies
and Progress Fuels’ counsel; and

(g) the Companies shall have executed a Trademark Coexistence Agreement with
Progress Energy substantially in the form attached hereto as Exhibit 7.3(g), to
which Holdings will acknowledge its consent.

ARTICLE VIII

POST-CLOSING COVENANTS

8.1 Access to Books and Records. At Progress Fuels’ expense, Progress Fuels and
their authorized agents, officers and representatives shall have reasonable
access after the Closing Date to the properties, books, records, contracts,
information and documents of the Companies and each of the Subsidiaries for any
reasonable business purpose, including, without limitation, matters relating to
Taxes; provided, however, such access by Progress Fuels (a) shall be conducted
during the normal business hours of the Companies and the Subsidiaries and (b)
shall not unreasonably interfere with the operations and activities of the
Companies or any of the Subsidiaries. Holdings and the Companies shall
cooperate, and the Companies shall cause each of the Subsidiaries to cooperate,
in all reasonable respects with Progress Fuels’ review of such information,
including, without limitation, retaining all such information until Progress
Fuels has notified Holdings in writing that all tax years (including any portion
of a tax year) ending prior to or including the Closing Date have been closed or
for seven (7) years, whichever is longer. Commencing seven (7) years after the
Closing Date, Holdings may request that Progress Fuels inform Holdings in
writing whether all tax years (including any portion of a tax year) ending prior
to or including the Closing Date have been closed. Progress Fuels shall respond
in writing to any such request within ninety (90) days of receipt thereof.

8.2 Tax Matters.

(a) Federal Income Taxes in General. The income and other Tax items (including
any deferred income from intercompany transactions triggered into income by
Section 1.1502-13 of the Treasury regulations and any excess loss accounts taken
into income under Section 1.1502-19 of the Treasury regulations) of the
Companies and of those Subsidiaries that are included in the same consolidated
federal income Tax Return as Progress Fuels (“Consolidated Subsidiaries”) for
periods ending on or before the Closing Date shall be included in the
consolidated federal income Tax Return of the affiliated group, within the
meaning of Section 1504(a) of the Code, of which Progress Fuels is a member (the
“Progress Fuels Group”) for all such periods and Progress Fuels will pay or
cause to be paid any federal income Taxes on such income. Progress Fuels will
take no position on such Tax Returns that relate to the Companies or the
Subsidiaries that could adversely affect the Companies or the Subsidiaries after
the Closing Date, except as may be required by applicable Tax Law, may be
required to be consistent with past practice for Tax Returns filed for prior
periods by such entity or group with respect to such Tax or may be consented to
by Holdings, with such consent not to be unreasonably withheld. Progress Fuels
shall provide Holdings with a copy of pro formas for the Companies and the
Subsidiaries included on Tax Returns filed under this Section 8.2(a) and copies
of the associated workpapers for such pro formas. Information provided pursuant
to the preceding sentence may be provided in an electronic format, so long as
the recipient is able to access and copy the information without unreasonable
hardship or expense. Except as otherwise provided in this Section 8.2, Progress
Fuels shall be entitled to any reductions or refunds of Taxes (including
interest), for Pre-Closing Periods with respect to the consolidated federal
income Tax Return of the Progress Fuels Group, except to the extent that such
refund is attributable to a carryback of a Tax item of a Company or one of the
Subsidiaries arising in a Post-Closing Period. If Holdings or any of the
Companies or the Consolidated Subsidiaries receives any such refund (other than
a refund attributable to a carryback permitted by Section 8.2(d)(vi) of a Tax
item of a Company or one of the Subsidiaries arising in a Post-Closing Period),
Holdings shall promptly pay (or cause such Company or Consolidated Subsidiary to
pay) the entire amount of the refund (including interest received) to Progress
Fuels. Holdings shall be entitled to any reduction in and refunds of Taxes
(including interest) for Post-Closing Periods with respect to federal income
Taxes of any of the Companies or the Subsidiaries and any refunds for
Pre-Closing Periods attributable by a carryback permitted by Section 8.2(d)(vi)
of a Tax item of a Company or one of the Subsidiaries arising in a Post-Closing
Period. If Progress Fuels or any of its Affiliates receive any such refund or
any refund for a Pre-Closing Period that is attributable to a carryback
permitted by Section 8.2(d)(vi) of a Tax item of a Company or one of the
Subsidiaries arising in a Post-Closing Period, Progress Fuels shall promptly pay
(or cause such Affiliate to pay) the entire amount of the refund (including
interest received) to Holdings.

(b) State Income Taxes in General.

(i) For purposes of this Agreement, the term “State Income Tax” means any Tax,
imposed by a state or political subdivision of a state in the United States or
by the District of Columbia, that is based on or measured by net income or for
which at least one of two or more alternative bases is measured by or based on
net income. Progress Fuels shall be responsible for preparing and filing the
State Income Tax Returns of the Companies and the Consolidated Subsidiaries for
all taxable periods ending on or before the Closing Date and will pay or cause
to be paid any State Income Taxes on the taxable income of the Companies and the
Consolidated Subsidiaries for such periods (including any deferred income from
intercompany transactions triggered into income by Section 1.1502-13 of the
Treasury regulations and any excess loss accounts taken into income under
Section 1.1502-19 of the Treasury regulations, including comparable provisions
under state or local Tax Law). Progress Fuels will take no position on such Tax
Returns that relate to the Companies or the Subsidiaries that could adversely
affect the Companies or the Subsidiaries after the Closing Date, except as may
be required by applicable Tax Law, may be required to be consistent with past
practice for Tax Returns filed for prior periods by such entity or group with
respect to such Tax or may be consented to by Holdings, with such consent not to
be unreasonably withheld. Progress Fuels shall provide Holdings with the Tax
Returns or, in the case of a consolidated, combined or similar Tax Return,
copies of pro formas for the Companies and the Subsidiaries included on Tax
Returns filed under this Section 8.2(b) and copies of the associated workpapers
for such pro formas. Information provided pursuant to the preceding sentence may
be provided in an electronic format, so long as the recipient is able to access
and copy the information without unreasonable hardship or expense. Except as
otherwise provided in this Section 8.2, Progress Fuels shall be entitled to any
reductions in and refunds of State Income Taxes (including interest received)
for Pre-Closing Periods (other than a refund attributable to a carryback
permitted by Section 8.2(d)(vi) of a Tax item of a Company or one of the
Subsidiaries arising in a Post-Closing Period). If Holdings or any of the
Companies or the Consolidated Subsidiaries receives any such refund (other than
any refund for a Pre-Closing Period that is attributable to a carryback
permitted by Section 8.2(d)(vi) of a Tax item of a Company or one of the
Subsidiaries arising in a Post-Closing Period), Holdings shall promptly pay (or
cause such Company or Consolidated Subsidiary to pay) the entire amount of such
refund (including interest received) to Progress Fuels. Holdings shall be
entitled to any reduction in and refunds of State Income Taxes (including
interest) for Post-Closing Periods with respect to State Income Taxes of any of
the Companies or the Subsidiaries. If Progress Fuels or any of its Affiliates
receive any such refund or any refund for a Pre-Closing Period that is
attributable to a carryback permitted by Section 8.2(d)(vi) of a Tax item of a
Company or one of the Subsidiaries arising in a Post-Closing Period, Progress
Fuels shall promptly pay (or cause such Affiliate to pay) the entire amount of
the refund (including interest received) to Holdings.

(ii) If any of the Companies and the Consolidated Subsidiaries is required to
file any State Income Tax Return for a taxable period covering days before and
after the Closing Date, Holdings shall cause such Tax Return to be filed and
shall be responsible for the payment of any Tax for such period. However,
Progress Fuels shall pay to Holdings or Holdings shall pay to Progress Fuels, as
appropriate and as an adjustment to the Purchase Price, the amount by which the
State Income Tax attributable to the period through the Closing Date exceeds or
is less than the amount of such Tax paid (including payments of estimated Tax
with respect to such Tax) on or before the Closing Date. The Tax attributable to
the period through the Closing Date shall be determined (A) as if that period
were a separate taxable year, and (B) except as otherwise required by Law,
pursuant to Section 8.2(g)(iii) and using the Tax accounting methods and Tax
elections used by such Company or Consolidated Subsidiary before the Closing
Date. Holdings shall compute the amount of the Tax attributable to the period
through the Closing Date and shall notify Progress Fuels of such amount in
writing no later than thirty (30) days following the filing of any such State
Income Tax Return. Within forty-five (45) days after the date of such
notification, Progress Fuels shall pay to Holdings or Holdings shall pay to
Progress Fuels, as appropriate, the difference between (i) the amount of Tax
attributable to the portion of the period through the Closing Date, and (ii) the
amount of the Tax for the taxable period paid (including payments of estimated
Tax) on or before the Closing Date, unless within forty-five (45) days after
such notification date, Progress Fuels notifies Holdings in writing that
Progress Fuels disagrees with the computation of any such amount, including any
disagreement based on the manner in which such Tax Return was prepared. In that
case, Progress Fuels and Holdings shall proceed in good faith to determine the
correct amount. If the parties cannot reach agreement within thirty (30) days of
Progress Fuels’ notification of its disagreement, then the parties shall submit
the dispute to KPMG for resolution in accordance with the procedures set forth
in Section 2.8(d) hereof. Progress Fuels’ payment to Holdings, or Holdings’
payment to Progress Fuels shall be due the later of (1) the time specified in
the third preceding sentence or (2) ten (10) days after the resolution of such
disagreement.

(c) Section 338 Elections.

(i) The parties agree that no election under Section 338(h)(10) of the Code or
any corresponding provision of state, local or foreign Tax Law will be made with
respect to the acquisition of the Shares provided for herein. (ii)
Notwithstanding any other provision of this Agreement, the parties agree that,
if an election under Section 338 or any corresponding provision of state, local
or foreign Law is made by Holdings with respect to any of the Companies or its
Subsidiaries, Holdings shall prepare and file the returns for, be responsible
for the payment of, indemnify and hold Progress Fuels and its Affiliates
harmless from, and be entitled to any refund (excluding any refund resulting
from carrying back a loss or other Tax item to a period ending on or before the
Closing Date) of any Taxes resulting from the elections. In addition, no such
election shall be made by Holdings or any of its Affiliates (including, after
the Closing, the Companies and the Subsidiaries) with respect to a Subsidiary
that is not a Consolidated Subsidiary without Progress Fuels’ express written
consent, which may be withheld in Progress Fuels’ absolute discretion.

(d) Cooperation.

(i) Holdings agrees to cooperate and to cause the Companies and the Consolidated
Subsidiaries to cooperate with Progress Fuels to the extent reasonably required
after the Closing Date in connection with (A) the filing, amendment, preparation
and execution of all federal income and State Income Tax Returns with respect to
any taxable period of any of the Companies and the Consolidated Subsidiaries
ending on or before the Closing Date or including but not ending on the Closing
Date, (B) contests concerning the federal or State Income Tax due for any such
period and (C) audits and other proceedings relating to income Taxes with
respect to any such period.

(ii) If any Taxing Authority or other Person asserts a Tax Claim, then the party
hereto first receiving notice of such Tax Claim promptly shall provide written
notice of such Tax Claim to the other party hereto; provided that the failure of
a party to give such prompt notice to the other party of any such Tax Claim
shall not relieve such other party of any of its obligations under this Section
8.2, except to the extent of actual prejudice. Such notice shall specify in
reasonable detail the basis for such Tax Claim and shall include a copy of any
relevant correspondence received from the Taxing Authority or other Person, to
the extent such correspondence relates to the Companies or Subsidiaries.

(iii) Except as provided in Section 8.2(d)(iv) and in the this Section
8.2(d)(iii), Progress Fuels shall have the right to control, defend or
prosecute, at its sole cost, expense and risk those Tax Claims solely with
respect to Taxes set forth in Section 8.2(g)(i). Progress Fuels shall not,
without the prior written consent of Holdings, enter into any compromise or
settlement of such Tax Claim that would result in any Tax detriment to any Tax
Indemnitee, unless Progress Fuels agrees to indemnify such Tax Indemnitee for
such detriment. Progress Fuels shall inform Holdings of all material
developments and events relating to such Tax Claim (including, without
limitation, providing to Holdings copies of all written materials relating to
such Tax Claim, to the extent they relate to the Companies or Subsidiaries), and
Holdings or its authorized representatives shall be entitled, at the expense of
Holdings, to attend, but not participate in or control, all conferences,
meetings and proceedings relating to such Tax Claim, to the extent they relate
to the Companies or Subsidiaries. Except as provided in Section 8.2(d)(iv) or as
may be reasonably determined to be required by applicable law or by a Taxing
Authority, Holdings and its representatives shall not take, or cause any of the
Companies or the Subsidiaries to take, any action with respect to any Tax Claim
or portion of a proceeding that Progress Fuels is entitled to control, defend or
prosecute hereunder that is inconsistent with such control, defense or
prosecution without Progress Fuel’s prior written consent. Except as may
reasonably be determined to be required by applicable law or by a Taxing
Authority, Progress Energy, Progress Fuels and their representatives shall not
take, or cause any of their Affiliates to take, any action with respect to any
Tax Claim or portion of a proceeding that Progress Fuels is not given the right
to control, defend or prosecute hereunder that is inconsistent with the right of
Holdings and its Affiliates to control, defend or prosecute such Tax Claim or
portion of proceeding without Holdings’ prior written consent. Except as
required by law, it shall be considered inconsistent with a party’s right to
control, defend or prosecute for the other party or its Affiliates to provide to
any Taxing Authority any document or other writing relating to the merits of any
issue and not publicly available without the prior consent of the other party,
such consent not to be unreasonably withheld or delayed.

