**Exhibit 10.kkkk**

 

**EXECUTION COPY**

 

 

**ASSET PURCHASE AGREEMENT**

 

**BY AND AMONG**

 

**PSI ENERGY, INC.**

 

**AND**

 

**THE CINCINNATI GAS &ELECTRIC COMPANY**

 

**(AS BUYERS)**

 

**AND**

 

**ALLEGHENY ENERGY SUPPLY COMPANY,LLC,**

 

**ALLEGHENY ENERGY SUPPLY WHEATLAND**

 

**GENERATING FACILITY, LLC**

 

**AND**

 

**LAKE ACQUISITION COMPANY, L.L.C.**

 

**(AS SELLER PARTIES)**

 

 

**DATED AS OF MAY 6, 2005**

 

----

 

**TABLE OF CONTENTS**

 
|                                                                     |                                                              |   |
|--------------------------------------------------------------------------|-------------------------------------------------------------------|--------|
|                                                                     |                                                              |   |
| **ARTICLE I  DEFINITIONS**                                          |                                                              |
|                                                                     |                                                              |   |
| 1.1.                                                                     | Definitions                                                       |   |
|                                                                     |                                                              |   |
| **ARTICLE II  PURCHASE AND SALE**                                   |                                                              |
|                                                                     |                                                              |   |
| 2.1.                                                                     | Purchase and Sale                                                 |   |
| 2.2.                                                                     | Excluded Assets                                                   |   |
| 2.3.                                                                     | Assumed Liabilities                                               |   |
| 2.4.                                                                     | Excluded Liabilities                                              |   |
| 2.5.                                                                     | Procedures for Acquired Assets  Not Transferable                  |   |
|                                                                     |                                                              |   |
| **ARTICLE III  PURCHASE PRICE**                                     |                                                              |
|                                                                     |                                                              |   |
| 3.1.                                                                     | Purchase Price                                                    |   |
| 3.2.                                                                     | Possible Purchase Price  Adjustment                               |   |
| 3.3.                                                                     | Allocation of Purchase Price                                      |   |
| 3.4.                                                                     | Proration                                                         |   |
|                                                                     |                                                              |   |
| **ARTICLE IV  THE CLOSING**                                         |                                                              |
|                                                                     |                                                              |   |
| 4.1.                                                                     | Time and Place of Closing                                         |   |
| 4.2.                                                                     | Payment of Purchase Price                                         |   |
| 4.3.                                                                     | Deliveries by the Sellers                                         |   |
| 4.4.                                                                     | Deliveries by the Buyers                                          |   |
|                                                                     |                                                              |   |
| **ARTICLE V  REPRESENTATIONS AND WARRANTIES OF THE SELLER PARTIES** |                                                              |
|                                                                     |                                                              |   |
| 5.1.                                                                     | Organization; Qualification                                       |   |
| 5.2.                                                                     | Authority Relative to this  Agreement                             |   |
| 5.3.                                                                     | Capitalization and Other  Matters                                 |   |
| 5.4.                                                                     | Consents and Approvals; No  Violation                             |   |
| 5.5.                                                                     | Reports                                                           |   |
| 5.6.                                                                     | Absence of Certain Changes or  Events; No Undisclosed Liabilities |   |
| 5.7.                                                                     | Indebtedness of the Sellers                                       |   |
| 5.8.                                                                     | Real Property and Related  Matters                                |   |
| 5.9.                                                                     | Insurance                                                         |   |
| 5.10.                                                                    | Environmental Matters                                             |   |
| 5.11.                                                                    | Labor and Employment Matters                                      |   |
| 5.12.                                                                    | ERISA; Employee Benefit Plans                                     |   |
| 5.13.                                                                    | Contracts                                                         |   |
| 5.14.                                                                    | Legal Proceedings                                                 |   |
| 5.15.                                                                    | Compliance  with Permits and Laws                                 |   |

 

i

----

 
| 5.16.                                                            | Regulation; Sole  Purpose                                              |   |
|------------------------------------------------------------------|------------------------------------------------------------------------|--------|
| 5.17.                                                            | Tax Matters                                                            |   |
| 5.18.                                                            | Related Party  Matters                                                 |   |
| 5.19.                                                            | Assets  Other than Real Property Interests                             |   |
| 5.20.                                                            | Intellectual  Property                                                 |   |
| 5.21.                                                            | Due Diligence  Materials                                               |   |
| 5.22.                                                            | No  Knowledge of Certain Conditions                                    |   |
| 5.23.                                                            | Disclaimer  of Other Representations and Warranties                    |   |
|                                                             |                                                                   |   |
| **ARTICLE VI REPRESENTATIONS AND WARRANTIES OF THE BUYERS** |                                                                   |
|                                                             |                                                                   |   |
| 6.1.                                                             | Organization                                                           |   |
| 6.2.                                                             | Authority  Relative to this Agreement                                  |   |
| 6.3.                                                             | Consents  and Approvals; No Violation                                  |   |
| 6.4.                                                             | Availability of  Funds                                                 |   |
| 6.5.                                                             | Litigation                                                             |   |
| 6.6.                                                             | No  Knowledge of Certain Conditions                                    |   |
| 6.7.                                                             | Due  Diligence Investigation and Other Acknowledgements                |   |
| 6.8.                                                             | Disclaimer  of Other Representations and Warranties                    |   |
|                                                             |                                                                   |   |
| **ARTICLE VII COVENANTS OF THE PARTIES**                    |                                                                   |
|                                                             |                                                                   |   |
| 7.1.                                                             | Conduct of Business                                                    |   |
| 7.2.                                                             | Access to  Information                                                 |   |
| 7.3.                                                             | Expenses                                                               |   |
| 7.4.                                                             | Further Assurances                                                     |   |
| 7.5.                                                             | Public Statements                                                      |   |
| 7.6.                                                             | Consents  and Approvals; Other Obligations                             |   |
| 7.7.                                                             | Regulatory  Approvals                                                  |   |
| 7.8.                                                             | Fees and Commissions                                                   |   |
| 7.9.                                                             | Tax Matters                                                            |   |
| 7.10.                                                            | Employees                                                              |   |
| 7.11.                                                            | Risk of Loss                                                           |   |
| 7.12.                                                            | Tax Clearance  Certificates                                            |   |
| 7.13.                                                            | Non-Use of  Allegheny Marks After the Closing                          |   |
| 7.14.                                                            | Insurance                                                              |   |
| 7.15.                                                            | No Solicitation                                                        |   |
| 7.16.                                                            | Notifications                                                          |   |
| 7.17.                                                            | Notice of  Allocation of Acquired Assets                               |   |
| 7.18.                                                            | Post-Closing  Start-Up                                                 |   |
| 7.19.                                                            | Waiver of  Indiana Responsible Transfer Property Law                   |   |
| 7.20.                                                            | Certain  Transmission Matters                                          |   |
|                                                             |                                                                   |   |
| **ARTICLE VIII CONDITIONS**                                 |                                                                   |
|                                                             |                                                                   |   |
| 8.1.                                                             | Conditions  to Each Party’s Obligations to Effect the Transaction |   |
| 8.2.                                                             | Conditions  to Obligation of the Buyers                                |   |

 

ii

----

 
| 8.3.                                           | Conditions  to Obligation of the Seller Parties |       |
|------------------------------------------------|-------------------------------------------------|------------|
|                                           |                                            |       |
| **ARTICLE IX INDEMNIFICATION**            |                                            |
|                                           |                                            |       |
| 9.1.                                           | Indemnification                                 |       |
| 9.2.                                           | Defense of Claims                               |       |
|                                           |                                            |       |
| **ARTICLE X TERMINATION AND ABANDONMENT** |                                            |
|                                           |                                            |       |
| 10.1.                                          | Termination                                     |       |
| 10.2.                                          | Procedure  and Effect of Termination            |       |
| ** **                                     | ** **                                      | ** ** |
| **ARTICLE XI MISCELLANEOUS PROVISIONS**   |                                            |
|                                           |                                            |       |
| 11.1.                                          | Amendment  and Modification                     |       |
| 11.2.                                          | Waiver of  Compliance                           |       |
| 11.3.                                          | Survival                                        |       |
| 11.4.                                          | Notices                                         |       |
| 11.5.                                          | Assignment;  No Third-Party Beneficiaries       |       |
| 11.6.                                          | Governing  Law                                  |       |
| 11.7.                                          | Counterparts                                    |       |
| 11.8.                                          | Interpretation                                  |       |
| 11.9.                                          | Schedules  and Exhibits                         |       |
| 11.10.                                         | Entire  Agreement                               |       |
| 11.11.                                         | Bulk Sales  or Transfer Laws                    |       |
| 11.12.                                         | Consent to  Jurisdiction                        |       |
| 11.13.                                         | Waiver of  Jury Trial                           |       |
| 11.14.                                         | Waiver of  Consequential, Etc. Damages          |       |
| 11.15.                                         | Specific  Performance                           |       |
| 11.16.                                         | Change of  Structure                            |       |
| 11.17.                                         | Certain  Approvals                              |       |

 
| **EXHIBITS**   |                                              |
|----------------|---------------------------------------------------|
|           |                                              |   |
| EXHIBIT A | Form of Assignment and  Assumption Agreement |   |
| EXHIBIT B | Form of Bill of Sale                         |   |
| EXHIBIT C | Form of Deeds                                |   |
| EXHIBIT D | Form of  FIRPTA Affidavit                    |   |
| EXHIBIT E | Indiana  Settlement Agreement                     |   |

 

iii

----

 

**SCHEDULES**

 
| 1.1(a)(37)(A) |   | Seller Parties’  Knowledge Persons                                                    |
|---------------|--------|--------------------------------------------------------------------------------------------|
| 1.1(a)(37)(B) |   | Buyers’  Knowledge Persons                                                            |
| 2.1(a)(i)     |   | AESC Contracts  and Leases                                                                 |
| 2.1(a)(ii)    |   | AESC Vehicles                                                                              |
| 2.1(b)(ii)    |   | Personal  Property                                                                         |
| 2.1(b)(iii)   |   | Permits and  Environmental Permits                                                         |
| 2.1(b)(iv)    |   | Assumed  Contracts                                                                         |
| 2.1(b)(viii)  |   | Emission  Allowances                                                                       |
| 2.2(f)        |   | Excluded  Contracts and Leases                                                             |
| 2.4(i)        |   | Excluded  Liabilities                                                                      |
| 5.4(a)        |   | Consents and  Approvals                                                                    |
| 5.5           |   | Reports                                                                                    |
| 5.6(a)        |   | Absence of  Certain Changes                                                                |
| 5.8           |   | Lake Owned Real  Property, Wheatland Owned Real Property and Other Real Property Interests |
| 5.8(a)        |   | Exceptions to  Title                                                                       |
| 5.8(d)        |   | Title Policies                                                                             |
| 5.8(f)        |   | Leases                                                                                     |
| 5.10(a)       |   | Environmental  Matters                                                                     |
| 5.10(b)       |   | Environmental  Permits                                                                     |
| 5.10(c)       |   | Emission  Allowances                                                                       |
| 5.11          |   | Employees who  Provide Services for Wheatland Facility                                     |
| 5.12(a)       |   | Benefit Plans                                                                              |
| 5.12(f)       |   | Benefit Plan  Claims                                                                       |
| 5.13(a)       |   | Material  Contracts                                                                        |
| 5.13(c)       |   | Transferability  of Material Contracts                                                     |
| 5.15(a)       |   | Compliance with  Permits                                                                   |
| 5.15(b)       |   | Sellers’ Permits                                                                      |
| 5.17          |   | Taxes                                                                                      |
| 5.18          |   | Related Party  Matters                                                                     |
| 5.19(a)       |   | Title to  Acquired Assets                                                                  |
| 5.20          |   | Intellectual  Property                                                                     |
| 7.1(a)        |   | Sellers’ Conduct  of Business                                                         |
| 7.1(a)(xiii)  |   | Maintenance  Expenditures                                                                  |
| 7.1(b)        |   | AESC’s Conduct  of Business                                                           |
| 7.6(d)        |   | Guarantees                                                                                 |

 

iv

----

 

**ASSET PURCHASE AGREEMENT**

 

ASSETPURCHASE AGREEMENT (this “Agreement”), dated as of May 6, 2005, byand among PSI Energy, Inc., an Indiana corporation (“PSI Energy”),and The Cincinnati Gas & Electric Company, an Ohio corporation (“CG&E”and, together with PSI Energy, collectively, the “Buyers”), andAllegheny Energy Supply Wheatland Generating Facility, LLC, a Delaware limitedliability company and a wholly owned subsidiary of AESC (“Wheatland LLC”),Lake Acquisition Company, L.L.C., a Delaware limited liability company and awholly owned subsidiary of AESC (“Lake LLC” and, together with WheatlandLLC, each, individually, a “Seller” and, collectively, the “Sellers”),and Allegheny Energy Supply Company, LLC, a Delaware limited liability company(“AESC” and, together with the Sellers, the “Seller Parties”).

 

WITNESSETH

 

WHEREAS,Wheatland LLC owns, among other things, a 508-MW (nominal rating) naturalgas-fired generating facility located in Wheatland, Indiana (the “WheatlandFacility”) and certain other assets associated therewith, and Lake LLC ownscertain real property relating to the Wheatland Facility; and

 

WHEREAS,the Buyers desire to purchase and assume, and the Sellers desire to sell andconvey, certain assets and liabilities relating to the Wheatland Facility, uponthe terms and subject to the conditions hereinafter set forth.

 

NOW, THEREFORE, in consideration of the foregoing andthe mutual covenants, representations, warranties and agreements hereinafterset forth, the parties hereto agree as follows:

 

**ARTICLE IDEFINITIONS**

** **

**1.1.         ****Definitions.**

 

### (a)           As used inthis Agreement, the following terms have the meanings specified in this Section 1.1(a).  For capitalized terms used in this Agreementbut not defined in this subsection (a), see subsection (b).

###  

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

####  

#### (2)           “AlleghenyMarks” means the names and marks “Allegheny Energy” and “Allegheny”together with all derivations and variations thereof, and the Allegheny Energy, Inc.corporate logo, together with all derivations or variations thereof.

####  

#### (3)           “AncillaryAgreements” means the Deeds, the Bill of Sale, the Assignment andAssumption Agreement, the Sellers Confidentiality Agreement and any otherinstruments of sale, transfer, conveyance, assignment or assumption as may berequired to convey the Acquired Assets in accordance with this Agreement.

 

1

----

 

#### (4)           “Assignment andAssumption Agreement” means the agreement between the Buyers and the SellerParties pursuant to which, among other things, the Seller Parties shall assign,and the Buyers shall assume, the Assumed Contracts, in substantially the formattached hereto as Exhibit A.

####  

#### (5)           “Billof Sale” means the bill of sale by which the title to the personal propertyincluded in the Acquired Assets shall be conveyed by the Sellers to the Buyers,in substantially the form attached hereto as Exhibit B.

####  

#### (6)           “BusinessDay” means any day other than Saturday, Sunday and any day that is a legalholiday or a day on which banking institutions in New York City areauthorized by Law or other governmental action to close.

####  

#### (7)           “Buyers’Representatives” means the accountants, employees, officers, directors,counsel, environmental consultants, financial advisors and other authorizedrepresentatives of the Buyers and their Affiliates.

####  

#### (8)           “COBRA”means the Consolidated Omnibus Reconciliation Act of 1985, as amended, and anysimilar applicable state Law.

####  

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

####  

#### (10)         “Commercially Reasonable Efforts”means efforts that are reasonable for a prudent business enterprise in circumstancessimilar to those of the performing party, but that do not require theperforming party to expend funds other than expenditures that are customary andreasonable in transactions of the kind and nature contemplated by thisAgreement in order for the performing party to satisfy its obligations underthis Agreement.

####  

#### (11)         “ConfidentialityAgreement” means that certain Confidentiality Agreement dated as of October 6,2004, between Cinergy Corp. and AESC,including any amendments or waivers thereto.

####  

#### (12)         “CreditAgreement” means that certain Amended and Restated Credit Agreement datedas of October 28, 2004, among AESC, the Lenders and Loan Parties referredto therein, Citicorp North America, Inc., as Administrative Agent, andCitibank, N.A., as Collateral Agent and Intercreditor Agent.

####  

#### (13)         “Deeds”means special warranty deeds, duly executed by Wheatland LLC and Lake LLC andduly acknowledged, which convey to the Buyers (i) fee simple title to theOwned Real Property and (ii) all of the right, title and interest of theSellers in and to the Other Real Property Interests, subject, in each case,only to the Permitted Encumbrances, and which shall be in substantially theform attached hereto as Exhibit C and otherwise in a form suitablefor recording.

####  

#### (14)         “Due Diligence Materials” means (i) alldue diligence materials provided for review or distributed in written ordigital form by the Seller Parties or the Seller Parties’ Representatives tothe Buyers or the Buyers’ Representatives, (ii) all written, oral orelectronic answers to questions provided by the Seller Parties or the SellerParties’ Representatives to the

 

2

----

 

#### Buyers or the Buyers’ Representatives, and (iii) all materialscontained in data rooms or privately-accessible internet sites established bythe Seller Parties for purposes of providing due diligence materials to theBuyers or the Buyers’ Representatives.

####  

#### (15)         “Emission Allowances” means (i) “Allowance,”as that term is defined in 40 CFR § 72.2, and (ii) “NOxAllowance,” as that term is defined in 326 Indiana Administrative Code § 10-4-2(37),in each case, as such terms are defined as of the date hereof.

####  

#### (16)         “Encumbrances”means any mortgages, pledges, liens, security interests, conditional andinstallment sale agreements, charges, restrictions on transfer, proxies andvoting or other similar agreements, claims and other legal and equitableencumbrances, limitations, title or survey matters and restrictions of anynature whatsoever.

####  

#### (17)         “EnvironmentalLaws” means all Laws that relate to pollution or protection of theenvironment (including, without limitation, ambient air, surface water,groundwater, land, surface and subsurface strata) or human health and safetyrelating to Hazardous Substance exposure including, without limitation, Lawswhich relate to Releases or threatened Releases of Hazardous Substances orotherwise relate to the manufacture, processing, distribution, use, treatment,storage, Release, transport or handling of Hazardous Substances.

####  

#### (18)         “ERISA”means the Employee Retirement Income Security Act of 1974, as amended, and the rules andregulations promulgated thereunder.

####  

#### (19)         “ExchangeAct” means the Securities Exchange Act of 1934, as amended, and the rules andregulations promulgated thereunder.

####  

#### (20)         “Existing Debt Documents” means,collectively, (i) the Credit Agreement dated as of March 8, 2004,among Allegheny Energy, Inc., the Lenders and the Lender Parties referredto therein, and Citicorp North America, Inc., as Administrative Agent, (ii) theCredit Agreement, (iii) the Amendment Agreement dated as of October 28,2004, among AESC, the other Grantors referred to therein, Citibank, N.A., asCollateral Agent, Intercreditor Agent and Depository Bank, and Citicorp NorthAmerica, Inc., as Administrative Agent, (iv) the Amendment Agreementdated as of March 8, 2004, among AESC, the other Grantors referred totherein, Citibank, N.A., as Collateral Agent, Intercreditor Agent andDepository Bank, and Citicorp North America, Inc., as AdministrativeAgent, (v) the Security and Intercreditor Agreement, (vi) theRefinancing Indenture referred to in the Security and Intercreditor Agreement,and (vii) other documents, instruments and agreements executed anddelivered in connection with or otherwise relating to the foregoing agreements,including any mortgages, deeds of trust, security agreements, financingstatements, pledge agreements and other documents creating or evidencingEncumbrances securing the indebtedness or other obligations under theforegoing.

####  

#### (21)         “ExtraordinaryCapital Expenditures” means the aggregate amount of all funds actuallyexpended or Liabilities actually incurred (other than such as constituteAssumed Liabilities) by the Seller Parties on capital expenditures associatedwith the Wheatland Facility or the Site during the period beginning on the datehereof and ending on the Closing Date, but only to the extent such funds wereexpended, in whole or in part, as required by any change in

 

3

----

 

#### Law or as required by any Governmental Entity or quasi regulatoryagency, including, without limitation, any independent system operator.

####  

#### (22)         “FERC”means the Federal Energy Regulatory Commission.

####  

#### (23)         “FederalPower Act” means the Federal Power Act, as amended, and the rules andregulations promulgated thereunder.

####  

#### (24)         “FinalOrder” shall mean action by the relevant Governmental Entity which has notbeen reversed, stayed, enjoined, set aside, annulled or suspended (without regardto any waiting period prescribed by Law other than waiting periods under theHSR Act).

####  

#### (25)         “FIRPTAAffidavit” means the Foreign Investment in Real Property Tax ActCertification and Affidavit, in substantially the form attached hereto as Exhibit D.

####  

#### (26)         “Good Utility Practice” means anyof the practices, methods and acts engaged in and approved by a significantportion of the independent electric power generation industry during therelevant time period that, in the exercise of reasonable judgment in light ofthe applicable manufacturer’s recommendations and the facts known at the timethe decision was made, could have been expected to accomplish the desiredresult at a reasonable cost consistent with good business practices,reliability, safety and expedition.  GoodUtility Practice is intended to consist of practices, methods or acts generallyaccepted in the region where the Wheatland Facility is located, and is notintended to be limited to optimum practices, methods or acts to the exclusionof all others.

####  

#### (27)         “GovernmentalEntity” means any federal, state or local court, governmental or regulatoryauthority, agency, commission, body or other governmental entity.

####  

#### (28)         “HazardousSubstances” means any chemicals, materials or substances defined as orincluded in the definition of “hazardous substances,” “hazardous wastes,” “hazardousmaterials,” “restricted hazardous materials,” “extremely hazardous substances,”“toxic substances,” “contaminants” or “pollutants” or words of similar meaningor substance found in any Environmental Law, or any petroleum and allderivatives thereof or synthetic substitutes therefor, and any asbestos orasbestos-containing material.

####  

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

####  

#### (30)         “HSR Act”means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, andthe rules and regulations promulgated thereunder.

####  

#### (31)         “Improvements”means all buildings, structures (including all step-up transformers,transmission facilities and lines and gas handling and storage facilities),improvements, machinery, equipment, fixtures and construction in progress,including all piping, cables and similar equipment forming part of themechanical, electrical, plumbing or HVAC infrastructure of any building,structure or equipment, located on the Site, including all generating unitslocated on and affixed to the Wheatland Facility.

 

4

----

 

#### (32)         “IncomeTax Return” means a Tax Return for any Tax based upon or calculated inwhole or in part with respect to net income, gain or profits.

####  

#### (33)         “Indebtedness”means (i) all indebtedness for borrowed money or for the deferred purchaseprice of property or services (other than current trade Liabilities incurred inthe ordinary course of business and payable in accordance with customarypractices), (ii) any other indebtedness that is evidenced by a note, bond,debenture or similar instrument, (iii) all obligations under financingleases, (iv) all obligations in respect of acceptances issued or created, (v) allLiabilities secured by any lien on any property, and (vi) all guaranteeobligations.

####  

#### (34)         “IndependentAccounting Firm” means an independent accounting firm (which may not be theauditors of any party hereto or any of their Affiliates) of national orregional reputation mutually appointed by the Seller Parties and the Buyers.

####  

#### (35)         “Information Memorandum” means that certain Information Memorandum regardingthe Facility, dated September, 2004, and any supplements or amendments theretoto the extent provided to the Buyers or the Buyers’ Representatives.

####  

#### (36)         “Inventories”means any fuel inventories, materials, spare parts, consumable supplies and chemicaland gas inventories located at the Wheatland Facility, in transit to theWheatland Facility, owned by the Sellers or held by the Sellers.

####  

#### (37)         “Knowledge” means, with respect toan individual, that, with respect to a particular fact or other matter, suchindividual is actually aware of such fact or other matter.  With respect to the Seller Parties, “Knowledge”means the Knowledge of any of the Persons listed on Schedule 1.1(a)(37)(A) (andany individual who, after the date hereof, replaces any such person’semployment position).  With respect tothe Buyers, “Knowledge” means the Knowledge of any of the Persons listed on Schedule 1.1(a)(37)(B) (andany individuals who, after the date hereof, replaces any such person’semployment position).

####  

#### (38)         “LakeOwned Real Property” means the real property described in Schedule 5.8and designated therein as the “Lake Real Property”, together with all rights,privileges, interests, easements and appurtenances now or hereafter belongingor in any way pertaining to such real property (including, without limitation,any mineral rights) and any Improvements located thereon.

####  

#### (39)         “Laws”means any applicable federal, state or local law, common law, statute, code,ordinance, rule, regulation, judgment, order, injunction, decree, arbitrationaward, agency requirement, license or permit of any Governmental Entity.

####  

#### (40)         “Liabilities”means any debts, liabilities, commitments or obligations of any kind, characteror nature whatsoever.

####  

#### (41)         “MaintenanceExpenditures” means those maintenance expenditures that are identified on Schedule 7.1(a)(xiii).

####  

#### (42)         “MaterialAdverse Effect” means (i) any change or changes in, or effect on, theWheatland Facility (excluding the Excluded Assets and the Excluded Liabilities)that is,

 

5

----

 

#### or in the aggregate are, materially adverse to the business, assets,operations or conditions (financial or otherwise) of the Wheatland Facility, or(ii) any change or changes in, or effect on, the Sellers (excluding theExcluded Assets and the Excluded Liabilities), taken as a whole, that is, or inthe aggregate are, reasonably likely to prevent, materially delay or impair anyof the Seller Parties’ ability to consummate the transactions contemplated bythis Agreement.  “Material AdverseEffect”, however, does not include any effect that is attributable to anyof the following: (a) any change or effect generally affecting theinternational, national or regional electric generating, transmission ordistribution industry as a whole, (b) any change or effect resulting fromchanges in the international, national or regional wholesale or retail marketsfor electric power, (c) any change or effect resulting from changes in thenational or regional markets for the type of fuel used at the WheatlandFacility, (d) any change or effect resulting from changes in theinternational, national or regional electric transmission or distributionsystems, (e) any change or effect resulting from changes in the generalnational or regional economic or financial conditions, (f) any change oreffect resulting from changes in Laws or in industry standards, or (g) anychange or effect that is cured to the reasonable satisfaction of the Buyersbefore the earlier of the Closing or the termination of this Agreement pursuantto Section 10.1; except, in the cases of clauses (a) through (f) above,for such changes or events which materially disproportionately impact theSellers or the Acquired Assets.

