**Exhibit10-uu**

 

 

ASSET PURCHASEAGREEMENT

 

 

BY AND AMONG

 

 

CINERGY CAPITAL& TRADING, INC.,

 

CINCAP VII, LLC

 

 

AND

 

 

PSI ENERGY, INC.

 

 

Dated as ofFebruary 5, 2003

 

----

 
| ARTICLE I                  |
|---------------------------------|
| DEFINITIONS                     |
|                            |
| ARTICLE II                 |
| PURCHASE AND  SALE              |
|                            |   |
| Section 2.01.              | Transfer of Assets |
| Section 2.02.              | Excluded Assets |
| Section 2.03.              | Assumed Liabilities |
| Section 2.04.              | Excluded Liabilities |
|                            |   |
| ARTICLE III                |
| PURCHASE  PRICE; CLOSING        |
|                            |   |
| Section 3.01.              | Purchase Price |
| Section 3.02.              | Inventory |
| Section 3.03.              | Proration |
| Section 3.04.              | Closing |
| Section 3.05.              | Closing Deliveries |
|                            |   |
| ARTICLE IV                 |
| REPRESENTATIONS AND  WARRANTIES |
|                            |   |
| Section 4.01.              | Representations and Warranties of Parent  and Seller |
| Section 4.02.              | Representations and Warranties of Buyer |
|                            |   |
| ARTICLE V                  |
| COVENANTS                       |
|                            |   |
| Section 5.01.              | Books and Records |
| Section 5.02.              | Finder’s Fees |
| Section 5.03.              | Tax Matters |
| Section 5.04.              | Further Assurances |
|                            |   |
| ARTICLE VI                 |
| INDEMNIFICATION                 |
|                            |   |
| Section 6.01.              | Survival |
| Section 6.02.              | Indemnification |
| Section 6.03.              | Procedure for Indemnification |
|                            |   |
| ARTICLE VII                |
| MISCELLANEOUS  PROVISIONS       |
|                            |   |
| Section 7.01               | Notices |

 

----

 
| Section 7.02.        | Waiver                                                        |
|---------------------------|---------------------------------------------------------------|
| Section 7.03.        | Entire Agreement; Amendment etc.                              |
| Section 7.04.        | Assignment                                                    |
| Section 7.05.        | Severability                                                  |
| Section 7.06.        | Bulk Sales Laws                                               |
| Section 7.07.        | Governing Law                                                 |
| Section 7.08.        | Counterparts; Facsimile Execution                             |
| Section 7.09.        | Schedules                                                     |
| Section 7.10         | U.S. Dollars                                                  |
| Section 7.11.        | Dispute Resolution                                            |
| Section 7.12.        | Ratemaking                                                    |
| Section 7.13.        | State Review                                                  |
|                      |                                                          |
| SCHEDULES                 |
|                      |                                                          |
| Schedule I           | Form  of Deed                                                 |
| Schedule II          | Form of Bill of Sale                                          |
| Schedule III         | Form of  Assumption Agreement                                 |
|                      |                                                          |
| DISCLOSURE SCHEDULES      |
|                      |                                                          |
| Schedule 2.01(b)     | Tangible  Personal Property                                   |
| Schedule 2.01(d)     | Transferred  Contracts                                        |
| Schedule 2.01(e)     | Transferred  Permits                                          |
| Schedule 4.01(c)(ii) | Seller’s  Required Governmental and Third Party Consents |
| Schedule 4.01(g)(i)  | Real Property                                                 |
| Schedule 4.01(k)     | Environmental  Permits                                        |
| Schedule 4.01(m)     | Seller Contracts                                              |
| Schedule 4.01(o)     | Permits                                                       |
| Schedule 4.02(c)(ii) | Buyer’s  Required Governmental and Third Party Consents  |
|                           |                                                               |  |

 

----

 

ASSET PURCHASEAGREEMENT

 

ASSET PURCHASE AGREEMENT(this “Agreement”), dated as of February 5, 2003, by and among Cinergy Capital& Trading, Inc., an Indiana corporation (“Parent”), CinCap VII, LLC, aDelaware limited liability company and indirect wholly-owned subsidiary ofParent (“Seller”), and PSIEnergy, Inc., an Indiana corporation (“Buyer”and, together with Parent and Seller, “Parties”and individually, a “Party”).

 

WITNESSETH

 

WHEREAS, Seller owns theHenry County Generating Station (“Henry County Station”), a simple cycle,natural gas-fired electric generating station located in Henry County, Indiana,comprised of three GE Model LM 6000 combustion turbines with an aggregate summerrated capacity of approximately 136.5 megawatts, together with certain otherassets, properties, facilities and rights associated therewith or ancillarythereto; and

 

WHEREAS, Buyer desires topurchase and assume from Seller, and Seller desires to sell and assign toBuyer, the Purchased Assets (as hereinafter defined) and certain associatedliabilities, upon the terms and conditions hereinafter set forth;

 

NOW, THEREFORE, inconsideration of the premises and the mutual covenants, agreements, representationsand warranties hereinafter set forth, the Parties, intending to be legallybound, hereby agree as follows:

 

ARTICLE I

#  

DEFINITIONS

 

SECTION1.01.          Definitions.          (a)          Asused in this Agreement, the following terms have the following meanings::

 

“Affiliate” means aPerson that directly, or indirectly through one or more intermediaries,controls, or is controlled by, or is under common control with, the Personspecified.  The term “control”(including the terms “controlling,” “controlled by” and “under common controlwith”) means the possession, direct or indirect, of the power to direct orcause the direction of the management and policies of a Person, whether throughthe ownership of voting securities, by contract or otherwise.

 

“Ancillary Agreements” means the AssumptionAgreement, the Bill of Sale and the Deed.

 

“Assumption Agreement” means the form ofAssumption Agreement of Buyer in favor of Seller attached hereto asSchedule III.

 

1

----

 

“Assumed Liabilities” has the meaning set forthin Section 2.03.

 

“Bill of Sale” means the form of Bill of Salefrom Seller to Buyer attached hereto as Schedule II.

 

“Buyer” has themeaning set****in the first paragraph of this Agreement.

 

“Buyer Indemnitee”has the meaning set forth in Section 6.02.

 

“Buyer’sRequired Consents” means Buyer’s Required Governmental Consents andBuyer’s Required Third-Party Consents.

 

“Buyer’s Required Governmental Consents” meansthe consents, approvals, filings and/or notices of, with, from or toGovernmental Authorities listed in Section I of Schedule 4.02(c)(ii).

 

“Buyer’s Required Third-Party Consents” meansthe consents, approvals, filings and/or notices of, with, from or to ThirdParties (other than Governmental Authorities) listed in Section II ofSchedule 4.02(c)(ii).

 

“Carrying Costs” means an amount in dollarsequal to the financing costs associated with Henry County Station incurred fromthe earlier of (1) the date of the Indiana Utility Regulatory Commission Orderin Cause No. 42145 granting Buyer a certificate of public convenience andnecessity to purchase the Henry County Station, or (2) December 1, 2002, to andincluding the Closing Date, to be calculated at Buyer’s weighted cost ofcapital using the return on equity from Buyer’s last retail base rate case (11%ROE).

 

“CERCLA” means theComprehensive Environmental Response, Compensation, and Liability Act of 1980,as amended from time to time.

 

“Closing” hasthe meaning set forth in Section 3.04.

 

“Closing Date” hasthe meaning set forth in Section 3.04.

 

“Closing Inventory” means an amount in dollarsequal to all Inventories on the Closing Date.

 

“Deed” means the form ofWarranty Deed and Assignment of Adjoining Easement Interest from Seller toBuyer attached hereto as Schedule I.

 

“Direct Claim” hasthe meaning set forth in Section 6.03(c).

 

“Encumbrance” means anysecurity interest, pledge, mortgage, lien, charge, option to purchase, lease,claim, restriction, covenant, title defect, hypothecation,

 

2

----

 

assignment, deposit arrangement or other encumbrance of any kind or anypreference, priority or other security agreement or preferential arrangement ofany kind or nature whatsoever (including any conditional sale or titleretention agreement).

 

“Environmental Condition” means the presence orRelease****tothe environment, whether at the Real Property or otherwise, of HazardousSubstances, including any migration of Hazardous Substances through air, soilor groundwater at, to or from the Real Property or at, to or from any Off-SiteLocation, regardless of when such presence or Release occurred or isdiscovered.

 

“EnvironmentalLaws” means all (a) Laws relating to pollution or protection of theenvironment, natural resources or human health and safety, including Lawsrelating to Releases or threatened Releases of Hazardous Substances orotherwise relating to the manufacture, formulation, generation, processing,distribution, use, treatment, storage, Release, transport, Remediation,abatement, cleanup or handling of Hazardous Substances, (b) Laws with regard torecordkeeping, notification, disclosure and reporting requirements respectingHazardous Substances and (c) Laws relating to the management or use of naturalresources.

 

“Environmental Liabilities” has the meaning setforth in Section 2.03.

 

“EnvironmentalPermit” has the meaning set forth in Section 4.01(k).

 

“Excluded Assets”has the meaning set forth in Section 2.02.

 

“Excluded Liabilities”has the meaning set forth in Section 2.04.

 

“GAAP” means****UnitedStates generally accepted accounting principles as in effect from time to time,applied on a consistent basis.

 

“GoodUtility Practice” means any of the practices, methods and actsengaged in or approved by a significant portion of the electric utilityindustry during the relevant time period, or any of the practices, methods oracts which, in the exercise of reasonable judgment in light of the facts knownat the time the decision was made, could have been expected to accomplish thedesired result at a reasonable cost consistent with good business practices,reliability, safety and expedition.

 

“Governmental Authority” means any: (a) nation, state,county, city, town, village, district, or other jurisdiction of any nature; (b)federal, state, local, municipal, foreign, or other government; (c)governmental or quasi-governmental authority of any nature (including anygovernmental agency, branch, department, official, or entity and any court orother tribunal); (d) multi-national organization or body; or (e) bodyexercising, or entitled to exercise, any administrative, executive, judicial,legislative, police, regulatory, or taxing authority or power of any nature.

 

3

----

 

“Hazardous Substances” means (a)any petrochemical or petroleum products, oil or coal ash, radioactivematerials, radon gas, asbestos in any form that is or could become friable,urea formaldehyde foam insulation and transformers or other equipment thatcontain dielectric fluid which may contain levels of polychlorinated biphenyls;(b) any chemicals, materials or substances defined as or included in thedefinition of “hazardous substances,” “hazardous wastes,” “hazardousmaterials,” “hazardous constituents,” “restricted hazardous materials,”“extremely hazardous substances,” “toxic substances,” “contaminants,”“pollutants,” “toxic pollutants,” or words of similar meaning and regulatoryeffect under any applicable Environmental Law; and (c) any other chemical, materialor substance, exposure to which is prohibited, limited or regulated by anyapplicable Environmental Law.

 

“Henry County Station” has the meaning given inthe recitals to this Agreement.

 

“Improvements” means all buildings,structures,  machinery and equipment,fixtures, construction in progress, and other improvements, including allpiping, cables and similar equipment forming part of the mechanical,electrical, plumbing or HVAC infrastructure of any building, structure orequipment, located on and affixed to the Real Property.

 

“IndemnifiableLoss” has the meaning set forth in Section 6.02(a).

 

“IndemnifyingParty” has the meaning set forth in Section 6.02(d).

 

“Indemnitee” has the meaning set forth inSection 6.02(c).

 

“Inventories” means all inventories of fuels,supplies, materials and spare parts of Seller located on or in transit to theReal Property.

 

“Knowledge” means theactual knowledge of the corporate officer or officers of the specified Personcharged with responsibility for the particular function as of the date of thisAgreement, or, with respect to any certificate delivered pursuant to thisAgreement, the date of delivery of the certificate, after reasonable inquiry byeach such officer of selected employees of the specified Person whom suchofficer believes, in good faith, to be the persons generally responsible forthe subject matters to which the knowledge is pertinent.

 

“Laws” means alllaws, statutes, rules, regulations, ordinances and other pronouncements havingthe effect of law of the United States, any foreign country and any domestic orforeign state, county, city or other political subdivision or of anyGovernmental Authority.

 

“Liability” means any liability or obligation,whether known or unknown, whether asserted or unasserted, whether absolute orcontingent, whether accrued or unaccrued, whether liquidated or unliquidated,whether incurred or consequential, and whether due or to become due.

 

4

----

 

“Material Adverse Effect”means (i) any event, circumstance or condition materially impairing theability of Seller or Parent to perform its obligations under this Agreement orany Ancillary Agreement, or (ii) any change in or effect on Seller or thePurchased Assets that is materially adverse to the Purchased Assets, other than(a) any change resulting from changes in the international, national, regionalor local wholesale or retail markets for electricity, (b) any change resultingfrom changes in the international, national, regional or local markets for fuelused at Henry County Station, (c) any change resulting from changes in theNorth American, national, regional or local electric transmission system, and(d) any change in Law generally applicable to similarly situated Persons.

 

“Net Book Value” means an amount in dollars, as setforth in the balance sheet of Seller as of the applicable date, equal to totalfixed assets net of accrued depreciation.

 

“Off-Site Location” means any real propertyother than the Real Property.

 

“Organizational Documents”means (a) the articles or certificate of incorporation and the bylaws ofa corporation; (b) the limited liability company or operating agreement andcertificate of formation of a limited liability company; (c) the partnershipagreement and any statement of partnership of a general partnership; (d) thelimited partnership agreement and the certificate of limited partnership of alimited partnership; (e) any charter or similar document adopted or filed inconnection with the creation, formation, or organization of a Person; and (f)any amendment to any of the foregoing.