(iv) If, at any time unsecured indebtedness of Progress Energy has a rating from
S&P or any successor to S&P that is below “BB+” (or any equivalent successor
rating) and a rating from Moody’s or any successor to Moody’s that is below
“Ba1” (or any equivalent successor rating), then Holdings, upon making a
reasonable, written determination that Progress Fuels is not pursuing with
reasonable diligence any Tax Claim that it is entitled to control under Section
8.2(d)(iii), or any portion of a Tax proceeding that Progress Fuels is entitled
to control pursuant to Section 8.2(d)(v), despite at least twenty (20) days
having passed since Holdings gave Progress Fuels written notice (setting forth
the basis for such belief) that Holdings believes Progress Fuels is not pursuing
such Tax Claim with reasonable diligence, Holdings shall be entitled to assume
control over such Tax Claim or such portion of a Tax proceeding, subject to the
limitation that Holdings may not settle or consent to the entry of judgement
with respect to such Tax Claim or such portion of a Tax proceeding without the
prior consent of Progress Fuels, which consent may not be unreasonably withheld
or delayed; provided, however, that Holdings shall not be entitled to assume
control if (A) Progress Fuels deposits into escrow, under an agreement
reasonably acceptable to the Progress Fuels and Holdings, an amount sufficient
to cover at least 75 percent of the amount of such Tax Claim within twenty (20)
days after receipt of the written determination from Holdings or (B) Progress
Fuels has paid or deposited, or within twenty (20) days after receipt of the
written determination from Holdings, pays or deposits the amount of such Tax
Claim to the relevant Taxing Authority and, under applicable Law, such payment
or deposit cannot be recovered prior to a favorable determination that (i) is
not appealable or has ceased to be appealable and (ii) is not subject to
reversal or has ceased to be subject to reversal. After the date on which
Holdings comes to control a Tax Claim under this Section 8.2(d)(iv), Holdings
shall inform Progress Fuels of all material developments and events relating to
such Tax Claim (including, without limitation, providing to Progress Fuels
copies of all written materials relating to such Tax Claim, to the extent that
they relate to the Companies or Subsidiaries), and Progress Fuels or its
authorized representatives shall be entitled, at the expense of Progress Fuels,
to attend, but not participate in or control, all conferences, meetings and
proceedings relating to such Tax Claim, to the extent they relate to the
Companies or Subsidiaries. This Section 8.2(d)(iv) shall not apply to any Tax
Claim or portion of a Tax proceeding with respect to income Taxes for periods
where the Company or Subsidiary whose Tax liability is at issue filed income Tax
Returns on a consolidated, combined, unitary or similar basis with Progress
Energy or any of its Subsidiaries (other than Tax Returns that include only the
Companies and their Subsidiaries).

(v) Where an audit or other proceeding involves Taxes other than Taxes set forth
in Section 8.2(g)(i), then Holdings and Progress Fuels agree that they shall
each take, and cause their respective Affiliates to take, reasonable steps to
have the portion of such audit or proceeding that relates solely to Taxes set
forth in Section 8.2(g)(i) bifurcated from the rest of such proceeding. Pending
or in the absence of such bifurcation, Progress Fuels shall control such audit
or proceeding to the extent that it relates to Taxes set forth in Section
8.2(g)(i) and Holdings shall control the remaining portion of such audit or
proceeding, provided, however, that neither Holdings nor Progress Fuels shall be
permitted to take a position in connection with their respective portions of
such audit or proceeding, or settle or compromise a matter in connection with
such portion, that adversely affects the position of the other party with
respect to its portion of such audit or proceeding, without the consent of the
other party, with such consent not to be unreasonably withheld or delayed. Both
Holdings and Progress Fuels shall keep the other party informed of all material
developments with respect to such audit or proceeding and allow the other party
to attend all conferences, meetings or similar events relating to such audit or
proceeding.

(vi) Progress Fuels agrees to make available to Holdings, the Companies and the
Subsidiaries records in the custody of Progress Fuels or of any member of
Progress Fuels Group or any subsidiary of Progress Fuels, to furnish other
information and otherwise to cooperate to the extent reasonably required for the
preparation or filing of Tax Returns relating to either of the Companies or any
of the Subsidiaries for which Holdings, either of the Companies or any of the
Subsidiaries is responsible under this Section 8.2 or for the defense or conduct
of any audit, action or similar proceeding. Progress Energy and Progress Fuels
shall provide Holdings or one or more Affiliates of Holdings designated by
Holdings, within a reasonable time following receipt of a request thereof,
copies of any Tax Return of or that includes or relates to a Company or any of
the Subsidiaries, together with the related workpapers; provided, that, in the
case of such a Tax Return that was filed prior to 2001, information on such Tax
Return (or the related workpapers) is relevant to the preparation and filing of
a Tax Return due after the Closing Date (or a Tax Return due on or prior to the
Closing Date that was not filed on or prior to the Closing Date) or the conduct
of an audit, action or similar proceeding taking place after the Closing Date.
References to “Tax Returns” in the preceding sentence shall, in the case of
income Tax Returns that a Company or a Subsidiary filed on a consolidated or
similar basis with an Affiliate of Progress Energy other than a Company or a
Subsidiary, a pro forma for such Company or Subsidiary. Information provided
pursuant to the second preceding sentence may be provided in an electronic
format, so long as the recipient is able to access and copy the information
without unreasonable hardship or expense. However, no loss, credit or other item
of any of the Companies or the Subsidiaries may be carried back from a
Post-Closing Period without Progress Fuels’ written consent, which Progress
Fuels may withhold in its absolute discretion, to a taxable period for which (A)
any of the Companies and the Subsidiaries and (B) Progress Fuels or any entity
affiliated with Progress Fuels filed a consolidated, unitary, combined or
similar Tax Return. Progress Energy and Progress Fuels will not dispose of any
books, records (including Tax Returns) or contracts relating to income Tax
attributes of either Company or any of the Subsidiaries prior to the date
specified in the second sentence of Section 8.1(a) without the prior written
consent of Holdings, which shall not be unreasonably withheld or delayed.

(vii) Progress Fuels agrees to cooperate with Holdings, and Holdings agrees to
cooperate (and cause the Companies to cooperate) with Progress Fuels, to the
extent reasonably necessary in connection with the preparation and filing of any
Tax Return relating to Holdings’ acquisition of the Companies.

(e) Termination of Tax-Sharing Agreement. As of the Closing, this Section 8.2
shall supersede any and all Tax-sharing or similar agreements to which (i) any
of the Companies and the Subsidiaries, on the one hand, and (ii) Progress Fuels
or any affiliated entity, on the other hand, are parties. Neither the Companies,
the Subsidiaries, Progress Fuels nor any such affiliated entity shall have any
obligation or right with respect to each other under any such prior agreement
from and after the Closing.

(f) Other Tax Returns and Taxes. The Companies and Subsidiaries (and not
Progress Fuels) shall be responsible for preparing and filing all Tax Returns of
the Companies and the Subsidiaries other than those income Tax Returns to which
Sections 8.2(a) through 8.2(c) apply (“Other Tax Returns”). The preceding
sentence shall not affect any liability that Progress Energy or Progress Fuels
may otherwise have hereunder. Except as otherwise required by Law or expressly
agreed in writing by Progress Fuels and Holdings (with such agreement not to be
unreasonably withheld or delayed), (i) each Other Tax Return filed after the
Closing Date for any period ending on or before or including the Closing Date
shall be based on the same accounting methods and Tax elections as used for the
same type of Other Tax Return filed most recently before the Closing Date, and
(ii) no amended Other Tax Return may be filed for a period ending on or before
or including the Closing Date. Holdings shall, at least 30 days prior to the due
date for such Tax Returns, provide or cause to be provided to Progress Fuels
drafts of all foreign income Tax Returns of the Companies or any of the
Subsidiaries that are for a taxable period that is or includes a Pre-Closing
Period and are due (taking into account any applicable extensions) more than 90
days after the Closing Date and shall consider in good faith any comments raised
by Progress Fuels in a timely fashion with respect to any such drafts. If
Progress Fuels, within 10 days of receipt of such a draft, provides notice in
writing to Holdings that either such draft is inconsistent with the requirements
of applicable foreign Tax Law or violates any provision of this Section 8.2(f)
and Holdings and Progress Fuels are unable to resolve such dispute within 4
business days, the parties shall submit such dispute to KPMG for resolution,
except as set forth herein, in accordance with the procedures set forth in
Section 2.8(d) hereof; provided, that KPMG shall be required to resolve such
dispute at least three business days before the due date for such Tax Return. In
resolving such dispute, KPMG shall adopt Holdings’ position except to the extent
that it is not permitted by applicable foreign Tax Law or violates any provision
of this Section 8.2(f). Holdings shall make good faith reasonable efforts to
provide to Progress Fuels drafts of foreign income Tax Returns of the Companies
or any of the Subsidiaries that are for a taxable period that is or includes a
Pre-Closing Period and are due (taking into account any applicable extensions)
less than 91 days after the Closing Date prior to filing such Tax Returns and
shall consider in good faith any comments raised by Progress Fuels with respect
to such drafts.

(g) Tax Indemnification.

(i) Except as provided in Section 8.2(d)(ii) above or Section 8.2(g)(ii)(B)
below, from and after the Closing Date, Progress Fuels and Progress Energy, on a
joint and several basis, shall be responsible for, shall pay or cause to be
paid, and shall indemnify, defend and hold harmless each Tax Indemnitee against,
and reimburse such Tax Indemnitee for:

    (A)        any federal income Tax, State Income Tax or (to the extent in
excess of the amount of such foreign income Tax actually taken into account as a
liability in determining Closing Working Capital, after first subtracting the
amount of any payments, credits or rights to refunds or credits with respect to
such foreign income Tax actually taken into account as an asset in determining
Closing Working Capital) foreign income Tax imposed, including, in each case,
any liability for interest, penalties, fines, assessments or additions related
to such federal, state, local or foreign Tax liability and any liability for
interest, penalties, fines, assessments or additions resulting from a failure to
comply with a requirement regarding a related Tax Return, on or relating to any
of the Companies or the Subsidiaries with respect to any Pre-Closing Period;

    (B)        any federal income Tax, State Income Tax or (to the extent in
excess of the amount of such foreign income Tax actually taken into account as a
liability in determining Closing Working Capital, after first subtracting the
amount of any payments, credits or rights to refunds or credits with respect to
such foreign income Tax actually taken into account as an asset in determining
Closing Working Capital) foreign income Tax imposed, including, in each case,
any liability for interest, penalties, fines, assessments or additions related
to such federal, state, local or foreign Tax liability and any liability for
interest, penalties, fines, assessments or additions resulting from a failure to
comply with a requirement regarding a related Tax Return, upon or relating to
any Relevant Group of which the Companies or any Subsidiary (or any predecessor)
is or was a member prior to the Closing pursuant to Section 1.1502-6 of the
Treasury regulations (or any similar provision of state, local, or foreign Law);
provided, that this clause (B) shall not apply with respect to a Relevant Group
for any Tax liability arising with respect to a taxable period following the
Closing during which such Relevant Group does not include Progress Fuels,
Progress Energy or any of their Affiliates;

    (C)        all Taxes incurred as a result of any action taken by Progress
Energy, Progress Fuels or any of their Affiliates or representatives in
violation of Section 8.2(d)(iii); and

    (D)        all liabilities that may be determined in, arise out of or in
connection with any examination, disputes, claims or similar proceedings
referred to on Schedule 4.14(b) or the portion of Schedule 4.14(d) titled “Open
Disputes/Claims” and relating to Taxes imposed by Canada or any political
subdivision thereof.

(ii)     From and after the Closing Date, Holdings shall be responsible for,
shall pay or cause to be paid, and shall indemnify, defend and hold harmless
Progress Fuels and its Affiliates against, and reimburse Progress Fuels and its
Affiliates for:

    (A)        any Tax with respect to either Company or any Subsidiary for
which Progress Fuels and Progress Energy are not responsible under this Section
8.2, except to the extent Progress Fuels would be required to indemnify against
such Tax pursuant to Article IX hereof were such Tax paid by Holdings or the
Companies (as determined without regard to any limitations relating to the
Basket or Progress Fuel’s maximum indemnity liability); and

    (B)        any federal income Tax or State Income Tax incurred as a result
of any action taken by Holdings or its Affiliates (including, after the Closing,
the Companies and the Subsidiaries) (i) in violation of Section 8.2(d)(iii), or
(ii) outside the ordinary course of business after the Closing and on the
Closing Date other than actions contemplated by this Agreement (including
borrowings by, and use of borrowed funds by, Progress Rail Merger Sub, Progress
Metal Merger Sub, Progress Rail or Progress Metal to fund the Merger
Consideration, but excluding the effects of any guarantee, borrowing,
coborrowing or pledge by any Subsidiary or any pledge of the shares of any
Subsidiary) or actions by either of the Companies or any of the Subsidiaries
pursuant to agreements entered into by those entities prior to the Closing.

(iii)     Allocation of Certain Taxes.