####  

#### (43)         “Off-Site Location” means any locationother than the Owned Real Property.

####  

#### (44)         “Other Real Property Interests” meansthe easements, rights-of-way and other interests in real property identified inSchedule 5.8 and designated therein as the “Other Real PropertyInterests.”

####  

#### (45)         “Owned Real Property” means,collectively, the Wheatland Owned Real Property and the Lake Owned RealProperty.

####  

#### (46)         “PermittedEncumbrances” means (i) those exceptions to title listed in Schedule 5.8as of the date hereof, (ii) liens for Taxes or other governmental chargesor assessments not yet due and delinquent or the validity of which is beingcontested in good faith by appropriate proceedings, (iii) mechanics’,carriers’, workers’, repairers’ and other similar liens and rights arising orincurred in the ordinary course of business for amounts not yet due and payableor the validity of which is being contested in good faith by appropriateproceedings, (iv) zoning, entitlement, conservation restrictions and otherland use and environmental regulations by any Governmental Entities, and (v) suchother Encumbrances which would not, individually or in the aggregate, bereasonably likely to have a Material Adverse Effect.

####  

#### (47)         “Person”means an individual, a partnership, a limited liability company, a jointventure, a corporation, a trust, an unincorporated organization, anassociation, a joint stock company, any other business entity, and aGovernmental Entity or a department or agency thereof.

####  

#### (48)         “Release”means a release, spill, leak, discharge, disposal of, pumping, pouring,emitting, emptying, injecting, leaching, dumping or escape into or through theenvironment.

 

6

----

 

#### (49)         “ResponseActions” means those activities defined in section 101(25) of theComprehensive Environmental Response Compensation and Liability Act, 42 U.S.C. § 9601(25).

####  

#### (50)         “RetainedEnvironmental Liabilities” means the following Liabilities: (i) Liabilitiesfor Response Actions to the extent required to address the Release of HazardousSubstances occurring at or from the Owned Real Property on or before theClosing Date; (ii) Liabilities for loss of life, injury to persons orproperty, or damage to natural resources to the extent arising in connectionwith the Release of Hazardous Substances on, at or from the Owned Real Propertyon or before the Closing Date; (iii) Liabilities arising in connectionwith any Hazardous Substances that were disposed of at, or transported by or onbehalf of either of the Sellers to, any Off-Site Location on or before the ClosingDate; or (iv) Liabilities for any violation or alleged violation of ornoncompliance with any Environmental Law by the Sellers or their Affiliates orpredecessor owners of the Wheatland Facility or the Owned Real Property on orprior to the Closing Date, including any fines and penalties and the costs ofcorrecting such violations or non-compliance with applicable EnvironmentalLaw.  “Retained EnvironmentalLiabilities” shall not include any of the following Liabilities: (a) Liabilitiesfor Response Actions arising in connection with Releases of HazardousSubstances at or from the Wheatland Facility or the Owned Real Propertyspecifically authorized by, and in compliance with, any Environmental Permits; (b) anycosts for decommissioning of any equipment or facilities; (c) costs forupgrades to pollution control or other equipment required by changes inapplicable Environmental Laws that impose compliance deadlines after theClosing Date; (d) Liabilities arising in connection with any Releases ofHazardous Substances, or the disposal of Hazardous Substances, on, at or fromthe Owned Real Property, initially occurring after the Closing Date; (e) Liabilitiesarising in connection with any transportation or disposal of HazardousSubstances from the Wheatland Facility or the Owned Real Property to anyOff-Site Location which occurs after the Closing Date; or (f) Liabilitiesfor any violation or alleged violation of or noncompliance with anyEnvironmental Law by the Buyers or their Affiliates, in connection with theownership or operation of the Acquired Assets, which occurs after the ClosingDate.

####  

#### (51)         “SEC”means the Securities and Exchange Commission.

####  

#### (52)         “SecuritiesAct” means the Securities Act of 1933, as amended, and the rules andregulations promulgated thereunder.

####  

#### (53)         “Security and Intercreditor Agreement”means that certain Amended and Restated Security and Intercreditor Agreementamong AESC, the other Grantors referred to therein, Citibank, N.A., asCollateral Agent, Intercreditor Agent and Depository Bank, Citicorp NorthAmerica, Inc., as Administrative Agent, and Law Debenture Trust Company ofNew York, as Indenture Trustee, dated February 21, 2003, as amended andrestated in its entirety on March 8, 2004, and as further amended andrestated in its entirety on October 28, 2004.

####  

#### (54)         “SellerParties’ Representatives” means the accountants, employees, officers,directors, counsel, environmental consultants, financial advisors and otherauthorized representatives of any of the Seller Parties and their Affiliates.

 

7

----

 

#### (55)         “Site”means, collectively, the Owned Real Property and the Other Real PropertyInterests.

####  

#### (56)         “Subsidiary”means any corporation, partnership, limited liability company or other entityin which any Person has direct or indirect equity or ownership interest thatrepresents fifty percent (50%) or more of the aggregate equity or ownershipinterest in such entity, or has the power to vote or direct the voting ofsufficient securities to elect a majority of the directors or governors.

####  

#### (57)         “Taxes”means all taxes, charges, fees, levies, duties, customs, tariffs, imports,penalties, assessments or other obligations of the same or of a similar natureto any of the foregoing imposed by any federal, state or local or foreigntaxing authority, including, without limitation, income or profits, excise,property, sales, transfer, franchise, payroll, withholding, unemployment,severance, use, ad valorem, gross receipts, business license, occupation,stamp, environmental, workers’ compensation, social security or other taxes,including any interest, penalties or additions attributable thereto, whetherdisputed or not.

####  

#### (58)         “TaxReturn” means any return, declaration, claim for refund, report, informationreturn or other document (including any related or supporting information)supplied to or required to be filed with any taxing authority with respect toTaxes.

####  

#### (59)         “TransferringEmployee Records” means all personnel files related to the Sellers’ Employeesthat pertain to (i) seniority histories and (ii) salary and benefitinformation, but only to the extent disclosure of such information is permittedby Law.

####  

#### (60)         “WheatlandOwned Real Property” means the real property described in Schedule 5.8and designated therein as the “Wheatland Real Property”, together with allrights, privileges, interests, easements and appurtenances now or hereafterbelonging or in any way pertaining to such real property (including, withoutlimitation, any mineral rights) and any Improvements located thereon.

####  

### (b)           Each ofthe following terms has the meaning specified in the Section set forthopposite such term:

 
| **Term**                              | ** ** | **Section** | ** ** |
|---------------------------------------|------------|-------------|------------|
| Acquired Assets                       |       | 2.1         | (b)        |
| AESC Transferred  Assets              |       | 2.1         | (a)        |
| Assumed  Contracts                    |       | 2.1         | (b)(iv)    |
| Assumed  Liabilities                  |       | 2.3         |       |
| Bankruptcy and  Equity Exception      |       | 5.2         |       |
| Benefit Plans                         |       | 5.12        | (a)        |
| Buyers’ Benefit  Plans           |       | 7.10        | (c)        |
| Buyers  Indemnified Party             |       | 9.1         | (a)        |
| Buyers-Initiated  Start-Up            |       | 7.18        | (a)        |
| Buyers Required  Regulatory Approvals |       | 6.3         | (b)        |
| Capital Expenditures  Statement       |       | 3.2         | (b)        |

 

8

----

 
| **Term**                                         | ** ** | **Section** | ** ** |
|--------------------------------------------------|------------|-------------|------------|
| Closing                                          |       | 4.1         |       |
| Closing Date                                     |       | 4.1         |       |
| CPCN                                             |       | 6.3         | (b)        |
| Direct Claim                                     |       | 9.2         | (c)        |
| Environmental  Permits                           |       | 5.10        | (a)(i)     |
| ERISA Affiliate                                  |       | 5.12        | (a)        |
| Excluded Assets                                  |       | 2.2         |       |
| Excluded  Liabilities                            |       | 2.4         |       |
| FERC                                             |       | 5.5         |       |
| FERC Approvals                                   |       | 6.3         | (b)        |
| Final  Extraordinary Capital Expenditures Amount |       | 3.2         | (c)        |
| GAAP                                             |       | 3.2         | (a)        |
| Indemnifiable  Loss                              |       | 9.1         | (a)        |
| Indemnifying  Party                              |       | 9.1         | (d)        |
| Indemnitee                                       |       | 9.1         | (c)        |
| Indiana  Settlement Agreement                    |       | 6.3         | (c)        |
| Intellectual  Property                           |       | 5.20        |       |
| IRS                                              |       | 5.12        | (a)        |
| IURC                                             |       | 5.4         | (b)        |
| Leases                                           |       | 5.8         | (f)        |
| Material  Contracts                              |       | 5.13        | (a)        |
| Notice of  Disagreement                          |       | 3.2         | (c)        |
| Permits                                          |       | 5.15        | (a)        |
| Prior Welfare  Plans                             |       | 7.10        | (b)        |
| Proposed  Acquisition Transaction                |       | 7.15        |       |
| Property Taxes                                   |       | 3.4         | (a)(i)     |
| Purchase Price                                   |       | 3.1         |       |
| Replacement  Welfare Plans                       |       | 7.10        | (b)        |
| Reviewing  Parties                               |       | 7.16        | (f)        |
| Sellers  Confidentiality Agreement               |       | 7.2         | (b)        |
| Sellers’  Employees                         |       | 5.11        |       |
| Sellers  Indemnified Party                       |       | 9.1         | (b)        |
| Sellers-Initiated  Start-Up                      |       | 7.18        | (b)        |
| Sellers Required  Regulatory Approvals           |       | 5.4         | (b)        |
| Support  Obligations                             |       | 7.6         | (d)        |
| Survey                                           |       | 4.3         | (o)        |
| Termination Date                                 |       | 10.1        | (b)        |
| Third Party  Claim                               |       | 9.2         | (a)        |
| Title Company                                    |       | 4.3         | (n)        |
| Title Policy                                     |       | 4.3         | (n)        |
| Transfer Taxes                                   |       | 7.9         | (a)        |
| Wheatland  Facility                              |       | Recitals    |       |

###  

### (c)           Unless otherwisespecified, any period measured in days shall be measured in calendar daysrather than Business Days.

 

9

----

 

**ARTICLE IIPURCHASE AND SALE**

 

**2.1.**         **Purchase and Sale.**

 

### (a)           Upon theterms and subject to the conditions set forth in this Agreement, at theClosing, AESC will sell, transfer, convey, assign and deliver to the Buyers,and the Buyers will purchase, acquire and assume from AESC, (i) all of therights of AESC under the contracts and Leases identified in Schedule 2.1(a)(i) tothe extent they pertain to the Wheatland Facility, including, withoutlimitation, any right to receive payment, any right to receive goods andservices and any right to assert claims and take other rightful actions inrespect of breaches, defaults and other violations of such contracts and Leases,and (ii) the vehicles identified on Schedule 2.1(a)(ii) (collectively,the “AESC Transferred Assets”).

###  

### (b)           Upon theterms and subject to the conditions set forth in this Agreement, at the Closing,the Sellers will sell, transfer, convey, assign and deliver to the Buyers, andthe Buyers will purchase, acquire and assume from the Sellers, all of theSellers’ right, title and interest in and to the properties and assets that areowned by the Sellers (tangible or intangible, including goodwill), whereverlocated, including, without limitation, the Sellers’ right, title and interestin and to the following assets (collectively, together with the AESCTransferred Assets, the “Acquired Assets”):

###  

##### (i)            theSite and the Wheatland Facility;

#####  

##### (ii)           themachinery, equipment, Inventories, furniture, boats, vehicles and otherpersonal property owned by the Sellers and located at or in transit to theWheatland Facility (including, without limitation, the step-up transformers andthe items of personal property described in Schedule 2.1(b)(ii) andall applicable warranties against manufacturers or vendors, to the extent thatsuch warranties are transferable without further action by the Sellers, and allitems of personal property due under applicable warranties), in each case as inexistence on the Closing Date;

#####  

##### (iii)          tothe extent transferable, all Permits and Environmental Permits set forth in Schedule 2.1(b)(iii);

#####  

##### (iv)          allof the rights of the Sellers under the Material Contracts and Leases set forthin Schedule 2.1(b)(iv) and any similar contracts or leasesentered into, in accordance with Section 7.1(a), after the date hereof andprior to the Closing Date (collectively, together with the contracts and Leasesincluded within the definition of AESC Transferred Assets, the “AssumedContracts”), including, without limitation, any right to receive payment,any right to receive goods and services and any right to assert claims and takeother rightful actions in respect of breaches, defaults and other violations ofthe Assumed Contracts;

#####  

##### (v)           allbooks, records, manuals, regulatory documents, real estate documents,engineering designs, blueprints, as-built plans, specifications, procedures,studies, reports and equipment repair, safety, maintenance or service records,lists of present and former

 

10

----

 

##### suppliers, lists ofpresent and former customers, and other such materials (in any form or medium)of the Sellers, including the Transferring Employee Records;

#####  

##### (vi)          allrights in and to any causes of action, lawsuits, judgments, claims and demandsof any nature available to or being pursued by or on behalf of the Sellers,whether arising by way of counterclaim or otherwise;

#####  

##### (vii)         exceptfor prepaid expenses and deposits of the Sellers attributable to any ExcludedAssets or Excluded Liabilities, all prepaid expenses, progress payments anddeposits of or by the Sellers, rights to receive a prepaid expense, deposit orprogress payment, and cash in transit that constitutes a prepaid expense,progress payment or deposit, relating to any Acquired Asset or AssumedLiability;

#####  

##### (viii)        subjectto Section 7.1(a)(xvi), all Emission Allowances set forth on Schedule 2.1(b)(viii),all Emissions Allowances specifically issued or allocated to the WheatlandFacility by environmental agencies of the United States of America or the Stateof Indiana with a vintage year of 2005 or later (to the extent not alreadyidentified on Schedule 2.1(b)(viii)), and any Emissions Allowancepurchased by the Sellers specifically for the Wheatland Facility on or beforethe date hereof;

#####  

##### (ix)           allIntellectual Property and associated licenses, including rights to sue for andremedies against past, present and future infringements thereof, and rights ofpriority and protection of interests therein under the laws of any jurisdictionworldwide and all tangible embodiments thereof; and

#####  

##### (x)            allother assets, rights and interests of the Sellers;

#####  

### provided, however, that the AcquiredAssets shall not include the Excluded Assets.

###  

**2.2.**         **Excluded Assets****.**  Notwithstanding any provision herein to thecontrary, the Acquired Assets shall exclude the following assets (collectively,the “Excluded Assets”):

 

### (a)           all cash,cash equivalents, bank deposits, accounts receivable of the Sellers or withrespect to the Wheatland Facility as of the Closing and any Tax receivables ofthe Sellers;

###  

### (b)           any refundor credit of Taxes paid by the Seller Parties in respect of the Sellers or theAcquired Assets or for which the Seller Parties are required to reimburse theBuyers, whether such payment is actually received as a refund or as a creditagainst Taxes payable;

###  

### (c)           allinterests in and to the Allegheny Marks, and the Maximo software license (itbeing understood that the database information, including historicalinformation, related to the Wheatland Facility used with the Maximo softwareshall be an Acquired Asset);

###  

### (d)           allpersonnel, medical and benefits records of the Seller Parties or theirAffiliates, other than Transferring Employee Records;

 

11

----

 

### (e)           any amountreceived after the Closing Date for electricity sold and delivered on or priorto the Closing Date;

###  

### (f)            thosecontracts and Leases listed on Schedule 2.2(f);

###  

### (g)           any assetsold, transferred or otherwise disposed of in accordance with Section 7.1(a)(v);and

###  

### (h)           allproperties and assets of AESC other than the AESC Transferred Assets.

###  

**2.3.**         **Assumed Liabilities.** On the terms and subject to the conditions set forth herein, from andafter the Closing, the Buyers shall assume and satisfy or perform all of theLiabilities of the Seller Parties that relate directly or indirectly to, inrespect of, or otherwise arising from the ownership, use or operation of theAcquired Assets (collectively, the “Assumed Liabilities”), including,without limitation, the following Liabilities:

 

### (a)           allLiabilities of the Seller Parties arising under the Assumed Contracts inaccordance with the terms thereof (other than Liabilities attributable to anyfailure by any of the Seller Parties prior to or on the Closing Date to complywith the terms thereof);

###  

### (b)           allLiabilities relating to any Environmental Law other than Retained EnvironmentalLiabilities; and

###  

### (c)           allLiabilities in respect of Taxes attributable to the Acquired Assets for taxableperiods, or portions thereof, beginning after the Closing Date (as proratedunder Section 3.4(a)(i) for Taxes described therein), and allLiabilities for Transfer Taxes pursuant to Section 7.9(a);

###  

### provided, however, that the AssumedLiabilities shall not include the Excluded Liabilities.

###  

**2.4.**         **Excluded Liabilities.** Notwithstanding the provisions of Section 2.3, the Buyers shall notassume the following Liabilities (collectively, the “Excluded Liabilities”),which shall remain the exclusive responsibility of the Seller Parties or theirAffiliates:

 

### (a)           theRetained Environmental Liabilities;

###  

### (b)           anyLiability of the Seller Parties or their Affiliates and predecessors in respectof or otherwise arising from the Excluded Assets, except to the extent causedby the acts or omissions of the Buyers or the Buyers’ Representatives or by theBuyers’ ownership, lease, maintenance or operation of the Acquired Assets;

###  

### (c)           anyLiability of the Seller Parties or their Affiliates and predecessors arisingfrom the execution, delivery or performance of this Agreement or any AncillaryAgreement or the transactions contemplated hereby or thereby;

###  

### (d)           anyLiability of the Seller Parties or their Affiliates and predecessors undercontracts or Leases which are not Assumed Contracts, except to the extentcaused by the

 

12

----

 

### acts or omissions of the Buyer or the Buyers’ Representatives or by theBuyers’ ownership, lease, maintenance or operation of the Acquired Assets;

###  

### (e)           anyLiability of the Seller Parties or their Affiliates and predecessors for anyfines or penalties imposed by a Governmental Entity resulting from any (i) investigationor proceeding by a Governmental Entity pending on or prior to the Closing Dateor (ii) acts or omissions of the Seller Parties or their Affiliates andpredecessors on or prior to the Closing Date;

###  

### (f)            anyLiability in respect of Taxes attributable to the Acquired Assets for taxableperiods, or portions thereof, ending on or before the Closing Date (as proratedunder Section 3.4(a)(i) for Taxes described therein), except forTransfer Taxes pursuant to Section 7.9(a);

###  

### (g)           anyLiability of the Seller Parties or their Affiliates arising from the breach ordefault by the Seller Parties or their Affiliates, prior to the Closing Date,of any Assumed Contracts or any other contract, license, agreement or personalproperty lease entered into by any of the Seller Parties or their Affiliateswith respect to the Purchased Assets;

###  

### (h)           anyLiability of the Seller Parties or their Affiliates and predecessors relatingto any cause of action pending, or threatened in writing, prior to the ClosingDate against the Seller Parties or their Affiliates and predecessors or theirassets;

###  

### (i)            anyLiabilities relating to any matters identified on Schedule 2.4(i);and

###  

### (j)            allLiabilities of the Seller Parties for Indebtedness incurred on or prior to theClosing.

###  

**2.5.****        ****Procedures for Acquired Assets Not Transferable.**  If any consent required to transfer or assignany of the Assumed Contracts, Permits, Environmental Permits or any otherproperty or rights included in the Acquired Assets cannot be obtained prior tothe Closing Date and the Closing occurs, or, if an attempted assignment thereofwould be ineffective or would adversely affect the rights of any of the SellerParties thereunder so that the Buyers would not in fact receive all suchrights, this Agreement and the related instruments of transfer shall notconstitute an assignment or transfer thereof and the Buyers shall not assumethe Seller Parties’ obligations with respect thereto.  In the event any such consent is not obtainedon or prior to the Closing Date, the Seller Parties shall continue to useCommercially Reasonable Efforts to obtain any such consent after the ClosingDate until such consent has been obtained. If such efforts are unsuccessful, the Seller Parties and the Buyers willcooperate to achieve a mutually agreeable arrangement under which the Buyerswould obtain the benefits and assume the obligations from and after the ClosingDate in accordance with this Agreement, including subcontracting, sublicensingor subleasing to the Buyers, or under which the Seller Parties would enforcefor the benefit of the Buyers any and all rights of the Seller Parties againsta third party thereto, in any case with the Buyers assuming the Seller Parties’obligations to the extent such obligations would have constituted an AssumedLiability if such assignment had occurred on the Closing Date.  Each Seller will pay promptly to the Buyerswhen received all monies received by such Seller after the Closing Date underany such contracts for any claim or right or any benefit

 

13

----

 

arising thereunder to the extent that the Buyers wouldbe entitled thereto pursuant hereto. Nothing in this Section 2.5 shall be deemed to (a) constitutean agreement to exclude from the Acquired Assets any assets described in Section 2.1or (b) alter the rights or obligations of the Buyers pursuant to Section 7.6or Section 8.1(c).

 

**ARTICLE IIIPURCHASE PRICE**

 

**3.1.**         **Purchase Price.**  Uponthe terms and subject to the conditions set forth in this Agreement, at theClosing, in exchange for the Acquired Assets, the Buyers shall pay to theSellers an amount equal to One Hundred Million Dollars ($100,000,000) (the “PurchasePrice”) and shall assume the Assumed Liabilities.  The parties acknowledge that the FinalExtraordinary Capital Expenditures Amount, if any, shall be treated as apost-Closing adjustment to the Purchase Price.

 

**3.2.**         **Possible Purchase Price Adjustment.**

 

### (a)           Beforeexpending any funds for an Extraordinary Capital Expenditure, (i) theSeller Parties shall give the Buyers written notice of such proposedExtraordinary Capital Expenditure, including supplementary materials explainingthe proposed Extraordinary Capital Expenditure and, if applicable, diagrams ortechnical drawings, and, if requested by the Buyers, reasonable supportingmaterials supporting the Seller Parties’ conclusion that the ExtraordinaryCapital Expenditure is required by a change in Law or by any GovernmentalEntity or quasi regulatory agency, at least 10 Business Days prior to the dateof the proposed Extraordinary Capital Expenditure, (ii) the Sellers shallconsider in good faith the Buyers’ reasonable comments on the proposedExtraordinary Capital Expenditure, and (iii) the parties shall haveattempted in good faith to agree on the appropriate response to thecircumstance that requires the Extraordinary Capital Expenditure.  The amount of Extraordinary CapitalExpenditures, if any, to be included in the Capital Expenditures Statement andthe Final Extraordinary Capital Expenditures Amount shall be reduced, in anamount to be mutually agreed upon by the parties in good faith, to account forthe ownership and usage of any project or addition funded by an ExtraordinaryCapital Expenditure (including, if appropriate, the fair depreciation of suchproject or addition under United States generally accepted accountingprinciples (“GAAP”) allocable to the period in which the Seller Partiesowned the project) by the Seller Parties prior to the Closing Date.

###  

### (b)           In theevent the Seller Parties have incurred an Extraordinary Capital Expenditure inaccordance with Section 3.2(a), then within 30 days after the Closing, theSeller Parties will prepare and deliver to the Buyers a statement (the “CapitalExpenditures Statement”) setting forth the Extraordinary CapitalExpenditures, if any, including detailed supporting material.  The Buyers agree to cooperate with the SellerParties in connection with the preparation of the Capital ExpendituresStatement and related information, and shall provide to the Seller Parties suchbooks, records and information as may be reasonably requested from time totime.

 

14

----

 

### (c)           During the30-day period following the delivery by the Seller Parties of the CapitalExpenditures Statement, the Buyers and the Buyers’ Representatives may reviewsuch statement.  The Seller Parties agreeto cooperate with the Buyers in such review and to provide the Buyers with theinformation used to prepare the Capital Expenditures Statement and any otherrelated information as reasonably requested by the Buyers.  The Buyers shall provide any comments orobjections they have with respect to the Capital Expenditures Statement to theSeller Parties in writing within such 30-day period (the “Notice ofDisagreement”).  The Buyers and theSeller Parties shall attempt in good faith to resolve any differences andissues as set forth in the Notice of Disagreement.  If no Notice of Disagreement is delivered orthe matters set forth in the Notice of Disagreement are so resolved, then theCapital Expenditures Statement, as adjusted for any changes as are agreed uponby the Buyers and the Seller Parties, shall be final and binding upon theBuyers and the Seller Parties and shall constitute the “Final ExtraordinaryCapital Expenditures Amount.”  If thematters raised by the Buyers in the Notice of Disagreement cannot be resolvedbetween the Buyers and the Seller Parties within 15 days following delivery bythe Buyers of the Notice of Disagreement, the question or questions in disputeshall be promptly submitted to the Independent Accounting Firm, which shall beinstructed to determine and report to the parties, within 30 days afterreceiving such submission, upon such remaining disputed amounts, and suchreport shall be final, binding and conclusive on the parties hereto withrespect to the amounts disputed.  Anyamount (i) mutually agreed to in writing by the Seller Parties and theBuyers with respect to an amount that was disputed by the Buyers or (ii) finallydetermined by the Independent Accounting Firm shall be the “FinalExtraordinary Capital Expenditures Amount.” The fees and disbursements of the Independent Accounting Firm shall beborne equally by the Buyers and the Seller Parties.  Notwithstanding any other provision of thisAgreement, in no event shall the Final Extraordinary Capital ExpendituresAmount exceed $2,000,000.