 

“Parent” has the meaning set forth in the firstparagraph of this Agreement.

 

“Party” has the meaning set forth in the firstparagraph of this Agreement.

 

“Permits”has the meaning set forth in Section 4.01(o).

 

“Permitted Encumbrances”means (i) the respective rights and obligations of the Parties under thisAgreement and the Ancillary Agreements; (ii) all matters that would bedisclosed in a current title commitment or title policy or survey for the RealProperty; (iii) Encumbrances for Taxes not yet due or which are being contestedin good faith by appropriate proceedings and that would not, individually or inthe aggregate, reasonably be expected to have a Material Adverse Effect; (iv)carriers’, warehousemen’s, materialmen’s, mechanics’, repairman’s or other likeEncumbrances arising in the ordinary course of business that would not,individually or in the aggregate, reasonably be expected to have a MaterialAdverse Effect; (v) zoning, planning, conservation restriction and other landuse and environmental regulations by Governmental Authorities; (vi)Encumbrances resulting from legal proceedings being contested in good faith byappropriate proceedings that would not, individually or in the aggregate,reasonably be expected to have a Material Adverse Effect; and (vii) otherEncumbrances that would not, individually or in the aggregate, reasonably beexpected to have a Material Adverse Effect.

 

5

----

 

“Person” means anyindividual, corporation (including any non-profit corporation), general orlimited partnership, limited liability company, joint venture, estate, trust,association, organization, labor union, or other entity or GovernmentalAuthority.

 

“Prime Rate” means as of any date, the primerate as published in The Wall Street Journal on such date or, if not publishedon such date, on the most recent date of publication.

 

“Purchase Price” has the meaning set forth inSection 3.01.

 

“Purchased Assets” has the meaning set forth inSection 2.01.

 

“Real Property” has the meaning set forth inSection 4.01(g)(i).

 

“Real PropertyLease” has the meaning set forth in Section 4.01(g)(ii).

 

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

 

“Remediation” means an action of any kind toaddress an Environmental Condition or a Release of Hazardous Substances or thepresence of Hazardous Substances at the Real Property or an Off-Site Location,including the following activities to the extent they relate to, result from orarise out of the presence of a Hazardous Substance at the Real Property or anOff-Site Location:  (a) monitoring,investigation, assessment, treatment, cleanup, containment, removal,mitigation, response or restoration work; (b) obtaining any permits, consents,approvals or authorizations of any Governmental Authority necessary to conductany such activity; (c) preparing and implementing any plans or studies for anysuch activity; (d) obtaining a written notice from a Governmental Authoritywith jurisdiction over the Real Property or an Off-Site Location underEnvironmental Laws that no material additional work is required by suchGovernmental Authority; (e) the use, implementation, application, installation,operation or maintenance of removal actions on the Real Property or an Off-SiteLocation, remedial technologies applied to the surface or subsurface soils,excavation and treatment or disposal of soils at an Off-Site Location, systemsfor long-term treatment of surface water or groundwater, engineering controlsor institutional controls; and (f) any other activities reasonably determinedby a Party to be necessary or appropriate or required under Environmental Lawsto address an Environmental Condition or a Release of Hazardous Substances orthe presence of Hazardous Substances at the Real Property or an Off-SiteLocation.

 

“Representatives” means,with respect to a Party, such respective directors (or partiesperforming similar functions), officers, employees, representatives, agents and

 

6

----

 

advisors (including accountants, legal counsel, environmentalconsultants and financial advisors).

 

**“**Seller” has the meaning set forth in thefirst paragraph of this Agreement.

 

“Seller Indemnitee”has the meaning set forth in Section 6.02(a).

 

“Seller’s Required Consents” means Seller’sRequired Governmental Consents and Seller’s Required Third-Party Consents.

 

“Seller’s Required Governmental Consents” meansthe consents, approvals, filings and/or notices of, with, from or toGovernmental Authorities listed in Section I of Schedule 4.01(c)(ii).

 

“Seller’s Required Third-Party Consents” meansthe consents, approvals, filings and/or notices of, with, from or to ThirdParties (other than Governmental Authorities) listed in Section II ofSchedule 4.01(c)(ii).

 

“Tax” means anytax, charge, fee, levy, penalty or other assessment imposed by any federal,state, local or foreign taxing authority, including, but not limited to, anyincome, gross receipts, excise, property, sales, transfer, use, franchise,payroll, withholding, social security or other tax, including any interest,penalty or addition attributable thereto.

 

“Third Party Claim”has the meaning set forth in Section 6.03(a).

 

“Transferred Contracts” has the meaning setforth in Section 2.01(d).

 

“Transferred Intellectual Property” has themeaning set forth in Section 2.01(h).

 

“Transferred Permits” has the meaning set forthin Section 2.01(e).

 

(b)                                 Interpretation.                    In thisAgreement, unless otherwise specified or where the context otherwise requires:

 

(i)                                     areference, without more, to a recital is to the relevant recital to thisAgreement, to an Article or Section is to the relevant Article or Section of thisAgreement, and to a Schedule is to the relevant Schedule to thisAgreement;

 

(ii)                                  wordsimporting any gender shall include other genders;

 

(iii)                               wordsimporting the singular only shall include the plural and vice versa;

 

(iv)                              thewords “include,” “includes” or “including” shall be deemed to be followed bythe words “without limitation;”

 

7

----

 

(v)                                 reference to any agreement,document or instrument means such agreement, document or instrument as amendedor modified and in effect from time to time in accordance with the termsthereof;

 

(vi)                              reference to any applicable Lawmeans, if applicable, such Law as amended, modified, codified, replaced orreenacted, in whole or in part, and in effect from time to time, includingrules and regulations promulgated thereunder,

 

(vii)                           “or” is used in the inclusive senseof “and/or”;

 

(viii)                        references to documents,instruments or agreements shall be deemed to refer as well to all addenda,exhibits, schedules or amendments thereto;

 

(ix)                                thewords “hereof,” “herein” and “herewith” and words of similar import shall,unless otherwise stated, be construed to refer to this Agreement as a whole andnot to any particular provision of this Agreement; and

 

(x)                                   referencesto any party hereto or any other agreement or document shall include suchparty’s successors and permitted assigns, but, if applicable, only if such successors and assigns are notprohibited by this Agreement.

 

ARTICLE II

#  

PURCHASE AND SALE

 

Section 2.01.                             Transfer of Assets.          Upon the terms and conditions set forth in this Agreement, at theClosing, Seller shall sell, convey, assign, transfer and deliver to Buyer, andBuyer shall purchase and acquire from Seller, free and clear of allEncumbrances other than Permitted Encumbrances, all of Seller’s right, titleand interest in, to and under the real and personal property, tangible andintangible, constituting, or used in connection with the operation of, HenryCounty Station, except as otherwise provided in Section 2.02, each as ofthe Closing Date, including all of Seller’s right, title and interest in, toand under the following assets (collectively, the “Purchased Assets”):

 

(a)                                  the Real Property;

 

(b)                                 the machinery, fixtures, equipment(including communications equipment), vehicles, furniture and other personalproperty located on the Real Property, including the items of tangible personalproperty listed on Schedule 2.01(b);

 

(c)                                  all Inventories;

 

8

----

 

(d)                                 subject to the receipt of anynecessary consents and approvals, the contracts or agreements (including anylicenses or real or personal property leases, other than any thereofconstituting Transferred Permits or Transferred Intellectual Property) listedon Schedule 2.01(d) (the “Transferred Contracts”);

 

(e)                                  subject to the receipt of anynecessary consents and approvals, the permits, licenses, certificates,certifications, orders and other governmental authorizations listed onSchedule 2.01(e) (the “Transferred Permits”);

 

(f)                                    allunexpired, transferable warranties and guarantees from manufacturers, vendorsand other third parties with respect to any item of real or tangible personalproperty referred to in clauses (a), (b) and (c) of this Section 2.01;

 

(g)                                 allbooks, expired purchase orders, operating records, operating, safety andmaintenance manuals, engineering design plans, blueprints and as-built plans,specifications, procedures, studies, reports, equipment repair, safety,maintenance or service records, and similar items (subject to the right ofSeller to retain copies of same for its use), other than such items that areproprietary to third parties and accounting records (to the extent that any ofthe foregoing is contained in an electronic format, Seller shall cooperate withBuyer to transfer such items to Buyer in a format that is reasonably acceptableto Buyer); and

 

(h)                                 subject to the receipt of anynecessary consents and approvals, any intellectual property (the “TransferredIntellectual Property”).

 

Notwithstanding the foregoing, the transfer of the PurchasedAssets pursuant to this Agreement shall not include the assumption of anyLiability related to the Purchased Assets unless Buyer expressly assumes thatLiability pursuant to Section 2.03.

 

Section 2.02.                             Excluded Assets.          Notwithstanding anything to thecontrary contained in Section 2.01 or elsewhere in this Agreement, thefollowing assets of Seller (collectively, the “Excluded Assets”) are not partof the sale and purchase contemplated hereunder, are excluded from thePurchased Assets and shall remain the property of Seller after the Closing:

 

(a)                                  all cash, cash equivalents, bankdeposits, accounts and notes receivables (trade or otherwise), prepaid expensesand any income, sales, payroll or other Tax receivables;

 

(b)                                 all minute books, limited liabilitycompany interest transfer books, corporate seals and other corporate records;

 

(c)                                  anyrefund, credit penalty payment, adjustment or reconciliation (i) related toTaxes paid prior to the Closing Date in respect of the Purchased Assets,whether such refund, adjustment or reconciliation is received as a payment or,subject to

 

9

----

 

Section 3.03, as a credit against future Taxes payable, or (ii)arising under Assigned Contract and relating to a period before the ClosingDate;

 

(d)                                 therights of Seller in, to and under all contracts, agreements, arrangements, permitsor licenses of any nature, of which the obligations of Seller thereunder arenot expressly assumed by Buyer pursuant to Section 2.03;

 

(e)                                  anyinsurance policies; and

 

(f)                                    therights of Seller under this Agreement and the AncillaryAgreements.

 

Section 2.03.                             Assumed Liabilities.          Onthe Closing Date, Buyer shall execute and deliver in favor of Seller theAssumption Agreement, pursuant to which Buyer shall assume and agree to pay,perform and discharge, without recourse to Seller or Parent, the followingLiabilities of Seller, solely to the extent such Liabilities accrue or arisefrom and after the Closing, other than Excluded Liabilities (as defined below),in accordance with the respective terms and subject to the respectiveconditions thereof (collectively, the “Assumed Liabilities”):

 

(a)                                  AllLiabilities of Seller under the Transferred Contracts, Transferred Permits andTransferred Intellectual Property, in each case in accordance with the termsthereof, except to the extent that such Liabilities, but for a breach ordefault by Seller, would have been paid, performed or otherwise discharged onor prior to the Closing Date or to the extent the same arise out of any suchbreach or default or out of any event which after the giving of notice wouldconstitute a default by Seller;

 

(b)                                 allLiabilities with respect to Henry County Station arising under or relating toEnvironmental Laws or relating to any claim in respect of EnvironmentalConditions or Hazardous Substances, including settlements, judgments, costs andexpenses, including reasonable attorneys fees, whether based on common law orEnvironmental Laws (collectively, “Environmental Liabilities”), but in eachcase solely to the extent accruing or arising from and after the Closing Date,with respect to (i) any violation or alleged violation of Environmental Lawswith respect to the ownership, lease, maintenance or operation of any of thePurchased Assets, including any fines or penalties that arise in connectionwith the ownership, lease, maintenance or operation of the Purchased Assets,and the costs associated with correcting any such violations; (ii) loss oflife, injury to persons or property or damage to natural resources caused (orallegedly caused) by any Environmental Condition or the presence or Release ofHazardous Substances at, on, in, under, adjacent to or migrating from thePurchased Assets, including any Environmental Condition or Hazardous Substancescontained in building materials at or adjacent to the Purchased Assets or in thesoil, surface water, sediments, groundwater, landfill cells, or in otherenvironmental media at or near the Purchased Assets; (iii) any Remediation ofany Environmental Condition or Hazardous Substances that are present or havebeen Released at, on, in, under, adjacent to or 

 

10

----

 

migrating from, the Purchased Assets or in the soil, surface water,sediments, groundwater, landfill cells or in other environmental media at oradjacent to the Purchased Assets; (iv) any bodily injury, loss of life,property damage, or natural resource damage arising from the storage,transportation, treatment, disposal, discharge, recycling or Release, at anyOff-Site Location, or arising from the arrangement for such activities, ofHazardous Substances generated in connection with the ownership, lease,maintenance or operation of the Purchased Assets; (v) any Remediation of anyEnvironmental Condition or Release of Hazardous Substances arising from thestorage, transportation, treatment, disposal, discharge, recycling or Release,at any Off-Site Location, or arising from the arrangement for such activities,of Hazardous Substances generated in connection with the ownership, lease,maintenance or operation of the Purchased Assets; and (vi) any obligation torepower, replace, decommission, deactivate, dismantle, demolish or close thePurchased Assets or any  portionthereof, or any surface impoundments or other waste or effluent handling orstorage units on owned or leased adjacent properties used in connection withthe operation of the Purchased Assets;

 

(c)                                  allliabilities or obligations to third parties for personal injury or tort, orsimilar causes of action arising solely out of the ownership, lease,maintenance or operation of the Purchased Assets (collectively, “TortLiabilities”), but in each case solely to the extent accruing or arising fromand after the Closing Date; and

 

(d)                                 anyTax that may be imposed by any federal, state or local government on theownership, sale, operation or use of the Purchased Assets on or after theClosing Date, except for any income Taxes attributable to income received bySeller.