    (A)        If the Companies and the Subsidiaries are permitted but not
required under applicable state, local, or foreign income Tax Laws to treat the
Closing Date as the last day of a taxable period, then the parties shall treat
that day as the last day of a taxable period.

    (B)        In the case of Taxes arising in a taxable period of either
Company or any Subsidiary that includes, but does not end on, the Closing Date,
except as provided in Section 8.2(g)(iii)(C), the allocation of such Taxes
between the Pre-Closing Period and the Post-Closing Period shall be made on the
basis of an interim closing of the books as of the end of the Closing Date (and
for this purpose, each entity in which either of the Companies or any Subsidiary
has a direct or indirect interest and that is treated as a partnership for Tax
purposes shall be treated as having its taxable period close at the end of the
Closing Date). “Post-Closing Period” means any taxable period or portion thereof
beginning after the Closing Date. If a taxable period begins on or prior to the
Closing Date and ends after the Closing Date, then the portion of the taxable
period that begins on the day following the Closing Date shall constitute a
Post-Closing Period. “Pre-Closing Period” means any taxable period or portion
thereof that is not a Post-Closing Period. For the avoidance of doubt, for
purposes of this Section 8.2(g)(iii)(B), any Tax resulting from the transactions
contemplated by this Agreement (including the distribution and dissolution
provided for in Section 7.2(o) and the transfer of the Retained Real Property
provided for in Section 7.2(n)) and any Tax resulting from the departure of
either Company or any Subsidiary from a Relevant Group as a result of the
transactions provided for in this Agreement (including any Tax resulting from
the triggering into income of items from deferred intercompany transactions
under Section 1.1502-13 of the Treasury regulations or excess loss accounts
under Section 1.1502-19 of the Treasury regulations or similar provision of Law)
is attributable to the Pre-Closing Period, and any Tax resulting from any action
of either Company or any Subsidiary outside the ordinary course of business
after the Closing and on the Closing Date, other than actions contemplated by
this Agreement, or actions by either of the Companies or any of the Subsidiaries
pursuant to agreements entered into by those entities prior to the Closing
(Taxes resulting from such actions shall be treated for purposes of this
Agreement as attributable to Pre-Closing Periods), is attributable to the
Post-Closing Period. For the avoidance of doubt, (x) any interest, penalties,
fines, assessments or additions related to a Tax liability that is attributable
to a Pre-Closing Period other than, in the case of a taxable period beginning
before and ending after the Closing Date, any such amount attributable to an
action or inaction by Holdings or its Affiliates after the Closing and (y) any
interest, penalties, fines, assessments or additions attributable to a failure
to comply with any requirement regarding Tax Returns due (with regard to
applicable extensions) on or prior to the Closing Date or for which Progress
Fuels is responsible under Section 8.2 hereof shall be treated as attributable
to a Pre-Closing Period. For the avoidance of doubt, (i) any interest,
penalties, fines, assessments or additions related to a Tax liability
attributable to a Post-Closing Period or, in the case of a taxable period
beginning before and ending after the Closing Date, attributable to an action or
inaction of Holdings or its Affiliates after the Closing and (ii) any interest,
penalties, fines, assessments or additions attributable to a failure to comply
with any requirement regarding Tax Returns (other than Tax Returns due (with
regard to applicable extensions) on or prior to the Closing Date or Tax Returns
which Progress Fuels is responsible for filing under Section 8.2 hereof)) shall
be treated as attributable to a Post-Closing Period.

    (C)        In the case of any Taxes that are imposed on a periodic basis and
are payable for a taxable period that includes, but does not end on, the Closing
Date, the portion of such Tax which relates to the portion of such taxable
period ending on the Closing Date shall (i) in the case of any Taxes other than
Taxes based upon or related to income, sales or receipts, or franchise Taxes, or
Taxes based on capitalization, debt or shares of stock authorized, issued or
outstanding, be deemed to be the amount of such Tax for the entire taxable
period multiplied by a fraction, the numerator of which is the number of days in
the taxable period ending on the Closing Date and the denominator of which is
the number of days in the entire taxable period, and (ii) in the case of any Tax
based upon or related to income, sales or receipts, or franchise Taxes, or Taxes
based on capitalization, debt or shares of stock authorized, issued or
outstanding, be deemed equal to the amount which would be payable if the
relevant taxable period ended as of the end of the Closing Date. All
determinations necessary to give effect to the foregoing allocations shall be
made in a manner consistent with the prior practice of the Companies and their
Subsidiaries.

    (D)        For the avoidance of doubt, all Taxes attributable to borrowings
to fund the Merger Consideration that are arranged by Holdings or its
Affiliates, and the use of those borrowed funds to fund the Merger
Consideration, other than federal income Taxes or State Income Taxes that may be
imposed on Progress Rail, Progress Metal or their Affiliates (other than the
Subsidiaries) as a result of such borrowings by Progress Rail Merger Sub,
Progress Metal Merger Sub, Progress Rail or Progress Metal or use of those
borrowed funds to fund the Merger Consideration (as determined without regard to
the effect of any guarantees, borrowings, coborrowings or pledges by any
Subsidiary and the pledges of any shares of any Subsidiary), shall be treated as
Taxes attributable to a Post-Closing Period.

(iv)     Except as otherwise required by applicable Law, the parties shall treat
any indemnification payment made hereunder as an adjustment to Purchase Price.

(h)     Payment of Transfer Taxes and Fees. Progress Fuels shall pay all
Transfer Taxes arising out of the transactions effected pursuant to this
Agreement or contemplated by Sections 7.2(n) and 7.2(o), and shall indemnify,
defend, and hold harmless Holdings, and Holdings’ Affiliates including,
following the Closing, the Companies and the Subsidiaries with respect to such
Transfer Taxes. Progress Fuels shall file all necessary documentation and Tax
Returns with respect to such Transfer Taxes. All Transfer Taxes arising out of
the borrowings to fund the Merger Consideration that are arranged by Holdings or
its Affiliates, and the use of those borrowed funds to fund the Merger
Consideration, shall be paid by Holdings.

(i)     FIRPTA Certificates. Progress Fuels shall deliver to Holdings on the
Closing Date a duly completed and executed certification, in form reasonably
satisfactory to Holdings, establishing that Progress Fuels is not a foreign
person for purposes of Section 1445 of the Code.

(j)     Relationship of Section 8.2 to Article IX. Any conditions or limitations
set forth in Article IX with respect to monetary amount of claims or liability
shall not apply to any claim or liability to which this Section 8.2 applies or
to any breach of any obligation under this Section 8.2. In the event of any
inconsistency between provisions of Article IX and Section 8.2, this Section 8.2
shall control. Progress Fuels shall have no liability under this Agreement for
any Taxes of any of the Companies and the Subsidiaries except as otherwise
expressly provided in Section 8.2 or Article IX.

(k)     Survival. Notwithstanding any other provision of this Agreement, the
covenants and obligations set forth in this Section 8.2 shall survive until, and
any claim for indemnification with respect thereto must be made prior to, sixty
days following the expiration of the applicable statute of limitations with
respect to the underlying Tax claim (including any valid extensions).

(l)     Indemnity Amounts to be Computed On After-Tax Basis. The amount of any
indemnity payable under Section 8.2(g) shall be (i) net of any federal, foreign,
or state income Tax benefit realized and the then present value (based on a
discount rate of five percent (5%)) of any such income Tax benefit to be
realized, after taking into account the provisions of this Agreement relating to
the allocation of rights and responsibilities with respect to Tax items, by such
indemnified party (and, where Holdings is the indemnified party, any of the
Companies or the Subsidiaries), or the consolidated or similar group that
includes such indemnified party, by reason of the facts and circumstances giving
rise to the indemnification, and (ii) increased by the amount of any federal,
foreign or state income Tax required to be paid by the indemnified party (and,
where Holdings is the indemnified party, any of the Companies or the
Subsidiaries), or the consolidated or similar group that includes such
indemnified party, on the accrual or receipt of the indemnification payment
(including any amount payable pursuant to this clause (ii)). For purposes of the
preceding sentence, the amount of any state income Tax benefit or cost shall
take into account the federal income Tax effect of such benefit or cost. In
addition, the extent not covered by the first sentence of this Section 8.2(l),
the amount of any indemnity payment under Section 8.2(g)(i) shall be reduced,
but not below zero) by the amount, after first subtracting the amount of any net
Tax cost resulting from the receipt or the accrual of such refund, of any
refunds of foreign income taxes with respect to Pre-Closing Periods received,
whether through a crediting against Tax liability or otherwise, by any of the
Companies or Subsidiaries after the Closing, except any such refunds reflected
in the Closing Working Capital or attributable to a carryback from a
Post-Closing Period.

    (m)        The parties agree that they shall treat and shall cause their
Affiliates to treat the payment of the Merger Consideration as a redemption of
Shares for income Tax purposes to the extent the Merger Consideration is funded
by borrowings by Progress Rail Merger Sub, Progress Metal Merger Sub, Progress
Rail or Progress Metal.

8.3 Employee Benefits.

(a)     Benefit Plans. Holdings agrees to permit or cause the Companies and the
Subsidiaries to take appropriate action to honor all Benefit Plans in accordance
with their terms. Holdings agrees that, except as otherwise specifically
provided, all Benefit Plans maintained by the Companies and the Subsidiaries as
of the date hereof, will continue at a level of benefits not less than the level
currently provided under such Benefit Plans for the period following the Closing
until and including November 30, 2005. If employees of the Companies and the
Subsidiaries become participants in any welfare or pension plan or program
maintained by Holdings or its Affiliates, such plan or program shall take into
account for purposes of eligibility and vesting thereunder, but not for purposes
of benefit accrual (other than for vacation accruals), the service of such
employees with the Companies and the Subsidiaries as if such service were with
Holdings, to the same extent that such service was credited under a comparable
plan of the Companies and the Subsidiaries. If applicable, employees of the
Companies and the Subsidiaries as of the Closing Date shall not be subject to
any waiting periods or pre-existing condition limitations, and shall receive
credit for all payments to satisfy deductibles, contributions, and co-payments
under the medical, dental and health plans of Holdings or its Affiliates in
which they may be eligible to participate. Employees of the Companies and the
Subsidiaries will retain credit for unused sick leave and vacation pay which has
been accrued as of the Closing Date and for purposes of determining the
entitlement of such employees to sick leave and vacation pay following the
Closing Date, the service of such employees with the Companies and the
Subsidiaries shall be treated as if such service was with Holdings or its
Affiliates.

(b)     Plan Funding Statement. Unless Progress Fuels provides written notice to
Holdings on or before the thirtieth (30th) day following the Closing Date that
Progress Fuels has elected to assume, effective as of the Closing Date,
sponsorship of, and all Liabilities of the Pension Plan for Salaried,
Non-Bargaining Unit Employees and Bargaining Unit Employees of Chemetron Railway
Products, Inc. with respect to benefits accrued as of the Closing Date, then the
Unfunded PBO with respect to any Pension Plan not so assumed shall be treated as
a current liability for purposes of calculating the Closing Working Capital. The
Unfunded PBO with respect to any Pension Plan not so assumed will be set forth
in a Plan Funding Statement delivered by Progress Fuels to Holdings within
thirty (30) days following the Closing Date. Upon receipt of the Plan Funding
Statement, Holdings shall have the right to review and confirm the accuracy of
the calculations. Holdings shall deliver a Notice of Disagreement to Progress
Fuels within thirty (30) calendar days after receiving the Plan Funding
Statement if Holdings disagrees with Progress Fuels calculation of Unfunded PBO,
which Notice of Disagreement will initiate the Dispute Resolution Process set
forth in Section 8.3(c). If the Plan Funding Statement cannot be delivered prior
to the time the Closing Working Capital is determined pursuant to Section 2.8,
or is delayed on account of the Dispute Resolution Process and thus cannot be
finalized until after the Closing Working Capital is determined pursuant to
Section 2.8, then the amount of the Unfunded PBO shall be paid by Progress Fuels
to Holdings in immediately available funds by wire transfer to an account
specified by Holdings within sixty (60) days from the delivery of the Plan
Funding Statement or the completion of the Dispute Resolution Process, as the
case may be. Holdings shall provide, or shall cause the Companies or the
Subsidiaries to provide to Progress Fuels, such information as Progress Fuels
reasonably requests to assist Progress Fuels in the administration of any
assumed Pension Plan.

For purposes of Sections 8.3(b) and (c) : (i) “Pension Plan” shall mean each
Benefit Plan that is subject to Title IV of ERISA; (ii) “Plan Funding Statement”
shall mean a statement prepared by a nationally recognized actuarial firm
engaged by Progress Fuels setting forth the amount of the Unfunded PBO, if any,
with respect to each Pension Plan that is not to be assumed by Progress Fuels,
as well as all the data (and supporting calculations) used to determine these
amounts; (iii) “PBO” shall mean the projected benefit obligation, within the
meaning of Financial Accounting Statement 87, under each Pension Plan as of the
Closing Date; (iv) “Unfunded PBO” shall mean the excess, if any, of the PBO for
each Pension Plan over the fair value of the assets of such Pension Plan as of
the Closing Date where the PBO shall be determined using the actuarial
assumptions and methods contained in The Retirement Plan for Employees of
Progress Metal Reclamation Company D/B/A Mansbach Metal Company, Actuarial
Report for FAS 87 & 132, Fiscal Year Ending December 31, 2004 and Financial
Accounting Standards Board Statements 87 and 132, Pension Expense Valuation for
Chemetron Railway Products, Inc. Group Annuity Policy GA-60045, Disclosures for
the Fiscal Year December 1, 2003 to November 30, 2004, except that the discount
rate for the Pension Plans shall be the Moody’s Corporate AA bond rate in effect
at the Closing Date; and (v) “Notice of Disagreement” shall mean a written
statement setting forth in reasonable detail the basis for a dispute.