###  

### (d)           Withinfive Business Days after the final determination of the Final ExtraordinaryCapital Expenditures Amount, if any, the Buyers shall pay to the Seller Partiesan amount equal to the Final Extraordinary Capital Expenditures Amount.  Any amount paid under this Section 3.2(d) shallbe paid with interest for the period commencing on the Closing Date through thedate of payment, calculated at the 90-day U.S. treasury bill rate as publishedin The Wall Street Journal in the “Money Rates” section on the ClosingDate, and in cash by federal or other wire transfer of immediately availablefunds to the bank account or accounts designated by the Seller Parties inwriting.

###  

**3.3.****        ****Allocation of Purchase Price.**  The Buyers and the Seller Parties shall useCommercially Reasonable Efforts to agree upon an allocation among the AcquiredAssets of the portion of the Purchase Price set forth in Section 3.1,together with Assumed Liabilities, consistent with section 1060 of theCode and the treasury regulations thereunder within 180 days of the date ofthis Agreement but in no event less than 30 days prior to the Closing.  Any post-Closing adjustments with respect tothe Purchase Price for purchase price allocation purposes shall be jointly madeand agreed to within 30 days following the determination of the FinalExtraordinary Capital Expenditures Amount in a manner consistent with theallocation determined pursuant to this Section 3.3.  In the event the parties are unable to agreeupon such an allocation, then the matter shall be resolved in accordance with Section 7.9(f).  Each of the Buyers and the Seller

 

15

----

 

Parties agree to file IRS Form 8594, and allfederal, state, local and foreign Tax Returns, in accordance with such agreedallocation.  Each of the Buyers and theSeller Parties shall report the transactions contemplated by this Agreement forTax purposes in a manner consistent with the allocation determined pursuant tothis Section 3.3.  Each of theBuyers and the Seller Parties agrees to provide each other promptly with anyother information reasonably required to complete Form 8594.  Each of the Buyers and the Seller Partiesshall notify each other in the event of an examination, audit or otherproceeding regarding the agreed upon allocation of the Purchase Price.

 

**3.4.**         **Proration.**

 

### (a)           The Buyersand the Seller Parties agree that those items listed below, to the extent theyrelate to the Acquired Assets, will be prorated as of the Closing Date, withthe Seller Parties liable to the extent such items relate to any time periodthrough the Closing Date, and the Buyers liable to the extent such items relateto periods subsequent to the Closing Date:

###  

##### (i)            anyad valorem taxes imposed on tangible or intangible property (“Property Taxes”)shall be prorated based on the number of days in such taxable period up to andincluding the Closing Date, and on the number of days in such taxable periodafter the Closing Date, provided that, for purposes of this Agreement, thetaxable period of any Property Tax shall be the calendar year during which thestatutory assessment date falls (for the avoidance of doubt, the items listedin this Section 3.4(a)(i) include, without limitation, any PropertyTaxes with respect to the taxable period including the Closing Date, and allprior taxable periods, for which the Seller Parties have not (A) receivedfrom the county treasurer a statement of current and delinquent taxes andspecial assessments, or (B) paid the amount shown as due on suchstatement);

#####  

##### (ii)           anypermit, license, registration, or compliance assurance fees with respect to anyPermit;

#####  

##### (iii)          sewerrents and charges for water, telephone, electricity and other utilities andsimilar charges of the Sellers; and

#####  

##### (iv)          anypayment obligations for goods purchased or delivered, or services rendered,including rent under any Leases or leases of personal property that are AssumedContracts by which either Seller is bound.

#####  

### (b)           Inconnection with the prorations referred to in (a) above, in the event thatactual figures are not available at the Closing Date, the proration shall bebased upon the actual Taxes or fees for the preceding year (or appropriateperiod) for which actual Taxes or fees are available and such Taxes or feesshall be reprorated upon request of either the Seller Parties or the Buyersmade within 30 days of the date that the actual amounts become available.  The Buyers shall cooperate with the SellerParties in the prosecution of tax proceedings which have not been completed bythe Closing Date.  The Seller Parties andthe Buyers agree to furnish each other with such documents and other records asmay be reasonably requested in order to confirm all adjustment and prorationcalculations made pursuant to this Section 3.4.

 

16

----

 

**ARTICLE IVTHE CLOSING**

 

**4.1.**         **Time and Place of Closing.** Upon the terms and subject to the satisfaction of the conditionscontained in Article VIII of this Agreement, the closing of the purchaseand sale of the Acquired Assets contemplated by this Agreement (the “Closing”)will take place at Skadden, Arps, Slate, Meagher & Flom LLP, 1440 NewYork Avenue, N.W., Washington, D.C., at 10:00 A.M. (local time) on suchdate as the parties may agree, which date is as soon as practicable, but nolater than five Business Days following the date on which all of the conditionscontained in Article VIII have been satisfied or waived (except for thoseconditions which by their nature can only be satisfied at the Closing); or atsuch other place or time as the parties may agree.  The date and time at which the Closingactually occurs is hereinafter referred to as the “Closing Date.”

 

**4.2.**         **Payment of Purchase Price.** The Buyers shall pay to the Sellers at the Closing an amount in UnitedStates dollars in the aggregate equal to the Purchase Price, by wire transferof immediately available funds to the bank account or accounts designated bythe Sellers, in writing, on or prior to the 2nd Business Dayimmediately preceding the Closing Date.

 

**4.3.**         **Deliveries by the Sellers.** At the Closing, the Seller Parties will deliver the following to theBuyers:

 

### (a)           the Deeds;

###  

### (b)           the Billof Sale, duly executed by the applicable Seller Parties;

###  

### (c)           theAssignment and Assumption Agreement, duly executed by the applicable SellerParties, in recordable form if necessary;

###  

### (d)           each otherAncillary Agreement required to be delivered under this Agreement, dulyexecuted by the applicable Seller Parties;

###  

### (e)           the FIRPTAAffidavit, duly executed by AESC;

###  

### (f)            certificatesof title for the vehicles and boats which are part of the Acquired Assets, dulyexecuted by the applicable Seller Parties;

###  

### (g)           allattornment agreements, notices and other documents and instruments required forthe assignment or other transfer of any of the Assumed Contracts from theapplicable Seller Parties to the Buyers, duly executed by the applicable SellerParties and, in the case of any leases, upon the reasonable request of theBuyers, in recordable form;

###  

### (h)           UniformCommercial Code and other Encumbrance searches with respect to the AcquiredAssets, and such duly executed UCC-3 Termination or Partial Release Statementsand other releases as may be required to convey the Acquired Assets free andclear of all Encumbrances (except for Permitted Encumbrances) in accordancewith this Agreement;

###  

### (i)            copies ofall consents, waivers or approvals obtained by the Sellers with respect to thetransfer of the Acquired Assets or the consummation of the transactions

 

17

----

 

### contemplated by this Agreement and the Ancillary Agreements, to theextent required under this Agreement or the Ancillary Agreements;

###  

### (j)            all ofthe books, records and other materials of the Sellers set forth in Section 2.1(b)(v);

###  

### (k)           acertificate from an authorized officer of each of the Seller Parties inaccordance with Section 8.2(e);

###  

### (l)            anyamounts for which the Seller Parties are liable pursuant to Section 3.4;

###  

### (m)          anydisclosure document required to be delivered in accordance with the IndianaResponsible Transfer Property Law (Ind. Code § 13-251-3-1 et seq.);

###  

### (n)           an ALTA (Form B-1992)Owner Policy of Title Insurance, with an endorsement providing “extendedcoverage” over the standard exceptions contained in such form of Owner Policyof Title Insurance and such other endorsements as are reasonably requested bythe Buyers (the “Title Policy”), issued by Chicago Title Insurance Company(the “Title Company”), in the amount of $100,000,000, and insuring that (i) goodand marketable title to the Owned Real Property and (ii) valid easementinterests in the Other Real Property Interests are vested in the Buyers,subject to no exceptions to title other than the Permitted Encumbrances;

###  

### (o)           a surveyof the Site (the “Survey”) prepared by a surveyor licensed in the Stateof Indiana, (i) certified to the Seller Parties, the Buyers and the TitleCompany in accordance with a form of certification which is reasonablyacceptable to the Buyers, such certification to include a statement that thesurvey has been prepared in accordance with “Minimum Standard DetailRequirements for ALTA/ACSM Land Title Surveys” jointly adopted by ALTA, ACSMand NSPS in 1999 and including Items 1, 4, 6, 7(a), 7(b)(1), 7(c), 8-10, 11(b) and13-16, (ii) showing no gaps, gores, encroachments or other matters whichare not Permitted Encumbrances, (iii) showing that the easements createdby (A) that certain Easement Agreement, dated March 10, 2000, betweenWest Fork Land Development Company, L.L.C. and Larry B. Murray and (B) thatcertain Easement Agreement, dated March 10, 2000, between West Fork LandDevelopment Company, L.L.C. and Charles L. Murray and Barbara Nell Murray,constitute a continuous easement corridor between the fee parcels owned byWheatland LLC and the fee parcels owned by Lake LLC and (iv) plotting thelocation of the water pipeline, gas transmission pipeline and electricaltransmission poles and lines serving the Wheatland Facility and confirming thatsuch pipelines, poles and lines lie wholly within the Owned Real Property orthe Other Real Property Interests; and

###  

### (p)           such realestate transfer declarations, disclosures or forms and such other documents,instruments or agreements, if any, as shall have been reasonably requested bythe Title Company in order to issue the Title Policy to the Buyers and toconsummate the Closing.

###  

**4.4.**         **Deliveries by the Buyers.** At the Closing, the Buyers will deliver the following to the SellerParties:

 

### (a)           thePurchase Price by wire transfer of immediately available funds, together withany amounts for which the Buyers are liable pursuant to Section 3.4;

 

18

----

 

### (b)           theAssignment and Assumption Agreement, duly executed by the Buyers and inrecordable form if necessary;

###  

### (c)           each otherAncillary Agreement required to be delivered under this Agreement, dulyexecuted by the Buyers as applicable;

###  

### (d)           acertificate from an authorized officer of each of the Buyers referred to in Section 8.3(d);and

###  

### (e)           such otheragreements, documents, instruments and writings as are required to be deliveredby the Buyers at or prior to the Closing Date pursuant to this Agreement orotherwise required in connection herewith.

###  

**ARTICLE VREPRESENTATIONS AND WARRANTIES OF THE SELLER PARTIES**

 

The Seller Parties jointly and severally represent andwarrant to the Buyers, except as set forth on the corresponding sections of theSeller Parties’ Schedules, as follows:

 

**5.1.**         **Organization; Qualification.** Each of the Seller Parties is a limited liability company dulyorganized, validly existing and in good standing under the laws of the State ofDelaware.  Each of the Sellers has allrequisite limited liability company power and authority to own, lease andoperate its respective properties and to carry out its respective business asis now being conducted, and is duly qualified and in good standing to dobusiness in each jurisdiction in which the nature of its business or theownership or leasing of its assets and properties makes such qualificationnecessary (including Indiana, as applicable), except where the failure to havesuch power and authority, or to be so qualified or in good standing, would not,individually or in the aggregate, be reasonably likely to have a MaterialAdverse Effect.  The Sellers have madeavailable to the Buyers complete and correct copies of the Sellers’ respectiveCertificates of Formation and Limited Liability Company Agreements, each ascurrently in effect.

 

**5.2.**         **Authority Relative to this Agreement.**  Each of the Seller Parties has full limitedliability company power and authority to execute and deliver this Agreementand, as of the Closing, will have full limited liability company power andauthority to execute and deliver the Ancillary Agreements, as applicable, andto consummate the transactions contemplated hereby and thereby.  The execution and delivery of this Agreementand the consummation of the transactions contemplated hereby have been, and, asof the Closing, the execution and delivery of the Ancillary Agreements and theconsummation of the transactions contemplated thereby will have been, duly andvalidly authorized by the Boards of Managers of each of the Seller Parties, andno other limited liability company proceedings on the part of the SellerParties are necessary to authorize this Agreement or, as of the Closing, theAncillary Agreements, as applicable, or to consummate the transactionscontemplated hereby and thereby.  ThisAgreement has been, and, as of the Closing, the Ancillary Agreements, asapplicable, will be, duly and validly executed and delivered by the SellerParties, as applicable.  Assuming thatthis Agreement and, as of the Closing, the Ancillary Agreements constitutevalid and binding agreements of the respective Buyers, subject to receipt ofthe Sellers Required Regulatory Approvals and the Buyers Regulatory RequiredApprovals, this Agreement constitutes, and the Ancillary Agreements will

 

19

----

 

constitute, valid andbinding agreements of the Seller Parties, enforceable against the SellerParties in accordance with their respective terms, subject to bankruptcy,insolvency, fraudulent transfer, reorganization, moratorium and similar laws ofgeneral applicability relating to or affecting creditors’ rights and to generalequity principles (the “Bankruptcy and Equity Exception”).

 

**5.3.**         **Capitalization and Other Matters.**  AESC owns, beneficially and of record, all ofthe issued and outstanding limited liability company interests in the Sellers,free and clear of all Encumbrances, other than Encumbrances pursuant to theExisting Debt Documents.  Neither of theSellers has any equity or other investment interest in any other Person.

 

**5.4.**         **Consents and Approvals; No Violation.**

 

### (a)           Other thanobtaining the Sellers Required Regulatory Approvals and the Buyers RequiredRegulatory Approvals, and except as set forth on Schedule 5.4(a),neither the execution and delivery of this Agreement and, on the Closing Date,the Ancillary Agreements, as applicable, by the Seller Parties nor the sale bythe Sellers of the Acquired Assets pursuant to this Agreement or performance bythe Seller Parties under this Agreement or the Ancillary Agreements, asapplicable, will (i) conflict with or result in any breach of anyprovision of the respective Certificates of Formation or Limited LiabilityCompany Agreements of the Seller Parties; (ii) require any consent,approval, authorization or permit of, or filing with or notification to, anyGovernmental Entity, except (A) where the failure to obtain such consent,approval, authorization or permit, or to make such filing or notification,would not, individually or in the aggregate, be reasonably likely to have aMaterial Adverse Effect or (B) for those requirements which becomeapplicable to the Sellers as a result of the specific regulatory status of theBuyers (or any of their Affiliates) or as a result of any other facts thatspecifically relate to the business or the activities in which either of theBuyers (or any of their Affiliates) is or proposes to be engaged; (iii) requireany consent, approval or notice, or result in a default (with or without noticeor lapse of time or both) (or give rise to any right of termination,cancellation or acceleration), under any of the terms, conditions or provisionsof any note, bond, mortgage, indenture, license, agreement or other instrumentor obligation to which any of the Seller Parties is a party, other than theExisting Debt Documents, or by which any of the Seller Parties may be bound,except for such defaults (or rights of termination, cancellation oracceleration) as to which requisite waivers or consents have been obtained orwhich would not, individually or in the aggregate, be reasonably likely to havea Material Adverse Effect; or (iv) violate any Law or Permit applicable toany of the Seller Parties, or their respective assets, which violation would,individually or in the aggregate, be reasonably likely to have a MaterialAdverse Effect; and without limiting the generality of the foregoing, thetransactions contemplated by this Agreement comply with the provisions of theExisting Debt Documents and the Seller Parties have obtained the board approvaland the appraisal required under Section 5.02(e)(v) of the CreditAgreement.

###  

### (b)           Except for(i) any filings or approvals required under the Federal Power Act, (ii) thefilings by the Seller Parties required by the HSR Act and the expiration orearlier termination of all waiting periods under the HSR Act, and (iii) therequired approvals from the Indiana Utility Regulatory Commission (the “IURC”)(the filings and approvals referred to in clauses (i) through (iii) arecollectively referred to as the “Sellers Required Regulatory Approvals”),no declaration, filing or registration with, or notice to, or authorization,consent or

 

20

----

 

### approval of any Governmental Entity is necessary for the consummationby the Seller Parties of the transactions contemplated hereby or by theAncillary Agreements, other than such declarations, filings, registrations,notices, authorizations, consents or approvals which, if not obtained or made,would not, individually or in the aggregate, be reasonably likely to have aMaterial Adverse Effect.

###  

**5.5.**         **Reports.**  Except as set forth in Schedule 5.5,since January 1, 2004, each of the Seller Parties has filed or caused tobe timely filed with the SEC (limited to filings on Form 10-K and Form 10-Q,and any amendments thereof, with respect to filings under the Exchange Act) andthe Federal Energy Regulatory Commission (the “FERC”), as the case maybe, all material forms, statements, reports and documents (including allexhibits, amendments and supplements required to be filed by them) with respectto the business and operations of the Sellers under each of the Federal PowerAct and the Holding Company Act and the respective rules and regulationsthereunder, all of which complied in all material respects with all applicablerequirements of the appropriate act and the rules and regulationsthereunder in effect on the date each such report was filed, and there are nomaterial misstatements or omissions in respect of such reports.

 

**5.6.**         **Absence of Certain Changes or Events; No Undisclosed Liabilities.**

 

### (a)           Except asdisclosed in Schedule 5.6(a), since December 31, 2004, each ofthe Sellers has conducted its business only in the ordinary course of businessconsistent with past practice and Good Utility Practice and there has notbeen:  (i) any Material AdverseEffect; (ii) any damage, destruction or casualty loss with respect to theAcquired Assets, whether covered by insurance or not, which would, individuallyor in the aggregate, be reasonably likely to have a Material Adverse Effect; (iii) anyentry into any agreement, commitment or transaction (including, withoutlimitation, any Indebtedness, capital expenditure or capital financing) by anyof the Seller Parties, which is material to the business or operations of theSellers; (iv) any change in financial or Tax accounting methods,principles or practices, of the Sellers, or with respect to any of the AcquiredAssets, except as required under GAAP; (v) any election, revocation, oramendment of any Tax election of the Sellers or with respect to any of theAcquired Assets; (vi) any filing of any amended Tax Return of the Sellersor with respect to any of the Acquired Assets; (vii) an entry into anyclosing agreement affecting any Tax liability or refund of the Sellers or withrespect to any of the Acquired Assets; or (viii) a settlement orcompromise of any Tax liability or refund of the Sellers or with respect to anyof the Acquired Assets.

###  

### (b)           There areno Liabilities of the Seller Parties relating to the Wheatland Facility or theSite of a nature that would be required to be accrued in accordance with GAAPon a balance sheet of any Seller Party if such Seller Party had prepared such abalance sheet.

###  

**5.7.**         **Indebtedness of the Sellers.** Except for Indebtedness pursuant to the Existing Debt Documents, neitherSeller has any Indebtedness.

 

### **5.8.**         **Real Property and Related Matters.**

###  

### (a)           Except asset forth in Schedule 5.8(a) and except for Permitted Encumbrances, (i) WheatlandLLC holds (A) good, valid and marketable title in fee simple to

 

21

----

 

### each parcel included in the Wheatland Owned Real Property and (B) avalid perpetual easement to each parcel subject to the Other Real PropertyInterests that are appurtenant to the Wheatland Owned Real Property and (ii) LakeLLC holds (A) good, valid and marketable title in fee simple to eachparcel included in the Lake Owned Real Property and (B) a valid perpetualeasement to each parcel subject to the Other Real Property Interests that areappurtenant to the Lake Owned Real Property. The Other Real Property Interests are in full force and effect.  The Owned Real Property is the only realproperty owned by the Sellers, and the Other Real Property Interests constituteall easements,rights-of-way or other rights of the Sellers to use real property owned byPersons other than the Sellers.  TheSite is the only real property necessary for the use and operation of theWheatland Facility as currently used and operated.  No other Person has, directly or indirectly,any interest in the Site (whether legal or equitable), except for PermittedEncumbrances, and no other Person has any contract, option, right of firstrefusal or other agreement to purchase the Site or any part thereof.

###  

### (b)           To theSeller Parties’ Knowledge, each of the Wheatland Owned Real Property and theLake Owned Real Property is an independent property that does not rely on anyfacilities, Improvements or easements (other than public facilities and publicroads) located on any property other than the Site to fulfill any requirementof any Governmental Entity, for the furnishing to the Wheatland Owned RealProperty or the Lake Owned Real Property of any access, essential buildingsystems or utilities or for the use or operation of the Wheatland Facility.

###  

### (c)           Each ofthe Wheatland Owned Real Property and the Lake Owned Real Property is aseparate real estate tax parcel, separate and apart from any property otherthan the Owned Real Property.  The SellerParties have not received any notice of any real property special taxassessments or reassessment of the Site. There are no unpaid charges, debts, Liabilities or claims arising fromthe construction, occupancy, use or operation of the Site which could give riseto any mechanic’s or materialman’s or other statutory lien against the Siteother than charges incurred in the ordinary course of business and which shallbe timely paid.

###  

### (d)           To theSeller Parties’ Knowledge, true and accurate copies of the existing owner’stitle insurance policy with respect to the Site issued to Wheatland LLC andLake LLC and the lender’s title insurance policy issued to Citibank, N.A., asCollateral Agent, are attached hereto as Schedule 5.8(d).

###  

### (e)           There areno tax proceedings pending in respect of the Site.

###  

### (f)            Schedule 5.8(f) describesall of the leases, licenses and occupancy agreements affecting the Site and towhich either of the Seller Parties is a party, whether as lessor or lessee (the“Leases”).  No third party has anyoccupancy or use rights with respect to the Owned Real Property except pursuantto the Leases.  All Leases are in fullforce and effect.  All materialobligations of the Seller Parties under the Leases and, to the Seller Parties’Knowledge, all material obligations of the other parties to the Leases undersuch Leases, in each case, to be performed through the date hereof have beenperformed in full.  The Seller Partieshave not received any notice of default by either of the Sellers under any ofthe Leases.

 

22

----

 

### (g)           There are no surfaceconditions, and to the Seller Parties’ Knowledge, there are no subsurfaceconditions, upon the Site which constitute, or which with the passing of timemay constitute, a public nuisance.  To theSeller Parties’ Knowledge, the Site does not contain any archeologicalartifacts, human remains or other historical or archeological materials whichare regulated under any Laws.

###  

### (h)           To theSeller Parties’ Knowledge, there are no public improvements pending,contemplated or proposed relating to the Site. None of the Seller Parties have commenced any improvements upon theOwned Real Property, nor to the Seller Parties’ Knowledge, are any suchimprovements contemplated or proposed to be commenced upon the Owned RealProperty.

###  

### (i)            The Siteis served by public electric, telephone and utility services which are madeavailable to the Site from public utility easements, appurtenant insuredeasements or public rights-of-way.  Allsuch utilities are adequate and have sufficient capacity for operation and useof the Wheatland Facility as currently operated and used and for compliancewith the Assumed Contracts.

###  

### (j)            (i) Theobligations of the Sellers with regard to all applicable covenants, easementsand restrictions affecting the Site have been and are being performed in aproper and timely manner by the Sellers, except for such matters which wouldnot, individually or in the aggregate, be reasonably likely to have a MaterialAdverse Effect, (ii) the Sellers are not currently in default under anyagreement, order, judgment or decree relating to the Site, and no conditions orcircumstances exist which, with the giving of notice or passage of time, wouldconstitute a default or breach with respect to any such agreement, order,judgment or decree, except for such default or breach which would not,individually or in the aggregate, be reasonably likely to have a MaterialAdverse Effect, (iii) the Sellers have received no notice of, and are nototherwise aware of, any claims, causes of action, lawsuits or legal proceedingspending or threatened regarding the ownership, use or possession of the Siteincluding, without limitation, condemnation or similar proceedings and (iv) theSellers have received no notice of any violation of any zoning, subdivision,platting, building, fire, insurance, safety, health, environmental or otherapplicable laws, ordinances or regulations (whether related to the Site or theoccupancy thereof).

###  

### (k)           The Wheatland Facilityis located entirely on the Owned Real Property (other than improvementsrequired to connect the Wheatland Facility with the electric transmission grid,natural gas pipelines and water reserves, which are properly located on realproperty subject to the Other Real Property Interests).

###  

**5.9.**         **Insurance.**  Allmaterial policies of fire, liability, worker’s compensation and other forms ofinsurance owned or held by the Seller Parties or their Affiliates that insureany of the Acquired Assets are in full force and effect, subject to the termsof each policy, all premiums with respect thereto have been paid (other thanretroactive premiums which may be payable with respect to comprehensive generalliability and worker’s compensation insurance policies), and no notice ofcancellation or termination has been received with respect to any such policywhich was not replaced on substantially similar terms prior to the date of suchcancellation.  During the past 12 months,the Seller Parties or their Affiliates have not been refused any insurance with

 

23

----

 

respect to the AcquiredAssets nor has such coverage been limited by any insurance carrier to whichSeller Parties or their Affiliates has applied for any such insurance or withwhich it has carried insurance.

 

**5.10.**       **EnvironmentalMatters.**

 

### (a)           Except asset forth in Schedule 5.10(a), and except for such matters thatwould not, individually or in the aggregate, be reasonably likely to have aMaterial Adverse Effect:

###  

##### (i)            The Sellers have obtained allpermits, licenses, registrations, exemptions and other authorizations which arerequired under the Environmental Laws for the ownership, use and operation ofthe Wheatland Facility and the Owned Real Property as presently operated (“EnvironmentalPermits”).  All such EnvironmentalPermits are in effect, and, to the Seller Parties’ Knowledge, no appeal or anyother action is pending to revoke any such Environmental Permits.  The Sellers have filed (or will have filed bythe Closing Date) all applications necessary to renew any necessaryEnvironmental Permits in a timely fashion.

#####  

##### (ii)           The Sellers have been and are in compliancewith applicable Environmental Laws and Environmental Permits.  To the Seller Parties’ Knowledge, predecessorowners and operators of the Wheatland Facility and the Owned Real Property werein compliance with applicable Environmental Laws and Environmental Permits.

#####  

##### (iii)          The Sellers have made available to the Buyerscomplete copies of all the environmental studies on the Wheatland Facility orthe Owned Real Property in theirpossession, including, without limitation, environmental audit reports andPhase I or Phase II environmental assessments, if any.

#####  

##### (iv)          There is no civil, criminal or administrativeaction, suit, demand, claim, hearing, notice of violation, investigation,proceeding, notice or demand letter existing or pending that has not beenresolved with no further obligations on the part of the Sellers or, to theSeller Parties’ Knowledge, threatened, relating to the Wheatland Facility orthe Site pursuant to any Environmental Laws or relating Hazardous Substances,including, without limitation, claims for personal or bodily injury withrespect to exposure to Hazardous Substances.