 

Section 2.04.                             ExcludedLiabilities.          Exceptfor the Assumed Liabilities, Buyer shall not assume by virtue of thisAgreement, the Assumption Agreement or any other Ancillary Agreement, or thetransactions contemplated hereby or thereby, or otherwise, and shall have noliability for, any Liabilities of Seller (the “Excluded Liabilities”),including any of the following Liabilities:

 

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

 

(b)                                 anyLiabilities in respect of Taxes attributable to the Purchased Assets fortaxable periods ending before the Closing Date;

 

(c)                                  anyLiabilities of Seller (i) arising from the breach or default by Seller, prior to the Closing Date, ofany Transferred Contract, Transferred Permit or Transferred IntellectualProperty or (ii) in respect of any other contract, agreement, personal propertylease, permit, license or other arrangement or instrument entered into by Seller;

 

11

----

 

(d)                                 subjectto Section 3.03, any payment obligations of Seller, including accounts ornotes payable, arising prior to the Closing Date;

 

(e)                                  anyfines and penalties imposed by any Governmental Authority resulting from anyact or omission by Seller that occurred prior to the Closing Date;

 

(f)                                    anyincome Taxes attributable to income received by Seller;

 

(g)                                 anyLiability of Seller arising as a result of its execution and delivery of thisAgreement or any Ancillary Agreement, the performance of its obligations hereunder or thereunder, orthe consummation by Seller of the transactions contemplated hereby or thereby;

 

(h)                                 anyLiability of Seller based on Seller’s acts or omissions after the Closing; and

 

(i)                                     anyand all Environmental Liabilities and Tort Liabilities accruing, arising,existing or occurring prior to the Closing Date.

 

ARTICLE III

 

PURCHASE PRICE; CLOSING

 

Section 3.01.                             PurchasePrice.          Thepurchase price payable by Buyer to Seller for the Purchased Assets is$69,602,024.64, such amount being equal to (a) the Net Book Value at theearlier of (1) the date of the Indiana Utility Regulatory Commission Order inCause No. 42145 granting Buyer a certificate of public convenience and necessityto purchase the Henry County Station, or (2) December 1, 2002, plus (b) theCarrying Costs, minus (c) $5 million (collectively, the “Purchase Price”).

 

Section 3.02.                             Inventory.          AtClosing, in addition to payment of the Purchase Price, Buyer shall alsocompensate Seller for the Closing Inventory, at cost.

 

Section 3.03.                             Proration.          (a)          Buyerand Seller agree that all of the items normally prorated, including thoselisted below, relating to the business and operation of the Purchased Assetsshall be prorated as of the Closing Date, with Seller liable to the extent suchitems relate to any time period through the Closing Date, and Buyer liable tothe extent such items relate to periods subsequent to the Closing Date:

 

(i)                                     personalproperty, real estate, occupancy and any other Taxes, assessments and othercharges, if any, on or with respect to the business and operation of thePurchased Assets;

 

12

----

 

(ii)                                  rent,Taxes and other items payable by or to Seller under any of the SellerAgreements to be assigned to and assumed by the Buyer hereunder;

 

(iii)                               anypermit, license or registration fees with respect to any Environmental Permitor other Permit; and

 

(iv)                              sewerrents and charges for water, telephone, electricity and other utilities.

 

(b)                                 Inconnection with such proration, in the event that actual figures are notavailable at the Closing Date, the proration shall be based upon the actualamount of such Taxes or fees for the preceding year (or appropriate period) forwhich actual Taxes or fees are available and such Taxes or fees shall bereprorated upon request of either the Seller or the Buyer made within 60 daysof the date that the actual amounts become available.  Seller and Buyer agree to furnish each other with such documentsand other records as may be reasonably requested in order to confirm alladjustment and proration calculations made pursuant to this Section 3.03.

 

Section 3.04.                             Closing.          Thesale, assignment, conveyance, transfer and delivery of the Purchased Assets,the payment of the Purchase Price, and the consummation of the othertransactions contemplated by this Agreement shall take place at a closing (the“Closing”), to be held at the offices of Cinergy Corp., 139 East Fourth Street,Cincinnati Ohio 45201 at 10:00 a.m. eastern standard time (or another mutuallyacceptable time and location), on the date of execution and delivery of thisAgreement by each of the Parties (or on such other date as may be mutuallyagreed upon by the Parties) (the “Closing Date”)  The Closing shall be effective for all purposes as of the closeof business on the Closing Date.

 

Section 3.05.                             Closing Deliveries.          (a)          Atthe Closing, Parent will deliver, or cause to be delivered, to Buyer:

 

(i)                                     theDeed, duly executed and acknowledged by Seller and in recordable form;

 

(ii)                                  theBill of Sale, duly executed by Seller;

 

(iii)                               copiesof all Seller’s Required Consents obtained by Parent or Seller ;

 

(iv)                              thecertificate of incorporation, certificate of formation or similar formationdocument of each of Parent and Seller, certified as of a date not earlier than15 days prior to the Closing Date, by the office of the Secretary of State ofsuch entity’s organization;

 

13

----

 

(v)                                 acertificate of good standing with respect to (A) Seller , dated as of a datenot earlier than 20 days prior to the Closing Date, from the office of theSecretary of State of such entity’s organization and from the office ofSecretary of State of each state in which Seller is qualified or licensed to dobusiness as a foreign limited liability company, and (B) Parent, dated as of adate not earlier than 20 days prior to the Closing Date, from the office of theSecretary of State of such entity’s organization;

 

(vi)                              copies,certified on the Closing Date by the Secretary or Assistant Secretary of eachof Parent and Seller of corporate or limited liability company resolutions, asapplicable, authorizing the execution and delivery of this Agreement and eachAncillary Agreement to which Parent or Seller is a party, and the consummationof the transactions contemplated hereby and thereby;

 

(vii)                           acertificate dated the Closing Date of the Secretary or Assistant Secretary ofeach of Parent and Seller identifying the name and title and bearing thesignatures of the respective officers thereof authorized to execute and deliverthis Agreement and each Ancillary Agreement to which Parent or Seller is aparty;

 

(viii)                        a completecopy of the Organizational Documents as in effect on the Closing Date of eachof Parent and Seller, certified by the Secretary or Assistant Secretary of eachof Parent and Seller; and

 

(ix)                                suchother documents as Buyer may reasonably request to carry out the purposes ofthis Agreement.

 

(b)                                 Atthe Closing, Buyer will issue to Cinergy Corp. in full satisfaction of thePurchase Price one or more promissory notes, each in substantially the formattached as Exhibit A to the Buyer’s Petition filed with the Indiana UtilityRegulatory Commission in Cause No. 42311 on October 18, 2002.  In addition, Buyer will deliver, or cause tobe delivered, to Seller:

 

(i)                                     theAssumption Agreement, duly executed by Buyer;

 

(ii)                                  copiesof all Buyer’s Required Consents obtained by Buyer;

 

(iii)                               thecertificate of incorporation, certificate of formation or similar formationdocument of Buyer , certified as of a date not earlier than 20 days prior tothe Closing Date, by the office of the Secretary of State of such entity’s organization;

 

(iv)                              copies,certified on the Closing Date by the Secretary or Assistant Secretary of Buyer,of corporate resolutions authorizing the execution and delivery of thisAgreement and each Ancillary Agreement to which Buyer is a party, and theconsummation of the transactions contemplated hereby and thereby;

 

(v)                                 acertificate dated the Closing Date of the Secretary or Assistant Secretary ofBuyer identifying the name and title and bearing the signatures of the

 

14

----

 

officers thereof authorized to execute and deliverthis Agreement and each Ancillary Agreement to which Buyer is a party;

 

(vi)                              acomplete copy of the Organizational Documents as in effect on the Closing Dateof Buyer, certified by the Secretary or Assistant Secretary of Buyer; and

#  

(vii)                           suchother documents as Seller or Parent may reasonably request to carry out thepurposes of this Agreement.

 

ARTICLE IV

#  

REPRESENTATIONS ANDWARRANTIES

 

Section 4.01.                             Representations andWarranties of Parent and Seller. Parent and Seller jointly and severally represent and warrant to Buyeras follows:

 

(a)                                  Organization andGood Standing; Qualification.          Parentis a corporation duly formed, validly existing and in good standing under thelaws of the State of Indiana.  Seller isa limited liability company duly formed, validly existing and in good standingunder the laws of the State of Delaware. Seller has all requisite power and authority to own, lease or operatethe Purchased Assets and to carry on its business as it is now beingconducted.  Parent has all requisitepower and authority to own the outstanding limited liability company interestsof Seller and to carry on its business with respect to Seller as it is nowbeing conducted.  Seller does not own,directly or indirectly, any capital stock or other equity securities of, orhave any other direct or indirect equity or other ownership interest in, anyother corporation, limited liability company, partnership, entity or business.  Seller is duly qualified or licensed to dobusiness as a foreign limited liability company and is in good standing as aforeign limited liability company in each jurisdiction in which the characteror location of the properties owned or used by it or the nature of the businessconducted by it makes such qualification or license necessary, except forjurisdictions in which the failure to be so qualified, licensed or in goodstanding would not, individually or in the aggregate, reasonably be expected tohave a Material Adverse Effect.

 

(b)                                 Authority andEnforceability.          Each ofParent and Seller has full corporate or limited liability company (asapplicable) power and authority to execute and deliver, and carry out itsobligations under, this Agreement and each Ancillary Agreement to which it is aparty and to consummate the transactions contemplated hereby and thereby.  The execution, delivery and performance byParent and Seller of this Agreement and each Ancillary Agreement to which it isa party, and the consummation of the transactions contemplated hereby andthereby, have been duly and validly authorized by all necessary corporate orlimited liability company (as applicable) action on the part of Parent andSeller.  Assuming the due authorization,execution and delivery of this Agreement and each Ancillary Agreement to whichit is a party by Buyer, and

 

15

----

 

subject to the receipt of Seller’s Required Consents, each of thisAgreement and each such Ancillary Agreement constitutes a legal, valid andbinding obligation of Parent and/or Seller, as the case may be, enforceableagainst Parent and/or Seller in accordance with its terms, except as suchenforceability may be limited by applicable bankruptcy, insolvency and othersimilar laws affecting the rights and remedies of creditors generally and bygeneral principles of equity.

 

(c)                                  No Violation;Consents and Approvals.          (i)          Subjectto obtaining Seller’s Required Consents, neither the execution, delivery andperformance by Parent and Seller of this Agreement and each Ancillary Agreementto which Parent or Seller is a party, nor the consummation by Parent and Sellerof the transactions contemplated hereby and thereby, will (A) conflict with orresult in any breach of any provision of the Organizational Documents of Parentor Seller; (B) result in a default (or give rise to any right of termination,cancellation or acceleration), or require a consent, under any of the terms,conditions or provisions of any note, bond, mortgage, indenture, materialagreement or other instrument or obligation to which Parent or Seller is aparty or by which it or any of the Purchased Assets may be bound, except forany such defaults or consents (or rights of termination, cancellation oracceleration) as to which requisite waivers or consents have been obtained orwhich would not, individually or in the aggregate, reasonably be expected tohave a Material Adverse Effect; or (C) constitute a violation of any law,regulation, order, judgment or decree applicable to Parent or Seller, exceptfor any such violations as would not, individually or in the aggregate,reasonably be expected to have a Material Adverse Effect.

 

(ii)                                  Exceptas set forth in Section I of Schedule 4.01(c)(ii) (listing each ofSeller’s Required Governmental Consents) or Section II thereof (listingeach of Seller’s Required Third-Party Consents), no consent or approval of,filing with, or notice to, any Governmental Authority or other Person isnecessary for the execution, delivery and performance of this Agreement byParent or Seller or of any Ancillary Agreement to which Parent or Seller is aparty, or the consummation by Parent or Seller of the transactions contemplatedhereby and thereby, other than such consents, approvals, filings or noticeswhich, if not obtained or made, would not, individually or in the aggregate,reasonably be expected to have a Material Adverse Effect.

 

(d)                                 Ownership.          Parentowns beneficially and of record all the outstanding limited liability companyinterests of CinCap VIII, LLC, a Delaware limited liability company (“CinCapVIII”), free and clear of all Encumbrances. CinCap VIII owns beneficially and of record all the outstanding limitedliability company interests of Seller, free and clear of all Encumbrances.

 

(e)                                  FinancialStatements; No Material Adverse Effect; No Undisclosed Liabilities.          (i)          Seller has delivered to Buyer a balance sheet of Seller as at December 31,2001, and the related statement of income for the fiscal year then ended,including the notes thereto.  Suchfinancial statements fairly present the financial condition and the results ofoperations of Seller as of the date and for the period referred to in suchfinancial statements, all in accordance with GAAP.

 

16

----

 

(ii)                                  SinceDecember 31, 2001, there has not been any Material Adverse Effect and, to theKnowledge of Parent and Seller, no event has occurred or circumstance existsthat, individually or in the aggregate, would reasonably be expected to have aMaterial Adverse Effect.

 

(iii)                               Seller has noliabilities or obligations of any nature except for (A) liabilities orobligations reflected in the financial statements referred to in paragraph (i)of this Section 4.01(e), including the notes thereto; (B) liabilities orobligations incurred in the ordinary course of business, whether before orafter the respective dates of the financial statements referred to in paragraph(i) of this Section 4.01(e); and (C) liabilities or obligations which inthe aggregate are not material to the Purchased Assets.