(c)        Dispute Resolution Process. During the ten (10) calendar day period
immediately following the delivery of a Notice of Disagreement, Holdings and
Progress Fuels shall seek in good faith to resolve any differences that they may
have with respect to any matter specified in the Notice of Disagreement. If at
the end of such ten (10) calendar day period Holdings and Progress Fuels have
been unable to agree upon a Plan Funding Statement, then Holdings and Progress
Fuels shall submit to a nationally recognized, independent actuarial firm
(selected by the parties) for review and resolution any and all matters that
remain in dispute with respect to the Notice of Disagreement. Holdings and
Progress Fuels shall cause the independent actuarial firm to use commercially
reasonable efforts to make a final (which determination shall be binding on the
parties hereto) Plan Funding Statement within twenty (20) calendar days from
such submission, and such final determination shall be the Plan Funding
Statement. The cost of the independent actuarial firm’s review and determination
shall be split equally between and paid by Holdings and Progress Fuels. During
the twenty (20) calendar day review by the independent actuarial firm, Holdings
and Progress Fuels will each make available to the independent actuarial firm
such individuals and such information, books and records as may be reasonably
required by the independent actuarial firm to make its final determination.

8.4 WARN Act. Holdings shall be responsible for, and shall indemnify Progress
Fuels against, all expense and Liability, including attorneys’ fees, if
applicable, incurred under the WARN Act or any other Law requiring notice prior
to termination of employment or the payment of severance pay, wages or benefits
with respect to any employee who experiences a layoff, employment termination,
reduction in hours or other employment related loss after the Closing. Progress
Fuels shall be responsible for, and shall indemnify Holdings against, all
expense and Liability, including attorneys’ fees, if applicable, incurred under
the WARN Act or any other Law requiring notice prior to termination of
employment or the payment of severance pay, wages or benefits with respect to
any employee who experiences a layoff, employment termination, reduction in
hours or other employment related loss prior to the Closing.

8.5 Nonsolicitation; Noncompetition; Nondisclosure.

(a) Progress Energy and Progress Fuels will, for a period of two (2) years from
the Closing Date, refrain from, either alone or in conjunction with any other
Person, or directly or indirectly through its present or future Affiliates:

(i) employing, engaging or seeking to employ or engage any Person who within the
prior twenty-four (24) months had been an employee of the Companies or any
Subsidiary; provided, however, that nothing herein shall preclude Progress
Energy or Progress Fuels from hiring employees (i) who respond to general
advertisements in the media or (ii) who are independently presented to Progress
Energy or Progress Fuels by an employment agency;

(ii) causing or attempting to cause (A) any client, customer or supplier of the
Business to terminate or materially reduce its business with the Companies or
any Subsidiary or (B) any officer, employee or consultant of the Companies or
any Subsidiary to resign or sever a relationship with the Companies or any
Subsidiary; or

(iii) disclosing (unless compelled by judicial or administrative process) or
using any proprietary confidential or secret information relating to the
Companies or any Subsidiary, or any client, customer or supplier of the
Companies or any Subsidiary; or

(b) Progress Energy and Progress Fuels will, for a period of five (5) years from
the Closing Date, refrain from, either along or in conjunction with any other
Person, or directly or indirectly through its present or future Affiliates
participating or engaging in (other than through the ownership of 5% or less of
any class of securities registered under the Securities Exchange Act of 1934, as
amended), or otherwise lending financial assistance to any Person participating
or engaged in, any of the lines of business which comprised the Business on the
Closing Date other than any line of business consisting of the provision of
energy or telecommunications products and services in the United States, Canada
or Mexico; provided, however, that nothing in this Section 8.5(a)(iv) shall
prohibit (A) Progress Energy or Progress Fuels from such activities if Progress
Energy or Progress Fuels, as the case may be, is acquired by an entity which
conducted such activities in the normal course of business prior to the
acquisition of Progress Energy or Progress Fuels, as the case may be, or (B)
Progress Energy or Progress Fuels from acquiring any entity, or merging in a
“merger of equals” with any entity, which conducts such activities unless such
entity’s annual revenue from such activities neither exceeds $100 million nor
accounts for more than twenty-five percent (25%) of such entity’s annual revenue
in the aggregate, in each case, during the fiscal year prior to any such
acquisition. In the event that the conditions in the preceding clause (B) are
not satisfied, Progress Energy or Progress Fuels, as the case may be, may
acquire such entity but shall be required to either (i) divest itself of such
entity’s competing business during the twelve-month period following such
acquisition or (ii) pay to Holdings no later than the end of such twelve-month
period $10,000,000 in cash.

(c)        The parties hereto recognize that the Laws and public policies of the
various states of the United States may differ as to the validity and
enforceability of covenants similar to those set forth in this Section 8.5. It
is the intention of the parties that the provisions of this Section 8.5 be
enforced to the fullest extent permissible under the Laws and policies of each
jurisdiction in which enforcement may be sought, and that the unenforceability
(or the modification to conform to such Laws or policies) of any provisions of
this Section 8.5 shall not render unenforceable, or impair, the remainder of the
provisions of this Section 8.5. Accordingly, if any provision of this Section
8.5 shall be determined to be invalid or unenforceable, such invalidity or
unenforceability shall be deemed to apply only with respect to the operation of
such provision in the particular jurisdiction in which such determination is
made and not with respect to any other provision or jurisdiction.

(d)        The parties hereto acknowledge and agree that any remedy at Law for
any breach of the provisions of this Section 8.5 would be inadequate, and
Progress Energy and Progress Fuels hereby consent to the granting by any court
of an injunction or other equitable relief, without the necessity of actual
monetary loss being proved, in order that the breach or threatened breach of
such provisions may be effectively restrained.

8.6 Insurance.

(a)        In the event that, on or after the Closing Date, any of Progress
Energy, Progress Fuels or their Affiliates terminates any insurance coverage
relating to the Companies or the Subsidiaries or any of their respective
predecessors, or any real property currently or formerly owned, operated, leased
or occupied by the Companies, the Subsidiaries or any of their respective
predecessors under the general corporate policies of insurance of Progress
Energy or Progress Fuels for the benefit of all of the Companies and the
Subsidiaries, Progress Energy and Progress Fuels shall ensure that (i) no such
termination of any “occurrence” policy in force as of the Closing Date shall be
effected so as to prevent either Company or any Subsidiary from recovering under
such policies for losses from events, damages or conditions occurring prior to
the Closing Date; and (ii) no such termination of any “claims-made” policy in
force as of the Closing Date shall be effected so as to prevent either Company
or any Subsidiary from recovering under such policies for losses from events,
damages or conditions occurring prior to the Closing Date to the extent the
insurance company or third party claims administrator shall have received
written notice of claims per the terms and conditions of said policy.

(b)        With respect to all insurance claims of the Companies or any
Subsidiary filed prior to the Closing and for those claims of the Companies or
any Subsidiary which have not yet been filed but relate to losses from events or
damages occurring prior to the Closing Date, Progress Energy and/or Progress
Fuels shall be solely responsible for the payment of deductibles, self-insured
retentions, claims adjusting expenses, loss conversion factor expenses,
retro-active premium adjustments, collateral requirements and associated costs,
uninsured losses, legal expenses, audits and any other costs that become due and
payable under the terms of the applicable policy, with respect to such claims
subsequent to the Closing.

(c)        Holdings, the Companies and the Subsidiaries shall have rights under,
and neither Progress Energy nor Progress Fuels shall take any action to prevent
Holdings, the Companies or the Subsidiaries from recovering under, any and all
historic insurance policies (including, without limitation, “occurrence-based”
policies) that may provide coverage for losses arising from or related to
occurrences, events, damages or conditions occurring or arising on or prior to
the Closing Date with respect to the Companies, the Subsidiaries, any of their
respective predecessors, any of their respective operations or any real property
currently or formerly owned, operated, leased or occupied by the Companies, the
Subsidiaries or any of their respective predecessors, Progress Energy and
Progress Fuels shall provide access to such policies for such losses and shall
cooperate with Holdings, the Companies and the Subsidiaries in making and
prosecuting claims under such policies in connection with such losses, and shall
promptly remit any recoveries to Holdings. Holdings, the Companies and the
Subsidiaries will be responsible for compliance with the terms of such insurance
policies regarding timing and adequacy of required notices and other claims
requirements following the Closing.

8.7 Directors’ and Officers’ Insurance. To the extent that it can do so at no
additional cost and so long as it remains with its current insurance carrier,
for a period of six years after the Closing Date, Progress Energy shall
maintain, at its expense, directors and offices, and fiduciary liability
insurance policies which provide coverage in scope and amount equivalent to
those maintained by any Person on behalf of the Companies and the Subsidiaries
prior to the Closing Date for the benefit of those persons who are currently
covered by such policies on terms no less favorable than the terms of such
current insurance coverage.

8.8 Recoveries. Holdings will deliver to Progress Fuels promptly after receipt
by any of the Companies or Subsidiaries, an amount equal to all cash or other
property (net of any out-of-pocket expenses and good faith estimates (which
shall be submitted to Progress Fuels for review) of taxes incurred or to be
incurred as a result of the receipt of, or accrual of the right to, such cash or
other property), if any, received by them after the Closing Date (a) on account
of the rights arising from the Retained Leasing Assets or (b) on account of the
claims held by the Companies and the Subsidiaries in connection with the
Georgetown Steel Bankruptcy; provided, however, that, prior to the Closing,
either of the Companies or any Subsidiary may assign the rights or claims
arising from the Retained Leasing Assets or the claims held by such Company or
such Subsidiary, as the case may be, in connection with the Georgetown Steel
Bankruptcy to Progress Fuels or its designee(s).

ARTICLE IX

SURVIVAL; INDEMNIFICATION

9.1 Limitation on and Survival of Representations and Warranties.

(a)     Holdings acknowledges and agrees that no representations or warranties
have been made by Progress Energy or Progress Fuels in connection with the
transactions contemplated by this Agreement, except for those representations
and warranties made in Article III and Article IV hereof.

(b)     Subject to paragraph (a) of this Section 9.1, all representations and
warranties contained in this Agreement, or in any agreements or instruments
executed in connection herewith or delivered pursuant hereto, shall survive the
Closing for a period of two years beginning on the Closing Date, but not longer;
provided, however, that (i) the representations and warranties contained in
Section 4.14 (Taxes), the covenant set forth in Section 6.1(xi) and the
agreement to indemnify set forth in Section 9.2(a)(xi) hereof shall survive
until sixty (60) calendar days after the expiration of the applicable statute of
limitations (including any valid extensions, whether automatic or permissive)
for the matter giving rise to a claim hereunder, (ii) the representations and
warranties contained in Section 4.12 (Employee Benefits) and Section 4.17
(Environmental and Asbestos) shall survive the Closing for a period of seven
years beginning on the Closing Date and (iii) the representations and warranties
contained in the following sections shall survive indefinitely: Section 3.1
(Ownership of the Shares), Section 3.2 (Organization), Section 3.3
(Authorization; Execution and Delivery; Enforceability) and Section 3.4 (No
Violation or Conflict; Consents); Section 4.1 (Organization; Capitalization of
the Companies), Section 4.2 (Subsidiaries), Section 4.3 (No Violation or
Conflict; Consents), Section 4.15 (Transactions with Affiliates), Section 4.21
(Entire Business), and Section 4.26 (No Broker); and Section 5.1 (Organization),
Section 5.2 (Authorization; Execution and Delivery; Enforceability), Section 5.3
(No Violation or Conflict; Consents), and Section 5.4 (No Broker). Such
representations and warranties shall only be effective with respect to any
breach or claim when notice of such breach or claim shall have been given in
writing to the other party in breach or against whom indemnification is sought
within such period. Any claim for indemnification for which notice (including an
Initial Written Notice under Section 9.7) has been given within the prescribed
period shall be prosecuted to conclusion notwithstanding the subsequent
expiration of such period. Notwithstanding any right of Holdings and its
Affiliates (whether or not exercised) to investigate the affairs of the
Companies and the Subsidiaries or any right of any party (whether or not
exercised) to investigate the accuracy of the representations and warranties of
the other party contained in this Agreement or the waiver of any provision
hereof, Progress Energy and Progress Fuels, on the one hand, and Holdings, on
the other hand, have the right to rely fully upon the representations,
warranties, covenants and agreements of the other contained in this Agreement.