#####  

##### (v)           The Sellers have not, and, to the SellerParties’ Knowledge, no other Person has Released any Hazardous Substances on,beneath or adjacent to the Site,except for Releases of Hazardous Substances that are not likely to result in aclaim against the Sellers.  To theSeller Parties’ Knowledge, there are no Hazardous Substances present on,beneath or adjacent to the Site, except for such Hazardous Substances that arenot likely to result in a claim against the Sellers.

#####  

##### (vi)          To theSeller Parties’ Knowledge, noRelease or Response Action has occurred at the Site that could reasonably be expected to resultin the assertion or creation of an Encumbrance on the Site by any Governmental Entity with respectthereto, nor has

 

24

----

 

##### anysuch assertion of an Encumbrance been made by any Governmental Entity withrespect thereto.

#####  

##### (vii)         Neither of the Sellers has entered into oragreed to any outstanding consent decree or order, or is subject to anyoutstanding judgment, judicial or administrative decree or judicial oradministrative order relating to compliance with any Environmental Law or toResponse Actions to address a Release or threatened Release of HazardousSubstances under any Environmental Law.

#####  

### (b)           The Seller Parties have listedthe current Environmental Permits in Schedule 5.10(b), and havemade available to the Buyers a complete copy of each Environmental Permit.

###  

### (c)           Schedule 5.10(c) listsall Emission Allowances for 2005 and future years that have been (i) issuedor allocated by the U.S. Environmental Protection Agency or the IndianaDepartment of Environmental Management specifically for the Wheatland Facilityor (ii) purchased by the Sellers specifically for the Wheatland Facilityon or before the date hereof.

###  

### (d)           Therepresentations and warranties made in this Section 5.10 are the exclusiverepresentations and warranties of the Seller Parties relating to EnvironmentalLaws, Environmental Permits or other environmental matters, and no otherprovision of this Agreement shall be deemed to constitute, directly orindirectly, a representation or warranty with respect to such matters.

###  

**5.11.**       **Labor andEmployment Matters.**  With respect to thebusiness or operations of the Sellers, except for such matters that would not,individually or in the aggregate, be reasonably likely to have a MaterialAdverse Effect:  (a) each of theSeller Parties is in compliance with all applicable Laws respecting employmentand employment practices, terms and conditions of employment, health andsafety, and wages and hours; (b) none of the Seller Parties has receivednotice of any charge or complaint against it pending before the EqualEmployment Opportunity Commission, the National Labor Relations Board or anyother Governmental Entity regarding an unlawful employment practice; (c) thereis no labor strike, slowdown or work stoppage actually pending or, to theSeller Parties’ Knowledge, threatened against or affecting the Seller Partiesand none of the Seller Parties has experienced any strike, slowdown or workstoppage in the past 5 years; (d) none of the Seller Parties hasreceived notice that any representation petition respecting the employees ofthe Seller Parties has been filed with the National Labor Relations Board, nounion claims to represent any of the employees of the Seller Parties, and therehas been no labor union, prior to the date hereof, organizing or attempting toorganize any employees of the Seller Parties into one or more collectivebargaining units; (e) there are no complaints, lawsuits, arbitrations orother proceedings pending or, to the Seller Parties’ Knowledge, threatened byor on behalf of any present or former employee of the Seller Parties arisingout of or relating in any way to any present or former employee’s hiring by,employment with or separation from the Seller Parties, specifically including,without limitation, any claim for breach of any express or implied contract ofemployment, wrongful termination or infliction of emotional distress, or anyclaim under any applicable Law respecting employment, employment practices,terms and conditions of employment, health and safety, and wages and hours; and(f) to the Seller Parties’ Knowledge, no Sellers’ Employee, during thecourse of and

 

25

----

 

as part of his or her employment with the Sellersor their Affiliates, has been exposed to Hazardous Substances exceedingpermissible exposure limits established by applicable Law.  Schedule 5.11 lists the threeemployees of the Seller Parties or their Affiliates who provide services on afull time basis for the Wheatland Facility as of the date hereof (collectively,the “Sellers’ Employees”) and identifies the employer of each suchSellers’ Employee.

 

**5.12.**       **ERISA;Employee Benefit Plans.**

 

### (a)           Schedule 5.12(a) listsall deferred compensation, incentive compensation, bonus, vacation, equitycompensation and equity based or ownership plans, policies, programs,agreements and arrangements, all other “employee benefit plans,” within themeaning of section 3(3) of ERISA and all employment, retention,consulting, change in control, termination or severance agreements, programs,plans, policies or arrangements, covering the Sellers’ Employees, includingsuch policies of any Person that is considered a single employer with any ofthe Seller Parties under section 4001 of ERISA or section 414 of theCode (each, an “ERISA Affiliate”) (collectively, the “Benefit Plans”).  True and complete copies of all Benefit Plans(or if the Benefit Plan is not a written plan, a description thereof), anyrelated trust or other funding vehicle, the latest version of any reports orsummaries required under ERISA or the Code including, without limitation,summary plan descriptions and summary material modifications, a copy of thethree most recent annual reports and actuarial reports, to the extent requiredby ERISA or the Code, and the most recent determination letter received fromthe Internal Revenue Service (the “IRS”) with respect to each BenefitPlan intended to qualify under section 401 of the Code have been providedor made available to the Buyers.  TheSellers have had no employees and do not sponsor, maintain or contribute toBenefit Plans on behalf of the Sellers’ Employees.

 

### (b)           AllBenefit Plans that are subject to ERISA, other than “multiemployer plans”within the meaning of sections 3(37) or 4001(a)(3) of ERISA, are incompliance with their terms, and in material compliance with all applicableLaws, including, without limitation, the Code and ERISA.  Each Benefit Plan intended to be qualifiedwithin the meaning of section 401(a) of the Code has received acurrent favorable IRS determination letter with respect to suchqualifications.  None of the SellerParties or, to the Seller Parties’ Knowledge, any ERISA Affiliate has engagedin a transaction with respect to any Benefit Plan that could subject any of theSeller Parties to a tax or penalty imposed by either sections 4975 or 4976 ofthe Code or section 409 or 502(i) of ERISA in an amount that would bematerial.

 

### (c)           There hasbeen no amendment to, or announcement or other communication by the SellerParties or, to the Seller Parties’ Knowledge, any ERISA Affiliate regarding anychange in employee participation or coverage under, any Benefit Plan whichwould increase materially the benefits provided to the Sellers’ Employees undersuch plan above the level of the benefits provided thereunder for the mostrecent fiscal year.  Neither theexecution of this Agreement nor the consummation of any of the transactionscontemplated hereby or the termination of employment after the date hereof willentitle any Sellers’ Employees to severance pay or other payments (but notincluding any payments made pursuant to any tax-qualified retirement plan), anyincrease in severance pay or other payments, or any acceleration of vesting ofany payment or benefit, or would result in any funding of any payment orbenefit by the Seller Parties.

 

26

----

 

(d)                                 Neitherthe Seller Parties nor any ERISA Affiliate (i) has failed to fulfill itsobligations under the minimum funding requirements of section 302 ofERISA, to the extent applicable; or (ii) has any actual or potentialwithdrawal liability resulting from a complete or partial withdrawal (asdefined in sections 4203 and 4205 of ERISA) from any multiemployer plan (asdefined in sections 3(37) and 4001(a)(3) of ERISA).  No Liability under Title IV of ERISA has beenincurred by the Seller Parties or any ERISA Affiliate that has not beensatisfied in full as of the date of this Agreement.  No event has occurred in connection with anyof the employee benefit plan of the Seller Parties or any ERISA Affiliate thathas, will or may result in any Liability for which any transferee of assets ofthe Sellers may be responsible, whether by operation of Law, by contract orotherwise.  The transactions contemplatedby this Agreement will not, either alone or in combination with any other eventor events, cause the Buyers to incur any Liabilities under Title IV of ERISA orsection 4980B of the Code.

 

(e)                                  Tothe Seller Parties’ Knowledge, none of the Seller Parties nor any ERISAAffiliate has used the services of workers provided by third party contractlabor suppliers, temporary employees, “leased employees” (as that term isdefined in section 414(n) of the Code), or independent contractors to anextent that would reasonably be expected to result in the disqualification ofany of the Benefit Plans or the imposition of penalties or excise taxes withrespect to the Benefit Plans by the IRS, the Department of Labor, or thePension Benefit Guaranty Corporation.

 

(f)                                    Exceptas set forth in Schedule 5.12(f), there are no pending orthreatened claims by or on behalf of any Benefit Plan, by any employee,beneficiary or alternate payee against any such Benefit Plan, or otherwiseinvolving any such Benefit Plan (other than routine claims for benefits)against the Seller Parties or any ERISA Affiliate.

 

**5.13.****                    ****Contracts.**

 

(a)                                  Schedule 5.13(a) liststhe following agreements and contracts to which any of the Seller Parties(limited in the case of AESC, to the extent such agreements or contracts areincluded in the definition of AESC Transferred Assets) is a party or by whicheither of the Sellers or the Wheatland Facility is bound (the “MaterialContracts”):

 

(i)                                     gaspipeline interconnection agreements, gas supply agreements, gas purchase andsale agreements, and gas transportation agreements;

 

(ii)                                  powerpurchase agreements, electricity transmission agreements, and electricityinterconnection agreements;

 

(iii)                               swap,exchange, commodity option or hedging agreements;

 

(iv)                              materialoperating and maintenance agreements;

 

(v)                                 materialequipment lease, purchase and sale contracts;

 

(vi)                              anycontract (i) requiring known or liquidated expenditures or payments by anyof the Seller Parties in excess of $100,000 in any calendar year or (ii) thatcannot

 

27

----

 

be terminated withoutpenalty by the Seller Party that is a party to such contract upon 90 days’notice or less;

 

(vii)                           anypending sale or lease of real property of either Seller or any pending sale orlease of personal property of either Seller (other than sales of electricenergy in the ordinary course of business) in excess of $100,000;

 

(viii)                        anycontract that contains a covenant not to compete applicable to any SellerParty;

 

(ix)                                anyother agreement material to either Seller, the Acquired Assets or the WheatlandFacility; and

 

(x)                                   anyamendment relating to any of the foregoing.

 

(b)                                 TheSeller Parties have provided or made available to the Buyers true, correct andcomplete copies of all the Material Contracts.

 

(c)                                  Eachof the Material Contracts (i) constitutes a valid and binding obligationof the respective Seller Parties and, to the Seller Parties’ Knowledge,constitutes a valid and binding obligation of the other parties thereto, (ii) isin full force and effect, and (iii) except as set forth in Schedule 5.13(c),may be transferred to the Buyers pursuant to this Agreement, without theconsent of, or notice to, any third party.

 

(d)                                 NoSeller Party and, to the Seller Parties’ Knowledge, no other party to any ofthe Material Contracts, is in breach or default under, and, to the SellerParties’ Knowledge, no event has occurred that, with notice or lapse of time,would constitute a breach or default or permit termination, modification oracceleration of, any of the Material Contracts, except for such breaches,defaults or events as to which requisite waivers have been, or prior to theClosing will have been, obtained or that would not, individually or in theaggregate, be reasonably likely to have a Material Adverse Effect.

 

**5.14.****                    ****Legal Proceedings.**  SinceDecember 31, 2004, there have been no claims, actions, proceedings orinvestigations pending or, to the Seller Parties’ Knowledge, threatened inwriting against any Seller before any Governmental Entity, which (a) involvein the aggregate an amount greater than $100,000 or (b) if adversely determinedwould, individually or in the aggregate, be reasonably likely to have aMaterial Adverse Effect.  Neither theSellers, the Acquired Assets nor the Assumed Liabilities are subject to anyoutstanding judgments, rules, orders, writs, injunctions or decrees of anyGovernmental Authority relating specifically to the Sellers, the AcquiredAssets or the Assumed Liabilities that would, individually or in the aggregate,be reasonably likely to have a Material Adverse Effect.

 

**5.15.****                    ****Compliance with Permits and Laws.**

 

(a)                                  Eachof the Sellers has all material permits, subdivision approvals, variances,licenses, franchises and other governmental authorizations, consents andapprovals (other than with respect to Environmental Laws which are addressed inSection 5.10) (collectively, “Permits”) necessary to operate itsrespective businesses as presently conducted.

 

28

----

 

Except as set forth in Schedule 5.15(a),no Seller has received any notification that it or the Site is in materialviolation of any Permits or Laws applicable to it or the Acquired Assets.  Each Seller and the Site is in materialcompliance with all Permits and Laws applicable to it or the Acquired Assets.

 

(b)                                 Schedule 5.15(b) listsall Permits obtained by the Sellers in connection with the ownership oroperation of the Wheatland Facility and the Site and all consent orders towhich any Seller is subject.  The SellerParties have provided or made available to the Buyers true, correct andcomplete copies of all Permits and consent orders.  All such Permits have become final andnonappealable and, except as would, individually or in the aggregate, bereasonably likely to have a Material Adverse Effect, are valid and in fullforce and effect.

 

**5.16.**                     **Regulation; Sole Purpose.**

 

(a)                                  WheatlandLLC is an “exempt wholesale generator” as defined by the Holding Company Actand is authorized by the FERC to sell electric energy at market-based ratespursuant to an approved rate schedule on file with the FERC.  The Wheatland Facility is an “eligiblefacility” as defined in the Holding Company Act.  Neither Seller is subject to regulation as apublic utility, public service company or an electric company or similar entitysubject to regulation by a Governmental Authority.

 

(b)                                 WheatlandLLC has not conducted, and is not conducting, any business or operations, otherthan the development, construction, ownership, operation and maintenance of theWheatland Facility, including the generation and sale of electric energy atwholesale from the Wheatland Facility, and the ownership of the Wheatland OwnedReal Property.

 

**5.17.**                     **Tax Matters.**

 

(a)                                  Exceptas set forth in Schedule 5.17, (i) all material Tax Returnsrequired to be filed on or before the Closing Date, by or with respect to anySeller or any of the Acquired Assets, have been or will be timely filed on orbefore the Closing Date in all jurisdictions in which such Tax Returns arerequired to be filed; (ii) such Tax Returns are or will be true, correct,and complete in all material respects; and (iii) all Taxes shown to be dueon such Tax Returns have been or will be timely paid in full.

 

(b)                                 Nostatute of limitations of any jurisdiction regarding the assessment orcollection of any Tax of either Seller or with respect to any of the AcquiredAssets has been extended or waived, which extension or waiver remains ineffect.

 

(c)                                  Thereare no audits, claims, assessments, levies, administrative proceedings, orlawsuits pending, or to the Seller Parties’ Knowledge, threatened against eitherSeller or with respect to any of the Acquired Assets by any taxing authority.

 

(d)                                 TheSellers have each qualified as, and been treated as, an entity disregarded asseparate from its owner for federal, state and local income Tax purposes at alltimes since the date of its formation.

 

29

----

 

(e)                                  Thereare no Encumbrances for Taxes on any of the Acquired Assets, except forPermitted Encumbrances.

 

(f)                                    Tothe Seller Parties’ Knowledge, no claim has ever been made by an authority in ajurisdiction where a Tax Return is not filed by, or with respect to, eitherSeller or any of the Acquired Assets, that either Seller or any of the AcquiredAssets are or may be subject to taxation in that jurisdiction.

 

(g)                                 TheSellers have each withheld and paid all material Taxes required to have beenpaid in connection with amounts paid or owing to any employee, independentcontractor, creditor, member or other third party.

 

(h)                                 Trueand complete copies of all Income Tax Returns filed by either Seller, or anyTax Returns (other than Income Tax Returns) filed with respect to any of theAcquired Assets, and all written communications to or from any taxing authoritysince January 1, 2003 have been made available to the Buyers for inspection.

 

(i)                                     Noneof the assets of the Sellers (i) is required to be treated as “tax-exemptuse property” within the meaning of section 168(h) of the Code, (ii) issubject to the provisions of section 168(f) of the Code, or (iii) directlyor indirectly secures any debt the interest on which is tax exempt under section 103(a) ofthe Code.

 

**5.18.**                     **Related Party Matters.** Except as set forth in Schedule 5.18, neither Seller isparty to any agreement, contract, commitment, transaction or proposedtransaction with any of its Affiliates.

 

**5.19.**                     **Assets Other than Real Property Interests.**

 

(a)                                  Except as set forth in Schedule 5.19(a),each of the Seller Parties has good and valid title to all of itsrespective properties and assets constituting the Acquired Assets other thanthe Site (it being understood that the Site is covered by Section 5.8), ineach case free and clear of all Encumbrances except any Permitted Encumbrances.

 

(b)                                 Allthe material tangible personal property of the Sellers has been maintained inall material respects in accordance with the past practice of the Sellers andGood Utility Practice.  Each item ofmaterial tangible personal property of the Sellers is in all material respectsin good working order, ordinary wear and tear excepted.  All leased personal property of the Sellersis in all material respects in the condition required of such property by theterms of the lease applicable thereto during the term of the lease and upon theexpiration thereof.

 

(c)                                  Otherthan the Acquired Assets and the Excluded Assets listed in clauses (a) through(g) of Section 2.2, none of the Seller Parties or their Affiliatesowns any material assets relating to the Site or the Wheatland Facility.

 

**5.20.**                     **Intellectual Property.** The Sellers own, or possess licenses or other valid rights to use, allpatents, patent rights, trademarks, trademark rights, trade names, trade namerights, copyrights, service marks, service mark rights, trade secrets,applications to register, and registrations for, the foregoing trademarks, servicemarks, know-how and other proprietary rights

 

30

----

 

and information(collectively, the “Intellectual Property”) necessary in connection withthe business of the Sellers as currently conducted, except where the failure topossess such rights or licenses or valid rights to use would not, individuallyor in the aggregate, be reasonably likely to have a Material AdverseEffect.  The conduct of the businesses ofthe Sellers as currently conducted does not infringe upon any IntellectualProperty of any third party, except where such infringement would not,individually or in the aggregate, be reasonably likely to have a MaterialAdverse Effect.  No person is infringingupon any Intellectual Property of the Sellers, except where such infringementwould not, individually or in the aggregate, be reasonably likely to have aMaterial Adverse Effect.  Except as setforth in Schedule 5.20, the execution and delivery of thisAgreement and the consummation of the transactions contemplated hereby will notresult in the loss of, or any Encumbrance on, the rights of the Sellers withrespect to the Intellectual Property owned or used by them, except where suchloss or encumbrance would not, individually or in the aggregate, be reasonablylikely to have a Material Adverse Effect.

 

**5.21.****                    ****Due Diligence Materials.** All of the Due Diligence Materials that are photostatic, facsimile orelectronic copies conform in all material respects with the original documents.

 

**5.22.****                    ****No Knowledge of Certain Conditions.**  To the Seller Parties’ Knowledge, andassuming the accuracy of the Buyers’ representations and warranties in thisAgreement, the parties’ compliance with their obligations under this Agreement,and the making or obtaining, as applicable, of the Buyers Required RegulatoryApprovals, the Sellers Required Regulatory Approvals and any other third partyconsents contemplated herein, no condition or circumstance exists as of thedate of this Agreement that will excuse the Seller Parties from their timelyperformance of their obligations under this Agreement.

 

**5.23.****                    ****Disclaimer of Other Representations and Warranties.**

 

(a)                                  **EXCEPT FOR THOSE REPRESENTATIONS AND WARRANTIES EXPRESSLY SET FORTH INTHIS ARTICLE V OR ELSEWHERE IN THIS AGREEMENT OR THE ANCILLARY AGREEMENTS,THE SELLER PARTIES MAKE NO REPRESENTATIONS OR WARRANTIES OF ANY KIND OR NATURE,EXPRESS OR IMPLIED, AS TO THE ACQUIRED ASSETS, INCLUDING, WITHOUT LIMITATION,THE SITE OR THE WHEATLAND FACILITY, THE OPERATIONS OF THE WHEATLAND FACILITY,OR THE PROSPECTS (FINANCIAL AND OTHERWISE), RISKS AND OTHER INCIDENTS OF THEWHEATLAND FACILITY OR THE ACQUIRED ASSETS, INCLUDING, WITHOUT LIMITATION, WITHRESPECT TO THE ACTUAL OR RATED GENERATING CAPABILITY OF THE WHEATLAND FACILITYOR THE ABILITY OF THE BUYERS TO GENERATE OR SELL ELECTRICAL ENERGY.**

 

(b)                                 **WITHOUT LIMITING THE FOREGOING, AND EXCEPT FOR THOSE REPRESENTATIONSAND WARRANTIES EXPRESSLY SET FORTH IN THIS ARTICLE V OR ELSEWHERE IN THISAGREEMENT OR THE ANCILLARY AGREEMENTS, THE SELLER PARTIES MAKE NOREPRESENTATIONS OR WARRANTIES OF MERCHANTABILITY, USAGE OR SUITABILITY ORFITNESS FOR ANY PARTICULAR PURPOSE WITH RESPECT TO THE ACQUIRED ASSETS OR ANYPART THEREOF, OR AS TO THE WORKMANSHIP THEREOF, OR THE ABSENCE OF ANYDEFECTS THEREIN, WHETHER LATENT OR PATENT, OR COMPLIANCE OF SUCH PROPERTIES ORASSETS WITH ANY LAWS, INCLUDING, WITHOUT LIMITATION, ENVIRONMENTAL LAWS, OR ASTO THE CONDITION OF THE ACQUIRED ASSETS OR ANY PART THEREOF, OR AS TO THEABSENCE OF**

 

31

----

 

**HAZARDOUS SUBSTANCES OR LIABILITYOR POTENTIAL LIABILITY UNDER ENVIRONMENTAL LAWS WITH RESPECT TO THE ACQUIREDASSETS.  ANY SUCH OTHER REPRESENTATIONSAND WARRANTIES ARE HEREBY EXPRESSLY DISCLAIMED.**

 

(c)                                  **EXCEPT FOR THOSE REPRESENTATIONS AND WARRANTIES EXPRESSLY SET FORTH INTHIS ARTICLE V OR ELSEWHERE IN THIS AGREEMENT OR THE ANCILLARY AGREEMENTS,THE ACQUIRED ASSETS ARE SOLD “AS IS, WHERE IS” ON THE CLOSING DATE, AND INTHEIR CONDITION ON THE CLOSING DATE “WITH ALL FAULTS.”**

 

(d)                                 **WITHOUT LIMITING THE FOREGOING, EXCEPT AS OTHERWISE SET FORTH IN THISAGREEMENT OR THE ANCILLARY AGREEMENTS, NO MATERIAL OR INFORMATION PROVIDED BYOR COMMUNICATIONS MADE BY THE SELLER PARTIES OR THE SELLER PARTIES’REPRESENTATIVES, INCLUDING, WITHOUT LIMITATION, ANY INFORMATION OR MATERIALCONTAINED IN THE DUE DILIGENCE MATERIALS OR IN THE INFORMATION MEMORANDUM, WILLCAUSE OR CREATE ANY WARRANTY, EXPRESS OR IMPLIED, AS TO THE TITLE, CONDITION,VALUE OR QUALITY OF THE ACQUIRED ASSETS.**

 

**ARTICLE VI**

**REPRESENTATIONS AND WARRANTIES OFTHE BUYERS**

 

The Buyers jointly andseverally represent and warrant to the Seller Parties, except as set forth onthe corresponding sections of the Buyers’ Schedules, as follows:

 

**6.1.**                            **Organization.**  PSIEnergy is a corporation duly organized, validly existing and in good standingunder the laws of the State of Indiana. CG&E is a corporation duly organized, validly existing and in goodstanding under the laws of the State of Ohio.  Each of PSI Energy and CG&E has allrequisite corporate power and authority to own, lease and operate itsproperties and to carry out its respective business as is now being conducted,and is duly qualified and in good standing to do business in each jurisdictionin which the nature of its business or the ownership or leasing of its assetsand properties makes such qualification necessary, except where the failure tohave such power and authority, or to be so qualified or in good standing, wouldnot individually or in the aggregate, be reasonably likely to prevent ormaterially delay or impair such Buyer’s ability to consummate the transactionscontemplated by this Agreement.  TheBuyers have made available to the Seller Parties complete and correct copies oftheir respective Articles of Incorporation and By-Laws, each as currently ineffect.

 

**6.2.**                            **Authority Relative to this Agreement.**  Each of the Buyers has full corporate powerand authority to execute and deliver this Agreement and, as of the ClosingDate, will have full corporate power and authority to execute and deliver theAncillary Agreements, as applicable, and to consummate the transactionscontemplated hereby and thereby.  Theexecution and delivery of this Agreement and the consummation of thetransactions contemplated hereby have been, and, as of the Closing, theexecution and delivery of the Ancillary Agreements and the consummation of thetransactions contemplated thereby will have been, duly and validly authorizedby the Boards of Directors of each of the Buyers, and no other corporateproceedings on the part of the Buyers are necessary to authorize this Agreementand, as of the Closing, the Ancillary Agreements, as applicable, or toconsummate the transactions contemplated hereby or

 

32

----

 

thereby.  This Agreement has been, and, as of theClosing, the Ancillary Agreements, as applicable, will have been, duly andvalidly executed and delivered by the Buyers, as applicable.  Assuming that this Agreement and, as of theClosing, the Ancillary Agreements constitute valid and binding agreements ofthe respective Seller Parties, subject to receipt of the Sellers RequiredRegulatory Approvals and the Buyers Required Regulatory Approvals, thisAgreement constitutes, and the Ancillary Agreements will constitute, valid andbinding agreements of the Buyers, enforceable against the Buyers in accordancewith their respective terms, subject to the Bankruptcy and Equity Exception.