 

(f)                                    Insurance.          Allmaterial policies of fire, liability, workers’ compensation and other forms ofinsurance owned or held by, or on behalf of, Parent or Seller and insuring thePurchased Assets are in full force and effect, all premiums with respectthereto covering all periods up to and including the date hereof have been paid(other than retroactive premiums which may be payable with respect to comprehensivegeneral liability and workers’ compensation insurance policies), and no noticeof cancellation or termination has been received with respect to any suchpolicy which was not replaced on substantially similar terms prior to the dateof such cancellation.

 

(g)                                 Real Property.          (i)          Schedule 4.01(g)(i)sets forth all real property owned, used or occupied by Seller (the “RealProperty”), including a description of all land, and all encumbrances,easements or rights of way of record (or, if not of record, of which Seller orParent has Knowledge) granted on or appurtenant to or otherwise affecting suchReal Property, and all plants, buildings, structures or other Improvementslocated thereon.  To the Knowledge ofParent and Seller, encumbrances, easements or rights of way which are not ofrecord, if any, would not have a Material Adverse Effect.  There are now in full force and effect dulyissued certificates of occupancy permitting the Real Property and Improvementslocated thereon to be legally used and occupied as the same are nowconstituted.  To the Knowledge of Parentand Seller, no fact or condition exists which would prohibit or adverselyaffect the ordinary rights of access to and from the Real Property from and tothe existing highways and roads and there is no pending or, to the Knowledge ofParent or Seller, threatened restriction or denial, governmental or otherwise,upon such ingress and egress.  To theKnowledge of Parent and Seller, there is not (i) any claim of adverse possessionor prescriptive rights involving any of the Real Property, (ii) any structurelocated on any Real Property which encroaches on or over the boundaries ofneighboring or adjacent properties or (iii) any structure of any other partywhich encroaches on or over the boundaries of any such Real Property.  To the Knowledge of Parent and Seller, nopublic improvements have been commenced and none are planned which in eithercase may result in special assessments or otherwise would, individually or inthe aggregate, reasonably be expected to have a Material Adverse Effect.

 

17

----

 

(ii)                                  Thereare no material Real Property leases (the “Real Property Leases”) relating tothe Purchased Assets under which the Seller is a lessee, lessor or under whichSeller has any interest.

 

(h)                                 Conveyanceof Real Property.          Nostate, municipal, or other governmental approval regarding the division,platting, or mapping of real estate is required as a prerequisite to theconveyance by Seller to Buyer (or as a prerequisite to the recording of anyconveyance document) of any Real Property pursuant to the terms hereof.

 

(i)                                     Improvements.          NeitherSeller nor any Affiliate thereof has received any written notices from anyGovernmental Authority stating or alleging that any Improvements have not beenconstructed in compliance with applicable Laws.  No written notice has been received by the Seller or anyAffiliate thereof from any Governmental Authority requiring or advising as to theneed for any repair, alteration, restoration or improvement in connection withthe Purchased Assets.

 

(j)                                     Title;Condition and Sufficiency of Assets.          (i)          Subjectto Permitted Encumbrances, Seller is the holder of record title to the RealProperty and has good and valid title to the other Purchased Assets which itpurports to own, free and clear of all Encumbrances.

 

(ii)                                  Thetangible assets (real and personal) at, related to, or used in connection withHenry County Station, taken as a whole, (A) are in good operating and usablecondition and repair, free from any defects (except for ordinary wear and tear,in light of their respective ages and historical usages, and except for suchdefects as do not materially interfere with the use thereof in the conduct ofthe normal operation and maintenance of the Purchased Assets taken as a whole)and (B) have been maintained consistent with Good Utility Practice.

 

(iii)                               Except for immaterialomissions, the PurchasedAssets (A) constitute all of the assets, tangible and intangible, of any naturewhatsoever, necessary to operate Seller’s business in the manner presentlyoperated by Seller and (B) include all of the operating assets of Seller.

 

(k)                                  EnvironmentalMatters.          (i)          Selleror its Affiliate, Cinergy Power Generation Services, LLC, a Delaware limitedliability company (“GGPS”) holds, and is in compliance with, all permits,certificates, certifications, licenses and other authorizations issued byGovernmental Authorities under Environmental Laws (collectively, “Environmental Permits”) that arerequired for Seller to conduct the business and operations of the PurchasedAssets, and Seller is otherwise in compliance with all applicable EnvironmentalLaws with respect to the business and operations of the Purchased Assets,except for any such failures to hold or comply with required EnvironmentalPermits, or such failures to be in compliance with applicable EnvironmentalLaws, as would not, individually or in the aggregate, reasonably be expected tohave a Material Adverse Effect;

 

18

----

 

(ii)                                  neitherSeller nor Parent has received any written request for information, or beennotified of any violation, or that it is a potentially responsible party, underCERCLA or any other Environmental Law for contamination or air emissions atHenry County Station or the Real Property, except for any such requests ornotices that would result in liabilities under such laws as would not,individually or in the aggregate, reasonably be expected to have a MaterialAdverse Effect, and there are no claims, actions, proceedings or investigationspending or, to the Knowledge of Seller or Parent, threatened against Sellerbefore any Governmental Authority or body acting in an adjudicative capacityrelating in any way to any Environmental Laws or against Seller or Parentconcerning contamination or air emissions at Henry County Station or the RealProperty; and

 

(iii)                               there are no outstandingjudgments, decrees or judicial orders relating to the Purchased Assetsregarding compliance with any Environmental Law or to the investigation orcleanup of Hazardous Substances under any Environmental Law relating to thePurchase Assets, except for such outstanding judgments, decrees or judicialorders as would not, individually or in the aggregate, reasonably be expectedto have a Material Adverse Effect.

 

(iv)                              Schedule 4.01(k)lists all Environmental Permits.

 

The representations and warranties made in thisSection 4.01(k) are the exclusive representations and warranties of Parentand Seller relating to environmental matters.

 

(l)                                     Condemnation.               There are nopending or, to the Knowledge of Parent or Seller, threatened proceedings orgovernmental actions to condemn or take by power of eminent domain all or anypart of the Purchased Assets.

 

(m)                               Contractsand Leases.          (i)          Schedule 4.01(m)lists all written contracts, agreements, licenses (other than EnvironmentalPermits, Permits or Intellectual Property) or personal property leases that arematerial to the business or operations of the Purchased Assets, other than anysuch agreements, licenses, or personal property leases that are expected toexpire or terminate on or prior to the Closing Date.

 

(ii)                                  Exceptas disclosed in Schedule 4.01(m), each Transferred Contract (A)constitutes a legal, valid and binding obligation of Seller and, to Parent’sand Seller’s Knowledge, constitutes a valid and binding obligation of the otherparties thereto, (B) is in full force and effect and Seller has not deliveredor received any written notice of termination thereunder, and (C) may betransferred to Buyer pursuant to this Agreement without the consent of theother parties thereto and will continue in full force and effect thereafter, ineach case without breaching the terms thereof or resulting in the forfeiture orimpairment of any rights thereunder.

 

(iii)                               Except as set forth inSchedule 4.01(m), there is not under any Transferred Contract any defaultor event which, with notice or lapse of time or both, (A) would

 

19

----

 

constitute a default by Seller or, to Parent’s or Seller’s Knowledge,any other party thereto, (B) would constitute a default by Seller or, toParent’s or Seller’s Knowledge, any other party thereto which would give riseto an automatic termination, or the right of discretionary termination,thereof, or (C) would cause the acceleration of any of Seller’s obligationsthereunder or result in the creation of any Encumbrance (other than anyPermitted Encumbrance) on any of the Purchased Assets.  There are no claims, actions, proceedings orinvestigations pending or, to the Knowledge of Seller or Parent, threatenedagainst Seller or any other party to any Transferred Contract before anyGovernmental Authority or body acting in an adjudicative capacity relating inany way to any Transferred Contract or the subject matter thereof.  Seller and Parent have no Knowledge of anydefense, offset or counterclaim arising under any Transferred Contract.

 

(n)                                 LegalProceedings.          Thereare no actions or proceedings pending or, to the Knowledge of Seller or Parent,threatened against Seller before any court, arbitrator or GovernmentalAuthority, which, individually or in the aggregate, would reasonably beexpected to have a Material Adverse Effect. Seller is not subject to any outstanding judgments, rules, orders,writs, injunctions or decrees of any court, arbitrator or GovernmentalAuthority which, individually or in the aggregate, would reasonably be expectedto have a Material Adverse Effect.

 

(o)                                 Permits.          (i)          Sellerhas all permits, licenses, franchises-and other governmental authorizations,consents and approvals (other than Environmental Permits, which are addressedin Section 4.01(k)) (collectively, “Permits”) necessary to own and operatethe Purchased Assets, except where any failures to have such Permits would not,individually or in the aggregate, reasonably be expected to have a MaterialAdverse Effect.  Neither Seller norParent has received any written notification that Seller is in violation, nordoes Parent or Seller have Knowledge of any violations, of any such Permits, orany Law or judgment of any Government Authority applicable to Seller with respectto the Purchased Assets, except for violations that would not, individually orin the aggregate, reasonably be expected to have a Material Adverse Effect.

 

(ii)                                  Schedule 4.01(o)lists all material Permits.

 

(p)                                 Taxes.          Sellerhas-filed all Tax Returns that are required to be filed by it with respect toany Tax, and Seller has paid all Taxes that have become due as indicatedthereon, except where such Tax is being contested in good faith by appropriateproceedings, or where any failures to so file or pay would not, individually orin the aggregate, reasonably be expected to have a Material AdverseEffect.  There are no Encumbrances forTaxes on the Purchased Assets that are not Permitted Encumbrances.

 

(q)                                 IntellectualProperty.          Sellerhas such ownership of or such rights by license or other agreement to use allIntellectual Property necessary to permit Seller to conduct its business ascurrently conducted, except where any failures to have such ownership, licenseor right to use would not, individually or in the aggregate, reasonably beexpected to have a Material Adverse Effect. Seller is not, nor has Parent or Seller

 

20

----

 

received any notice that Seller is, in default (or with the giving ofnotice or lapse of time or both, would be in default) under any contract to usesuch Intellectual Property, and there are no material restrictions on thetransfer of any material contract, or any interest therein, held by Seller inrespect of such Intellectual Property. Neither Parent nor Seller has received notice that Seller is infringingany Intellectual Property of any other Person in connection with the operationor business of the Purchased Assets.

 

(r)                                    Compliancewith Laws.          Selleris in compliance with all applicable Laws with respect to the ownership oroperation of the Purchased Assets, except where any such failures to be incompliance would not, individually or in the aggregate, reasonably be expectedto have a Material Adverse Effect.

 

(s)                                  EWGStatus.          Selleris an “exempt wholesale generator” and Henry County Station is an “eligiblefacility,” each within the meaning of Section 32(a) of the Public UtilityHolding Company Act of 1935.

 

(t)                                    Employees.          Sellerhas no employees or employee benefit plans nor has had any employees oremployee benefit plans since the date of its formation.  Seller has not assumed (voluntarily or byoperation of Law or order) or incurred any liabilities associated withemployees or employee benefit plans, including without limitation under orpursuant to the Employee Retirement Income Security Act of 1974, as amended.

 

(u)                                 Limitation ofRepresentations and Warranties.          EXCEPTFOR THE REPRESENTATIONS AND WARRANTIES SET FORTH IN THIS AGREEMENT AND IN ANYANCILLARY AGREEMENT, PARENT AND SELLER ARE NOT MAKING, AND HEREBY DISCLAIM, ANYOTHER REPRESENTATIONS AND WARRANTIES, WRITTEN OR ORAL, STATUTORY, EXPRESS ORIMPLIED, CONCERNING SELLER, PARENT, HENRY COUNTY STATION OR THE PURCHASEDASSETS OR ANY PART THEREOF.

 

Section 4.02.                             Representations andWarranties of Buyer.  Buyerrepresents and warrants to Seller and Parent as follows:

 

(a)                                  Organizationand Good Standing.          Buyeris a corporation duly formed, validly existing and in good standing under thelaws of the State of Indiana and has all requisite power and authority to own,lease or operate its properties and to carry on its business as it is now beingconducted.

 

(b)                                 Authority andEnforceability.          Buyerhas full corporate power and authority to execute and deliver and carry out itsobligations under this Agreement and each Ancillary Agreement to which it is aparty, and to consummate the transactions contemplated hereby and thereby.  The execution, delivery and performance byBuyer of this Agreement and each such Ancillary Agreement, and the consummationof the transactions contemplated hereby and thereby, have been duly and validlyauthorized by all necessary corporate action by Buyer.  Assuming the due authorization, execution and

 

21

----

 

delivery of this Agreement and each such Ancillary Agreement by theother party or parties thereto, and subject to the receipt of Buyer’s RequiredConsents, each of this Agreement and each such Ancillary Agreement constitutesa legal, valid and binding obligation of Buyer , enforceable against Buyer inaccordance with its terms, except as such enforceability may be limited byapplicable bankruptcy, insolvency and other similar laws affecting the rightsand remedies of creditors generally and by general principles of equity.