9.2 Indemnification by Progress Energy and Progress Fuels.

(a) Subject to the limitations set forth in Sections 9.1 and 9.4, Progress
Energy and Progress Fuels, jointly and severally, hereby agree to indemnify and
hold harmless Holdings and its stockholders, officers, directors, employees,
agents and the respective Affiliates thereof from and against any and all
claims, demands, suits, proceedings, judgments, losses, Liabilities, damages,
costs and expenses (including, without limitation, reasonable attorneys’ fees
and out-of-pocket expenses, whether incurred before or after the date of this
Agreement, and, in particular, with respect to Holdings and its Affiliates,
those third-party fees and expenses and other out-of-pocket expenses incurred
over the past three years which did not exceed $2 million as of November 30,
2004) (collectively, “Losses”) imposed upon or incurred by Holdings or any such
other indemnified person (any and all such losses by Holdings, a “Holdings
Claim”), whether or not involving a third party claim, as a result of or in
connection with any of the following:

(i) any inaccuracy or breach of a representation or warranty made by Progress
Energy or Progress Fuels under Article III or by Progress Fuels under Article IV
of this Agreement (provided that for any representation or warranty that is
limited by materiality, Material Adverse Effect, Material Adverse Change,
Knowledge or similar terms, an inaccuracy or breach shall be determined as if
such terms were not included therein);

(ii) the breach of, or default in the performance by Progress Energy or Progress
Fuels of, any covenant, agreement or obligation to be performed by Progress
Energy or Progress Fuels pursuant to this Agreement or any agreement or
instrument executed in connection herewith or pursuant hereto;

(iii) (A) the Retained Leasing Liabilities, (B) the Retained Real Property, (C)
the Retained Leasing Assets and (D) 3079936 Nova Scotia Company, including,
without limitation, any Losses arising in connection with such Subsidiary’s
dissolution;

(iv) any Losses not arising in connection with the Business or arising from or
in connection with any assets, businesses or properties formerly owned, formerly
operated, formerly occupied or formerly leased by the Companies, the
Subsidiaries, current or former Affiliates or their respective predecessors,
including, without limitation, relating to or arising under Environmental Laws
or any indemnification obligations or retained liabilities under purchase or
similar agreements executed in connection with the sale of such assets,
businesses or properties;

(v) any Company Transaction Expenses which shall not have been paid by Progress
Energy or Progress Fuels and any Indebtedness of the Companies or the
Subsidiaries;

(vi) (A) any actual or potential litigation or claims set forth in Schedule 4.10
or litigation or claims based upon facts asserted in the litigation or claims
set forth in Schedule 4.10; and (B) the provision of products or services prior
to the Closing, including, without limitation, warranty claims and claims of
nonconformity with specifications or requirements or similar claims (including,
for purposes of clarity, any litigation or claim arising from any warranty
dispute regarding the lining of the railcars leased pursuant to the Lease of
Railroad Equipment dated November 1, 2000 by and between American Rock Salt
Company LLC, as agent for the Livingston County Industrial Development Agency
and Railcar Amrock Trust and all related Lease Supplements) but excluding
Ordinary Rework and matters subject to Sections 9.2(a)(vi)(A), (vii) or (x)
which shall be subject to the indemnities in those respective Sections;

(vii) any Asbestos Matters;

(viii) (A)  arising from or relating to any Plan that is not a Benefit Plan; and
(B) arising from or relating to the use of any surplus of any Canadian Benefit
Plans by Progress Fuels, including any contribution holidays;

(ix) arising from the failure to obtain any consent, approval or authorization
or make any registration or filing required under Section 7.2(c);

(x) Environmental Matters, including, without limitation, matters set forth in
Schedule 4.17 (other than any matters set forth in Schedule 4.17 that are
subject to other indemnities under Section 9.2(a)); provided that any voluntary
investigation, testing, sampling or other similar action performed by Holdings
on the Current Property prior to such time as an indemnification obligation
arises under this Section 9.2(a) shall be at the sole expense of Holdings;

(xi) all liability imposed on the Companies or any of the Subsidiaries for
Taxes, other than income Taxes, attributable (under the principles of Section
8.2(g)(iii) hereof) to Pre-Closing Periods to the extent that the aggregate
amount of such liability (net of the after-tax benefit of any refunds or credits
with respect to such Taxes for Pre-Closing Periods received (whether in the form
of a credit or otherwise) and retained (taking into account any payments
required by this Agreement) by Holdings or its Affiliates after Closing which
were not actually taken into account as an asset in determining Closing Working
Capital and which are not attributable to operations of Holdings and its
Affiliates after the Closing) is in excess of the amount of such Taxes actually
taken into account as a liability in determining Closing Working Capital, after
first subtracting the amount of any payments, credits or rights to refunds or
credits with respect to such Taxes actually taken into account as an asset in
determining Closing Working Capital; and

(xii) either of the Companies or any Subsidiary not owning good and marketable
fee title to the Owned Real Property subject to no Liens, except for Permitted
Liens, or the lack of a title policy or real property survey covering the Owned
Real Property as of the Closing Date in a commercially customary amount, form
and substance; provided, however, that, with respect to any Owned Real Property,
the provisions of this Section 9.2(a)(xii) shall terminate with respect to such
Owned Real Property at such time that Holdings receives a title policy covering
such Owned Real Property in a commercially customary amount, form and substance.

(b) Promptly after receipt by Holdings of notice of an Action or other event
giving rise to a Holdings Claim with respect to which Holdings may be entitled
to indemnification under this Section 9.2, Holdings shall notify Progress Energy
in writing of the commencement of such Action or the assertion of such Holdings
Claim (the “Holdings Claim Notice”); provided, however, that failure to give
such notice shall not affect the right to indemnification hereunder except to
the extent of actual prejudice. Progress Energy shall have the option, and shall
notify Holdings in writing within ten business days after the date of the
Holdings Claim Notice of its election either: (i) to participate (at the expense
of Progress Energy) in the defense of such Action or Holdings Claim (in which
case the defense of such Action or Holdings Claim shall be controlled by
Holdings) or (ii) to take charge of and control the defense of such Action or
Holdings Claim (at the expense of Progress Energy); provided, however, that
where an Action or Holdings Claim relates to Taxes and involves Taxes other than
Taxes for which Holdings or its Affiliates is entitled to indemnification under
this Agreement, Progress Energy shall only take charge of and control the
portion of such proceeding that relates to Taxes for which Holdings or its
Affiliates is entitled to indemnification under this Agreement and Holdings
shall control the remainder of such proceeding relating to Taxes. As permitted
herein, if Progress Energy elects to control the defense, it will not compromise
or settle the Action or Holdings Claim if (A) the amount to be paid in
settlement exceeds the Maximum Indemnity Amount or (B) the settlement does not
include a provision releasing Holdings from all Liabilities with respect thereto
and, further, Progress Energy may only compromise or settle a third party claim
(other than such third party claim in which criminal conduct is alleged) without
Holdings’ consent if such settlement or compromise (1) constitutes a complete
and unconditional discharge and release of Holdings, and (2) provides for no
relief other than the payment of monetary damages and such monetary damages are
paid in full by Progress Energy. Where an Action of Holdings Claim involves
Taxes, Progress Energy may compromise or settle such claim only with the prior
written consent of Holdings, which consent may not be unreasonably withheld. If
Progress Energy fails to notify Holdings of its election within the applicable
response period, then Progress Energy shall be deemed to have elected not to
control the defense of such Action or Holdings Claim. If Progress Energy elects
to assume the defense of any Action or Holdings Claim, Holdings shall have the
right to employ separate counsel and participate in the defense of such Action
or Holdings Claim, but the fees and expenses of such counsel shall be at the
expense of Holdings unless: (x) the named parties in such Action or Holdings
Claim (including any impleaded parties) include both Holdings and an
indemnifying party and Holdings shall have been advised by such counsel that
there may be one or more legal defenses available to it that are different from
or additional to those available to the indemnifying party, or (y) Holdings has
reasonably determined that losses which may be incurred may exceed either
individually, or when aggregated with other Holdings Claims, the Maximum
Indemnity Amount (in which case Progress Energy shall not have the right to
control the defense of such Action or Holdings Claim on behalf of Holdings, it
being understood, however, that Holdings shall not, in connection with such
Action or Claim be liable for the fees and expenses of more than one separate
firm of attorneys (in addition to any local counsel) and that all such fees and
expenses shall be reimbursed as they are incurred). The parties will provide
each other with reasonable access to business records and personnel as may be
reasonably necessary to defend any Action or Holdings Claim involving any third
party claim.

(c) The parties acknowledge that, upon the Closing, Progress Energy will take
charge of and control the defense of all matters set forth in Schedule 4.10 as
contemplated by Section 9.2(b)(ii) and that Holdings shall be deemed to have
provided a Holdings Claim Notice with respect thereto. The Companies and the
Subsidiaries will provide reasonable assistance in connection with the
transition of the defense of the matters set forth in Schedule 4.10.

(d) If Progress Energy does not control the defense of any Action or Holdings
Claim, then Holdings may settle such Action or Holdings Claim with the written
consent of Progress Energy (not to be unreasonably withheld).

9.3 Indemnification by Holdings.

(a) Subject to the limitations set forth in Section 9.4, Holdings hereby agrees
to indemnify and hold Progress Fuels harmless from and against any and all
Losses imposed upon or incurred by Progress Fuels (any of such Losses by
Progress Fuels, a “Progress Fuels Claim”), as a result of or in connection with
any of the following:

(i) any inaccuracy or breach of a representation or warranty made by Holdings in
this Agreement or in any agreement or instrument executed in connection herewith
or pursuant hereto; or

(ii) the breach of or default in the performance by Holdings of any covenant,
agreement or obligation to be performed by Holdings pursuant to this Agreement
or any agreement or instrument executed in connection herewith or pursuant
hereto.

(b) Promptly after receipt by Progress Fuels of notice of the commencement of an
Action or other event giving rise to a Progress Fuels Claim with respect to
which Progress Fuels is entitled to indemnification, the party receiving such
notice shall notify Holdings in writing of the commencement of such Action or
the assertion of such Progress Fuels Claim (the “Progress Fuels Claim Notice”);
provided, that failure to give such notice shall not affect the right to
indemnification hereunder except to the extent of actual prejudice. Holdings
shall have the option, and shall notify each indemnified party in writing within
ten business days after the date of the Progress Fuels Claim of its election
either: (i) to participate (at its own expense) in the defense of the Action or
Progress Fuels Claim (in which case the defense of such Action or Holdings Claim
shall be controlled by the indemnified party) or (ii) to take charge of and
control defense of such Action or Progress Fuels Claim (at its own expense). If
Holdings fails to notify the indemnified party of its election within the
applicable response period, then Holdings shall be deemed to have elected not to
control the defense of such Action or Progress Fuels Claim. If Holdings elects
to assume the defense of any Action or Progress Fuels Claim, each indemnified
party shall have the right to employ separate counsel and participate in the
defense of any such Action or Progress Fuels Claim, but the fees and expenses of
such counsel shall be at the expense of the indemnified party unless: the named
parties in such Action or Progress Fuels Claim (including any impleaded parties)
include both the indemnified party and Holdings and the indemnified party shall
have been advised by such counsel that there may be one or more legal defenses
available to it that are different from or additional to those available to
Holdings (in which case Holdings shall not have the right to assume the defense
of such Action or Progress Fuels Claim on behalf of the indemnified party, it
being understood, however, that Holdings shall not, in connection with such
Action or Progress Fuels Claim be liable for the fees and expenses or more than
one separate firm of attorneys (in additional to any local counsel) and that
such fees and expenses shall be reimbursed as they are incurred). The parties
will provide each other with reasonable access to business records and personnel
as may be reasonably necessary to defend any Action or Progress Fuels Claim
involving any third party claim.

(c) If Holdings does not control the defense of any Action or Progress Fuels
Claim, then the indemnified party or parties may settle such Action or Progress
Fuels Claim with the written consent of Holdings (not to be unreasonably
withheld).

9.4 Limitation of Liability. Notwithstanding the foregoing, (a) neither Progress
Energy nor Progress Fuels shall be obligated to indemnify Holdings, and Holdings
shall not be obligated to indemnify Progress Fuels pursuant to this Article IX
unless and until the amount of all Losses incurred by Holdings, or by Progress
Fuels, as the case may be, taken as a group, exceeds two million five hundred
thousand dollars ($2,500,000) in the aggregate (the “Basket”), in which event
the party seeking indemnity may recover all Losses incurred from the first
dollar, (b) Progress Fuels’ maximum liability for Losses under Section 9.2 and
Holdings’ maximum liability for Losses under Section 9.3 shall be, in each case,
one hundred one million two hundred fifty thousand dollars ($101,250,000);
provided, however, that Progress Energy’s and Progress Fuels’ liability under
Sections 3.1, 4.2(a), 4.10, 4.14 (with respect to income Taxes and only if
Section 8.2 applies), 9.2(a)(ii), (iii), (iv), (v), (vi)(A), (vii), (viii), (ix)
and (xii) and Holdings’ liability under Section 9.3(a)(ii) shall not be subject
to the Basket and shall be unlimited; provided, further, that Progress Energy
and Progress Fuels’ obligations under Sections 9.2(a)(vi)(B) and (x) shall
survive the Closing for a period of seven years beginning on the Closing Date,
with Progress Energy and Progress Fuels remaining obligated thereunder for any
claim for which notice (including, without limitation, an Initial Written Notice
under Section 9.7) has been given within the seven-year period notwithstanding
the subsequent expiration of such period (and with respect to Section 9.2(a)(x)
and Section 9.2(a)(i), Progress Energy and Progress Fuels have an
indemnification obligation that does not cease after the seven year anniversary
of the Closing Date if the requirements of Section 9.8(b) are not met for any
Environmental Response Actions or if any other indemnification or other
obligations remain with respect to an Environmental Matter for which the
required notice was given during the seven-year period, (c) neither Progress
Energy nor Progress Fuels shall be obligated to indemnify pursuant to
Section 9.2(a)(vi)(B) unless and until the amount of all Losses incurred by
Holdings exceeds two hundred fifty thousand dollars ($250,000) in the aggregate
in any twelve-month period beginning on the Closing Date; and (d) neither
Progress Energy nor Progress Fuels shall be obligated to indemnify pursuant to
Section 9.2(a) with respect to any liability to the extent it is reflected in
the Closing Working Capital.