 

**6.3.**                            **Consents and Approvals; No Violation.**

 

(a)                                  Otherthan obtaining the Sellers Required Regulatory Approvals and the BuyersRequired Regulatory Approvals, neither the execution and delivery of thisAgreement and, on the Closing Date, the Ancillary Agreements, as applicable, bythe Buyers nor the purchase by the Buyers of the Acquired Assets pursuant tothis Agreement or performance by the Buyers under this Agreement or theAncillary Agreements, as applicable, will (i) conflict with or result inany breach of any provision of the respective Articles of Incorporation orBy-Laws of the Buyers, (ii) require any consent, approval, authorizationor permit of, or filing with or notification to, any Governmental Entity,except where the failure to obtain such consent, approval, authorization orpermit, or to make such filing or notification, would not, individually or inthe aggregate, be reasonably likely to prevent or materially delay or impairthe Buyers’ ability to consummate the transactions contemplated by thisAgreement, (iii) require any consent, approval or notice, or result in adefault (with or without notice or lapse of time or both) (or give rise to anyright of termination, cancellation or acceleration), under any of the terms,conditions or provisions of any note, bond, mortgage, indenture, license, agreement,lease or other instrument or obligation to which any of the Buyers or theirrespective Subsidiaries is a party or by which any of the Buyers or theirrespective Subsidiaries may be bound, except for such defaults (or rights oftermination, cancellation or acceleration) as to which requisite waivers orconsents have been obtained or which, individually or in the aggregate, are notreasonably likely to prevent or materially delay or impair the Buyers’ abilityto consummate the transactions contemplated by this Agreement, or (iv) violateany Law or permit applicable to any of the Buyers, or their respective assets,which violation would, individually or in the aggregate, be reasonably likelyto prevent or materially delay or impair the Buyers’ ability to consummate thetransactions contemplated by this Agreement.

 

(b)                                 Exceptfor (i) any filings or approvals under section 203 and section 205the Federal Power Act (the “FERC Approvals”); (ii) the filings bythe Buyers required by the HSR Act and the expiration or earlier termination ofall waiting periods under the HSR Act; and (iii) subject to Section 11.16,(A) IURC approval of a certificate of public convenience and necessity (“CPCN”)and deferred ratemaking treatment for transaction costs, capital improvementcosts, carrying costs and depreciation costs (i.e., return on and return of)associated with the Acquired Assets consistent with the Indiana SettlementAgreement and (B) any required approvals from the SEC under the HoldingCompany Act (the filings and approvals referred to in clauses (i) through(iii), collectively, the “Buyers Required Regulatory Approvals”), nodeclaration, filing or registration with, or notice to, or authorization,consent or approval of any Governmental Entity is necessary for theconsummation by the Buyers of the transactions contemplated hereby or by theAncillary Agreements, other than such declarations, filings,

 

33

----

 

registrations, notices,authorizations, consents or approvals which, if not obtained or made, are notreasonably likely to prevent or materially delay or impair the Buyers’ abilityto consummate the transactions contemplated by this Agreement.

 

(c)                                  Onor prior to the date hereof, the Buyers executed a settlement agreement withthe IURC staff and the Indiana Office of Utility Consumer Counselor concerningboth CPCN authority and ratemaking treatment regarding the Wheatland Facility,a copy of which is attached hereto as Exhibit E (the “IndianaSettlement Agreement”).

 

**6.4.**                            **Availability of Funds.** Each Buyer has access to, and at the Closing will have available,sufficient funds to enable it to pay its portion of the Purchase Price on theterms and conditions of this Agreement. The Buyers’ obligations hereunder are not subject to any conditionsregarding the Buyers’ ability to obtain financing for the consummation of thetransactions contemplated hereby.

 

**6.5.**                            **Litigation****.**  Thereare no claims, actions, proceedings or investigations pending or, to the Buyers’Knowledge, threatened against or relating to either Buyer before anyGovernmental Entity, which question,challenge the validity of, or are reasonably likely to have the effect ofpreventing, delaying, making illegal or otherwise interfering with, thisAgreement or the Ancillary Agreements, the transactions contemplated herein ortherein or any action taken or proposed to be taken by the Buyers pursuanthereto or thereto or in connection with the transactions contemplated herein ortherein.

 

**6.6.**                            **No Knowledge of Certain Conditions.**  To the Buyers’ Knowledge, and assuming theaccuracy of the Seller Parties’ representations and warranties in thisAgreement, the parties’ compliance with their obligations under this Agreement,and the making or obtaining, as applicable, of the Buyers Required RegulatoryApprovals, the Sellers Required Regulatory Approvals and any other third partyconsents contemplated herein, no condition or circumstance exists as of thedate of this Agreement that will excuse the Buyers from their timelyperformance of their obligations under this Agreement.

 

**6.7.         Due Diligence Investigation and OtherAcknowledgements.**

 

(a)                                  Eachof the Buyers acknowledges and agrees that it has conducted and is relyingexclusively upon the Seller Parties’ representations and warranties in thisAgreement and any Ancillary Agreement and its own inspections and investigationin order to satisfy itself as to the condition and suitability of the business,Inventories, assets, real and personal properties, Liabilities, results ofoperations, condition (financial or otherwise) and prospects of the WheatlandFacility and of the Acquired Assets.

 

(b)                                 Eachof the Buyers acknowledges and agrees that, except as provided in thisAgreement and any Ancillary Agreement, the Seller Parties make norepresentations or warranties (express, implied, at common law, statutory orotherwise) with respect to the accuracy or completeness of the InformationMemorandum or the Due Diligence Materials now, previously or hereafter madeavailable to the Buyers in connection with this Agreement (including anydescription of the Wheatland Facility, revenue, price and expense assumptions,electricity demand forecasts or environmental information), or of any otherinformation

 

34

----

 

furnished to the Buyersor the Buyers’ Representatives by the Seller Parties or the Seller Parties’Representatives.

 

**6.8.****                           ****Disclaimer of Other Representations and Warranties.**  **EXCEPTFOR THOSE REPRESENTATIONS AND WARRANTIES EXPRESSLY SET FORTH IN THIS ARTICLE VIOR THE ANCILLARY AGREEMENTS, THE BUYERS MAKE NO REPRESENTATIONS OR WARRANTIESOF ANY KIND OR NATURE, EXPRESS OR IMPLIED.**

 

**ARTICLE VIICOVENANTS OF THE PARTIES**

 

**7.1.**                            **Conduct of Business.**

 

(a)                                  Exceptas specifically contemplated in this Agreement, except as described in Schedule 7.1(a),except as required as a result of any change in Law, except with respect to theExcluded Assets, and except as necessitated by Good Utility Practices incircumstances where time does not permit the Seller Parties to obtain the priorwritten consent of the Buyers (in which case the Seller Parties shall notifythe Buyers promptly after any such circumstance), during the period from thedate of this Agreement to the Closing Date, each of the Sellers shall, and AESCshall cause each Seller to, operate its respective business in the usual,regular and ordinary course consistent with Good Utility Practice and shall useCommercially Reasonable Efforts to preserve intact its respective business andthe goodwill and relationships with customers, suppliers, GovernmentalEntities, local communities and others having dealings with it.  Without limiting the generality of theforegoing, and, except as specifically contemplated in this Agreement, except asdescribed in Schedule 7.1(a), except as required as a result of anychange in Law, except with respect to the Excluded Assets, and except asnecessitated by Good Utility Practices in circumstances where time does notpermit the Seller Parties to obtain the prior written consent of the Buyers (inwhich case the Seller Parties shall notify the Buyers promptly after any suchcircumstance), prior to the Closing Date, without the prior written consent ofthe Buyers, which will not be unreasonably withheld or delayed, the Sellersshall not, and AESC shall not permit the Sellers to, directly or indirectly:

 

(i)                                     amendtheir respective certificates of formation or limited liability companyagreements;

 

(ii)                                  (A) issueany new limited liability company interests in the Sellers; (B) grant anystock option, warrant or other right to purchase limited liability companyinterests in the Sellers; or (C) issue any security convertible intolimited liability company interests in the Sellers;

 

(iii)                               (A) exceptfor Permitted Encumbrances, create, incur, assume or suffer to exist any Indebtednesssecured by, or any Encumbrances on, the Acquired Assets; or (B) assume,guarantee, endorse or otherwise become liable or responsible (whether directlyor indirectly, contingently or otherwise) for the obligations of any Person;

 

(iv)                              makeany material change in the levels of Inventory customarily maintained by theSellers, other than consistent with Good Utility Practice;

 

35

----

 

(v)                                 sell,lease (as lessor), transfer or otherwise dispose of, any asset, other thanassets used, consumed or replaced in the ordinary course of business consistentwith past practice and Good Utility Practice;

 

(vi)                              terminate,extend, request or grant a waiver under, or otherwise amend, in any materialrespect, any Material Contract or Lease, or enter into any contract, agreement,commitment or arrangement which, had it been in effect as of the date hereof,would have constituted a Material Contract;

 

(vii)                           execute,enter into, terminate or otherwise amend, in any material respect, (A) anyof the Permits or Environmental Permits, other than routine renewals or (B) anyother agreement, order, decree or judgment relating to any current or newPermits or Environmental Permits;

 

(viii)                        enter intoany power sales commitments other than those on customary terms and marketpricing and that have terms that expire on or before November 20, 2005 orsuch other date that the parties mutually agree to be the date on which theClosing is expected to occur;

 

(ix)                                permitthe Seller Parties or their Affiliates to (A) amend or cancel anyliability or casualty insurance policies related to the Acquired Assets or (B) failto maintain, by self insurance or with financially responsible insurancecompanies, insurance in such amounts and against such risks and losses as wasin place as of the date of this Agreement and as is consistent with GoodUtility Practice for the Acquired Assets;

 

(x)                                   enterinto any commitment or contract not addressed in clauses (i) through (ix) abovethat will be delivered or performed after the Closing, in an amount greaterthan $100,000;

 

(xi)                                acquire(including by merger, consolidation or acquisition of stock or assets) anyPerson or any division thereof or material portion of the assets thereof;

 

(xii)                             liquidate,dissolve or wind up either of the Sellers or commence a voluntary bankruptcy orsimilar proceeding in respect of either of the Sellers or appoint a custodian,receiver, liquidator or similar official or make an assignment for the benefitof creditors or admit in writing of its inability to pay its debts;

 

(xiii)                          makeless than 100% of its Maintenance Expenditures, unless the projects associatedwith such expenditures are duly completed at a price below the cost indicatedon Schedule 7.1(a)(xiii), or fail to make any capital expendituresrequired in accordance with Good Utility Practice;

 

(xiv)                         enterinto any agreement or arrangement with any Affiliates other than suchagreements and arrangements as are entered into in the ordinary course ofbusiness and which have been negotiated on an arm’s-length basis and are noless favorable to the Sellers than the Sellers would have obtained from anunaffiliated third party, and provided that the Sellers shall have notified theBuyers in writing prior to entering into

 

36

----

 

any such Affiliatetransactions and, further, that the termination date of any such agreement orarrangement shall be not later than the Closing Date;

 

(xv)                            takeany action that alters the regulatory status of the Sellers, the Site or theWheatland Facility;

 

(xvi)                         sell,lease, dispose of, transfer or otherwise convey Emission Allowances issued withrespect to the Wheatland Facility, including the transfer of EmissionAllowances to other accounts maintained by the Sellers or their Affiliates,except to the extent that such transfers do not result in a breach of theprovisions of this Agreement with respect to the Emission Allowances to betransferred to the Buyers; provided that, in any event, if the Closing occursprior to November 30, 2005, the Sellers shall transfer to the Buyers, inaddition to the Emission Allowances to be transferred to the Buyers as setforth in Section 2.1(b)(viii), additional Emission Allowances sufficientfor the Wheatland Facility to comply with the Indiana NOx Budget Program for NOxemissions occurring in 2005 up to and including the Closing Date; providedfurther, that if the Closing occurs on or after November 30, 2005, theSellers shall not be obligated to transfer Emissions Allowances with a vintageyear of 2005 to the Buyers to the extent necessary for the Sellers to complywith the Indiana NOx Budget Program with respect to the emissions from theWheatland Facility; or

 

(xvii)                      enter intoany written or oral contract, agreement, commitment or arrangement with respectto any of the transactions set forth in the foregoing paragraphs (i) through(xvi).

 

(b)                                 Exceptas specifically contemplated in this Agreement, except as described in Schedule 7.1(b),except as required as a result of any change in Law, except with respect to theExcluded Assets, and except as necessitated by Good Utility Practices incircumstances where time does not permit the Seller Parties to obtain the priorwritten consent of the Buyers (in which case the Seller Parties shall notifythe Buyers promptly after any such circumstance), during the period from thedate of this Agreement to the Closing Date, AESC shall, with respect to theSellers and the Wheatland Facility only, operate its business in the usual,regular and ordinary course consistent with Good Utility Practice and shall,with respect to the Sellers and the Wheatland Facility only, use CommerciallyReasonable Efforts to preserve intact its respective business and the goodwilland relationships with customers, suppliers, Governmental Entities, localcommunities and others having dealings with it. Without limiting the generality of the foregoing, and, except asspecifically contemplated in this Agreement, except as described in Schedule 7.1(b),except as required as a result of any change in Law, except with respect to theExcluded Assets, and except as necessitated by Good Utility Practices incircumstances where time does not permit the Seller Parties to obtain the priorwritten consent of the Buyers (in which case the Seller Parties shall notifythe Buyers promptly after any such circumstance), prior to the Closing Date,without the prior written consent of the Buyers, which will not be unreasonablywithheld or delayed, AESC shall not, and shall not permit the Sellers or any oftheir Affiliates to, directly or indirectly:

 

(i)                                     makeany change in the compensation payable or to become payable to any of theSellers’ Employees (other than normal recurring adjustments of salaries and

 

37

----

 

wages payable to theSellers’ Employees, which adjustments are in the ordinary course of businessconsistent with past practice);

 

(ii)                                  enterinto or amend any employment, severance, change in control, retention,consulting, termination or other compensation-related agreement or arrangementwith or with respect to, or make any loan or advance to, any of the Sellers’Employees, except for loans permitted under any 401(k) plan sponsored by anyERISA Affiliate in which the Sellers’ Employees participate;

 

(iii)                               (A) payor make any accrual or arrangement for payment of any pension, profit-sharing,retirement allowance or other employee benefit pursuant to any existing plan,agreement, policy or arrangement to any of the Sellers’ Employees, except tothe extent AESC or the Sellers are obligated to do so on the date hereof, (B) adoptor pay, grant, issue, accelerate or accrue salary or other payments or benefitspursuant to any pension, profit-sharing, bonus, extra compensation, incentive,deferred compensation, stock purchase, stock option, stock appreciation right,group insurance, termination, severance pay, retention, retirement or otheremployee benefit plan, agreement or arrangement, or any employment orconsulting agreement with or for the benefit of any of the Sellers’ Employees,except to the extent AESC or the Sellers are obligated to do so on the datehereof, or (C) amend in any material respect any existing employee benefitplan, agreement or arrangement in a manner inconsistent with the foregoing,except as required by applicable Law;

 

(iv)                              hireany new employee to provide services in connection with the businesses of theSellers with an annual salary in excess of $50,000 or terminate the employmentof any such employee other than for cause, or engage any additional consultantsor independent contractors or enter into or extend the term of any consultingor independent contractor relationship;

 

(v)                                 encumber,mortgage, pledge, lease, transfer or otherwise dispose of the AESC TransferredAssets;

 

(vi)                              takeany action which alters the regulatory status of the Sellers;

 

(vii)                           (A) changeany financial or Tax accounting methods, policies or practices of either Selleror with respect to any of the Acquired Assets, except as required under GAAP, (B) make,revoke or amend any Tax election of either Seller or with respect to any of theAcquired Assets, (C) file any amended Tax Return of either Seller or withrespect to any of the Acquired Assets, (D) enter into any closingagreement affecting any material Tax liability or refund of either Seller orwith respect to any of the Acquired Assets, (E) settle or compromise anymaterial Tax liability or refund of either Seller or with respect to any of theAcquired Assets, or (F) extend or waive the application of any statute oflimitations regarding the assessment or collection of any Tax of either Selleror with respect to any of the Acquired Assets;

 

(viii)                        terminate,extend, request or grant a waiver under, or otherwise amend, in any materialrespect, any Material Contract or Lease, or enter into any contract,

 

38

----

 

agreement, commitment orarrangement which, had it been in effect as of the date hereof, would haveconstituted a Material Contract; or

 

(ix)                                enterinto any written or oral contract, agreement, commitment or arrangement withrespect to any of the transactions set forth in the foregoing paragraphs (i) through(viii).

 

**7.2.**                            **Access to Information.**

 

(a)                                  Betweenthe date of this Agreement and the Closing Date, the Seller Parties will,during ordinary business hours and upon reasonable notice, (i) give theBuyers and the Buyers’ Representatives reasonable access to all books, records,personnel, plants, offices and other facilities and properties of the Seller Parties(limited, in the case of AESC, to the extent they pertain to the Sellers orotherwise relate directly to this Agreement, the Ancillary Agreements and thetransactions contemplated hereby and thereby), (ii) permit the Buyers andthe Buyers’ Representatives to make such reasonable inspections thereof as theBuyers may reasonably request, (iii) furnish the Buyers and the Buyers’Representatives with such financial and operating data and other informationregarding the Wheatland Facility as the Buyers may from time to time reasonablyrequest; provided, however, that the Seller Parties will not be requiredto create special reports or perform any studies, and (iv) furnish theBuyers a copy of each material report, schedule or other document filed orreceived by it with or from the SEC, FERC or any other Governmental Entity withrespect to the Wheatland Facility; provided, however, that (A) anysuch investigation shall be conducted in such manner as not to unduly interferewith the operation of the Seller Parties’ respective businesses and operations,(B) none of the Seller Parties shall be required to take any action whichwould constitute a waiver of the attorney-client privilege, and (C) noneof the Seller Parties need supply the Buyers with any information which suchPerson is under a legal obligation not to supply.  Notwithstanding anything in this Section 7.2to the contrary, (x) the Seller Parties will only furnish copies of or providesuch access to Transferring Employee Records and any other personnel, medicaland benefits records to the extent allowed by Law, and (y) the Buyers shall nothave the right to perform or conduct any environmental sampling or testing at,in, on or underneath any property or facility or real estate owned by any ofthe Seller Parties.

 

(b)                                 Untilthe Closing Date, all information furnished to or obtained by the Buyers andthe Buyers’ Representatives pursuant to this Section 7.2 or the AncillaryAgreements shall be subject to the provisions of the ConfidentialityAgreement.  At the Closing, the SellerParties shall execute a confidentiality and non-use agreement (the “SellersConfidentiality Agreement”) on substantially similar terms to theConfidentiality Agreement which shall require the Seller Parties to maintainthe confidentiality of all information related to the Acquired Assets and theAssumed Liabilities for a period of five years from the Closing Date.  Promptly following the date hereof, theSeller Parties shall request, if they have not previously done so, the returnor destruction of all non-public information provided by the Seller Parties ortheir Affiliates or the Seller Parties’ Representatives prior to the datehereof to other potential purchasers of the Acquired Assets in connection witha confidentiality agreement executed in connection with such a potential saleof the Acquired Assets.

 

39

----

 

 

(c)                                  Fora period of seven years after the Closing Date, each of the parties heretoshall have reasonable access to all of the books and records of the otherparties (limited, in the case of AESC, to the extent they pertain to theSellers or the Acquired Assets and, in the case of the Buyers, to the extentthey pertain to the Acquired Assets, or, in either case, to the extent otherwiserelated to this Agreement, the Ancillary Agreements and the transactionscontemplated hereby and thereby), including all Transferring Employee Records,to the extent that such access may reasonably be required by such party.  Such access shall be afforded by the party orparties in possession of such books and records upon receipt of reasonableadvance notice and during normal business hours.  The party or parties exercising this right ofaccess shall be solely responsible for any costs or expenses incurred by it orthem pursuant to this Section 7.2(c). If the party or parties in possession of such books and records shalldesire to dispose of any such books and records upon or prior to the expirationof such seven-year period, such party or parties shall, prior to suchdisposition, give the other party or parties a reasonable opportunity, at suchother party’s or parties’ expense, to segregate and remove such books andrecords as such other party or parties may select.

 

(d)                                 AESCagrees not to release any Person (other than the Buyers) from anyconfidentiality agreement now existing with respect to the Sellers or thetransactions contemplated hereby, or waive or amend any provision thereof.  From and after the Closing, AESC shall assignto the Buyers (or, if assignment is not permitted, enforce for the benefit ofthe Buyers) any such existing confidentiality agreements with other potentialpurchasers in connection with a potential sale of, or other transactionrelating to, the Sellers; provided,however, that AESC will notbe obligated to assign any existing confidentiality agreement if suchconfidentiality agreement contemplates, in addition to a transaction relatingto the Sellers, the consummation of other potential transactions with AESC orany of its Affiliates and instead AESC will enforce such confidentialityagreement for the benefit of the Buyers to the extent it relates to a potentialsale of, or other transaction relating to, the Sellers or the Acquired Assets.

 

**7.3.**                            **Expenses.**  Except asset forth in Section 7.9 and as otherwise specifically provided herein,whether or not the transactions contemplated hereby are consummated, all costsand expenses incurred in connection with this Agreement and the transactionscontemplated hereby shall be borne by the party incurring such costs andexpenses, except that (i) the fee payable in connection with the filingrequired by the HSR Act shall be shared one-half by the Seller Parties andone-half by the Buyers and (ii) the premium for the Title Policy, includingthe costs of any endorsements, and the cost of the Survey shall be paid solelyby the Seller Parties.

 

**7.4.**                            **Further Assurances.** Subject to the terms and conditions of this Agreement, each of theparties hereto will use Commercially Reasonable Efforts to take, or cause to betaken, all action, and to do, or cause to be done, all things necessary, properor advisable under applicable Laws to consummate and make effective the sale ofthe Acquired Assets pursuant to this Agreement, including, without limitation,using Commercially Reasonable Efforts to ensure satisfaction of the conditionsprecedent to each party’s obligations hereunder.  None of the parties hereto will, withoutprior written consent of the other parties, except as contemplated by this Agreement,take or fail to take any action, which would reasonably be expected to preventor materially impede, interfere with or delay the transactions contemplated bythis Agreement.  From time to time afterthe date hereof, without further consideration, each party shall, at its ownexpense, execute and deliver such and take such further actions as mayreasonably be requested

 

40

----

 

by the other party inorder to consummate the transactions contemplated by this Agreement inaccordance with the terms hereof.

 

**7.5.**                            **Public Statements.** Prior to the Closing, the parties shall consult with each other prior toissuing any public announcement, statement or other disclosure with respect tothis Agreement or the Ancillary Agreements or the transactions contemplatedhereby or thereby and shall not issue any such public announcement, statementor other disclosure prior to such consultation, except as may be required byLaw or by any securities exchange and except that the parties may make publicannouncements, statements or other disclosures with respect to this Agreementand the transactions contemplated hereby to the extent and under thecircumstances in which the parties are expressly permitted by theConfidentiality Agreement to make disclosures.

 

**7.6.**                            **Consents and Approvals; Other Obligations.**

 

### (a)                                  TheSeller Parties and the Buyers shall cooperate and consult with each other andkeep each other informed of the status and (i) prepare and file allnecessary documentation and (ii) effect all necessary applications,notices, petitions and filings and execute all agreements and documents, ineach case, to obtain as promptly as practicable all necessary consents,approvals and authorizations of all Persons (other than any GovernmentalEntity) necessary or advisable to consummate the transactions contemplated bythis Agreement or required by the terms of any note, bond, mortgage, indenture,deed of trust, license, franchise, permit, concession, contract, lease or otherinstrument to which any of the Seller Parties or the Buyers are a party or bywhich any of them is bound.

 

### (b)                                 Aspromptly as practicable after the date hereof, the Seller Parties or theirAffiliates and the Buyers (or the ultimate parent entity of the Buyers, if necessary)shall each file or cause to be filed with the Federal Trade Commission and theUnited States Department of Justice any notifications required to be filedunder the HSR Act and the rules and regulations promulgated thereunderwith respect to the transactions contemplated hereby.  The parties shall consult with each other asto the appropriate time of filing such notifications and shall use CommerciallyReasonable Efforts to make such filings at the agreed upon time, to respondpromptly to, and consult with each other with respect to, any requests foradditional information made by either of such agencies, and to cause thewaiting periods under the HSR Act to terminate or expire at the earliestpossible date after the date of filing.

 

### (c)                                  TheSeller Parties and the Buyers shall cooperate with each other and promptlyprepare and file notifications with, and request Tax clearances from, state andlocal taxing authorities in jurisdictions in which a portion of the PurchasePrice may be required to be withheld pursuant to such state and local Tax Law.

 

### (d)                                 TheSeller Parties, at their sole expense, will use all Commercially ReasonableEfforts to cause the transactions contemplated by this Agreement to bepermitted, as of the Closing, under the Existing Debt Documents.  In addition, the Seller Parties, at their soleexpense, will timely seek, and will use all Commercially Reasonable Efforts toobtain, the release of Allegheny Energy, Inc. or its Affiliates from theguarantees and other security obligations with respect to the WheatlandFacility set forth on Schedule 7.6(d) (the “Support

 

41

----

 

Obligations”).  The Buyers will use Commercially ReasonableEfforts to arrange for the Seller Parties and their Affiliates to be released,as of the Closing, from their obligations under the Support Obligations,including by providing any substitute guarantee or other security in likeamount, if necessary.  If the Buyers andthe Seller Parties are not successful in obtaining such releases of the SupportObligations prior to the Closing, then the Buyers shall indemnify and hold theSeller Parties and their Affiliates harmless from any claims made against theSeller Parties or their Affiliates with respect to the Wheatland Facility thatare attributable to the period on or after the Closing Date or are otherwise inrespect of Assumed Liabilities.