 

(c)                                  NoViolation; Consents and Approvals.          (i)          Subjectto obtaining Buyer’s Required Consents, neither the execution, delivery andperformance by Buyer of this Agreement and each Ancillary Agreement to whichBuyer is a party, nor the consummation by Buyer of the transactionscontemplated hereby and thereby, will (A) conflict with or result in any breachof any provision of the Organizational Documents of Buyer; (B) result in adefault (or give rise to any right of termination, cancellation oracceleration), or require a consent, under any of the terms, conditions orprovisions of any note, bond, mortgage, indenture, material agreement or otherinstrument or obligation to which Buyer is a party or by which any of theirrespective material properties or assets may be bound, except for any suchdefaults or consents (or rights of termination, cancellation or acceleration)as to which requisite waivers or consents have been obtained or which wouldnot, individually or in the aggregate, reasonably be expected to have amaterial adverse effect on the ability of Buyer to perform its obligationsunder this Agreement and the Ancillary Agreements; or (iii) constitute aviolation of any law, regulation, order, judgment or decree applicable toBuyer, except for any such violations as would not, individually or in theaggregate, reasonably be expected to have a material adverse effect on theability of Buyer to perform its obligations under this Agreement and theAncillary Agreements.

 

(ii)                                  Exceptas set forth in Section I of Schedule 4.02(c)(ii) (listing each ofBuyer’s Required Governmental Consents) or Section II thereof (listingeach of Buyer’s Required Third-Party Consents), no consent or approval of,filing with, or notice to, any Governmental Authority or other Person isnecessary for the execution and delivery of this Agreement or any AncillaryAgreement by Buyer, or the consummation by Buyer or Company of the transactionscontemplated hereby and thereby, except for any such consents, approvals,filings or notices which, if not obtained or made, would not, individually orin the aggregate, reasonably be expected to have a material adverse effect onthe ability of Buyer to perform its obligations under this Agreement and theAncillary Agreements.

 

(d)                                 LegalProceedings.          Thereare no actions or proceedings pending or, to the Knowledge of Buyer, threatenedagainst Buyer before any court, arbitrator or Governmental Authority, which,individually or in the aggregate, would reasonably be expected to have amaterial adverse effect on the ability of Buyer to perform its obligationsunder this Agreement and the Ancillary Agreements.  Buyer is not subject to any outstanding judgments, rules, orders,writs, injunctions or decrees of any court, arbitrator or GovernmentalAuthority which, individually or in the aggregate, would

 

22

----

 

reasonably be expected to have a material adverse effect on the abilityof Buyer to perform its obligations under this Agreement and the AncillaryAgreements.

 

(e)                                  Availabilityof Funds.          Buyerhas or will have liquid capital or committed sources therefor sufficient topermit Buyer to perform in full when due all of its obligations under thisAgreement and any Ancillary Agreement to which it is a party.

 

ARTICLE V

 

COVENANTS

 

Section 5.01.                             Books and Records.          Fora period of 7 years after the Closing Date (or such other date as the Partiesmay mutually determine), each Party and its Representatives shall havereasonable access to all books and records of the Purchased Assets , to theextent that such access may reasonably be required by such Party in connectionwith the Assumed Liabilities or the Excluded Liabilities, or other mattersaffected by the operation of the Purchased Assets.  Such access shall be afforded by the Party in possession of anysuch books and records upon receipt of reasonable advance notice and duringnormal business hours.  The Partyexercising this right of access shall be solely responsible for any costs orexpenses incurred by it or the other Party with respect to such access pursuantto this Section 5.01.  If the Partyin possession of such books and records desires to dispose of any such booksand records upon or prior to the expiration of such seven-year period, suchParty shall, prior to such disposition, give the other Party a reasonableopportunity, at such other Party’s expense, to segregate and remove such books andrecords as such other Party may select.

 

Section 5.02.                             Finder’s Fees.          Sellerand Parent, on the one hand, and Buyer, on the other hand, represent andwarrant to the other that no broker, finder or other Person is entitled to anybrokerage fees, commissions or finder’s fees in connection with thetransactions contemplated hereby by reason of any action taken by the Partymaking such representation.  Seller andParent, on the one hand, and Buyer, on the other hand, will pay to the other orotherwise discharge, and will indemnify and hold the other harmless from andagainst, any and all claims or liabilities for all brokerage fees, commissionsand finder’s fees incurred by reason of any action taken by the indemnifyingparty.

 

Section 5.03.                             Tax Matters.          Alltransfer, use, stamp, sales and similar Taxes incurred in connection with thisAgreement and the transactions contemplated hereby shall be the soleresponsibility of Seller and, to the extent paid by Buyer, Seller shallpromptly reimburse Buyer upon request.

 

Section 5.04.                             Further Assurances.          (a)          Subjectto the terms and conditions of this Agreement, each of Seller and Parent, onthe one hand, and Buyer, on the other hand, shall use commercially reasonableefforts to take, or cause to be taken, all actions, and to do, or cause to bedone, all things necessary, proper or advisable under applicable

 

23

----

 

Laws to consummate and make effective the transfer of the PurchasedAssets pursuant to this Agreement and the assumption of the AssumedLiabilities, including using commercially reasonable efforts with a view toobtaining all necessary consents, approvals and authorizations of, and makingall required notices or filings with, third parties required to be obtained ormade in order to consummate the transactions hereunder, including the transferof the Transferred Permits to Buyer. Neither Seller and Parent, on the one hand, nor Buyer, on the otherhand, shall, without prior written consent of the other, take or fail to takeany action which might reasonably be expected to prevent or materially impede,interfere with or delay the transactions contemplated by this Agreement.

 

(b)                                 Inthe event that any portion of the Purchased Assets shall not have been conveyedto Buyer at the Closing, Seller shall, subject to paragraphs (c) and (d)immediately below, convey such asset to Buyer as promptly as practicable afterthe Closing.

 

(c)                                  Tothe extent, if any, that Seller’s rights under any Transferred Contract may notbe assigned without the consent of any other party thereto, which consent hasnot been obtained by the Closing Date, this Agreement shall not constitute anagreement to assign the same if an attempted assignment would constitute abreach thereof or be unlawful.  Sellerand Buyer agree that if any consent to an assignment of any TransferredContract has not been obtained at the Closing Date, or if any attemptedassignment would be ineffective or would impair Buyer’s rights and obligationsunder the Transferred Contract in question, so that Buyer would not in effectacquire the benefit of all such rights and obligations, Seller, at its optionand to the maximum extent permitted by law and such Transferred Contract,shall, after the Closing Date, (i) appoint Buyer to be Seller’s agent withrespect to such Transferred Contract or (ii) to the maximum extent permitted bylaw and such Transferred Contract, enter into such reasonable arrangements withBuyer or take such other commercially reasonable actions to provide Buyer withthe same or substantially similar rights and obligations of such TransferredContract.  From and after the ClosingDate, Seller, Parent and Buyer shall cooperate and use commercially reasonableefforts to obtain an assignment to Buyer of any such Transferred Contract.

 

(d)                                 Tothe extent that Seller’s rights under any warranty or guaranty described inSection 2.01(f) may not be assigned without the consent of another Person,which consent has not been obtained by the Closing Date, this Agreement shallnot constitute an agreement to assign the same, if an attempted assignmentwould constitute a breach thereof or be unlawful.  The Parties agree that if any consent to an assignment of anysuch warranty or guaranty has not been obtained or if any attempted assignmentwould be ineffective or would impair Buyer’s rights and obligations under thewarranty or guaranty in question, so that Buyer would not in effect acquire thebenefit of all such rights and obligations, Seller shall use commerciallyreasonable efforts to the extent permitted by law and such warranty orguaranty, to enforce such warranty or guaranty for the benefit of Buyer to themaximum extent possible so as to provide Buyer with the benefits andobligations of such warranty or guaranty. Notwithstanding the foregoing, Seller shall not

 

24

----

 

be obligated to bring or file suit against any third party, providedthat if Seller determines not to bring or file suit after being requested byBuyer to do so, Seller shall assign, to the extent permitted by law or anyapplicable agreement, its rights in respect of the claims so that Buyer maybring or file such suit.

 

ARTICLE VI

 

INDEMNIFICATION

 

Section 6.01.                             Survival.          (a)          Therepresentations and warranties of the Parties contained herein shall survivethe Closing for a period of one year and thereafter shall be of no furtherforce and effect, except that (i) the representations and warranties set forthin Section 4.01(k) shall survive the Closing for a period of three years,(ii) the representations and warranties set forth in Section 4.01(p) shallsurvive the Closing for the period of the applicable statute of limitations,(iii) the representations and warranties set forth in Section 4.01(a), (b)and (c) and Section 4.02(a), (b) and (c) shall survive indefinitely, and(iv) any representation or warranty as to which a claim has been assertedduring the survival period shall continue in effect with respect to such claimuntil such claim has been finally resolved or settled.

 

(b)                                 Thecovenants and agreements of the Parties contained in this Agreement shallsurvive the Closing in accordance with their respective terms.

 

Section 6.02.                             Indemnification.          (a)          Fromand after the Closing, Buyer shall indemnify, defend and hold harmless Sellerand Parent and their Representatives (each, a “Seller Indemnitee”) from and against any and all claims, demands,suits, losses, liabilities, penalties, damages, obligations, payments, costsand expenses (including, without limitation, the costs and expenses of any andall actions, suits, proceedings, assessments, judgments, settlements andcompromises relating thereto and reasonable attorneys’ fees and reasonable disbursementsin connection therewith) (each, an “IndemnifiableLoss”) asserted against or suffered by any Seller Indemnitee relatingto, resulting from or arising out of (i) any breach by Buyer of anyrepresentation, warranty, covenant or agreement of Buyer contained in thisAgreement or the Ancillary Agreements, or (ii) the Assumed Liabilities.

 

(b)                                 Fromand after the Closing, Parent and Seller shall indemnify, defend and holdharmless Buyer and its Representatives (each, a “Buyer Indemnitee”) from and against any and all IndemnifiableLosses asserted against or suffered by any Buyer Indemnitee relating to,resulting from or arising out of (i) any breach by Parent or Seller of any oftheir representations, warranties, covenants or agreements contained in this Agreementor the Ancillary Agreements, (ii) the Excluded Liabilities, or (iii)noncompliance with any bulk sales or transfer laws as provided inSection 7.06.

 

25

----

 

 

(c)                                  Theamount of any Indemnifiable Loss shall be reduced (i) to the extent that anyPerson entitled to receive indemnification under this Agreement (an “Idemnitee”) receives any insuranceproceeds with respect to such Indemnifiable Loss, and (ii) to take into accountany net Tax benefit realized by the Indemnitee arising from the recognition ofsuch Indemnifiable Loss (but only to the extent that the Parties, followinggood faith negotiations for a period of 30 days, jointly agree that such Taxbenefit would be realized by the Indemnitee).

 

(d)                                 Theexpiration or termination of any covenant, agreement, representation orwarranty shall not affect the Parties’ obligations under this Section 6.02if the Indemnitee provided the Person required to provide indemnification underthis Agreement (the “Indemnifying Party”) with proper notice of the claim orevent for which indemnification is sought prior to such expiration, terminationor extinguishment.

 

(e)                                  Therights and remedies of the Parties under this Article VI are exclusive andin lieu of any and all other rights and remedies which the Parties may haveunder this Agreement or otherwise for declaratory, injunctive or monetaryrelief with respect to any breach of or failure to perform any representation,warranty, covenant or agreement set forth in this Agreement, after theoccurrence of the Closing.

 

(f)                                    EachParty waives any provision of law to the extent that it would limit or restrictthe agreements contained in this Section 6.02.  Notwithstanding any provisions in this Agreement to the contrary,each Party retains its remedies at law or in equity with respect to willful,knowing or intentional misrepresentations or breaches of this Agreement.

 

(g)                                 Notwithstandinganything to the contrary herein, no Party (including an Indemnitee) shall beentitled to recover from any other Party (including an Indemnifying Party) forany liabilities, damages, obligations, payments, losses, costs, or expensesunder this Agreement or any amount in excess of the actual compensatorydamages, court costs and reasonable attorney’s fees suffered by suchparty.  The Parties waive any right torecover punitive, special, exemplary and consequential damages arising inconnection with or with respect to this Agreement.  The provisions of this Section 6.02(g) shall not apply toindemnification for a Third Party Claim.

 

(h)                                 AnIndemnitee shall use commercially reasonable efforts to mitigate allIndemnifiable Losses, including availing itself of any defenses, limitations,rights of contribution, claims against third parties and other rights at law orequity.  Commercially reasonable effortsshall include the reasonable expenditure of money to mitigate or otherwisereduce or eliminate any losses or expenses for which indemnification wouldotherwise be due hereunder, and, in addition to its other obligationshereunder, the Indemnifying Party shall reimburse the Indemnitee for theIndemnitee’s reasonable expenditures in undertaking such mitigation.

 

(i)                                     Therights and obligations of indemnification under this Section 6.02 shallnot be limited or subject to set-off based on any violation or allegedviolation of any

 

26

----

 

obligation under thisAgreement or otherwise, including but not limited to breach or alleged breachby the Indemnitee of any representation, warranty, covenant or agreementcontained in this Agreement.

 

Section 6.03.                             Procedure forIndemnification.          (a)          Ifany Indemnitee receives notice of the assertion of any claim or of thecommencement of any claim, action, or proceeding made or brought by any Personwho is not a party to this Agreement or any Affiliate of a Party to thisAgreement (a “Third Party Claim”)with respect to which indemnification is to be sought from an IndemnifyingParty, the Indemnitee shall give such Indemnifying Party reasonably promptwritten notice thereof, but in any event such notice shall not be given laterthan 20 days after the Indemnitee’s receipt of notice of such Third PartyClaim.  Such notice shall describe thenature of the Third Party Claim in reasonable detail and shall indicate theestimated amount, if practicable, of the Indemnifiable Loss that has been ormay be sustained by the Indemnitee.  TheIndemnifying Party will have the right to participate in or, by giving writtennotice to the Indemnitee, to elect to assume the defense of any Third PartyClaim at such Indemnifying Party’s expense and by such Indemnifying Party’s owncounsel, provided that the counsel for the Indemnifying Party who shall conductthe defense of such Third Party Claim shall be reasonably satisfactory to theIndemnitee.  The Indemnitee shallcooperate in good faith in such defense at such Indemnitee’s own expense.  If an Indemnifying Party elects not toassume the defense of any Third Party Claim, the Indemnitee may compromise orsettle such Third Party Claim over the objection of the Indemnifying Party,which settlement or compromise shall conclusively establish the IndemnifyingParty’s liability pursuant to this Agreement.