9.5 Indemnity Amounts to be Computed on After Tax Basis. The amount of any
indemnification payable under any of the provisions of this Article IX shall be
(i) net of any federal, foreign or state income Tax benefit realized or the then
present value (based on a discount rate of five percent (5%)) of any such income
Tax benefit to be realized by such indemnified party (and, where Holdings is the
indemnified party, any of the Companies and the Subsidiaries) or any
consolidated or similar group that includes the indemnified party by reason of
the facts and circumstances giving rise to the indemnification after taking into
account the provisions of this Agreement relating to the allocation of rights
and responsibilities with respect to Tax items, and (ii) increased by the amount
of any federal, foreign or state income Tax required to be paid by the
indemnified party (and, where Holdings is the indemnified party, any of the
Companies and the Subsidiaries) or any consolidated or similar group that
includes the indemnified party on the accrual or receipt of the indemnification
payment (including any amount payable pursuant to this clause (ii)). For
purposes of the preceding sentence, the amount of any state income Tax benefit
or cost shall take into account the federal income Tax effect of such benefit or
cost.

9.6 Exclusive Remedy. After the Closing, the parties’ sole and exclusive
recourse against each other for any Loss or claim of Losses arising out of or
relating to this Agreement shall be expressly limited to the provisions of
Sections 8.2 and 8.5 and this Article IX. Notwithstanding anything contained in
this Agreement or any other agreement to the contrary, after the Closing neither
Progress Energy, Progress Fuels nor any Affiliate of Progress Energy or Progress
Fuels shall be entitled to any damages, indemnification, right of contribution
or other right of recovery from the Companies or any Subsidiary in connection
with any matter or thing whatsoever, including, without limitation, in
connection with any claim made by or which could be made against Progress Energy
or Progress Fuels or with respect to which either Company or any Subsidiary
could be liable for, all of which are irrevocably waived and released by
Progress Energy or Progress Fuels. In furtherance and not in limitation of the
foregoing, Progress Energy and Progress Fuels, on behalf of themselves, and
their successors and assigns, as of the Closing, hereby release and forever
discharge the Companies and the Subsidiaries for and from any Actions, Losses,
Contracts (other than those three Contracts listed in Schedule 4.9(f) with
respect to performance after the Closing), Liabilities or Indebtedness which
Progress Energy or Progress Fuels ever had, now has, or hereafter can, shall or
may have against either Company or any Subsidiary for, upon or by reason of any
matter, cause or thing whatsoever from the beginning of time through the Closing
Date.

9.7 Procedures for Environmental Response Actions.

(a) Notwithstanding anything in this Agreement to the contrary, including, but
not limited to, any contrary provisions in Section 9.2(b), Progress Energy shall
have the right to control, conduct and implement all investigations, studies,
tests, abatement, monitoring, cleanup, removal, remediation, restoration or
other response actions (“Environmental Response Action”) for which Progress
Energy or Progress Fuels has an indemnification obligation under
Sections 9.2(a)(i) and 9.2(a)(x) and any Environmental Response Actions which
are included in the Basket as described by Section 9.4(i) that arise under or
relate to Environmental Laws in effect as of the Closing Date with respect to
any Current Property (a “Progress Controlled Environmental Response Action”).
Progress Energy and Holdings shall comply with the requirements and procedures
contained in this Section 9.7 with respect to Environmental Response Actions at
any Current Property for which Progress Energy or Progress Fuels has an
indemnification obligation under Sections 9.2(a)(i) or 9.2(a)(x); provided,
however, the failure to comply with the requirements of this Section 9.7 shall
not affect the right to indemnification hereunder except to the extent of actual
prejudice to Progress Energy, and provided further, with respect to any Leased
Real Property, Progress Energy shall comply with any and all requirements,
obligations, procedures and/or time frames set forth in the relevant Applicable
Lease Agreement to the extent such procedures, requirements, obligations or
requirements in the Applicable Lease Agreement are more stringent than or
otherwise are inconsistent with those set forth herein and are required pursuant
to an Environmental Claim brought by a Person with rights under an Applicable
Lease Agreement (after the exhaustion of any administrative remedies or
litigation appeals that Progress Energy chooses to pursue at its sole cost and
expense). Progress Energy and Holdings shall comply with the requirements and
procedures set forth in Section 9.7 for all Environmental Response Actions that
are subject to the Basket as described by Section 9.4(i) (other than with
respect to payment obligations). Holdings shall promptly reimburse Progress
Energy for reasonable costs incurred by Progress Energy arising out of an
Environmental Response Action for which Holdings has provided an Approval
Notification pursuant to Section 9.7(g) or other written approval from Holdings
or pursuant to the last sentence in Section 9.7(g) that are subject to the
Basket and are the responsibility of Holdings under Section 9.4. Progress Energy
shall have the right to split soil or groundwater samples to be voluntarily
taken by Holdings on any Current Property concerning which an indemnification
obligation could potentially arise. Holdings agrees to notify Progress Energy
reasonably in advance of the sampling event to allow Progress Energy to exercise
this option and Holdings will provide Progress Energy with the date and time of
the sampling event and access to the relevant Current Property at that time;
provided, however, that the failure to give such notice shall not affect the
right to indemnification hereunder except to the extent of actual prejudice to
Progress Energy. Progress Energy shall not interfere with Holdings’ conduct of
the sampling event.

(b) With respect to any Progress Controlled Environmental Response Action,
Holdings shall provide initial written notice to Progress Energy, setting forth
with reasonable particularity (to the extent then known) the nature of the
condition or event giving rise to the Environmental Response Action for which
Progress Energy has or may have an indemnification obligation under Section
9.2(a) (each such notice, an “Initial Written Notice”). Holdings shall provide
Progress Energy with copies of sampling data, environmental reports, proposals
and correspondence in the possession of Holdings relevant to the subject matter
of the Initial Written Notice; provided, however, that failure to give such
information shall not affect the right to indemnification hereunder except to
the extent of actual prejudice to Progress Energy. The Initial Written Notice
shall be sent by Holdings as soon as practicable after discovery of the
condition or event giving rise to the indemnification obligation and, to the
extent commercially reasonable, prior to any relevant reporting requirement
under applicable Environmental Laws (other than with respect to any reporting
requirements that first arose prior to the Closing Date, even if such reporting
requirements continue after the Closing Date); provided, however, that failure
to give such information shall not affect the right to indemnification hereunder
except to the extent of actual prejudice to Progress Energy. Progress Energy
shall not be responsible for penalties assessed by a Governmental Authority that
arise out of Holdings’ failure to use commercially reasonable efforts to provide
the Initial Written Notice within the time frame set forth in this
Section 9.7(b) (other than with respect to any reporting requirements that first
arose prior to the Closing Date, even if such reporting requirements continue
after the Closing Date); provided, however, failure to give the notice within
the time frame set forth in this Section 9.7(b) shall not affect the right to
indemnification hereunder except to the extent of actual prejudice to Progress
Energy. Should it become necessary for Holdings to contact a Government
Authority in writing prior to issuance of the Initial Written Notice, to the
extent practicable, Holdings shall provide Progress Energy a draft of that
correspondence and an opportunity to promptly respond with comments before it is
submitted; provided, however, failure to provide the draft shall not affect the
right to indemnification hereunder except to the extent of actual prejudice to
Progress Energy.

(c) Upon receipt of an Initial Written Notice pursuant to Section 9.7(b) that
relates to the presence or Release of Hazardous Materials in soil and/or
groundwater at any Current Property, Progress Energy shall have the option of:
(i) promptly developing and implementing an appropriate Environmental Response
Action in accordance with the procedures and time frames set forth in Section
9.7(d)-(m); or (ii) delaying the development and implementation of an
Environmental Response Action until such time as the development and
implementation of an Environmental Response Action for which Progress Energy has
an indemnification obligation under Section 9.2(a)(x) or 9.2(a)(i) is required
by an Environmental Law, a Governmental Authority (after the exhaustion of any
administrative remedies that Progress Energy may choose to pursue at its sole
cost and expense) or an Environmental Claim (including, without limitation, an
Environmental Claim relating to an Applicable Lease Agreement) (after the
exhaustion of any administrative remedies or litigation appeals that Progress
Energy may choose to pursue at its sole cost and expense). Progress Energy and
Progress Fuels shall be solely responsible for any and all Losses incurred by
Holdings associated with Progress Energy’s decision to pursue the option
described in this Section 9.7(c)(ii). An Initial Written Notice shall be deemed
to be notice of a claim for indemnification by Holdings for purposes of the
seven-year survival period set forth in Section 9.4 (with respect to
Section 9.2(a)(x)) and Section 9.1(b) regardless of whether Progress Energy
and/or Progress Fuels has elected to promptly develop and implement an
Environmental Response Action or delay the development and implementation of an
Environmental Response Action pursuant to this Section 9.7(c) and Progress
Energy and Progress Fuels’ obligations under Section 9.2(a)(x) and
Section 9.2(a)(i) shall continue until the requirements of Sections 9.8(b) and
9.2(a) have been satisfied.

(d) As soon as practicable, but no later than forty-five (45) days after receipt
of the Initial Written Notice, Progress Energy will provide Holdings with a
written response that provides the following information: (1) whether Progress
Energy intends to promptly develop and implement an Environmental Response
Action or delay the development and implementation of an Environmental Response
Action in accordance with the options and requirements in Section 9.7(c); and
(2) if Progress Energy intends to promptly develop and implement an
Environmental Response Action, the following information should be provided with
reasonable particularity (to the extent reasonable particularity is feasible
based upon the information provided in the Initial Written Notice): (i) the
nature of the activities proposed to be undertaken, taking into consideration
any means of minimizing significant impacts on the use and operations of
Holdings on the relevant Current Property as well as the costs of the
Environmental Response Action alternatives; (ii) the identity of the
environmental professional proposed to undertake the action; (iii) the proposed
time frame for undertaking the proposed action (including interim milestones to
the extent appropriate); and (iv) the estimated cost associated with such action
(to the extent then estimable) (each such notice, an “Environmental Response
Action Proposal”).

(e) Holdings shall promptly provide Progress Energy with a copy of any and all
written notices received from a Governmental Authority or third party requiring
an Environmental Response Action or issuing or asserting an Environmental Claim
with respect to any matter for which an Initial Written Notice was issued;
provided, however, that failure to give such information shall not affect the
right to indemnification hereunder except to the extent of actual prejudice to
Progress Energy. In the event that Progress Energy has elected to delay
development and implementation of an Environmental Response Action pursuant to
Section 9.7(c)(ii), Progress Energy will promptly address any subsequent
requirement of an Environmental Law, a Governmental Authority (after the
exhaustion of any administrative remedies or litigation appeals that Progress
Energy chooses to pursue at its sole cost and expense) of which it has
knowledge, or Environmental Claims (after the exhaustion of any administrative
remedies or litigation appeals that Progress Energy chooses to pursue at its
sole cost and expense) of which it has knowledge, by preparing and implementing
an Environmental Response Action Proposal in accordance with the provisions of
Sections 9.7(d)(2)-9.7(n). The Environmental Response Action Proposal shall be
submitted to Holdings as soon as practicable, but no later than forty-five (45)
days after receipt of any written notice from Holdings or earlier to the extent
required by an Applicable Agreement relevant to a requirement of an
Environmental Law, a Governmental Authority or Environmental Claim. Should
Progress Energy need to comply with requirements of an Environmental Law, a
Governmental Authority, or an Environmental Claim prior to submittal of the
Environmental Response Action Proposal to Holdings, Holdings agrees to
reasonably cooperate with Progress so as to facilitate and not impede Progress
Energy from fulfilling those requirements; provided, however, any failure to
cooperate shall not affect the right to indemnification hereunder, except to the
extent of actual prejudice to Progress Energy.

(f) All Progress Controlled Environmental Response Actions shall be performed by
an environmental professional reasonably acceptable to Holdings and Progress
Energy. At Holdings’ request, Progress shall provide Holdings with information
concerning the certifications, education, professional licensure, experience,
and any other relevant qualifications of the environmental professional chosen
by Progress Energy within fifteen (15) days of receipt of the Environmental
Response Action Proposal. Holdings agrees that it will not unreasonably object
to the environmental professional chosen by Progress Energy. Any consultant
retained by Progress Energy to conduct work pursuant to a Progress Controlled
Environmental Response Action must hold and maintain insurance of the types and
amounts that are customary in the industry and Holdings, the Companies and
Subsidiaries shall be added as additional named insureds on such policies.