 

**7.7.**                            **Regulatory Approvals.**

 

### (a)                                  TheSeller Parties and the Buyers shall cooperate and consult with each other andkeep each other informed of the status and (i) prepare and file allnecessary documentation and (ii) effect all necessary applications,notices, petitions and filings and execute all agreements and documents, ineach case, to obtain as promptly as practicable all necessary consents,approvals and authorizations of all Governmental Entities (including, withoutlimitation, the Sellers Required Regulatory Approvals and the Buyers RequiredRegulatory Approvals) or required by the terms of any note, bond, mortgage,indenture, deed of trust, license, franchise, permit, concession, contract,lease or other instrument to which any of the Seller Parties or the Buyers area party or by which any of them is bound. The parties hereto have exchanged, and agreed to, drafts of the jointapplication to be filed with the FERC under section 203 of the FederalPower Act related to this Agreement and the transactions contemplated hereby, and of the application to be filed by theBuyers with the FERC under section 205 of the Federal Power Act related to thisAgreement and the transactions contemplated hereby, and such agreeddrafts will be filed with the FERC on or about May 6, 2005.  Each of the Seller Parties and the Buyersshall have the right to review in advance all characterizations of the informationrelating to the transactions contemplated by this Agreement which appear in anyfiling made in connection with the transactions contemplated hereby.

###  

### (b)                                 TheBuyers have retained and will use, at their expense, a qualified economist toprepare any analyses necessary to support such application.

###  

### (c)                                  TheBuyers will use Commercially Reasonable Efforts to obtain SEC approval pursuantto the Holding Company Act in parallel with all required FERC and stateregulatory approvals.

###  

**7.8.**                            **Fees and Commissions.** The Seller Parties and the Buyers each represent and warrant to theother that except for Banc of America Securities LLC, which is acting for andat the expense of the Seller Parties, no broker, finder or other Person isentitled to any brokerage fees, commissions or finder’s fees in connection withthe transactions contemplated hereby. The Seller Parties shall be solely responsible for paying all fees orcommissions of Banc of America Securities LLC.

 

**7.9.**                            **Tax Matters.**

 

### (a)                                  Notwithstandingany other provision of this Agreement, all applicable sales, transfer, use,stamp, conveyance, value added, recording, excise, and other similar Taxes,

 

42

----

###  

### if any, together with all recording or filing fees,notarial fees and other similar costs of Closing, that may be imposed upon, orpayable, collectible or incurred in connection with the transfer of theAcquired Assets to the Buyers or otherwise as a result of the transfer of theAcquired Assets (“Transfer Taxes”) shall be borne solely by theBuyers.  The Buyers, at their ownexpense, will file, to the extent required by applicable Law, all necessary TaxReturns and other documentation with respect to all such Transfer Taxes, and ifrequired by applicable Law, the Seller Parties will join in the execution ofany such Tax Returns or other documentation.

###  

### (b)                                 Withrespect to Taxes to be prorated in accordance with Section 3.4, the Buyersshall prepare and timely file all Tax Returns required to be filed after theClosing with respect to the Acquired Assets, if any, and shall duly and timelypay all such Taxes shown to be due on such Tax Returns.  The Buyers’ preparation of any such TaxReturns that are material shall be subject to the Seller Parties’ approval,which shall not be unreasonably withheld, conditioned or delayed.  The Buyers shall make such Tax Returnsavailable for the Seller Parties’ review and approval not later than 15Business Days prior to the due date for filing such Tax Return and shall makesuch changes as are reasonably requested by the Seller Parties.  Within 10 Business Days after the Buyers’payment of such Taxes, the Seller Parties shall pay to the Buyers, or theBuyers shall pay to the Seller Parties, as appropriate, the difference between (i) theSeller Parties’ proportionate share of the amount shown as due on such TaxReturn determined in accordance with Section 3.4 and (ii) the amountpaid by the Seller Parties at the Closing Date pursuant to Section 4.3(l).

###  

### (c)                                  Eachof the Buyers and the Seller Parties shall provide the other with suchassistance as may reasonably be requested in connection with the preparation ofany Tax Return, any audit or other examination by any taxing authority, or anyjudicial or administrative proceedings relating to Liability for Taxes, andeach will retain and provide the requesting parties with any records orinformation that may be relevant to such return, audit, or examination,proceedings or determination.  Anyinformation obtained pursuant to this Section 7.9(c) or pursuant toany other Section hereof providing for the sharing of information orreview of any Tax Return or other schedule relating to Taxes shall be keptconfidential by the parties hereto.

###  

### (d)                                 TheBuyers shall remit to the Seller Parties any refund or credit of Taxes, if andwhen actually received by the Buyers, to the extent such Taxes are attributableto any taxable period, or portion thereof, ending on or before the ClosingDate.

###  

### (e)                                  Anypayment by the Buyers or the Seller Parties to the other pursuant to this Section 7.9shall be treated for all purposes by both parties as an adjustment to thePurchase Price, to the maximum extent permitted by Law.

###  

### (f)                                    Inthe event that the Buyers and the Seller Parties disagree as to the amount orcalculation of any payment to be made under this Agreement relating to Taxes,or the interpretation or application of any provision under this Agreementrelating to Taxes, the parties shall attempt in good faith to resolve suchdispute.  If such dispute is not resolvedwithin 60 days following the commencement of the dispute, the Buyers and theSellers shall jointly retain the Independent Accounting Firm to resolve thedispute; provided, however, that neither party shall be entitled todispute any individual Tax item that involves an amount of less than$25,000.  The

 

43

----

 

### Independent Accounting Firm shall act as an arbitratorto resolve all points of disagreement and its decision shall be final andbinding upon all parties involved. Following the decision of the Independent Accounting Firm, the Buyersand the Seller Parties shall each take or cause to be taken any actionnecessary to implement the decision of the Independent Accounting Firm.  The fees and expenses relating to theIndependent Accounting Firm shall be borne fifty percent (50%) by the Buyersand fifty percent (50%) by the Seller Parties.

###  

**7.10.**                     **Employees.**

 

### (a)                                  Notlater than 15 days prior to the Closing Date, the Buyers will offer employmentto each of the Sellers’ Employees that is actively employed with any of theSeller Parties or their Affiliates immediately prior to the Closing Date, onsuch terms and conditions as the Buyers may determine in their solediscretion.  Each such offer ofemployment shall be made contingent upon the Sellers’ Employees passing the Buyers’standard screening procedures, which include drug screening and backgroundchecks.  The Seller Parties shallcooperate with the Buyers’ reasonable requests for access to the Sellers’Employees for purposes of making employment offers.  Each of the Sellers’ Employees who passes theBuyers’ standard screening procedures, accepts the Buyers’ offer of employmentand actually commences work with the Buyers or their Affiliates shall be a “Buyers’Employee” for purposes of this Agreement upon the later of the Closing Dateor the commencement of such Sellers’ Employee’s active employment with theBuyers.  Except as required by Law,neither the Buyers nor their Affiliates shall be required to continue the employmentof any Buyers’ Employee for any period of time, each such employee shall be anat-will employee, and the employment of any Buyers’ Employee may be terminatedin the Buyers’ sole discretion at any time in accordance with applicable Law.

###  

### (b)                                 Withrespect to each Buyers’ Employee, effective as of 12:01 a.m. on the datesuch employee becomes a Buyers’ Employee, such Buyers’ Employee shall cease toparticipate in the employee welfare benefit plans (as such term is defined inERISA) maintained or sponsored by the Sellers or their Affiliates (the “PriorWelfare Plans”), except as may be required under COBRA, and shall, ifapplicable, commence to participate in welfare benefit plans of the Buyers ortheir Affiliates (the “Replacement Welfare Plans”).  The Buyers shall use reasonable efforts (i) towaive all limitations as to pre-existing condition exclusions and waitingperiods with respect to the Buyers’ Employees under the Replacement WelfarePlans, other than, but only to the extent of, limitations or waiting periodthat were in effect with respect to such employee under the Prior Welfare Plansand that have not been satisfied as of the Closing Date, and (ii) toprovide the Buyers’ Employees with credit for any co-payments and deductiblespaid prior to the Closing Date in satisfying any deductible or out of pocketrequirements under the Replacement Welfare Plan (on a pro rata basis in theevent of a difference in plan years). With respect to each Buyers’ Employee (including any beneficiary or thedependant thereof), the Seller Parties shall retain all liabilities andobligations arising under any Prior Welfare Plan whether arising on, prior toor following the Closing Date.

###  

### (c)                                  Effectivenot later than the date a Sellers’ Employee becomes a Buyers’ Employee, theSeller Parties shall cause such Buyers’ Employee to cease to participate in theBenefit Plans, except as may be required under COBRA, and the Buyers shallcause such employee if applicable and to the extent that such employeesatisfies any applicable conditions and requirements, to commence participationin certain of the employee benefit plans, programs

 

44

----

 

### and fringe benefit plans, programs and fringe benefitarrangements of the Buyers (“Buyers Benefit Plans”).  The Buyers’ Employees shall be given years ofservice credit, solely for purposes of eligibility for vacation allotment andnot for (i) eligibility for any other purpose, (ii) vesting, (iii) benefitaccrual, (iv) service related to benefit level or (v) any otherpurpose, for all service with the Sellers under the Buyers Benefit Plans, ifany, in which they become participants to the same extent such employees werecredited with service under comparable Benefit Plans.  Neither the Buyers nor their Affiliates shallassume any Benefit Plan, including, without limitation, any severance plan,policy, program, agreement or arrangement of the Seller Parties or any of theirAffiliates, nor, except to the extent otherwise provided in subsection (d) below,shall there be any transfer of assets or Liabilities of any Benefit Plan to anyBuyers Benefit Plans.  No provision ofthis Agreement shall be construed to limit the authority of the Buyers or theirAffiliates to discontinue, suspend or modify any particular benefit orcompensation plan or program provided to the Buyers’ Employees at any time, orto terminate employment of any Buyers Employees at any time after the ClosingDate.

###  

### (d)                                 TheBuyers will, with respect to any 401(k) plan of the Seller Parties or theirERISA Affiliate in which any of the Sellers’ Employees participates, take allnecessary action to cause the trustee of any defined contribution plan of the Buyersor any of the Buyers’ ERISA Affiliates in which a Sellers’ Employee becomes aparticipant to, if elected by the Sellers’ Employee, accept a direct “rollover”of the employee’s “eligible rollover distribution,” as such terms are definedin Code section 401(a)(31), in cash, but solely to the extent suchdistribution is allowable by applicable Law and satisfies the requirements forsuch a rollover pursuant to applicable Law.

###  

### (e)                                  TheSeller Parties or their Affiliates (and not the Buyers or their Affiliates)shall be responsible for any and all Liabilities attributable to the Sellers’Employees, including without limitation, any and all Liabilities arising out ofor resulting from any claim by any Sellers’ Employee which arises under any Law(including, without limitation, any claims for wrongful discharge orotherwise), or under any policy, agreement, understanding or promise, writtenor oral, formal or informal, between the Seller Parties or any of theirAffiliates and the Sellers’ Employee, whether arising out of actions, events oromissions that occurred (or, in the case of omissions, failed to occur) before,on or after, the Closing Date), other than Liabilities attributable to anyBuyers’ Employees in respect of the period after the Closing Date (or suchlater date as the individual becomes a Buyers’ Employee).  Without limiting the generality of thepreceding sentence, the Seller Parties shall be responsible for satisfyingcontinuation coverage provisions under section 4980B of the Code and sections601-608 of ERISA with respect to any Sellers’ Employee (including any Sellers’Employee that becomes a Buyers’ Employee) and any eligible spouse or dependentwho experiences a “qualifying event,” as defined in Code section 4980B(f)(3),on or before the Closing Date.  TheSeller Parties shall pay to each Buyers’ Employee on or before the Closing Date(or such later date as the individual becomes a Buyers’ Employee) all sums suchBuyers’ Employee is due as of such date for any accrued but unpaid salary andwages, including, without limitation, accrued but unpaid vacation days,personal days, and expense reimbursements. In addition, the Seller Parties shall be solely responsible for any andall severance payments or benefits arising under any Benefit Plan, or otherwisewith respect to the transactions contemplated by this Agreement, and the Buyersshall have no Liabilities with respect thereto.

 

45

----

 

### (f)                                    Nothingcontained in this Section 7.10, whether express or implied, is intended toconfer upon any Sellers’ Employee or former employee of any of the SellerParties or their Affiliates or any Buyers’ Employee any right or remedy,including, without limitation, any right as a third-party beneficiary.

###  

### (g)                                 Effectiveas of the Closing Date, the Sellers shall pay to each Buyer’s Employee who wasa participant in the Annual Incentive Plan of any of the Seller Parties theannual bonus that such employee would have received had such employee remainedemployed with any of the Seller Parties until the last day of the plan year,prorated to reflect a partial plan year ending as of the Closing Date and basedon such other assumptions as the Seller Parties reasonably need to make tocalculate such bonuses.

###  

**7.11.**                     **Risk of Loss.**

 

### (a)                                  Fromthe date hereof through the Closing Date, all risk of loss or damage to theAcquired Assets shall be borne by the Seller Parties, except that loss ordamage caused by the acts or omissions of the Buyers or the Buyers’Representatives will be the responsibility of the Buyers.

###  

### (b)                                 If,before the Closing Date, all or any portion of the Acquired Assets is (i) condemnedor taken by eminent domain or is the subject of a pending or, to the SellerParties’ Knowledge, contemplated taking which has not been consummated, or (ii) materiallydamaged or destroyed by fire or other casualty, then the Seller Parties shallnotify the Buyers promptly in writing of such fact.  If that condemnation, taking, damage, ordestruction results in the failure of any condition in Sections 8.1 or 8.2 tobe met or results in a Material Adverse Effect, then the Buyers may terminatethis Agreement.  Unless the Buyersterminate this Agreement pursuant to the foregoing sentence, (x) in the case ofa condemnation or taking, the Seller Parties shall assign or pay, as the casemay be, any net proceeds thereof to the Buyers at the Closing, and (y) in thecase of a fire or other casualty, the Seller Parties shall either restore suchdamage or assign the insurance proceeds therefor to the Buyers at the Closing.

###  

**7.12.**                     **Tax Clearance Certificates.** The parties hereto shall use Commercially Reasonable Efforts to obtainfrom any taxing authority any certificate, permit, license, or other documentnecessary to mitigate, reduce or eliminate any Taxes (including additionsthereto or interest and penalties thereon) that otherwise would be imposed withrespect to the transactions contemplated in this Agreement.

 

**7.13.**                     **Non-Use of Allegheny Marks After the Closing.**

 

### (a)                                  TheAllegheny Marks appear on some of the Acquired Assets, including on signage atthe Wheatland Facility, and on supplies, materials, stationery, brochures,advertising materials, manuals and similar consumable items.  The Buyers acknowledge and agree that they donot have and, upon consummation of the transactions contemplated by this Agreement,will not have, any right, title, interest, license or other right to use theAllegheny Marks.

###  

### (b)                                 TheBuyers will (i) within 60 days after the Closing Date, remove theAllegheny Marks from, or cover or conceal the Allegheny Marks on, the AcquiredAssets,

 

46

----

###  

### including signage at the Wheatland Facility, andprovide written verification thereof to the Seller Parties promptly aftercompleting such removal, (ii) within 14 days after the Closing Date,return or destroy (with proof of destruction) all other Acquired Assets thatcontain any Allegheny Marks that are not removable, and (iii) within 30days after the Closing Date, submit notifications or amendments with respect toany Permits or Environmental Permits that use any Allegheny Marks.

###  

### (c)                                  EachBuyer agrees never to challenge Allegheny Energy, Inc.’s or its Affiliates’ownership of the Allegheny Marks or any application for registration thereof orany registration thereof or any rights of the Seller Parties or theirAffiliates therein as a result, directly or indirectly, of its ownership of theAcquired Assets.

###  

### (d)                                 TheBuyers will not will conduct any business or offer any goods or services underany Allegheny Marks, except as expressly permitted during the transactionperiod pursuant to Section 7.13(b) or as permitted pursuant toAllegheny Energy, Inc.’s written consent.

###  

### (e)                                  NoBuyer will send, or cause to be sent, any correspondence or other materials toany Person on any stationery that contains any Allegheny Marks or otherwiseoperate Wheatland Facility in any manner that would or might reasonably beexpected to confuse any Person into believing that such Buyer has any right,title, interest or license to use any Allegheny Marks.

###  

**7.14.**                     **Insurance.**  The Buyersacknowledge that, after the Closing, the Acquired Assets shall not be coveredby any insurance policy in respect of fire, liability, worker’s compensation orotherwise maintained by the Seller Parties or any of their Affiliates.  Accordingly, the parties agree that theBuyers shall be responsible for procuring insurance in respect of the AcquiredAssets after the Closing Date.

 

**7.15.**                     **No Solicitation.**  Fromthe date hereof through the Closing, none of the Seller Parties, theirAffiliates nor the Sellers’ Representatives (including, without limitation,investment bankers, attorneys and accountants) shall, directly or indirectly,enter into, solicit, initiate or continue any discussions or negotiations with,or encourage or respond to any inquiries or proposals by, or participate in anynegotiations with, or provide any information to, or otherwise cooperate in anyother way with, any Person or group, concerning any sale of all or a portion ofthe Acquired Assets, the Sellers or any equity interest therein, or any merger,consolidation, liquidation, dissolution or similar transaction involving theSellers (each such transaction being referred to herein as a “ProposedAcquisition Transaction”) other than with the Buyers, their Affiliates andthe Buyers’ Representatives.  None of theSeller Parties shall, directly or indirectly, through any Affiliate, officer,director, employee, Sellers’ Representative or otherwise, solicit, initiate orencourage the submission of any proposal or offer from any Person (including,without limitation, a “person” as defined in Section 13(d)(3) of theExchange Act) relating to any Proposed Acquisition Transaction.  The Seller Parties represent that they arenot now engaged in discussions or negotiations with any Person other than theBuyers with respect to a Proposed Acquisition Transaction.

 

47

----

 

**7.16.**                     **Notifications.**

 

### (a)                                  Subjectto the terms and conditions of this Agreement, each of the parties will useCommercially Reasonable Efforts to (i) promptly notify the other partiesof (A) any representation or warranty made by it contained in thisAgreement that is qualified as to materiality becoming untrue or inaccurate asso qualified in any respect or any such representation or warranty that is notso qualified becoming untrue or inaccurate in any material respect, (B) thefailure by it to comply in any material respect with or satisfy in any materialrespect any covenant, condition or agreement to be complied with or satisfiedby it under this Agreement, and (C) any change or event which,individually or in the aggregate, has had a material adverse effect on theBuyers or a Material Adverse Effect; and (ii) promptly provide the otherparty with copies of all filings made by such party or any Affiliates thereofwith any Governmental Entity in connection with this Agreement and thetransactions contemplated hereby.

###  

### (b)                                 TheSeller Parties will, from time to time prior to the Closing (but no more thanonce in any 30-day period), promptly supplement or amend any of the SellerParties’ Schedules relating to Article V with respect to any matter thatexisted as of the date of this Agreement and should have been set forth ordescribed in such Schedule.  If thematters disclosed on such supplemented or amended Schedules would, individuallyor in the aggregate, be reasonably likely to have a Material Adverse Effect,then the Buyers may elect to terminate this Agreement within 15 days afterreceipt of the supplemented or amended Schedule, by providing written noticethereof to the Seller Parties.  If theBuyers elect to terminate this Agreement pursuant to this Section 7.16(b),then the Seller Parties will have a 20-day period to cure the event causing theamended or supplemented Schedule, provided that, if so cured within such 20-dayperiod, this Agreement shall not be terminated. No disclosure by the Seller Parties pursuant to this Section 7.16(b),however, will be deemed to amend or supplement any of the Seller Parties’Schedules, to have qualified the representations and warranties contained inthis Agreement or to have reduced or limited in any way the indemnificationobligations of the Seller Parties pursuant to Article IX, unless theBuyers expressly consent to such supplement in writing.

###  

### (c)                                  TheSeller Parties will, from time to time prior to the Closing (but no more thanonce in any 30-day period), promptly supplement or amend any of the SellerParties’ Schedules relating to Article V with respect to any matterarising after the date of this Agreement, which, if existing as of the date ofthis Agreement, would have been required to be set forth or described in such Schedule inorder to make any representation or warranty set forth in this Agreement trueand correct as of such date.  If thematters disclosed on such supplemented or amended Schedules would, individuallyor in the aggregate, be reasonably likely to have a Material Adverse Effect,then the Buyers may elect to terminate this Agreement, within 15 days afterreceipt of the supplemented or amended Schedules, by providing written noticethereof to the Seller Parties; provided, however, that if the Buyers donot exercise such right to terminate this Agreement within such 15-day period,then (i) the Buyers will be deemed to have forever waived any right toterminate this Agreement based upon such supplement or amendment, except whenconsidered in the aggregate with subsequent supplements or amendments, (ii) theBuyers will be deemed to have accepted such supplement or amendment, subject to(and in no way limiting) the Buyers’ right to receive the indemnity set forthin the last

 

48

----

 

### sentence of this Section 7.16(c), and (iii) suchsupplement or amendment will be deemed to supplement or amend the Sellers’Schedules, subject to (and in no way limiting) the Buyers’ right to receive theindemnity set forth in the last sentence of this Section 7.16(c).  If the Buyers elect to terminate thisAgreement pursuant to this Section 7.16(c), then the Seller Parties willhave a 20-day period to cure the event causing the amended or supplementedSchedule, provided that, if so cured within such 20-day period, this Agreementshall not be terminated.  In the eventthe Closing occurs, the Seller Parties shall indemnify the Buyers for allLiabilities associated with or arising out of the matters disclosed in anysupplemented or amended Schedules delivered pursuant to this Section 7.16(c) inaccordance with Article IX.

###  

### (d)                                 TheBuyers will, from time to time prior to the Closing (but no more than once inany 30-day period), promptly supplement or amend any of the Buyers’ Schedulesrelating to Article VI with respect to any matter that existed as of thedate of this Agreement and should have been set forth or described in suchSchedule.  If the matters disclosed onsuch supplemented or amended Schedule would, individually or in theaggregate, be reasonably likely to prevent, materially delay or impair theBuyers’ ability to consummate the transactions contemplated by this Agreement,then the Seller Parties may elect to terminate this Agreement within 15 daysafter receipt of the supplemented or amended Schedule, by providing writtennotice thereof to the Buyers.  If theSeller Parties elect to terminate this Agreement pursuant to this Section 7.16(d),then the Buyers will have a 20 day period to cure the event causing the amendedor supplemented Schedule, provided that, if so cured within such 20-day period,this Agreement shall not be terminated. No disclosure by the Buyers pursuant to this Section 7.16(d),however, will be deemed to amend or supplement any of the Buyers’ Schedules, tohave qualified the representations and warranties contained in this Agreementor to have reduced or limited in any way the indemnification obligations of theBuyers pursuant to Article IX, unless the Seller Parties expressly consentto such supplement in writing.

###  

### (e)                                  TheBuyers will, from time to time prior to the Closing (but no more than once inany 30-day period), promptly supplement or amend any of the Buyers’ Schedules relatingto Article VI with respect to any matter arising after the date of thisAgreement, which, if existing as of the date of this Agreement, would have beenrequired to be set forth or described in such Schedule in order to makeany representation or warranty set forth in this Agreement true and correct asof such date.  If the matters disclosedon such supplemented or amended Schedule would, individually or in theaggregate, be reasonably likely to prevent, materially delay or impair theBuyers’ ability to consummate the transactions contemplated by this Agreement,then the Seller Parties may elect to terminate this Agreement, within 15 daysafter receipt of the supplemented or amended Schedule, by providing writtennotice thereof to the Buyers; provided, however, that if the SellerParties do not exercise such right to terminate this Agreement within such 15-dayperiod, then (i) the Seller Parties will be deemed to have forever waivedany right to terminate this Agreement based upon such supplement or amendment,except when considered in the aggregate with subsequent supplements oramendments, (ii) the Seller Parties will be deemed to have accepted suchsupplement or amendment, and (iii) such supplement or amendment will bedeemed to supplement or amend the Buyers’ Schedules.  If the Seller Parties elect to terminate thisAgreement pursuant to this Section 7.16(e), then the Buyers will have a 20-dayperiod to cure the event causing the amended or supplemented Schedule, providedthat, if so cured within such 20-day period, this Agreement shall not beterminated.

 

49

----

 

### (f)                                    Togetherwith any supplement or amendment to the Schedules pursuant to this Section 7.16,the party delivering such supplement or amendment shall also deliversupplementary material, and any other explanatory material with respect to suchamendment or supplement as reasonably requested by any other party, to theother parties (the “Reviewing Parties”). Notwithstanding any other provision in this Agreement, and regardless ofwhether the conditions to the Closing in Article VIII have been satisfiedor waived, in no event shall the Closing occur during the 15-day review periodgranted to the Reviewing Parties as provided in this Section 7.16 withoutthe written consent of the Reviewing Parties.

###  

**7.17.****                    ****Notice of Allocation of Acquired Assets.**  The Buyers shall deliver to the SellerParties, no later than four Business Days prior to the expected Closing Date, awritten notice indicating the respective ownership percentage of each of PSIEnergy and CG&E with respect to the Acquired Assets and Assumed Liabilitiesas of the Closing.  The parties heretoagree to use Commercially Reasonable Efforts to prepare the AncillaryAgreements to reflect the ownership percentages contained in such notice.

 

**7.18.****                    ****Post-Closing Start-Up.**

 

### (a)                                  Inthe event that the Buyers conduct a start-up (other than a Sellers-InitiatedStart-Up) of the Wheatland Facility (a “Buyers-Initiated Start-Up”)within three months after the Closing Date, the Buyers shall give the SellerParties written notice at least three days, or such shorter period as may bereasonably be required under the circumstances, prior to the planned date ofthe first Buyers-Initiated Start-Up, and the Buyers shall allow up to twoindividuals who are Seller Parties’ Representatives to attend the firstBuyers-Initiated Start-Up in order to observe the operation of the WheatlandFacility.  The Seller Parties shallsolely be observers of the Buyers-Initiated Start-Up and shall have noauthority with respect to the operational parameters of any Buyers-InitiatedStart-Up.  The Buyers shall be solelyresponsible for all costs related to any Buyers-Initiated Start-Up.