 

(b)                                 If,within 20 days after an Indemnitee provides written notice to the IndemnifyingParty of any Third Party Claims, the Indemnitee receives written notice fromthe Indemnifying Party that such Indemnifying Party has elected to assume thedefense of such Third Party Claim as provided in Section 6.03(a), theIndemnifying Party will not be liable for any legal expenses subsequentlyincurred by the Indemnitee in connection with the defense thereof; provided,however, that if the Indemnifying Party shall fail to take reasonable steps necessaryto defend diligently such Third Party Claim within 20 days after receivingnotice from the Indemnitee that the Indemnitee believes the Indemnifying Partyhas failed to take such steps, the Indemnitee may assume its own defense andthe Indemnifying Party shall be liable for all reasonable expensesthereof.  Without the prior writtenconsent of the Indemnitee, the Indemnifying Party shall not enter into anysettlement of any Third Party Claim which would lead to liability or create anyfinancial or other obligation on the part of the Indemnitee for which theIndemnitee is not entitled to indemnification hereunder.  If a firm offer is made to settle a ThirdParty Claim without leading to liability or the creation of a financial orother obligation on the part of the Indemnitee for which the Indemnitee is notentitled to indemnification hereunder and the Indemnifying Party desires toaccept and agree to such offer, the Indemnifying Party shall give writtennotice to the Indemnitee to that effect. If the Indemnitee fails to consent to such firm offer within 10 daysafter its receipt of such notice, the Indemnifying Party shall be relieved ofits obligations to defend such Third

 

27

----

 

Party Claim and theIndemnitee may contest or defend such Third Party Claim.  In such event, the maximum liability of theIndemnifying Party as to such Third Party Claim will be the amount of suchsettlement offer plus reasonable costs or expenses paid or incurred byIndemnitee up to the date of said notice.

 

(c)                                  Anyclaim by an Indemnitee on account of an Indemnifiable Loss which does notresult from a Third Party Claim (a “DirectClaim”) shall be asserted by giving the Indemnifying Party reasonablyprompt written notice thereof, stating the nature of such claim in reasonabledetail and indicating the estimated amount, if practicable, but in any eventsuch notice shall not be given later than 30 days after the Indemnitee becomesaware of such Direct Claim, and the Indemnifying Party shall have a period of30 days within which to respond to such Direct Claim.  If the Indemnifying Party does not respond within such thirty 30day period, the Indemnifying Party shall be deemed to have accepted such claim.  If the Indemnifying Party rejects suchclaim, the Indemnitee will be free to seek enforcement of its right toindemnification under this Agreement.

 

(d)                                 Ifthe amount of any Indemnifiable Loss, at any time subsequent to the making ofan indemnity payment in respect thereof, is reduced by recovery, settlement orotherwise under or pursuant to any insurance coverage, or pursuant to anyclaim, recovery, settlement or payment by, from or against any other entity,the amount of such reduction, less any costs, expenses or premiums incurred inconnection therewith (together with interest thereon from the date of paymentthereof at the Prime Rate) shall promptly be repaid by the Indemnitee to theIndemnifying Party.  Upon making anyindemnity payment, the Indemnifying Party, to the extent of such indemnitypayment, shall be subrogated to all rights of the Indemnitee against any thirdparty in respect of the Indemnifiable Loss to which the indemnity paymentrelates; provided, however, that (i) the Indemnifying Party shall then be incompliance with its obligations under this Agreement in respect of suchIndemnifiable Loss and (ii) until the Indemnitee recovers full payment of itsIndemnifiable Loss, any and all claims of the Indemnifying Party against suchthird party on account of said indemnity payment are hereby made subordinate inright of payment to the Indemnitee’s rights against such third party.  Without limiting the generality or effect ofany other provision hereof, each such Indemnitee and Indemnifying Party shallduly execute upon request all instruments reasonably necessary to evidence andperfect the above-described subrogation and subordination rights, and otherwisecooperate in the prosecution of such claims at the direction of theIndemnifying Party.  Nothing in thisSection 6.03(d) shall require any Party hereto to obtain or maintain anyinsurance coverage.

 

(e)                                  Afailure to give timely notice as provided in this Section 6.03 shall notaffect the rights or obligations of any Party hereunder except if, and only tothe extent that, as a result of such failure, the Party which was entitled toreceive such notice was actually and materially prejudiced as a result of suchfailure.

 

28

----

 

ARTICLE VII

 

MISCELLANEOUS PROVISIONS

 

Section 7.01                                Notices.          Allnotices and other communications hereunder shall be in writing and shallbe deemed given (i) on the day when delivered personally or by e-mail (withconfirmation) or facsimile transmission (with confirmation), (ii) on the nextbusiness day when delivered to a nationally recognized overnight deliveryservice, or (iii) 5 business days after deposited as registered or certifiedmail (return receipt requested), in each case, postage prepaid, addressed tothe recipient Party at its address set forth below (or to such other addressesand e-mail and facsimile numbers for a Party as shall be specified by likenotice; provided, however, that any notice of a change of address or e-mailor  facsimile number shall be effectiveonly upon receipt thereof):

 

If to Seller or Parent,to:

 

Cinergy Capital& Trading, Inc.c/o CinCap VII, LLC 139 East Fourth StreetCincinnati, OH 45202M. Stephen HarknessVice President, Chief Operations and Financial Officer Facsimile No.: 513-419-5719e-mail: sharkness@cinergy.com

 

If to Buyer, to:

 

PSI Energy, Inc.

1000 East Main Street

Plainfield, Indiana  46168Douglas F. Esamann/President

Facsimile No:317/838-2987

e-mail:desamann@cinergy.com

 

Section 7.02.                             Waiver.          Therights and remedies of the Parties are cumulative and not alternative.  Neither the failure nor any delay by anyParty in exercising any right, power, or privilege under this Agreement or thedocuments referred to in this Agreement will operate as a waiver of such right,power, or privilege, and no single or partial exercise of any such right,power, or privilege will preclude any other or further exercise of such right,power, or privilege or the exercise of any other right, power, orprivilege.  To the maximum extentpermitted by applicable Law, (a) no claim or right arising out of thisAgreement or the documents referred to in this Agreement can be discharged byone Party, in whole or in part, by a waiver or renunciation of the claim orright unless in writing signed by each other Party; (b) no waiver that may begiven by a

 

29

----

 

Party will be applicableexcept in the specific instance for which it is given; and (c) no notice to ordemand on one Party will be deemed to be a waiver of any obligation of suchParty or of the right of the Party giving such notice or demand to take furtheraction without notice or demand as provided in this Agreement or the documentsreferred to in this Agreement.

 

Section 7.03.                             Entire Agreement;Amendment etc.

(a)                                  ThisAgreement and the Ancillary Agreements, including the Schedules, documents,certificates and instruments referred to herein or therein, embody the entireagreement and understanding of the Parties hereto in respect of thetransactions contemplated by this Agreement. There are no restrictions, promises, representations, warranties,covenants or undertakings, other than those expressly set forth or referred toherein or therein.  This Agreementsupersedes all prior agreements and understandings between the Parties, whetherwritten or oral, with respect to the transactions contemplated hereby.

 

(b)                                 ThisAgreement may not be amended, supplemented, terminated or otherwise modifiedexcept by a written agreement executed by Seller, Parent and Buyer.  In addition, any proposed amendment heretois subject to Section 7.13.

 

(c)                                  ThisAgreement shall be binding upon and inure solely to the benefit of each Partyhereto and, other than with respect to Sections 7.12 and 7.13, nothing in thisAgreement, express or implied, is intended to or shall confer upon any otherPerson any right, benefit or remedy of any nature whatsoever under or by reasonof this Agreement.

 

Section 7.04.                             Assignment.          ThisAgreement and all the of the provisions hereof shall be binding upon and inureto the benefit of the Parties hereto and their respective successors andpermitted assigns, but neither this Agreement nor any of the rights, interestsor obligations hereunder may be assigned by, on the one hand, Seller andParent, and on the other hand, Buyer, in whole or in part (whether by operationof law or otherwise), without the prior written consent of the other Party, andany attempt to make any such assignment without such consent will be null andvoid.  Notwithstanding the foregoing,Seller or Buyer may assign or otherwise transfer its rights hereunder and underany Ancillary Agreement to any bank, financial institution or other lenderproviding financing to Seller or Buyer, as applicable, as collateral securityfor such financing; provided, however, that no such assignment shall (x) impairor materially delay the consummation of the transactions contemplated hereby or(y) relieve or discharge Seller or Buyer, as the case may be, from any of itsobligations hereunder and thereunder.

 

Section 7.05.                             Severability.          Ifany term or other provision of this Agreement is invalid, illegal or incapableof being enforced by any law or public policy, all other terms and provisionsof this Agreement will nevertheless remain in full force and effect so long asthe economic or legal substance of the transactions contemplated hereby is notaffected in any manner materially adverse to any party hereto.  Upon such determination that any

 

30

----

 

term or other provisionis invalid, illegal or incapable of being enforced, the Parties will negotiatein good faith to modify this Agreement so as to effect the original intent ofthe Parties as closely as possible in an acceptable manner in order that thetransactions contemplated hereby are consummated as originally contemplated tothe greatest extent possible.

 

Section 7.06.                             Bulk Sales Laws.          Buyerhereby acknowledges that, notwithstanding anything in this Agreement to thecontrary, Seller will not comply with the provisions of the bulk sales laws ofany jurisdiction in connection with the transactions contemplated by thisAgreement; and Buyer hereby irrevocably waives compliance by Seller with theprovisions of the bulk sales laws of all applicable jurisdictions.

 

Section 7.07.                             Governing Law.          ThisAgreement will be governed by and construed in accordance with the laws of theState of Indiana, without giving effect to choice of law principlesthereof.

 

Section 7.08.                             Counterparts;Facsimile Execution.   This Agreement may beexecuted in one or more counterparts, all of which will be considered one andthe same agreement and will become effective when one or more counterparts havebeen signed by each of the Parties and delivered to each other Party, it being understoodthat the Parties need not sign the same counterpart.  This Agreement may be executed by facsimile signature(s).

 

Section 7.09.                             Schedules.          TheSchedules to this Agreement are intended to be and hereby are specifically madea part of this Agreement

 

Section 7.10                                U.S. Dollars.   Unlessotherwise stated, all dollar amounts set forth herein are United States (U.S.)dollars.

 

Section 7.11.                             DisputeResolution.   (a)          Ifa dispute arises between the Parties relating to this Agreement, the Partiesagree to use the following alternative dispute resolution (“ADR”) proceduresprior to any Party pursuing other available remedies:

 

(i)                                     Ameeting shall be held promptly between the Parties, attended by individualswith decision-making authority regarding the dispute, to attempt in good faithto negotiate a resolution of the dispute.

 

(ii)                                  If,within 30 days after such meeting, the Parties have not succeeded innegotiating a resolution of the dispute, they will jointly appoint a mutually

 

31

----

 

acceptable neutral personnot affiliated with either Party (the “Neutral”) to act as a mediator.  If the Parties are unable to agree on theNeutral within 20 days, they shall seek assistance in such regard from the CPRInstitute for Dispute Resolution, Inc. (“CPR”).  The Parties shall share the fees of the Neutral and all othercommon fees and expenses equally.

 

(iii)                               Themediation may proceed in accordance with CPR’s Model Procedure for Mediation ofBusiness Disputes, or the Parties may establish their own procedure.

 

(iv)                              TheParties shall pursue mediation in good faith and in a timely manner.  In the event the mediation does not resultin resolution of the dispute within 60 days, then, upon 7 days” written noticeto the other Party, either Party may propose another form of ADR (e.g.,arbitration, a mini-trial, or a summary jury trial) or may pursue otheravailable remedies.

 

(b)                                 AllADR proceedings shall be strictly confidential and used solely for the purposesof settlement.  Any materials preparedby one Party for the ADR proceedings shall not be used as evidence by the otherParty in any subsequent litigation; provided, however, that the underlyingfacts supporting such materials may be subject to discovery.

 

(c)                                  EachParty fully understands its specific obligations under the ADR provisions ofthis Agreement.  Neither Party considerssuch obligations to be vague or in any way unenforceable, and neither Partywill contend to the contrary at any future time or in any future proceeding.

 

Section 7.12.                             Ratemaking.          Buyershall not seek to overturn, reverse, set aside, change or enjoin, whetherthrough appeal or the initiation or maintenance of any action in any forum, adecision or order of the Indiana Utility Regulatory Commission (“IURC”) whichpertains to recovery, disallowance, deferral or ratemaking treatment of anyexpense, charge, cost or allocation incurred or accrued by Buyer in or as aresult of this Agreement (or any amendment hereto) on the basis that thisAgreement and any such expense, charge, cost or allocation was filed with orapproved by the Securities and Exchange Commission (“SEC”).