(g) Holdings shall, as soon as practicable, but no later than forty-five (45)
days after receipt of the Environmental Response Action Proposal, notify
Progress Energy, in writing, that Holdings, in whole or in part, approves of
(“Approval Notification”) or objects to (“Dispute Notification”) such
Environmental Response Action Proposal, including the selection of the
environmental professional. Issuance of such Approval Notification shall grant
Progress Energy, its representatives and consultants necessary reasonable rights
of access to the relevant Current Property to conduct activities in conjunction
with the Environmental Response Action Proposal, unless otherwise stated in the
Approval Notification or thereafter; provided, however, that Progress Energy
shall provide reasonable prior notice of any dates or times Progress Energy or
its consultants or representatives plan to access the relevant Current Property
and shall accommodate Holdings’ schedule to the extent practicable. In the event
Holdings objects, in whole or in part, to an Environmental Response Action
Proposal, Holdings shall notify Progress Energy, in writing, of its specific
disagreement regarding such Environmental Response Action Proposal and provide
an alternative proposal in the Dispute Notification. Holdings agrees that its
approval of an Environmental Response Action Proposal shall not be unreasonably
withheld. In the event Holdings fails to approve or object to the Environmental
Response Action Proposal within forty-five (45) days after its receipt thereof
(unless a longer period of time is mutually agreed upon by the Parties), the
Environmental Response Action Proposal shall be deemed approved. Nothing in this
Section 9.7(g) shall prevent Holdings or Progress Energy from complying with
applicable reporting or notification requirements pursuant to Environmental Laws
with respect to the subject matter of an Environmental Response Action Proposal
or Initial Written Notice. In the case of a Progress Controlled Environmental
Response Action, Holdings agrees to reasonably cooperate with Progress Energy,
after the issuance of an Initial Notification and prior to receipt of an
Approval Notification or Dispute Notification under this Section, so as to
facilitate and not impede Progress Energy from fulfilling any such requirements
under Environmental Laws or imposed by a Governmental Authority that must be
addressed and/or satisfied sooner than the forty-five (45) day time period in
this Subsection; provided, however, any failure to cooperate shall not affect
the right to indemnification hereunder, except to the extent of actual prejudice
to Progress Energy.

(h) In the event Holdings objects to an Environmental Response Action Proposal
or any portion thereof under the previous paragraph, Holdings and Progress
Energy shall thereafter negotiate in good faith in an attempt to reach agreement
as to the disputed Environmental Response Action Proposal. In the event Holdings
and Progress Energy are unable to resolve the dispute within a reasonable period
of time, the parties shall resolve the dispute in accordance with their rights
under this Agreement and applicable Law.

(i) With respect to any such Progress Controlled Environmental Response Action,
Progress Energy agrees to provide Holdings with the following: (i) copies of all
work plans, test results, sampling data, surveys and other data generated by
Progress Energy and its representatives, promptly upon the availability thereof,
but in any event, prior to submitting the same to any Governmental Authority;
(ii) copies of all material draft reports and final reports, plans and other
documents developed with respect to the Environmental Response Action, including
any such materials to be submitted to any Governmental Authority prior to any
such submission; (iii) an opportunity to meet with Progress Energy and/or its
representatives prior to and following any substantive communications or
meetings with any Governmental Authority, (iv) the opportunity to participate in
substantive communications or meetings with Governmental Authorities; and (v) an
opportunity to timely comment upon the foregoing and any other proposed material
determinations or actions relating to investigative, testing and remedial
actions and the reporting of the same to any Governmental Authority.

(j) In the event Holdings (or its respective Affiliates, consultants or
representatives) have information or documentation relevant to the matter giving
rise to an Initial Written Notice, Holdings shall reasonably cooperate with
Progress Energy with respect to such matter, including, without limitation:
(i) providing copies of relevant information and documents to Holdings
reasonably requested by Progress Energy; and (ii) providing reasonable access to
personnel and outside representatives and consultants of Holdings (or their
respective Affiliates) that may be knowledgeable about the specific matter.

(k) Progress Energy agrees to diligently perform (or direct its consultants to
perform) the Progress Controlled Environmental Response Action in a good and
workman-like manner in accordance with accepted industry practices and standards
in compliance with applicable Environmental Laws and shall comply with any of
the Companies’ or the Subsidiaries’ site-specific health and safety requirements
or policies (which shall be provided to Progress Energy prior to accessing the
relevant Current Property). Progress Energy will follow the proposed schedule
provided in the Environmental Response Action in all material respects. Should
material changes be necessary to the proposed schedule, Progress Energy shall
promptly provide a revised schedule to Holdings. Holdings shall have the
opportunity to dispute the revised schedule by providing a Dispute Notification
and following the procedures in Subsections (e) and (f) of this Subpart.

(l) Circumstances in which Holdings Shall Temporarily or Permanently Control the
Environmental Response Action:

(i) Progress Energy may opt out of controlling, conducting and implementing the
Environmental Response Action. To the extent Progress Energy declines to
exercise its ability under this Section 9.7 to control, conduct and implement
any Environmental Response Action, Holdings shall have the right to control,
conduct and implement the relevant Environmental Response Action provided the
procedures in this Section 9.7 shall be complied with, substituting in each case
(other than payment obligations), Holdings for Progress Energy and vice versa (a
“Holdings Controlled Environmental Response Action”). Should Progress Energy
exercise this option, it shall provide timely written notification of its
decision to relinquish control. In no circumstances will Progress Energy
exercise this option in a manner that would jeopardize Holdings’ ability to
comply with a deadline imposed by a Governmental Authority or Environmental Laws
with respect to the Environmental Response Action activities.

(ii) If Holdings has an interest in controlling, conducting and/or implementing
a particular Environmental Response Action, it may submit a written request to
Progress Energy to control, conduct and/or implement the Environmental Response
Action. Progress Energy shall promptly respond to the request in writing. If
Progress Energy waives its ability to control, conduct and/or implement the
Environmental Response Action, Holdings may institute a Holdings Controlled
Environmental Response Action.

(iii) If Environmental Response Action activities must be performed within
forty-eight (48) hours of discovery of the event giving rise to the indemnity
obligation pursuant to a deadline imposed by a Governmental Authority or an
Environmental Law, Holdings may temporarily control, conduct and implement the
relevant Environmental Response Action activities. The procedures in
Section 9.7(b)-(n) continue to apply in this circumstance, and Progress Energy
will retain control over the Environmental Response Action upon receipt of the
Initial Written Notice by Holdings.

(iv) If Progress has failed to diligently undertake or implement the
Environmental Response Action in a good and workman-like manner in accordance
with accepted industry practices and standards or follow the proposed or revised
schedule provided in the Environmental Response Action in material respects,
Holdings shall notify Progress Energy, in writing, including a description of
the basis for its contention and a proposal to cure the alleged deficiencies,
including a proposed, reasonable time frame for correction. Progress shall have
the opportunity to cure any deficiencies in its performance within Holdings’
proposed time frame for correction or within (30) days of receipt of the
notification of Holdings, whichever is later, unless a shorter time frame is set
by an Environmental Law or Governmental Authority, in which case the shorter
time frame specified by the Environmental Law or Governmental Authority shall
apply. If the deficiencies are not timely cured, Holdings shall have the right
to institute a Holdings Controlled Environmental Response Action.

(v) Progress Energy and/or Progress Fuels shall promptly reimburse Holdings for
any and all Losses incurred by Holdings with respect to any actions undertaken
by Holdings pursuant to this Section 9.7(l) for which Progress Energy or
Progress Fuels have an indemnification obligation under Section 9.2(a).

(m) All notices under this subpart shall comply with requirements of Section
11.7.

(n) Notwithstanding anything to the contrary in Sections 9.7 and 9.8, to the
extent practicable, Progress Energy will develop and implement the relevant
Environmental Response Actions in a manner that does not materially interfere
with Holdings’, the Companies’ or the Subsidiaries’ operations at the relevant
Current Real Property.

9.8 Standards for Environmental Response Actions.

(a) Notwithstanding anything in this Agreement to the contrary, the Parties
agree that the applicable remediation standard with respect to any Environmental
Response Action at any Current Property for which Progress Energy and Progress
Fuels have an indemnification obligation under Section 9.2(a)(x) and
Section 9.2(a)(i), shall be the least costly or least stringent standard that:
(1) complies with applicable Environmental Laws in effect as of the Closing
Date; (2) complies with applicable Permits required pursuant to Environmental
Laws in effect as of the Closing Date; (3) complies with and is consistent with
(i) settlements, Environmental Claims (including any Environmental Claims
relating to Applicable Lease Agreements), after exhaustion of any administrative
remedies or litigation appeals that Progress Energy may choose to pursue at its
sole cost and expense, and other agreements entered into with third parties or
Governmental Authorities with respect to a Progress Controlled Environmental
Response Action or Holdings Controlled Environmental Response Action, as the
case may be, at any Current Property for which Progress Energy or Progress Fuels
have an indemnification obligation under Section 9.2(a)(x) or 9.2(a)(i);
(ii) consent decrees, consent agreements, consent orders or other orders issued
by or entered into with Governmental Authorities with respect to an
Environmental Response Action at any Current Property for which Progress Energy
or Progress Fuels have an indemnification obligation under Section 9.2(a)(x) or
9.2(a)(i); and (4) is consistent with Holdings’, the Companies’ or the
Subsidiaries’ industrial use of the relevant Current Property (the “Least
Stringent Standard”); provided, however, Progress Energy and Progress Fuels
shall comply with a standard that is more stringent than the Least Stringent
Standard in the event required by an Environmental Claim (after the exhaustion
of any administrative remedies or litigation appeals that Progress Energy
chooses to pursue at Progress Energy’s sole cost and expense) brought by a
Person with rights under an Applicable Lease Agreement.

(i) To the extent that Holdings desires that the Environmental Response Action
achieve a remediation standard that exceeds or is more costly than the Least
Stringent Standard, the parties shall negotiate, in good faith, a separate set
of site-specific procedures with respect thereto, and Holdings shall bear the
additional costs associated with pursuing the more stringent or costly remedy
(other than where the more stringent or costly remedy is required by this
Section 9.8(a)).

(ii) The “Least Stringent Standard” for the purposes of Section 1.36(i)
(definition of Environmental Matters) may differ from the “Least Stringent
Standard” for purposes of Section 9.8(b).

(b) Progress Energy’s and Progress Fuels’ indemnification obligations under
Section 9.2(a)(x) and Section 9.2(a)(i) with respect to an Environmental
Response Action at any Current Property for which an Initial Written Notice has
been provided by Holdings prior to the seventh anniversary of the Closing Date,
shall be deemed complete (i) upon receipt of a “no further action” letter or the
equivalent thereof with respect to such Environmental Response Action from an
appropriate Governmental Authority with jurisdiction over the relevant Current
Property and Environmental Response Action, or (ii) if it is a type of
Environmental Response Action for which a “no further action” letter or the
equivalent thereof is not typically issued, the receipt of a certification from
an environmental consultant approved by Holdings and Progress Energy (such
approval not to be unreasonably withheld) that the requirements of the Least
Stringent Standard have been achieved; and (iii) with respect to a Leased Real
Property where an Environmental Claim brought by a Person with rights under an
Applicable Lease Agreement (after the exhaustion of any administrative remedies
or litigation appeals that Progress Energy may choose to pursue at its sole cost
and expense) requires an Environmental Response Action that is more stringent
than the Least Stringent Standard (A) upon completion of the implementation of
the required more stringent Environmental Response Action, and (B) to the extent
requested by Holdings, upon receipt of written confirmation from the owner of
the Real Property (or other Person with rights under the Applicable Lease
Agreement) that the obligations under the Applicable Lease Agreement with
respect to the Environmental Response Action have been satisfied (except to the
extent that such written confirmation cannot be obtained after Progress Energy
has used best efforts to obtain such written confirmation).

(c) Notwithstanding anything to the contrary in Section 9.7 and 9.8, Progress
Energy shall not be responsible for any obligations or requirements contained in
any Applicable Lease Agreements arising out of an Environmental Response Action
at any Leased Real Property that would not have been required but for changes in
applicable Environmental Laws after the Closing Date.

9.9 Insurance Proceeds. Each party agrees that it will use commercially
reasonable efforts to obtain insurance proceeds under existing policies and the
amount of indemnification under Article IX shall be reduced by the amount of
insurance proceeds actually received by the indemnified party (net of any
expenses incurred relating to such insurance claim), and if the indemnification
payment has already been made by the indemnifying party, then the indemnified
party shall pay over the insurance proceeds to the extent the insurance proceeds
received do not exceed the indemnification payment plus the amount of other
Losses with respect to which no indemnification payment has been made; provided,
further, that this Section 9.9 shall not relieve any indemnifying party of its
obligations hereunder.

9.10 Procedures and Standards for Asbestos Abatement.

(a)     Notwithstanding anything in this Agreement to the contrary, these
provisions shall govern the procedures and standards for Abatement of Asbestos
(“Asbestos Abatement”) at any Current Property for which Progress Energy and/or
Progress Fuels has an indemnity obligation under Section 9.2.

(b)     For any Asbestos located at any Current Property for which Progress
Energy and/or Progress Fuels has an indemnification obligation under Section
9.2, Holdings shall submit an Initial Written Notification to Progress Energy in
the same manner described by Section 9.7(c) along with (i) copies of any
inspections, surveys, testing data, reports and other documentation in the
possession of Holdings relevant to the subject matter of the Initial Written
Notice; (ii) the nature of the activities proposed to be undertaken; (iii) the
identity of the asbestos professional proposed to undertake the action; and
(iv) the estimated cost associated with such action (to the extent then
estimable) (an “Asbestos Abatement Proposal”). Any such Asbestos Abatement
Proposal shall be exchanged, handled and implemented as between Holdings and
Progress Energy, consistent (to the extent practicable) with the procedures for
implementing a Holdings Controlled Environmental Response Action under
Section 9.7 of this Agreement. Progress Energy shall have an opportunity to
promptly verify the information forming the basis of the claimed indemnity
obligation at its own expense. Holdings shall reasonably cooperate and
facilitate such verification to the extent that Progress Energy needs reasonable
access to the relevant Current Property to conduct a verification investigation.