###  

### (b)                                 Within30 days after the Closing Date, the Seller Parties may deliver a written noticeto the Buyers requesting that the Buyers initiate one start-up of the WheatlandFacility (a “Sellers-Initiated Start-Up”).  In the event such a notice is delivered, theBuyers shall use Commercially Reasonable Efforts to conduct suchSellers-Initiated Start-Up within 30 days of the delivery of such notice to theBuyers, subject to reasonable delay for weather conditions, fuel availabilityand other reasonable factors that might delay such Sellers-Initiated Start-Up.  The Buyers shall allow up to two individualswho are Seller Parties’ Representatives to attend the Sellers-InitiatedStart-Up in order to observe the operation of the Wheatland Facility.  The Seller Parties shall solely be observersof the Sellers-Initiated Start-Up and shall have no authority with respect tothe operational parameters of the Sellers-Initiated Start-Up.  The Seller Parties shall pay to the Buyersthe difference between the market price of the electricity sold during theSellers-Initiated Start-Up and the price of the natural gas used to generatesuch electricity, also known as the spark spread.

###  

### (c)                                  NotwithstandingSections 7.18(a) and (b), in no event shall the Buyers be obligated to (i) conducta Sellers-Initiated Start-Up if the Buyers have already conducted aBuyers-Initiated Start-Up in compliance with Section 7.18(a) or (ii) allowthe Seller Parties’

 

50

----

 

### Representatives to observe more than one start-up ofthe Wheatland Facility, regardless of whether such observed start-up was aBuyers-Initiated Start-Up or a Sellers-Initiated Start-Up.

###  

### (d)                                 Forthe avoidance of doubt, the occurrence of a Buyers-Initiated Start-Up or aSellers-Initiated Start-Up shall in no way limit or modify (i) the representationsand warranties of the Seller Parties, including those contained in Section 5.19(b),(ii) the indemnification obligations of the Seller Partiers pursuant to Article IXor (iii) the survival periods of any of the provisions of this Agreementas set forth in Section 11.3.

###  

**7.19.****                    ****Waiver of Indiana Responsible Transfer Property Law.**  The Sellers shall comply with the provisionsof section 2(b) of the Indiana Responsible Transfer Property Law(Ind. Code § 13-25-3), to the extent applicable, in connection with theconveyance of the Owned Real Property to the Buyers; provided, however,that each of the Buyers hereby (a) waives the 30 day advance deliveryrequirement set forth in section 13-25-3-2(a) of the IndianaResponsible Transfer Property Law, and (b) acknowledges its awareness ofthe purpose and intent of the disclosure document referred to therein

 

**7.20.****                    ****Certain Transmission Matters.**  On or prior to the Closing Date, the SellerParties shall, and shall cause their Affiliates to, take all necessary actionsrequired to delist all of the units at the Wheatland Facility as capacityresources for PJM.  From and after theClosing Date, the Seller Parties shall not, and shall cause their Affiliatesnot to, use any of the units at the Wheatland Facility for any capacityobligations of the Seller Parties or their Affiliates.  No later than May 31, 2006, the SellerParties shall, and shall cause their Affiliates to, cease utilizing any of theunits at the Wheatland Facility as a source for the purposes of transmissionservice or transmission service reservations. If any of the Seller Parties or any of their Affiliates have an existingtransmission service reservation from the Wheatland Facility on June 1,2006, such Seller Parties shall, or shall cause their Affiliates to, eitherterminate such transmission service reservation or, if reasonably acceptable toboth the Seller Parties and the Buyers, assign such transmission serviceagreement to the Buyers.

 

**ARTICLE VIIICONDITIONS**

 

**8.1.**                            **Conditions to Each Party’s Obligations to Effect the Transaction.**  The respective obligations of each party toeffect the sale and purchase of the Acquired Assets shall be subject to thefulfillment at or prior to the Closing Date of the following conditions, exceptas may be waived in writing pursuant to Section 11.2 by the joint actionof the parties hereto:

 

### (a)                                  Thewaiting period under the HSR Act applicable to the consummation of the sale ofthe Acquired Assets contemplated hereby shall have expired or been terminated;

###  

### (b)                                 Nopreliminary or permanent injunction or other order or decree by any federal orstate court which prevents the consummation of the sale of the Acquired Assetscontemplated hereby shall have been issued and remain in effect (each partyagreeing to use Commercially Reasonable Efforts to have any such injunction,order or decree lifted); and no Law shall have been enacted by any GovernmentalEntity which prohibits the consummation of the sale of the Acquired Assets;

 

51

----

 

### (c)                                  Allconsents and approvals for the consummation of the sale of the Acquired Assetsrequired under the terms of any note, bond, mortgage, indenture, contract,Permit or other agreement to which the Seller Parties or the Buyers, or any oftheir Subsidiaries, are a party shall have been obtained, other than thosewhich if not obtained, would not, individually or in the aggregate, bereasonably likely to have a Material Adverse Effect; and

###  

### (d)                                 Subjectto Section 11.16, the Sellers Required Regulatory Approvals and the BuyersRequired Regulatory Approvals shall have been obtained by a Final Order.

###  

**8.2.**                            **Conditions to Obligation of the Buyers.**  The obligation of the Buyers to effect thepurchase of the Acquired Assets contemplated by this Agreement shall be subjectto the fulfillment at or prior to the Closing Date of the following additionalconditions, except as may be waived by the Buyers in writing pursuant to Section 11.2:

 

### (a)                                  Thereshall not have occurred since the date of this Agreement and be continuing aMaterial Adverse Effect or any events or conditions which are reasonably likelyto have a Material Adverse Effect;

###  

### (b)                                 TheSeller Parties shall have performed and complied with in all material respectsthe covenants and agreements contained in this Agreement that are required tobe performed and complied with by the Seller Parties on or prior to the ClosingDate;

###  

### (c)                                  Eachof the representations and warranties of the Seller Parties set forth in thisAgreement that are not qualified by materiality or Material Adverse Effectshall be true and correct in all material respects as of the date of thisAgreement and as of the Closing Date, with the same effect as though suchrepresentations and warranties had been made on and as of the Closing Date, exceptthat such representations and warranties that are made as of a specific dateneed only be true and correct as of such date;

###  

### (d)                                 Eachof the representations and warranties of the Seller Parties that are qualifiedby materiality or Material Adverse Effect shall be true and correct as of thedate of this Agreement and as of the Closing Date, with the same effect asthough such representations and warranties had been made on and as of theClosing Date, except that such representations and warranties that are made asof a specific date need only be true and correct as of such date;

###  

### (e)                                  Eachof the Buyers shall have received a certificate from an authorized officer ofeach of the Seller Parties, dated the Closing Date, to the effect that theconditions set forth in Sections 8.2(a), 8.2(b), 8.2(c) and 8.2(d) havebeen satisfied;

###  

### (f)                                    TheSeller Parties shall have complied with the delivery requirements of Section 4.3;

###  

### (g)                                 AllPermits and material Environmental Permits shall have been transferred to theBuyers or, if such Permits and Environmental Permits are not transferable,shall have been modified or reissued to the Buyers, except to the extent thatapplicable Laws (including, without limitation, applicable Environmental Laws)would allow the Buyers to lawfully own and operate the Wheatland Facility andthe Site after the Closing Date in the manner in which they are currentlyoperated without such conditions having been satisfied;

 

52

----

 

(h)           Subjectto Section 11.16, the Final Orders of any Governmental Entity havingauthority over the transactions contemplated by this Agreement shall have beenreceived, and such Final Orders shall not impose terms or conditions whichwould, individually or in the aggregate, be reasonably likely to have aMaterial Adverse Effect or a material adverse effect on the business, assets,operations or conditions of either of the Buyers, in the context of thetransaction contemplated hereby and as determined by the board of directors ofeither of the Buyers based on the advice of the Buyers’ Representatives; and

 

(i)            TheSeller Parties shall have delivered evidence, reasonably satisfactory in formand substance to the Buyers, of the full and irrevocable release of allEncumbrances on the Acquired Assets arising under or relating to the ExistingDebt Documents.

 

**8.3.         Conditions to Obligation of the Seller Parties.**  The obligation of the Seller Parties toeffect the sale of the Acquired Assets contemplated by this Agreement shall besubject to the fulfillment at or prior to the Closing Date of the followingadditional conditions, except as may be waived by the Seller Parties in writingpursuant to Section 11.2:

 

(a)           TheBuyers shall have performed and complied with in all material respects thecovenants and agreements contained in this Agreement that are required to beperformed and complied with by the Buyers on or prior to the Closing Date;

 

(b)           Eachof the representations and warranties of the Buyers set forth in this Agreementthat are not qualified by materiality shall be true and correct in all materialrespects as of the date of this Agreement and as of the Closing Date, with thesame effect as though such representations and warranties had been made on andas of the Closing Date, except that such representations and warranties thatare made as of a specific date need only be true and correct as of such date;

 

(c)           Eachof the representations and warranties of the Buyers that are qualified bymateriality shall be true and correct as of the date of this Agreement and asof the Closing Date, with the same effect as though such representations andwarranties had been made on and as of the Closing Date, except that suchrepresentations and warranties that are made as of a specific date need only betrue and correct as of such date;

 

(d)           TheSeller Parties shall have received a certificate from an authorized officer ofeach of the Buyers, dated the Closing Date, to the effect that the conditionsset forth in Sections 8.3(a), 8.3(b) and 8.3(c) have been satisfied;

 

(e)           TheBuyers shall have complied with the delivery requirements of Section 4.4;and

 

(f)            Subjectto Section 11.16, the Final Orders of any Governmental Entity havingauthority over the transactions contemplated by this Agreement shall have beenreceived, and such Final Orders shall not impose terms or conditions whichwould, individually or in the aggregate, be reasonably likely to have amaterial adverse effect on the business, assets, operations or conditions ofany of the Seller Parties, in the context of the transactions contemplatedhereby and as determined by the board of directors of AESC based on the adviceof the Seller Parties’ Representatives.

 

53

----

 

**ARTICLE IXINDEMNIFICATION**

 

**9.1.**                            **Indemnification.**

 

### (a)                                  Fromand after the Closing Date, subject to the limitations set forth in this Section 9.1(a),and provided that the Buyers Indemnified Party makes a written claim forindemnification against the Seller Parties pursuant to Section 11.4 withinthe survival period set forth in Section 11.3, the Seller Parties shall,jointly and severally, indemnify, defend and hold harmless each of the Buyersand their Affiliates, and their respective directors, officers, employees,shareholders and agents (each, a “Buyers Indemnified Party”) from andagainst any and all claims, demands or suits (by any Person), losses,Liabilities, damages, obligations, payments, costs and expenses (including,without limitation, the costs and expenses of any and all actions, suits,proceedings, assessments, judgments, settlements and compromises relatingthereto and reasonable attorneys’ fees and reasonable disbursements inconnection therewith) (each, an “Indemnifiable Loss”) asserted againstor suffered by the Buyers Indemnified Parties relating to, resulting from orarising out of (i) any breach by any of the Seller Parties of any of therepresentations and warranties of the Seller Parties contained in thisAgreement, or any inaccurate statement in the certificate delivered pursuant toSection 8.2(e), (ii) any breach by any of the Seller Parties of anycovenant or agreement of the Seller Parties contained in this Agreement, (iii) anyExcluded Liabilities, (iv) any failure of the Seller Parties to complywith applicable bulk sales Laws or (v) the matters disclosed on anysupplemented or amended Schedules provided by the Seller Parties pursuant to Section 7.16(c).  Notwithstanding the foregoing, (A) theSeller Parties shall have no Liability under Sections 9.1(a)(i) or9.1(a)(v) for Indemnifiable Losses (other than Indemnifiable Lossespursuant to Section 7.8), unless and until the aggregate IndemnifiableLosses incurred by the Buyers Indemnified Parties exceed $750,000 in which casethe Seller Parties shall be jointly and severally liable for all losses inexcess of $750,000, (B) in no event shall the Seller Parties’ aggregateLiability under Sections 9.1(a)(i) and 9.1(a)(v) exceed $50,000,000in the aggregate; (C) in no event shall the Seller Parties’ aggregateLiability under Section 9.1(a)(ii) exceed the amount of the PurchasePrice; and (D) for purposes of calculating the amount of IndemnifiableLosses, all references to materiality or similar qualifiers or Material AdverseEffect shall be disregarded.

###  

### (b)                                 Fromand after the Closing Date, subject to the limitations set forth in this Section 9.1(b),and provided that the Sellers Indemnified Party makes a written claim forindemnification against the Buyers pursuant to Section 11.4 within thesurvival period set forth in Section 11.3, the Buyers shall, jointly andseverally, indemnify, defend and hold harmless each of the Seller Parties andtheir Affiliates, and their respective directors, officers, employees,shareholders and agents (each, a “Sellers Indemnified Party”) from andagainst all Indemnifiable Losses asserted against or suffered by the SellersIndemnified Parties relating to, resulting from or arising out of (i) anybreach by either of the Buyers of any of the representations and warranties ofthe Buyers contained in this Agreement, or any inaccurate statement in thecertificate delivered pursuant to Section 8.3(d), (ii) any breach byeither of the Buyers of any covenant or agreement of the Buyers contained inthis Agreement, or (iii) the Assumed Liabilities.  Notwithstanding the foregoing, (A) theBuyers shall have no Liability under Section 9.1(b)(i) forIndemnifiable Losses (other than Indemnifiable Losses pursuant to Section 7.8),unless and until the aggregate Indemnifiable Losses incurred by the SellersIndemnified Parties

 

54

----

 

### exceed $750,000 in which case the Buyers shall be jointly and severallyliable for all losses in excess of $750,000; (B) in no event shall theBuyers’ aggregate Liability under Section 9.1(b)(i) exceed$50,000,000; (C) in no event shall the Buyers’ aggregate Liability under Section 9.1(b)(ii) exceedthe amount of the Purchase Price; and (D) for purposes of calculating theamount of Indemnifiable Losses, all references to materiality, material adverseeffect or similar qualifiers shall be disregarded.

###  

### (c)                                  AnyPerson entitled to receive indemnification under this Agreement (an “Indemnitee”)having a claim under these indemnification provisions shall make a good faitheffort to recover all Indemnifiable Losses from insurers of such Indemniteeunder applicable insurance policies so as to reduce the amount of anyIndemnifiable Loss hereunder; provided that in no event shall an Indemnitee berequired to initiate litigation or arbitration against an insurance providerbefore receiving payment for any Indemnifiable Loss pursuant to this Article IX.  The amount of Indemnifiable Loss will be (i) reducedto the extent that Indemnitee receives any insurance proceeds with respect toan Indemnifiable Loss and (ii) reduced or increased to take into accountany net Tax benefit or burden recognized by the Indemnitee arising from therecognition of the Indemnifiable Loss and any payment actually received withrespect to an Indemnifiable Loss.

###  

### (d)                                 Theexpiration, termination or extinguishment of any representation, warranty,covenant or agreement pursuant to Section 11.3 shall not affect theparties’ obligations under this Section 9.1 if the Indemnitee provided thePerson required to provide indemnification under this Agreement (the “IndemnifyingParty”) with proper notice of the claim or event for which indemnificationis sought prior to such expiration, termination or extinguishment.

###  

### (e)                                  Followingthe Closing and except with respect to intentional breaches of this Agreement,willful misconduct or fraud, the remedies set forth in this Article IXwill be the sole and exclusive remedies for any and all claims, damages,complaints, demands, causes of action, investigations, hearings, actions, suitsor other proceedings in connection with, arising from or relating to thisAgreement and the Ancillary Agreements and the transactions contemplated herebyand thereby and are in lieu of any and all other rights and remedies which the SellerParties or the Buyers may have under this Agreement or otherwise for relief(monetary or otherwise) with respect to any breach of or failure to performunder this Agreement and the Ancillary Agreements or otherwise with respect tothe transactions contemplated hereby and thereby, including with respect to theAssumed Liabilities or Excluded Liabilities. Each party waives any provision of Law to the extent that it would limitor restrict the agreements contained in this Article IX.  Nothing herein shall prevent either partyfrom terminating this Agreement in accordance with Article X.

###  

### (f)                                    Anyindemnity payment under this Agreement shall be treated as an adjustment to thePurchase Price for Tax purposes, to the maximum extent permitted by applicableLaw.

###  

**9.2.**                            **Defense of Claims.**

 

### (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

 

55

----

 

### party to this Agreement or an Affiliate of a party to this Agreement (a“Third Party Claim”) with respect to which indemnification is to besought from the Indemnifying Party, the Indemnitee will give the IndemnifyingParty reasonably prompt written notice thereof, but in any event not later than15 days after the Indemnitee’s receipt of written 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 the Indemnifying Party’s own expense and by the Indemnifying Party’sown counsel (reasonably acceptable to the Indemnitee), and the Indemnitee willcooperate in good faith in such defense at such Indemnitee’s own expense.

###  

### (b)                                 Ifwithin 10 days after an Indemnitee provides written notice to the IndemnifyingParty of any Third Party Claim the Indemnitee receives written notice from theIndemnifying Party that the Indemnifying Party has elected to assume thedefense of such Third Party Claim as provided in the last sentence of Section 9.2(a),the Indemnifying Party will not be liable for any legal expenses subsequentlyincurred by the Indemnitee in connection with the defense thereof; provided,however, that if at any time the Indemnifying Party fails to take reasonablesteps necessary to defend diligently such Third Party Claim within 10 daysafter receiving notice from the Indemnitee that the Indemnitee believes theIndemnifying Party has failed to take such steps, the Indemnitee may assume itsown defense, and the Indemnifying Party will be liable for all reasonableexpenses thereof; provided further, that if, under applicable standardsof professional conduct, a conflict with respect to any significant issuebetween any Indemnitee and the Indemnifying Party exists in respect of suchThird Party Claim, the Indemnifying Party shall pay reasonable fees andexpenses of one additional counsel as may be required to be retained in orderto resolve such conflict.  The IndemnifyingParty shall be liable for the fees and expenses of counsel employed by theIndemnitee for any period during which the Indemnifying Party has not assumedthe defense of any such Third Party Claim (other than during any period inwhich the Indemnitee has failed to give notice of the Third Party Claim asprovided above).  If the IndemnifyingParty assumes such defense, the Indemnitee shall have the right to participatein the defense thereof and to employ counsel, at its own expense, separate fromthe counsel employed by the Indemnifying Party, it being understood that theIndemnifying Party shall control such defense. If the Indemnifying Party chooses to defend or bring any Third PartyClaim, the Indemnitee shall agree to any settlement, compromise or discharge ofsuch Third Party Claim that the Indemnifying Party may recommend and that, byits terms, discharges the Indemnitee and its Affiliates from the full amount ofLiability in connection with such Third Party Claim; provided, however,that, without the consent of the Indemnitee, the Indemnifying Party shall notconsent to, and the Indemnitee shall not be required to agree to, the entry ofany judgment or entry into any settlement that (i) provides for injunctiveor other non-monetary relief affecting the Indemnitee or any of its Affiliatesor (ii) does not include as an unconditional term thereof the giving of arelease from all Liability with respect to such claim by each claimant orplaintiff to each Indemnitee that is the subject of such Third Party Claim.

###  

### (c)                                  Anyclaim by an Indemnitee on account of an Indemnifiable Loss which does notresult from a Third Party Claim (a “Direct Claim”) will be asserted bygiving the Indemnifying Party reasonably prompt written notice thereof, statingthe nature of such claim in reasonable detail and indicating the estimatedamount, if practicable, and the Indemnifying Party

 

56

----

 

### will have a period of 30 days within which to respond to such DirectClaim.  If the Indemnifying Party doesnot respond within such 30-day period, the Indemnifying Party will be deemed tohave accepted such claim.  If theIndemnifying Party rejects such claim, the Indemnitee will be free to seekenforcement of its rights to indemnification 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 or against any other Person, theamount of such reduction, less any costs, expenses or premiums incurred inconnection therewith will promptly be repaid by the Indemnitee to theIndemnifying Party, but in any event not later than 30 days after receipt of suchreduction by the Indemnitee.  Upon makingany indemnity payment, the Indemnifying Party will, to the extent of suchindemnity payment, be subrogated to, and the Indemnitee shall provide theIndemnifying Party a written assignment of, all rights of the Indemniteeagainst any third party (including any insurer) in respect of the IndemnifiableLoss to which the indemnity payment relates; provided, however, that (i) theIndemnifying Party will then be in compliance with its obligations under thisAgreement in respect of such Indemnifiable Loss and (ii) until theIndemnitee recovers full payment of its Indemnifiable Loss, any and all claimsof the Indemnifying Party against any such third party on account of saidindemnity payment is hereby made expressly subordinated and subject in right ofpayment to the Indemnitee’s rights against such third party.  Without limiting the generality or effect ofany other provision hereof, each such Indemnitee and the Indemnifying Partywill duly execute upon request all instruments reasonably necessary to evidenceand perfect the above-described subrogation and subordination rights, andotherwise cooperate in the prosecution of such claims at the direction of theIndemnifying Party.  Nothing in this Section 9.2(d) shallbe construed to require any party hereto to obtain or maintain any insurancecoverage.

###  

### (e)                                  Afailure to give timely notice as provided in this Section 9.2 will 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 prejudiced as a result of such failure.

 

**ARTICLE XTERMINATION AND ABANDONMENT**

 

**10.1.**                     **Termination.**

 

### (a)                                  ThisAgreement may be terminated at any time prior to the Closing Date by mutualwritten consent of the Seller Parties and the Buyers.

###  

### (b)                                 ThisAgreement may be terminated by the Seller Parties or the Buyers if the Closingcontemplated hereby shall have not occurred on or before December 31, 2005(the “Termination Date”); provided, however, that the right toterminate this Agreement under this Section 10.1(b) will not beavailable to any party whose failure to fulfill any obligation under thisAgreement has been the cause of, or resulted in, the failure of the Closing tooccur on or before such date.

 

57

----

 

### (c)                                  ThisAgreement may be terminated by the Seller Parties or the Buyers if (i) oneor more courts of competent jurisdiction shall have issued an order, judgmentor decree permanently restraining, enjoining or otherwise prohibiting theClosing, and such order, judgment or decree shall have become final andnonappealable or (ii) any Law shall have been enacted by any GovernmentalEntity which prohibits the consummation of the Closing.

###  

### (d)                                 ThisAgreement may be terminated by the Buyers if there shall have been a materialbreach of any representation or warranty, or a material breach of any covenantor agreement of the Seller Parties hereunder, which breach would, individuallyor in the aggregate, be reasonably likely to have a Material Adverse Effect andsuch breach has not been cured by the Seller Parties within 30 Business Daysafter the Seller Parties have Knowledge of such breach.

###  

### (e)                                  ThisAgreement may be terminated by the Seller Parties if there shall have been amaterial breach of any representation or warranty, or a material breach of anycovenant or agreement of the Buyers hereunder, which breach would prevent,materially delay or materially impair the Buyers’ ability to consummate thetransactions contemplated by this Agreement and such breach has not been curedby the Buyers within 30 Business Days after the Buyers have Knowledge of suchbreach.

###  

### (f)                                    ThisAgreement may be terminated by the Buyers as contemplated in Section 7.11(b).

###  

### (g)                                 ThisAgreement may be terminated by the Seller Parties or the Buyers in accordancewith the provisions of Section 7.16.

###  

**10.2.**                     **Procedure and Effect of Termination.**  In the event of termination of this Agreementand abandonment of the transactions contemplated hereby by either the SellerParties or the Buyers pursuant to Section 10.1, written notice thereofshall forthwith be given by the terminating party to the other parties and thisAgreement shall terminate and the transactions contemplated hereby shall beabandoned, without further action by any of the parties hereto.  If this Agreement is terminated as providedherein:

 

### (a)                                  Noneof the parties hereto nor any of their respective trustees, directors,officers, Affiliates, as the case may be, shall have any Liability or furtherobligation to the other parties or any of their respective trustees, directors,officers or Affiliates, as the case may be, pursuant to this Agreement, except (i) thatnothing herein shall relieve any party from Liability for any material breachof any representation, warranty, covenant, or agreement of such party containedin this Agreement and (ii) that Sections 7.2(b), 7.3, 7.8, 10.2, 11.1,11.2, 11.4 through 11.6, and 11.8 through 11.10 and 11.12 through 11.15 shallsurvive such termination; and

###  

### (b)                                 Allfilings, applications and other submissions made pursuant to this Agreement, tothe extent practicable, shall be withdrawn from the Governmental Entity orother Person to which they were made.

 

58

----

 

**ARTICLE XIMISCELLANEOUS PROVISIONS**

 

**11.1.**                     **Amendment and Modification.** Subject to applicable Law, this Agreement may be amended, modified orsupplemented only by written agreement of the Seller Parties and the Buyers.

 

**11.2.**                     **Waiver of Compliance.** Except as otherwise provided in this Agreement, any failure of any ofthe parties to comply with any obligation, covenant, agreement or conditionherein may be waived by the party entitled to the benefits thereof only by awritten instrument signed by the party expressly granting such waiver, but suchwaiver or failure to insist upon strict compliance with such obligation,covenant, agreement or condition shall not operate as a waiver of, or estoppelwith respect to, any other failure.

 

**11.3.**                     **Survival.**

 

### (a)                                  Therepresentations and warranties of the Seller Parties contained herein or in anycertificates or documents delivered pursuant to this Agreement on the ClosingDate shall survive the Closing for a period of 24 months following the ClosingDate; provided, however, that (i) the representations andwarranties set forth in Section 5.10 shall survive for a period of fiveyears following the Closing Date, (ii) the representations and warrantiesset forth in Section 5.19(b) shall survive for a period of threemonths following the Closing Date, and (iii) the representations andwarranties set forth in Sections 5.2, 5.3, 5.8, 5.17, 5.19(a), 5.22 and 5.23shall survive until 90 days after the expiration of the applicable statute oflimitations (giving effect to extensions or waivers thereof; provided,however, that nothing contained in this Agreement shall be deemed torequire any of the parties to agree to any such extension or waiver).

###  

### (b)                                 Therepresentations and warranties of the Buyers contained herein or in anycertificates or documents delivered pursuant to this Agreement on the ClosingDate shall survive the Closing for a period of 24 months following the ClosingDate; provided, however, that the representations and warranties setforth in Sections 6.2, 6.6, 6.7 and 6.8 shall survive until 90 days after theexpiration of the applicable statute of limitations (giving effect toextensions or waivers thereof; provided, however, that nothing containedin this Agreement shall be deemed to require any of the parties to agree to anysuch extension or waiver).