 

Section 7.13.                             StateReview.          Inthe event the Parties execute an amendment to this Agreement, the Parties shallfulfill the following obligations, where applicable (it being understood thatnone of such obligations are intended to detract from the authority of the SECunder the Public Utility Holding Company Act of 1935):

 

(a)                                  Priorto filing any amendment with the SEC, the Parties shall file with the IURC andprovide to the Indiana Utility Consumer Counselor (and, provide, upon request,to other appropriate parties) a copy of such amendment.

 

(b)                                 Inthe event that the amendment is finally rejected or disapproved or found to beunreasonable by the IURC prior to filing with the SEC, the amendment

 

32

----

 

shall not becomeeffective and the Parties shall not request SEC approval of the amendment.

 

(c)                                  Inthe event that the amendment is rejected or disapproved or found to beunreasonable by IURC after it has been filed with but before it has beenapproved by the SEC, the amendment shall be terminated and the Parties agree torequest withdrawal of the filing.

 

(d)                                 Notwithstanding“(b)” and “(c)” immediately above, in the event that the amendment is rejected,disapproved or found to be unreasonable by IURC before it has been approved bythe SEC, the Parties shall have the right to request further revisions of theamendment in order to cure or remove the cause of the IURC’s rejection,disapproval or finding of unreasonableness. Upon request by a Party, the other Parties shall agree promptly tonegotiate in good faith to revise the amendment and thereafter to file for anynecessary regulatory authorization of the renegotiated amendment.  If the Parties are unable to reach agreementsatisfactory to each of them and to the IURC after good faith negotiations,then “(b)” or “(c)” immediately above, as applicable, shall apply.

 

(e)                                  Inthe event that the IURC has previously approved the amendment prior to SECapproval, “(f)” immediately below shall not apply.

 

(f)                                    Inthe event that an amendment has become effective and is subsequently rejected,disapproved or found to be unreasonable by IURC, the Parties shall make a goodfaith effort to terminate, amend or modify the amendment in a manner whichremedies the IURC’s adverse findings without adverse impact on any of theParties.  The Parties shall request tomeet with representatives of the IURC and make a good faith attempt to resolveany differences regarding the subject amendment.  If agreement can be reached to terminate the amendment or amendor modify the amendment in a manner satisfactory to the Parties and to therepresentatives of the IURC, then the Parties shall file such amendment withthe appropriate state and federal regulatory agencies, seeking all necessaryregulatory authorizations.  If theParties are unable to reach agreement satisfactory to each of them and to the IURCafter good faith negotiations, then they shall be under no further obligationto amend the amendment.

 

[REMAINDER OF PAGELEFT INTENTIONALLY BLANK]

 

33

----

 

IN WITNESS WHEREOF, eachof the Parties has caused this Asset Purchase Agreement to be executed on itsbehalf by its respective officer thereunto duly authorized, all as of the dayand year first above written.

 

 
|   | CINERGY CAPITAL &  TRADING, INC. |
|--------|--------------------------------------|
|   |                                 |
|   |                                 |
|   | By:                                  | /s/ M. Stephen Harkness |   |
|   |                                 | M. Stephen Harkness |
|   |                                 | Vice President, Chief  Operations and |
|   |                                 | Financial Officer |
|   |                                 |   |
|   |                                 |   |
|   | CINCAP VII, LLC                      |
|   |                                 |   |
|   |                                 |   |
|   | By:                                  | /s/ M. Stephen Harkness |   |
|   |                                 | M. Stephen Harkness |
|   |                                 | Vice President, Chief  Operations and |
|   |                                 | Financial Officer |
|   |                                 |   |
|   |                                 |   |
|   | PSI ENERGY, INC.                     |
|   |                                 |   |
|   |                                 |   |
|   | By:                                  | /s/ Douglas F. Esamann |   |
|   |                                 | Douglas F. Esamann |
|   |                                 | President |

 

34

----

 

**SCHEDULEI:  FORM OF DEED**

 

THIS INDENTUREWITNESSETH that **CinCap VII, LLC**, a Delaware limited liability company(“Grantor”), CONVEYS AND WARRANTS unto **PSIEnergy, Inc.**, an Indiana corporation (“Grantee”), for the sum of OneDollar ($1.00) and other valuable consideration, the receipt of which is herebyacknowledged, the following described real estate in Henry County, Indiana(“Real Estate”), to-wit:

#  

Part of the east half ofSection 4, Township 17 North, Range 9 East, Henry County, Indiana, boundedand described as follows, to-wit:

 

Beginning at a point onthe east line of said Section 4 and in the centerline of State Road 38,Pendleton Pike, said point being Due North (an assumed bearing) 2845.99 feetfrom the Southeast Corner of said Section; thence along the east line of saidSection 4, passing a set concrete monument at 36.29 feet, Due South 400.96feet to a corner fence post; thence S89o40’54”W, passing a set concretemonument at 877.07 feet, 892.07 feet to a corner fence post; thence S00o03’25”E1052.92 feet to a set iron pin; thence S89o40’54”W 561.24 feet to a fence post;thence N00o13’24”E, passing a set concrete monument at 1822.12 feet, 1858.37feet to a point in the centerline of State Road 38; thence with the centerlineof said State Road S74o39’34”E 1498.39 feet to the point of beginning,containing 33.542 acres, more or less.

 

The above-described tractconveys all of the real estate, described in that certain Affidavit(recorded on May 11, 1994 in the Office of the Auditor of Henry County,Indiana), which is located south of the centerline of State Road 38 a/k/aPendleton Pike.

 

Being and intended to bethe same real estate conveyed to Grantor by S. Robert Abshire, Gary R. Abshireand Janice E. Carter as tenants in common, each an undivided one-third (1/3)interest, by that certain Warranty Deed dated November 19, 1999 and recordedNovember 22, 1999 as **Instrument No.99010989** in the Office of the Recorder of Henry County, Indiana.

 

**ANDALSO**, Out Lot number 1 in the Northwest Quarter ofSection 3, Township 17 North, Range 9 East; beginning at the Southwestcorner of the Northwest Quarter of Section 3, Township 17 North, Range 9East; thence running North 14 rods and 6 links; thence South 70 degrees East 44rods; thence West

 

35

----

 

41 rods and 3 links tothe place of beginning, containing 1.82 acres.

 

Being and intended to bethe same real estate conveyed to Grantor by Timothy Berg and Connie Diane Berg,husband and wife, by that certain Warranty Deed dated August 22, 2000 andrecorded August 23, 2000 as **Instrument No.20006497** in the Office of the Recorder of Henry County, Indiana.

 

Grantor alsoassigns and transfers to Grantee, and its successors and assigns, all right,title and interest which Grantor derives from that certain Legal DrainEasement dated June 27, 2000 and recorded August 30, 2000 as **Instrument No. 20006691** in the Officeof the Recorder of Henry County, Indiana.

 

Grantor statesthat there is no Indiana Gross Income Tax due and owing on this transaction.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]

 

36

----

 

IN WITNESS WHEREOF,Grantor has caused this Warranty Deed and Assignment of Adjoining EasementInterest to be executed by its duly authorized officer,this           day of                       ,200  .

 
|   | CinCap VII, LLC |
|--------|-----------------|
|   |            |
|   |            |
|   | By:             |   |   |
|   |            | M. Stephen  Harkness, |   |
|   |            | Vice President  and |   |
|   |            | Chief Operations  and Financial Officer |   |

 

| STATE OF  | ) |   |
|-----------|---|--------|
|      | ) | SS:    |
| COUNTY OF | ) |   |

 

Personallyappeared before me this day M. Stephen Harkness, Vice President and ChiefOperations and Financial Officer of CinCap VII, LLC, a Delaware limitedliability company, and acknowledged the execution of this Warranty Deed andAssignment of Adjoining Easement Interest to be his voluntary act and deedfor and on behalf of such company, and having been duly sworn states that anyrepresentations contained therein are true to the best of his personalknowledge.

 

IN WITNESSWHEREOF, I have hereunto set my hand and affixed my Notarial Seal, on this             day of            ,200  .

 
|                    |          |   |
|-------------------------|---------------|--------|
|                    | Notary Public |   |
|                    |          |   |
|                    |          |   |
|                    | Printed Name: |   |   |
| My Commission Expires:  |          |   |
|                    |          |   |
|                    |          |   |
|                    |          |   |
| My County of Residence: |          |   |
|                    |          |   |
|                    |          |   |
|                         |               |        |  |  |

 

 

| Please send tax  statements to:  |   | This instrument  prepared by: |
|----------------------------------|--------|-------------------------------|
| PSI  Energy, Inc.                |   | John  B. Scheidler            |
| Attention:  Tax Department  |   | Attorney  at Law              |
| 1000  East Main Street           |   | 1000  East Main Street        |
| Plainfield,  Indiana  46168 |   | Plainfield,  Indiana 46l68    |

 

37

----

 

**SCHEDULEII:  FORM OF BILL OF SALE**

 

BILL OF SALE made,executed and delivered as of this      day of         , 200   by CinCap VII, LLC, a Delaware limited liability company (“Seller”) to PSIEnergy, Inc., an Indiana corporation (“Buyer”).  (Capitalized terms used herein but not defined herein have therespective meanings assigned in that certain Asset Purchase Agreement of evendate herewith (the “Asset Purchase Agreement”) by and among Seller, Buyer andCinergy Capital & Trading, Inc., an Indiana corporation (“CC&T”).)

 

WHEREAS,Seller, Buyer and CC&T are parties to the Asset Purchase Agreementproviding for, among other things, the sale and transfer to Buyer of all ofSeller’s right, title and interest in, to and under the real and personalproperty, tangible and intangible, constituting, or used in connection with theoperation of, that certain natural gas-fired electric generating station knownas the Henry County Generating Station, located in Henry County, Indiana (asmore fully described in the Asset Purchase Agreement), in exchange for theconsideration, and subject to the other terms and conditions, specifiedtherein; and

 

WHEREAS, the parties tothe Asset Purchase Agreement having executed and delivered such agreementcontemporaneously herewith, Seller now desires to carry out the intent andpurposes of the Asset Purchase Agreement by its execution and delivery to Buyerof this instrument, evidencing the vesting in Buyer (together with such otherinstruments as Buyer shall have otherwise received concurrently herewith or mayhereafter request, including the Deed and certain Assignment and AssumptionAgreements) of substantially all of the properties and assets constituting, orused in connection with the operation of, the Henry County Generating Station;

 

NOW, THEREFORE, in consideration of the premises, andfor good and valuable consideration paid by Buyer, the receipt, adequacy andlegal sufficiency of which are hereby acknowledged, Seller, intending to belegally bound, hereby agrees as follows:

 

ARTICLE I

SALE AND TRANSFEROF ASSETS

 

Seller hereby irrevocablyand unconditionally sells, transfers, assigns, conveys, grants and delivers toBuyer, effective as of the execution and delivery hereof, free and clear of allEncumbrances (other than Permitted Encumbrances), all of Seller’s right, titleand interest in and to the following (collectively, the “Purchased Assets”):

 

(a)                                  the machinery, fixtures, equipment(including communications equipment), vehicles, furniture and other personalproperty located on the Real Property, including the items of tangible personalproperty listed on Schedule 2.01(b) of the Asset Purchase Agreement;

 

(b)                                 all Inventories;

 

38

----

 

(c)                                  subject to the receipt of anynecessary consents and approvals, the contracts or agreements (including anylicenses or real or personal property leases, other than any thereofconstituting Transferred Permits or Transferred Intellectual Property) listedon Schedule 2.01(d) of the Asset Purchase Agreement;

 

(d)                                 subject to the receipt of anynecessary consents and approvals, the permits, licenses, certificates,certifications, orders and other governmental authorizations listed onSchedule 2.01(e) of the Asset Purchase Agreement;

 

(e)                                  allunexpired, transferable warranties and guarantees from manufacturers, vendorsand other third parties with respect to any item of real or tangible personalproperty referred to in the preceding clauses (a) and (b);

 

(f)                                    allbooks, expired purchase orders, operating records, operating, safety andmaintenance manuals, engineering design plans, blueprints and as-built plans,specifications, procedures, studies, reports, equipment repair, safety, maintenanceor service records, and similar items (subject to the right of Seller to retaincopies of same for its use), other than such items that are proprietary tothird parties and accounting records (to the extent that any of the foregoingis contained in an electronic format, Seller shall cooperate with Buyer totransfer such items to Buyer in a format that is reasonably acceptable toBuyer);

 

(g)                                 subject to the receipt of anynecessary consents and approvals, any intellectual property; and .

 

(h)                                 allother assets and properties used in connection with the Henry County GeneratingStation.

 

ARTICLE II

FURTHER ACTIONS

 

Seller covenants and agrees to warrant and defend the sale, transfer,assignment, conveyance, grant and delivery of the Purchased Assets hereby madeagainst all persons whomsoever, to take all steps reasonably necessary toestablish the record of Buyer’s title to the Purchased Assets and, at therequest of Buyer, to execute and deliver further instruments of transfer andassignment and take such other action as Buyer may reasonably request to moreeffectively transfer and assign to and vest in Buyer each of the PurchasedAssets, all at the sole cost and expense of Seller.

 

39

----

 

ARTICLE III

POWER OF ATTORNEY

 

Without limiting Article 2 hereof, Seller hereby constitutesand appoints Buyer the true and lawful agent and attorney in fact of Seller,with full power of substitution and resubstitution, in whole or in part, in thename and stead of Seller but on behalf and for the benefit of Buyer and itssuccessors and assigns, from time to time:

 

(a)                                  to demand, receive and collect anyand all of the Purchased Assets and to give receipts and releases for and withrespect to the same, or any part thereof;

 

(b)                                 to institute and prosecute, in thename of Seller or otherwise, any and all proceedings at law, in equity orotherwise, that Buyer or its successors and assigns may deem proper in order tocollect or reduce to possession any of the Purchased Assets and in order tocollect or enforce any claim or right of any kind hereby assigned ortransferred, or intended so to be; and

 

(c)                                  to do all things legallypermissible, required or reasonably deemed by Buyer to be required to recoverand collect the Purchased Assets and to use Seller’s name in such manner asBuyer may reasonably deem necessary for the collection and recovery of same,

 

Seller hereby declaring that the foregoing powers are coupled withan interest and are and shall be irrevocable by Seller.