(c)     Notwithstanding anything in this Agreement to the contrary, the Parties
agree that the applicable standard with respect to any Asbestos Abatement at any
Current Property for which Progress Energy and Progress Fuel have an
indemnification obligation under Section 9.2(a)(vii) and Section 9.2(a)(i) shall
be the least costly or least stringent standard that: (1) complies with
applicable Asbestos Laws in effect as of the Closing Date; (2) complies with
applicable Permits required pursuant to Asbestos Laws in effect as of the
Closing Date; (3) complies with and is consistent with (i) settlements, Claims
(including any such Claims relating to Applicable Lease Agreements) after
exhaustion of any administrative remedies or litigation appeals that Progress
Energy may choose to pursue at its sole cost and expense and other agreements
entered into with third parties or Governmental Authorities with respect to an
Asbestos Abatement at any Current Property; or (ii) consent decrees, consent
agreements or orders issued by Governmental Authorities with respect to an
Asbestos Abatement at any Current Property; and (4) is consistent with
Holdings’, the Companies’ or the Subsidiaries’ industrial use of the relevant
Current Property (the “Least Stringent Abatement Remedy”); provided, however,
Progress Energy and Progress Fuels shall comply with a standard that is more
stringent than the Least Stringent Abatement Remedy in the event required by an
Environmental Claim (after the exhaustion of any administrative remedies or
litigation appeals that Progress Energy chooses to pursue and Progress Energy’s
sole cost and expense) brought by a Person with rights under an Applicable Lease
Agreement. Except as required by the preceding sentence, in the event that
Holdings desires that the Asbestos Abatement achieve a standard that exceeds or
is more costly than the Least Stringent Abatement Remedy, the parties agree to
negotiate, in good faith, a separate set of site-specific procedures with
respect thereto, and Holdings shall bear the additional costs associated with
pursuing the more stringent or costly remedy.

(d)     Progress Energy and/or Progress Fuels shall promptly reimburse Holdings
for any and all Losses incurred by Holdings with respect to any actions
undertaken by Holdings with respect to any Asbestos Abatement at any Current
Property for which Progress Energy and/or Progress Fuels has an indemnification
obligation under Section 9.2(a).

(e)     Progress Energy’s and Progress Fuels’ indemnification obligations under
this Agreement with respect to an Asbestos Abatement at any Current Property
shall be deemed complete (i) upon receipt of a “no further action” letter or the
equivalent thereof with respect to such Asbestos Abatement from an appropriate
Governmental Authority with jurisdiction over the relevant Current Property and
Asbestos Abatement, or (ii) if it is a type of Asbestos Abatement for which a
“no further action” letter or the equivalent thereof is not typically issued,
the receipt of a certification from an asbestos professional that the
requirements of the Least Stringent Abatement Remedy have been achieved; and
(iii) with respect to a Leased Real Property where a Claim with respect to an
Asbestos Abatement brought by a Person with rights under an Applicable Lease
Agreement (after the exhaustion of any administrative remedies or litigation
appeals that Progress Energy may choose to pursue at its sole cost and expense),
requires an Asbestos Abatement that is more stringent than the Least Stringent
Abatement Remedy (A) upon completion of the implementation of the required more
stringent Asbestos Abatement, and (B) to the extent requested by Holdings, upon
receipt of written confirmation from the owner of the Real Property (or other
Person with rights under the Applicable Lease Agreement) that the obligations
under the Applicable Lease Agreement with respect to the Asbestos Abatement have
been satisfied (except to the extent that such written confirmation cannot be
obtained after Progress Energy has used best efforts to obtain such written
confirmation).

(f)     Notwithstanding anything to the contrary in Section 9.10, Progress
Energy shall not be responsible for any obligations or requirements contained in
any Applicable Lease Agreements arising out of an Asbestos Abatement at any
Leased Real Property that would not have been required but for changes in
applicable Asbestos Laws after the Closing Date.

ARTICLE X

TERMINATION

10.1 Termination. This Agreement may be terminated and the transactions
contemplated by this Agreement may be abandoned at any time, but prior to the
Closing Date only as follows:

(a) by mutual written consent of Holdings and Progress Fuels;

(b) by Holdings or Progress Fuels if the Closing Date shall not have occurred on
or before June 17, 2005 (provided that the right to terminate this Agreement
under this Section 10.1(b) shall not be available to any party whose failure to
fulfill any obligation under this Agreement has been the cause of, or has
resulted in, the failure of the Closing Date to occur on or before such date);

(c) by Holdings or Progress Fuels, if any court of competent jurisdiction in the
United States or other United States governmental body shall have issued an
order, decree or ruling or taken any other action restraining, enjoining or
otherwise prohibiting the transactions contemplated hereby and such order,
decree, ruling or other action shall have become final and nonappealable;

(d) by Progress Fuels, if (i) any of the representations and warranties of
Holdings and the Merger Subs contained in Article V shall fail to be true and
correct such that the condition set forth in Section 7.3(a) with respect to
representations and warranties would not be satisfied or (ii) Holdings and the
Merger Subs shall have breached or failed to comply with any of their respective
obligations under this Agreement such that the condition set forth in Section
7.3(b) with respect to agreements and conditions would not be satisfied (in
either case other than as a result of a material breach by Progress Energy,
Progress Fuels or either Company of any of its obligations under this Agreement)
and such failure or breach with respect to any such representation, warranty or
obligation cannot be cured or, if curable, shall continue unremedied for a
period of forty-five days after Holdings has received written notice from
Progress Fuels of the occurrence of such failure or breach (provided that in no
event shall such forty-five day period extend beyond the second day preceding
the date contained in Section 10.1(b)); or

(e) by Holdings or the Merger Subs, if (i) any of the representations and
warranties of Progress Energy and Progress Fuels contained in Article III and
Article IV shall fail to be true and correct such that the condition set forth
in Section 7.2(b) with respect to representations and warranties would not be
satisfied or (ii) Progress Energy, Progress Fuels or either of the Companies
shall have breached or failed to comply with any of their respective obligations
under this Agreement such that the condition set forth in Section 7.2(d) with
respect to agreements and conditions would not be satisfied (in either case
other than as a result of a material breach by Holdings or either Merger Sub of
any of their respective obligations under this Agreement) and such failure or
breach with respect to any such representation, warranty or obligation cannot be
cured or, if curable, shall continue unremedied for a period of forty-five days
after Progress Energy, Progress Fuels or either Company has received written
notice from Holdings of the occurrence of such failure or breach (provided that
in no event shall such forty-five day period extend beyond the second day
preceding the date contained in Section 10.1(b)).

10.2 Effect of Termination. If this Agreement is terminated pursuant to Section
10.1 and the transactions contemplated by this Agreement are not consummated,
all further obligations of the parties under or pursuant to this Agreement shall
terminate without further liability of either party to the other; provided,
however, the obligations contained in this Section 10.2, Section 6.5, Section
6.7, Article IX and Article XI of this Agreement shall survive any such
termination. Nothing contained in this Section 10.2 shall relieve any party from
liability for any breach of this Agreement.

ARTICLE XI

MISCELLANEOUS

11.1 Entire Agreement. This Agreement and the documents referred to herein and
to be delivered pursuant hereto constitute the entire agreement between the
parties pertaining to the subject matter hereof, and supersede all prior and
contemporaneous agreements, understandings, negotiations and discussions of the
parties, whether oral or written, and there are no warranties, representations
or other agreements between the parties in connection with the subject matter
hereof, except as specifically set forth herein or therein.

11.2 Expenses. Whether or not the transactions contemplated by this Agreement
are consummated, each of the parties hereto shall pay the fees and expenses of
their respective counsel, investment bankers, financial advisors, accountants
and other experts and the other expenses incident to the negotiation and
preparation of this Agreement and consummation of the transactions contemplated
hereby.

11.3 Amendment. This Agreement may not be amended except by an instrument in
writing signed by all of the parties.

11.4 Extension; Waiver. At any time prior to the Closing Date, the parties may
(a) extend the time for the performance of any of the obligations or other acts
of the other parties hereto, (b) waive any inaccuracies in the representations
and warranties contained herein or in any document, certificate or writing
delivered pursuant hereto or (c) waive compliance with any of the agreements or
conditions contained herein. Any agreement on the part of any party to any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed on behalf of such party.

11.5 Governing Law. This Agreement shall be construed and interpreted according
to the laws of the State of New York without regard to the conflicts of law
rules thereof, other than the provisions of Section 5-1401 of the New York
General Obligations Laws, except, in so far as (a) the consummation of the
Progress Rail Merger, which shall be construed and interpreted in accordance
with the ABCA and (b) the consummation of the Progress Metal Merger, which shall
be construed and interpreted in accordance with the KBCA.

11.6 Assignment. This Agreement and each party’s respective rights hereunder may
not be assigned at any time except (i) by Holdings to any lenders as collateral
in connection with the transactions contemplated hereby or to any future buyer
of the Companies, any of the Subsidiaries or any portion of the Business or (ii)
as expressly set forth herein without the prior written consent of the other
parties.

11.7 Notices. All communications, notices and disclosures required or permitted
by this Agreement shall be in writing and shall be deemed to have been given
when delivered personally or by messenger or by overnight delivery service, or
when mailed by registered or certified United States mail, postage prepaid,
return receipt requested, or when received via telecopy, telex or other
electronic transmission, in all cases addressed to the Person for whom it is
intended at his address set forth below or to such other address as a party
shall have designated by notice in writing to the other party in the manner
provided by this Section 11.7:

If to Progress Fuels or Progress Energy:
                                        
                                        
                                        
                                        
                                        
                                        

With a copy to:
                                        
                                        
                                        
                                        
                                        

                                        

                                        
                                        
                                        
                                        
                                        
                                        
                                        

If to Holdings:
                                        
                                        
                                        
                                        

With a copy to:
                                        
                                        
                                        
                                         Progress Energy, Inc.
410 South Wilmington Street
Raleigh, North Carolina 27601
Attention: Mr. Don K. Davis
                  Executive Vice President
                  - Rail and Telecom
Telecopy: (919) 546-2405

Progress Energy Service Company, LLC
410 South Wilmington Street
Raleigh, North Carolina 27601
Attention: Mr. David B. Fountain
                  Deputy General Counsel
Telecopy: (919) 546-2920

 and

Hunton & Williams
One Hannover Square
Suite 1400
Fayetteville Street Mall
Raleigh, North Carolina 27601
Attention: Timothy S. Goettel, Esq.
Telecopy: (919) 833-6352

c/o One Equity Partners LLC
One Bank One Plaza, 14th Floor
Chicago, Illinois 60670-0610
Attention: Thomas J. Kichler
Telecopy: (312) 732-7495

Morgan, Lewis & Bockius LLP
101 Park Avenue
New York, New York 10178
Attention: Ira White
Telecopy: (212) 309-6001

11.8 Counterparts; Headings. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, but such counterparts
shall together constitute but one and the same Agreement. The Table of Contents
and Article and Section headings in this Agreement are inserted for convenience
of reference only and shall not constitute a part hereof.

11.9 Specific Performance. The parties hereto agree that irreparable damage
would occur in the event any of the provisions of this Agreement were not
performed in accordance with the terms hereof and that the parties , including
Progress Fuels with respect to Section 8.3, shall be entitled to specific
performance of the terms hereof, in addition to any other remedy at law or
equity.

11.10 Interpretation. Unless the context requires otherwise, all words used in
this Agreement in the singular number shall extend to and include the plural,
all words in the plural number shall extend to and include the singular and all
words in any gender shall extend to and include all genders.

11.11 Severability. If any provision, clause or part of this Agreement, or the
application thereof under certain circumstances, is held invalid, the remainder
of this Agreement, or the application of such provision, clause or part under
other circumstances, shall not be affected thereby.

11.12 No Reliance. No third party is entitled to rely on any of the
representations, warranties and agreements contained in this Agreement, and
Progress Fuels and Holdings assume no liability to any third party because of
any reliance on the representations, warranties and agreements of Progress Fuels
and Holdings contained in this Agreement, other than persons entitled to
indemnification under Article VIII or Article IX.

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        IN WITNESS WHEREOF, the parties have caused this Agreement and Plan of
Merger to be duly executed as of the day and year first above written.

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             
                             

                             

                             
PROGRESS RAIL SERVICES HOLDINGS CORP.

By: ___________________________________

Name:_________________________________

Title:__________________________________

PRSC ACQUISITION CORP.

By: ___________________________________

Name:_________________________________

Title:__________________________________

PMRC ACQUISITION CO.

By: ___________________________________

Name:_________________________________

Title:__________________________________

PROGRESS RAIL SERVICES CORPORATION

By: ___________________________________

Name:_________________________________

Title:__________________________________

PROGRESS METAL RECLAMATION COMPANY

By: ___________________________________

Name:_________________________________

Title:__________________________________

PROGRESS FUELS CORPORATION

By: ___________________________________

Name:_________________________________

Title:__________________________________

PROGRESS ENERGY, INC., with respect to Articles III, VI,
VIII and IX

By: ___________________________________

Name:_________________________________

Title:__________________________________