 

ARTICLE IV

TERMS OF ASSETPURCHASE AGREEMENT

 

The terms of the Asset Purchase Agreement, including but notlimited to Seller’s representations, warranties, covenants, agreements andindemnities relating to the Purchased Assets, are incorporated herein by thisreference.  Seller acknowledges andagrees that the representations, warranties, covenants, agreements andindemnities contained in the Asset Purchase Agreement shall not be supersededhereby but shall remain in full force and effect to the full extent providedtherein.  In the event of any conflictor inconsistency between the terms of the Asset Purchase Agreement and theterms hereof, the terms of the Asset Purchase Agreement shall govern.

 

40

----

 

 

IN WITNESS WHEREOF,Seller has caused this Bill of Sale to be duly signed on its behalf as of thedate first above written.

 
|   | CINCAP  VII, LLC |
|--------|------------------|
|   |             |   |   |
|   |             |   |   |
|   | By:              |   |   |   |
|   | Name:            | M.  Stephen Harkness |
|   | Title:           | Vice  President, Chief Operations  and Financial Officer |
|        |                  |  |  |  |  |  |  |

 

41

----

 

**SCHEDULEIII:  FORM OF ASSUMPTION AGREEMENT**

 

ASSUMPTION AGREEMENT madeand effective as of          , 200  by PSI Energy, Inc., an Indiana corporation (“Buyer”), in favor of CinCap VII,LLC, a Delaware limited liability company (“Seller”).  (Capitalizedterms used herein but not defined herein have the respective meanings assignedin that certain Asset Purchase Agreement of even date herewith (the “AssetPurchase Agreement”) by and among Buyer, Seller and Cinergy Capital &Trading, Inc., an Indiana corporation (“Parent”).)

 

WHEREAS, pursuant to theAsset Purchase Agreement, and by means of various agreements and instrumentsexecuted and delivered in connection therewith (including without limitationthe Deed, Bill of Sale and certain assignment and assumption agreements),concurrently with the execution and delivery hereof, Seller is selling andconveying to Buyer, and Buyer is purchasing from Seller, for the considerationand upon the terms and conditions set forth in the Asset Purchase Agreement,all of Seller’s right, title and interest in and to the assets (tangible andintangible) comprising, or used in connection with, the Henry County GeneratingStation (the “Purchased Assets”); and

 

WHEREAS, the AssetPurchase Agreement contemplates in Section 2.03 thereof that, on theClosing Date, in consideration of the foregoing, Buyer shall also execute thisinstrument in favor of Seller, agreeing to assume various liabilities andobligations of Seller relating to the Purchased Assets, as more specificallyset forth below;

 

NOW,THEREFORE, in consideration of the premises and the transactions contemplatedby the Asset Purchase Agreement, including without limitation the execution anddelivery simultaneously herewith of the Bill of Sale and the Deed, Buyer,intending to be legally bound, hereby agrees as follows:

 

ARTICLE I

ASSUMPTION OFASSUMED LIABILITIES

 

Section 1.1              Assumption ofAssumed Liabilities.  Effective uponthe execution and delivery hereof, Buyer hereby assumes and agrees to pay,perform and discharge, without recourse to Seller or Parent, the followingLiabilities of Seller (excluding, however, for the avoidance of doubt, for allpurposes whatsoever any Excluded Liabilities), solely to the extent suchLiabilities accrue or arise from and after the Closing, in each case inaccordance with the respective terms and subject to the respective conditionsthereof (collectively, the “Assumed Liabilities”):

 

(a)                                  AllLiabilities of Seller under the Transferred Contracts, Transferred Permits andTransferred Intellectual Property, in each case in accordance with the termsthereof, except to the extent that such Liabilities, but for a breach ordefault by Seller, would have been paid, performed or otherwise discharged onor prior to the Closing Date or to the extent the same arise out of any suchbreach or default or out of any event which after the giving of notice wouldconstitute a default by Seller;

 

42

----

 

(b)                                 allLiabilities with respect to Henry County Station arising under or relating toEnvironmental Laws or relating to any claim in respect of EnvironmentalConditions or Hazardous Substances, including settlements, judgments, costs andexpenses, including reasonable attorneys fees, whether based on common law orEnvironmental Laws, but in each case solely to the extent accruing or arisingfrom and after the Closing Date, with respect to (i) any violation or allegedviolation of Environmental Laws with respect to the ownership, lease,maintenance or operation of any of the Purchased Assets, including any fines orpenalties that arise in connection with the ownership, lease, maintenance oroperation of the Purchased Assets, and the costs associated with correcting anysuch violations; (ii) loss of life, injury to persons or property or damage tonatural resources caused (or allegedly caused) by any Environmental Conditionor the presence or Release of Hazardous Substances at, on, in, under, adjacentto or migrating from the Purchased Assets, including any EnvironmentalCondition or Hazardous Substances contained in building materials at oradjacent to the Purchased Assets or in the soil, surface water, sediments,groundwater, landfill cells, or in other environmental media at or near thePurchased Assets; (iii) any Remediation of any Environmental Condition orHazardous Substances that are present or have been Released at, on, in, under,adjacent to or migrating from, the Purchased Assets or in the soil, surfacewater, sediments, groundwater, landfill cells or in other environmental mediaat or adjacent to the Purchased Assets; (iv) any bodily injury, loss of life,property damage, or natural resource damage arising from the storage,transportation, treatment, disposal, discharge, recycling or Release, at anyOff-Site Location, or arising from the arrangement for such activities, ofHazardous Substances generated in connection with the ownership, lease,maintenance or operation of the Purchased Assets; (v) any Remediation of any EnvironmentalCondition or Release of Hazardous Substances arising from the storage,transportation, treatment, disposal, discharge, recycling or Release, at anyOff-Site Location, or arising from the arrangement for such activities, ofHazardous Substances generated in connection with the ownership, lease,maintenance or operation of the Purchased Assets; and (vi) any obligation torepower, replace, decommission, deactivate, dismantle, demolish or close thePurchased Assets or any  portionthereof, or any surface impoundments or other waste or effluent handling orstorage units on owned or leased adjacent properties used in connection withthe operation of the Purchased Assets;

 

(c)                                  allliabilities or obligations to third parties for personal injury or tort, orsimilar causes of action arising solely out of the ownership, lease,maintenance or operation of the Purchased Assets, but in each case solely tothe extent accruing or arising from and after the Closing Date; and

 

(d)                                 anyTax that may be imposed by any federal, state or local government on theownership, sale, operation or use of the Purchased Assets on or after theClosing Date, except for any income Taxes attributable to income received bySeller.

 

43

----

 

ARTICLE II

FURTHER ACTIONS

 

Buyer hereby covenants and agrees, at its own expense, to executeand deliver, at the request of Seller, from time to time after the ClosingDate, such further instruments of assumption and to take such other actions asSeller may reasonably request to more effectively consummate the assumptionsprovided in this Assumption Agreement.

 

ARTICLE III

TERMS OF ASSETPURCHASE AGREEMENT

 

The terms of the Asset Purchase Agreement, including but notlimited to Buyer’s representations, warranties, covenants, agreements andindemnities relating to the Assumed Liabilities, are incorporated herein bythis reference.  Buyer acknowledges andagrees that its representations, warranties, covenants, agreements andindemnities contained in the Asset Purchase Agreement shall not be supersededhereby but shall remain in full force and effect to the full extent providedtherein.  In the event of any conflictor inconsistency between the terms of the Asset Purchase Agreement and theterms hereof, the terms of the Asset Purchase Agreement shall govern.

 

 

[REMAINDER OF PAGELEFT INTENTIONALLY BLANK]

 

44

----

 

IN WITNESS WHEREOF, Buyerhas caused this Assumption Agreement in favor of CinCap VII, LLC, as Seller, tobe duly signed on its behalf as of the date first above written.

 

 
|   | PSI  ENERGY, INC.         |   |
|--------|---------------------------|--------|
|   |                      |   |   |
|   |                      |   |   |
|   | By:                       |   |   |
|   | Name:  Douglas F. Esamann |   |
|   | Title:  President    |   |
|        |                           |        |  |  |

 

45

----

 

**SCHEDULE2.01(B):  TANGIBLE PERSONAL PROPERTY**

 

•                  Three General Electric Model LM6000PC gas turbine generator units:

 

•                  Fuel system, including fuel oilforwarding skids and dual fuel burners;

 

•                  Plant high voltage power system &interconnection, including three two-winding generator step-up transfomers;

 

•                  Water supply and treatment systems,including 6” 327-ft deep raw water well and submersible pump, 440,000 gallonraw water storage tank, 573,000 gallon demineralized water storage tank andrelated pumps, and chemical feed system;

 

•                  Chilled water system, including three2,200 ton, motor-driven Trane absorption chillers;

 

•                  Cooling tower and circulating watersystem, including an eight cell, mechanical draft, evaporative, cross-flowcooling tower and three 33% horizontal centrifuge pumps;

 

•                  Fire protection system, includingfire hydrant, CO2 suppression systems, and fire detection system;

 

•                  Plant auxiliary power system,including auxiliary transformers, DC power supply system and AC uninterruptiblepower supply system;

 

•                  Continuous emissions monitoring;

 

•                  Plant control systems;

 

•                  Communications systems;

 

•                  Security and access, including chainlink security fence topped with barbed wire enclosing plant site,electronically operated access gate, and security cameras;

 

•                  Wastewater holding pond;

 

•                  Storm water drainage; and

 

•                  Maintenance/warehouse facilities

 

46

----

 

**SCHEDULE2.01(D):  TRANSFERRED CONTRACTS**

 

Fuel Supply andManagement Agreement dated as of April 1, 2001 between Seller and CinergyMarketing & Trading, LP

 

47

----

 

**SCHEDULE2.01(E):  TRANSFERRED PERMITS**

 

Air construction permit(CP-065-1049-00032) issued by Indiana Department of Environmental Management(“IDEM”)

 

Title V operating permit(permit pending) issued by IDEM

 

Title IV acid rain permit(AR-065-10505-00032) issued by IDEM

 

Water withdrawal permit(Reg. No. 33-04367) issued by Indiana Department of Natural Resources

 

NPDES discharge permit(INj0061361) issued by IDEM

 

48

----

 

**SCHEDULE4.01(C)(II):  SELLER’S REQUIREDGOVERNMENTAL AND THIRD PARTY CONSENTS**

 

### **Section I:Seller’s Required Governmental Consents**

 

Federal Energy RegulatoryCommission under Section 203 of Federal Power Act

 

Indiana Utility RegulatoryCommission under applicable provisions of the Indiana Code in respect of thesale of the Henry County Station to Buyer.

 

### **Section II:Seller’s Required Third-Party Consents**

 

Cinergy Marketing &Trading, LP in respect of Fuel Supply and Management Agreement with Seller

 

49

----

 

**SCHEDULE4.01(G)(I):  REAL PROPERTY**

 

1.               Fora description of all land owned, used or occupied by Seller, seeSchedule I to this Asset Purchase Agreement.

 

2.               LegalDrain Easement granted by S. Robert Abshire to Seller upon adjoining landdated June 27, 2000 and recorded on August 30, 2000 as Instrument No.20006691 in the Office of the Recorder of Henry County, Indiana.

 

3.               UnrecordedFarm License Agreement granted by Buyer to Shenandoah High School FFAChapter dated May 1, 2002.

 

4.               EasementAgreement For Ingress and Egress granted to S. Robert Abshire, an adult,dated June 26, 2000 and recorded on August 30, 2000 as Instrument No.20006692 in the Office of the Recorder of Henry County, Indiana.

 

5.               Fora description of plants, buildings, structures or other Improvements located onthe Real Property, see Schedule 2.01(b) to this Asset Purchase Agreement.

 

50

----

 

**SCHEDULE4.01(K):  ENVIRONMENTAL PERMITS**

 

The permits listed inSchedule 2.01(e) are hereby incorporated by reference herein.

 

51

----

 

**SCHEDULE4.01(M):  SELLER CONTRACTS**

 

The contracts listed inSchedule 2.01(d) are hereby incorporated by reference herein.

 

52

----

 

**SCHEDULE4.01(0):  PERMITS**

 

EWG certification (CinCapVII, LLC, 91 FERC par. 62,209(2000))

 

Market-based wholesalerate authority (CinCap VII, LLC, FERC Docket No. ER00-1831 (letter order, May4, 2000)

 

In addition, the permitslisted in Schedule 2.01(e) are hereby incorporated by reference herein.

 

53

----

 

**SCHEDULE4.02(C)(II):  BUYER’S REQUIREDGOVERNMENTAL AND THIRD PARTY CONSENTS**

 

### **Section I:Buyer’s Required Governmental Consents**

 

Federal Energy RegulatoryCommission under Section 203 of Federal Power Act

 

Indiana UtilityRegulatory Commission under applicable provisions of the Indiana Code inrespect of (i) the purchase of the Henry County Station by Buyer and (ii) theissuance by Buyer of long-term promissory notes in consideration therefor.

 

### **Section II:Buyer’s Required Third-Party Consents**

 

None

 

54

----