###  

### (c)                                  Thecovenants and agreements in Article IX shall survive the Closing and shallremain in full force and effect for such period as is necessary to resolve anyclaim made with respect to any representation, warranty, covenant or agreementcontained herein during the survival period thereof, and the covenants andagreements of the parties contained in Articles II, III, VII and XI ofthis Agreement shall survive the Closing for (i) the time period(s) setforth in the respective Sections contained in such Articles, or (ii) if notime period is so specified, until 90 days after the expiration of theapplicable statute of limitations.

###  

**11.4.**                     **Notices.**  All noticesand other communications hereunder shall be in writing and shall be deemedgiven if delivered personally or by facsimile transmission, telexed or mailedby overnight courier or registered or certified mail (return receipt requested),postage prepaid, to the

 

59

----

 

parties at the following address (or at such otheraddress for a party as shall be specified by like notice; provided thatnotices of a change of address shall be effective only upon receipt thereof):

 

### (a)                                  Ifto the Seller Parties, to:

###  

Allegheny EnergySupply Company, LLC

4350 Northern Pike– 4 North

Monroeville,PA  15146-2841

Facsimile:  (412) 856-2789

Attention:  Deputy General Counsel

 

with a copy to:

 

Allegheny Energy, Inc.

800 Cabin HillDrive

Greensburg,PA  15601-1689

Facsimile:  (724) 830-5151

Attention:  President

 

and

 

Gray, Plant,Mooty, Mooty & Bennett, P.A.

500 IDS Center

80 South EighthStreet

Minneapolis, MN55402

Facsimile:  (612) 632-4388

Attention:  Joseph T. Kinning, Esq.

 

### (b)                                 Ifto PSI Energy, to:

###  

PSI Energy, Inc.

1000 East MainStreet

Plainfield,IN  46168

Facsimile:  (317) 838-2111

Attention:  Kay E. Pashos, President

 

with a copy to:

 

Cinergy Corp.

139 East FourthStreet

Cincinnati,OH  45202

Facsimile:  (513) 287-4090

Attention:  Douglas C. Taylor, Vice President, CorporateDevelopment

 

and

 

60

----

 

Skadden, Arps,Slate, Meagher & Flom LLP

1440 New YorkAvenue, N.W.

Washington,DC  20005

Facsimile:  (202) 393-5760

Attention:  Pankaj K. Sinha, Esq.

 

### (c)                                  Ifto CG&E, to:

###  

The Cincinnati Gas &Electric Company

139 East FourthStreet

Cincinnati,OH  45202

Facsimile:  (513) 287-4031

Attention:  Gregory C. Ficke, President

 

with a copy to:

 

Cinergy Corp.

139 East FourthStreet

Cincinnati,OH  45202

Facsimile:  (513) 287-4090

Attention:  Douglas C. Taylor, Vice President, CorporateDevelopment

 

and

 

Skadden, Arps,Slate, Meagher & Flom LLP

1440 New YorkAvenue, N.W.

Washington,DC  20005

Facsimile:  (202) 393-5760

Attention:  Pankaj K. Sinha, Esq.

 

**11.5.**                     **Assignment; No Third-Party Beneficiaries. **This Agreement and all of theprovisions hereof shall be binding upon and inure to the benefit of the partieshereto and their respective successors and permitted assigns, but neither thisAgreement nor any of the rights, interests or obligations hereunder may beassigned by any party hereto, including by operation of Law without the priorwritten consent of the other party, nor is this Agreement intended to conferupon any other Person except the parties hereto any rights or remedieshereunder.  Without limiting thegenerality of the foregoing, no provision of this Agreement will create anythird-party beneficiary rights in any employee or former employee of the SellerParties or any of their Affiliates (including any beneficiary or dependentthereof) in respect of continued employment or resumed employment, and noprovision of this Agreement will create any rights in any such Persons inrespect of any benefits that may be provided, directly or indirectly, under anyemployee benefit plan or arrangement except as expressly provided forthereunder.

 

**11.6.**                     **Governing Law**.** **This Agreement shall be governedby and construed in accordance with the Laws of the State of Indiana(regardless of the Laws that might otherwise govern under applicable Indianaprinciples of conflicts of law) as to all matters, including,

 

61

----

 

without limitation, matters of validity, construction,effect, performance and remedies, except where Indiana Law is preempted byfederal Law, in which event federal Law shall govern.

 

**11.7.**                     **Counterparts.**  ThisAgreement may be executed and delivered (including via facsimile) in two ormore counterparts, each of which shall be deemed an original, but all of whichtogether shall constitute one and the same instrument.

 

**11.8.**                     **Interpretation.**  The article andsection headings contained in this Agreement are solely for the purpose ofreference, are not part of the agreement of the parties and shall not in anyway affect the meaning or interpretation of this Agreement.

 

**11.9.**                     **Schedules and Exhibits.**  All Exhibits and Schedules referred to hereinare intended to be and hereby are specifically made a part of this Agreement.

 

**11.10.**              **Entire Agreement.** This Agreement, the Confidentiality Agreement and the AncillaryAgreements including the Exhibits, Schedules, documents, certificates andinstruments referred to herein or therein, embody the entire agreement andunderstanding of the parties hereto in respect of the transactions contemplatedby this Agreement.  There are norestrictions, promises, representations, warranties, covenants or undertakings,other than those expressly set forth or referred to herein or therein.  This Agreement and the Ancillary Agreementssupersede all prior agreements and understandings, whether written or oral,between the parties with respect to such transactions other than theConfidentiality Agreement.

 

**11.11.**              **Bulk Sales or Transfer Laws.** The Buyers acknowledge that the Seller Parties will not comply with theprovision of any bulk sales or transfer Laws of any jurisdiction in connectionwith the transactions contemplated by this Agreement.  The Buyers hereby waive compliance by theSellers with the provisions of the bulk sales or transfer Laws of all applicablejurisdictions.

 

**11.12.**              **Consent to Jurisdiction.** Each party hereby irrevocably submits to the exclusive jurisdiction ofthe federal or state courts located in the State of Indiana in any action, suitor proceeding arising out of or relating to this Agreement or the AncillaryAgreements or any of the transactions contemplated hereby or thereby, provided,however, that such consent to jurisdiction is solely for the purposereferred to in this Section and shall not be deemed to be a generalsubmission to the jurisdiction of said courts or in the State of Indiana otherthan for such purpose.  Each party herebyirrevocably waives, to the fullest extent permitted by Law, any objection thatit may now or hereafter have to the laying of the venue of any such action,suit or proceeding brought in such a court and any claim that any such action,suit or proceeding brought in such a court has been brought in an inconvenientforum.

 

**11.13.**              **Waiver of Jury Trial.** **THE PARTIES HERETO HEREBYIRREVOCABLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY AND ALL RIGHT TOTRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THISAGREEMENT OR THE ANCILLARY AGREEMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATEDHEREBY OR THEREBY.**

 

**11.14.**              **Waiver of Consequential, Etc. Damages****. ****NOTWITHSTANDING ANYTHING TO THECONTRARY IN THIS AGREEMENT, EXCEPT TO THE EXTENT RESULTING FROM ANY THIRD PARTYCLAIM OR FROM FRAUD OR WILLFUL MISCONDUCT, THE BUYERS SHALL NOT BE LIABLE**

 

62

----

 

**TO THE SELLER PARTIES, NORSHALL THE SELLER PARTIES BE LIABLE TO THE BUYERS, FOR ANY EXEMPLARY, PUNITIVE,SPECIAL, INDIRECT, CONSEQUENTIAL, REMOTE OR SPECULATIVE DAMAGES (INCLUDING,WITHOUT LIMITATION, ANY DAMAGES ON ACCOUNT OF LOST PROFITS OR OPPORTUNITIES) RESULTINGFROM OR ARISING OUT OF THIS AGREEMENT OR THE ANCILLARY AGREEMENTS OR THETRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.**

 

**11.15.**              **Specific Performance****.**  Theparties hereto agree that irreparable damage would occur in the event any ofthe provisions of this Agreement were not to be performed in accordance withthe terms hereof and that prior to the Closing, the parties will be entitled tospecific performance of the terms hereof in addition to any other remedies atlaw or in equity.

 

**11.16.**              **Change of Structure.** Notwithstanding anything in this Agreement to the contrary, (a) if,with respect to Buyers Required Regulatory Approvals, all required IURCapprovals with respect to PSI Energy have not been obtained by November 20,2005, and all required FERC and SEC approvals have been obtained by November 30,2005, then, subject to the satisfaction of the other conditions contained in Article VIII,CG&E alone will acquire the Wheatland Facility pursuant to this Agreementand all references in this Agreement to “Buyers” shall be deemed to refer toCG&E only (and not PSI Energy) and PSI Energy shall have no further rightsor obligations under this Agreement, or (b) if, with respect to BuyersRequired Regulatory Approvals, all required IURC approvals and FERC Approvalshave been obtained, but all required SEC approvals under the Holding CompanyAct for CG&E have not been obtained by November 30, 2005, then,subject to the satisfaction of the other conditions contained in Article VIII,PSI Energy alone will acquire the Wheatland Facility pursuant to this Agreementand all references in this Agreement to “Buyers” shall be deemed to refer toPSI Energy only (and not CG&E) and CG&E shall have no further rights orobligations under this Agreement. Notwithstanding the foregoing, the Seller Parties acknowledge that,prior to November 20, 2005, the Buyers shall have sole discretion toallocate the ownership of the Acquired Assets and the Assumed Liabilitiesbetween the Buyers (including by allocating 100% of the Acquired Assets andAssumed Liabilities to one Buyer) provided the Buyer Required RegulatoryApprovals necessary for Closing the transaction with the selected allocationhave been received by November 20, 2005. In the event the Buyers determine, and give written notice pursuant to Section 7.17,that either PSI Energy or CG&E shall acquire 100% of the Acquired Assetsand Assumed Liabilities, all references in this Agreement to “Buyers” shall bedeemed to refer to the one applicable Buyer (and not the other Buyer) and theother Buyer shall have no further rights or obligations under thisAgreement.  The parties hereto agree touse their Commercially Reasonable Efforts to amend this Agreement and theAncillary Agreements if necessary to reflect any revised transaction structurediscussed in this Section 11.16.

 

**11.17.**              **Certain Approvals.** The parties hereto agree that in the event FERC approval under section 203of the Federal Power Act, in form and substance sufficient to satisfy therequirements of Section 8.2(h), is received on or before December 20,2005, and FERC approval under section 205 of the Federal Power Act is notreceived by the Buyers on or before December 29, 2005, then FERC approvalunder section 205 of the Federal Power Act shall no longer be deemed to bea Buyers Required Regulatory Approval (and thus shall no longer be deemed toconstitute a condition to the Closing) and, subject to the satisfaction of theother conditions contained in Article VIII, the Closing shall occur on December 30,2005; provided that, in no

 

63

----

 

event shall the Closing occur if, prior to December 30,2005, the FERC has issued an adverse order with respect to the filing made bythe Buyers under section 205 of the Federal Power Act.

 

**[Remainder of this page isblank. Signature page follows.]**

 

64

----

 

IN WITNESS WHEREOF, the Seller Parties and the Buyershave caused this Agreement to be signed by their respective duly authorizedofficers as of the date first above written.

 
| **BUYERS:**                                      | **SELLER PARTIES:**                                          |
|--------------------------------------------------|--------------------------------------------------------------|
| ** **                                       | ** **                                                   |
| PSI  ENERGY, INC.                                | ALLEGHENY  ENERGY SUPPLY  COMPANY, LLC                       |
|                                             |                                                         |
| By:                                              | /s/  Kay Pashos                                              |   |   |
|                                             | Name:  Kay Pashos                                            | By: | /s/John  P. Campbell |   |
|                                             | Title:  President                                            |   | Name:  John P. Campbell |
|                                             |                                                         |   | Title:  Vice President |
|                                             |                                                         |   |   |
|                                             |                                                         |
| THE  CINCINNATI GAS & ELECTRIC  COMPANY | ALLEGHENY  ENERGY SUPPLY  WHEATLAND GENERATING FACILITY, LLC |
|                                             |                                                         |
|                                             |                                                         |
| By:                                              | /s/  Gregory C. Ficke                                        |   | By: | /s/  John P. Campbell |   |
|                                             | Name:  Gregory C. Ficke                                      |   | Name:  John P. Campbell |
|                                             | Title:  President                                            |   | Title:  Vice President |
|                                             |                                                         |
|                                             |                                                         |
|                                             | LAKE  ACQUISITION COMPANY, L.L.C.                            |
|                                             |                                                         |
|                                             |                                                         |
|                                             | By:                                                          | /s/  John P. Campbell |   |
|                                             |                                                         | Name:  John P. Campbell |
|                                             |                                                         | Title:  Vice President |
|                                                  |                                                              |  |  |  |  |  |  |

 

----

 

**EXHIBIT A**

 

**ASSIGNMENT AND ASSUMPTION AGREEMENT**

 

ThisASSIGNMENT AND ASSUMPTION AGREEMENT (this “Agreement”) is made effectiveas of the      day of             ,2005, by and among PSI Energy, Inc., an Indiana corporation (“PSIEnergy”), and The Cincinnati Gas & Electric Company, an Ohiocorporation (“CG&E” and, together with PSI Energy, collectively, the“Buyers”), and Allegheny Energy Supply Wheatland Generating Facility,LLC, a Delaware limited liability company and a wholly owned subsidiary of AESC(“Wheatland LLC”), Lake Acquisition Company, L.L.C., a Delaware limitedliability company and a wholly owned subsidiary of AESC (“Lake LLC”),and Allegheny Energy Supply Company, LLC, a Delaware limited liability company(“AESC” and, together with Wheatland LLC and Lake LLC, the “Seller Parties”).

 

WHEREAS,the Seller Parties and the Buyers have entered into an Asset Purchase Agreementdated as of May 5, 2005 (the “Asset Purchase Agreement”;capitalized terms used herein but not otherwise defined herein having themeanings given to such terms in the Asset Purchase Agreement), pursuant towhich, subject to the terms and conditions set forth therein, the SellerParties have agreed to assign to the Buyers all of the Seller Parties’ right,title and interest in and to the Assumed Contracts and the Leases, and theBuyers have agreed to assume the Assumed Liabilities, in the proportions setforth on Schedule A.

 

NOW,THEREFORE, in consideration of the foregoing and the mutual covenants andagreements set forth herein, the Seller Parties and the Buyers hereby agree asfollows:

 

1.                                       Assignmentof Contracts.  Subject to the termsand conditions of the Asset Purchase Agreement, the Seller Parties herebyassign and transfer to the Buyers (in the percentages set forth on Schedule A),and the Buyers (in the percentages set forth on Schedule A) herebytake assignment of and assume from the Seller Parties, all of the SellerParties’ right, title and interest in and to the Assumed Contracts and anyother agreements or contracts included in the Acquired Assets.  Notwithstanding the foregoing, the SellerParties do not assign or transfer any agreement or contract or any claim orright or any benefit or obligation thereunder or resulting therefrom if anassignment or transfer thereof, without the consent of a third party thereto,would constitute a breach or violation thereof or impose any obligation orliability on the Seller Parties unless and until such a consent has beenobtained.

 

2.                                       Assumptionof Liabilities.  The Buyers (in thepercentages set forth on Schedule A) hereby assume and satisfy, andagree to pay, perform, fulfill and discharge when due, the Assumed Liabilities.

 

3.                                       AssetPurchase Agreement.  This Agreementis being executed and delivered pursuant and subject to the Asset PurchaseAgreement.  Nothing in this Agreementshall, or shall be deemed to, defeat, limit, alter or impair, enhance orenlarge

 

----

 

any right, obligation,claim or remedy created by the Asset Purchase Agreement.  In the event of any conflict between thisAgreement and the Asset Purchase Agreement, the Asset Purchase Agreement shallcontrol.

 

4.                                       Successorand Assigns.  This Agreement shall bebinding upon and inure to the benefit of the parties hereto and theirrespective successors and permitted assigns.

 

5.                                       ApplicableLaw.  This Agreement shall begoverned by and construed and enforced in accordance with the laws of the Stateof Indiana without giving effect to the principles of conflicts of law thereof.

 

6.                                       Counterparts.  This Agreement may be executed incounterparts, each of which shall be deemed an original, but all of whichtogether shall constitute one and the same instrument.

 

2

----

 

INWITNESS WHEREOF, the undersigned have caused this Agreement to be executed anddelivered as of this          day of                ,2005.

 
|   | PSI ENERGY, INC.                                             |
|--------|--------------------------------------------------------------|
|   |                                                         |
|   | By:                                                          |   |
|   | Name:                                                        |
|   | Title:                                                       |
|   |                                                         |
|   | THE CINCINNATI  GAS & ELECTRIC  COMPANY             |
|   |                                                         |
|   | By:                                                          |   |
|   | Name:                                                        |
|   | Title:                                                       |
|   |                                                         |
|   | ALLEGHENY ENERGY  SUPPLY COMPANY,  LLC                       |
|   |                                                         |
|   | By:                                                          |   |
|   | Name:                                                        |
|   | Title:                                                       |
|   |                                                         |
|   | ALLEGHENY ENERGY  SUPPLY WHEATLAND  GENERATING FACILITY, LLC |
|   |                                                         |
|   | By:                                                          |   |
|   | Name:                                                        |
|   | Title:                                                       |
|   |                                                         |
|   | LAKE ACQUISITION  COMPANY, L.L.C.                            |
|   |                                                         |
|   | By:                                                          |   |
|   | Name:                                                        |
|   | Title:                                                       |

 

3

----

 

**SCHEDULE A**

 

**Allocation of Contracts and AssumedLiabilities Between the Buyers**

 
| **Buyer**  | ** ** | **Percent Allocation**           | ** ** |
|------------|------------|----------------------------------|------------|
|       |       |                             |       |
| PSI Energy |       | [     ] | %(1)       |
|       |       |                             |       |
| CG&E   |       | [     ] | %          |

 

----

(1) To be determinedprior to Closing pursuant to the Asset Purchase Agreement.

 

----

 

**EXHIBIT B**

 

**BILL OF SALE**

 

ThisBILL OF SALE (this “Bill of Sale”) is made effective as of the     day of             ,2005, by Allegheny Energy Supply Wheatland Generating Facility, LLC, a Delawarelimited liability company (“Wheatland LLC”), Lake Acquisition Company,L.L.C., a Delaware limited liability company (“Lake LLC”), and AlleghenyEnergy Supply Company, LLC, a Delaware limited liability company (“AESC” and,together with Wheatland LLC and Lake LLC, the “Seller Parties”), to PSIEnergy, Inc., an Indiana Corporation (“PSI Energy”), and TheCincinnati Gas & Electric Company, an Ohio corporation (“CG&E”and, together with PSI Energy, the “Buyers”).(1)

 

WHEREAS,the Seller Parties and the Buyers have entered into an Asset Purchase Agreementdated as of May 5, 2005 (the “Asset Purchase Agreement”;capitalized terms used herein but not otherwise defined herein having themeanings given to such terms in the Asset Purchase Agreement) providing for,subject to the terms and conditions set forth therein, the sale, assignment,conveyance, transfer and delivery by the Seller Parties to the Buyers of theAcquired Assets.

 

NOW,THEREFORE, in consideration of the foregoing, and for other good and valuableconsideration, the receipt and sufficiency of which are hereby acknowledged,the Sellers hereby sell, assign, convey, transfer and deliver (or cause to besold, assigned, conveyed, transferred and delivered) to the Buyers (in thepercentages set forth on Schedule A) all of the Seller Parties’respective rights, title and interests in and to the Acquired Assets other thanthe Assumed Contracts, which are being assigned and transferred to the Buyerspursuant to the Assignment and Assumption Agreement of even date herewithbetween the Seller Parties and the Buyers.

 

ThisBill of Sale is being executed and delivered pursuant and subject to the AssetPurchase Agreement.  Nothing in this Billof Sale shall, or shall be deemed to, defeat, limit, alter, impair, enhance orenlarge any right, obligation, claim or remedy created by the Asset PurchaseAgreement.  In the event of any conflictbetween this Bill of Sale and the Asset Purchase Agreement, the Asset PurchaseAgreement shall control.

 

ThisBill of Sale shall be binding upon the Seller Parties and their successors andpermitted assigns and shall inure to the benefit of the Buyers and theirrespective successors and permitted assigns.

 

ThisBill of Sale shall be governed by and construed and enforced in accordance withthe laws of the State of Indiana without giving effect to the principles ofconflicts of law thereof.

 

----

(1) Note that if PSI Energy or CG&E acquires100% of the Acquired Assets, then this Bill of Sale will be revised to removethe entity that is not acquiring any of the Acquired Assets.

 

----

 

ThisBill of Sale may be executed in counterparts, each of which shall be deemed anoriginal, but all of which together shall constitute one and the sameinstrument.

 

INWITNESS WHEREOF, the undersigned have caused this Bill of Sale to be executedand delivered as of this       day of               ,2005.

 
|   | ALLEGHENY ENERGY  SUPPLY COMPANY,  LLC                      |
|--------|-------------------------------------------------------------|
|   |                                                        |
|   | By:                                                         |   |
|   | Name:                                                       |
|   | Title:                                                      |
|   |                                                        |
|   |                                                        |
|   | ALLEGHENY ENERGY  SUPPLY WHEATLAND GENERATING FACILITY, LLC |
|   |                                                        |
|   | By:                                                         |   |
|   | Name:                                                       |
|   | Title:                                                      |
|   |                                                        |
|   |                                                        |
|   | LAKE ACQUISITION  COMPANY, L.L.C.                           |
|   |                                                        |
|   | By:                                                         |   |
|   | Name:                                                       |
|   | Title:                                                      |

 

Acknowledged and acceptedas of this

     dayof              ,2005.

 
| PSI ENERGY, INC.                                |
|-------------------------------------------------|
|                                            |
| By:                                             |   |   |
| Name:                                           |
| Title:                                          |
|                                            |
|                                            |
| THE CINCINNATI  GAS & ELECTRIC COMPANY |
|                                            |
| By:                                             |   |   |
| Name:                                           |
| Title:                                          |

 

2

----

 

**SCHEDULE A**

 

**Allocation of Assets Between theBuyers**

 
| **Buyer**  | ** ** | **Percent Allocation**           | ** ** |
|------------|------------|----------------------------------|------------|
|       |       |                             |       |
| PSI Energy |       | [     ] | %(2)       |
|       |       |                             |       |
| CG&E   |       | [     ] | %          |

 

----

(2) To be determinedprior to Closing pursuant to the Asset Purchase Agreement.

 

----

 

**EXHIBIT C**

 

**FORM OF DEEDS**

 

**ThisInstrument Was Prepared By:**

 

Gray Plant Mooty

500 IDS Center, 80 South8th St.

Minneapolis, Minnesota  55402-3796

Attention:  John D. Giudicessi, Esq.

 

**AfterRecording, Mail To:**

 

Cinergy/PSI

1000 East Main Street

Plainfield, Indiana  46168

Attention:  John B. Scheidler, Esq.

 

**SendSubsequent Tax Bills To:**

 

Cinergy/PSI

1000 East Main Street

Plainfield, Indiana  46168

Attention:  Tax Department

 

**[SUBJECT TO FORMATTING REVISIONSTO CONFORM**

**WITH LOCAL RECORDING REQUIREMENTS]**

 

**SPECIAL WARRANTY DEED**

 

THISINDENTURE is made as of this **[    ]**day of **[          ]**,2005 from **[ALLEGHENY ENERGY SUPPLY WHEATLANDGENERATING FACILITY, LLC/LAKE ACQUISITION COMPANY, L.L.C.]**, a Delaware limited liability companyhaving its principal place of business at 4530 Northern Pike – 4 North,Monroeville, Pennsylvania 15146-2841 (“Grantor”), to PSI ENERGY, INC.,an Indiana corporation having its principal place of business at 1000 East MainStreet, Plainfield, Indiana 46168 (“PSI”), and THE CINCINNATI GAS &ELECTRIC COMPANY, an Ohio corporation having its principal place of business at139 East Fourth Street, Cincinnati, Ohio 45202 (“CG&E” andcollectively with PSI, “Grantee”), as tenants in common as moreparticularly set forth below.   **[Grantor is formerly known as West Fork LandDevelopment Company, LLC, a Delaware limited liability company.]**

 

WITNESSETH,that Grantor, for and in consideration of the sum of Ten Dollars ($10.00) andother good and valuable consideration in hand paid by Grantee, the receiptwhereof is hereby acknowledged, by these presents does DEMISE, RELEASE, ALIENAND CONVEY FOREVER unto (i) PSI and its successors and assigns, anundivided fifty percent (50%) interest as tenant in common and not as jointtenant with rights of survivorship and (ii) CG&E and its successorsand assigns, an undivided fifty percent (50%) interest as tenant in common andnot as joint tenant with rights of survivorship, in and to all of that certainreal estate, situated in the County of Knox and State of Indiana, which realestate is more particularly described on **Exhibit A**attached hereto, together with, all and singular, all the estate, right, title,interest, claim or demand whatsoever of Grantor, either in law or equity, of,in and to (i) the easements, rights of way, servitudes and otherhereditaments and appurtenances thereunto belonging, or in anyway appertaining,and the reversion and reversions, remainder and remainders, rents, issues andprofits thereof, (ii) allbuildings, structures, fixtures and other improvements located thereon and (iii) thestreets adjacent thereto (collectively, the “Property”), subjectto the matters set forth in **Exhibit B**

 

----

 

attached hereto (the “PermittedEncumbrances”): TO HAVE AND TO HOLD the Property, unto Grantee, and each oftheir respective successors and assigns forever.

 

AndGrantor, for itself, and its successors, does covenant, promise and agree, toand with Grantee and each of their respective successors and assigns, that,except for Permitted Encumbrances, it has not done or suffered to be done, anything whereby theProperty is, or may be, in any manner encumbered or charged, except as hereinrecited; and that Grantor WILL WARRANT AND DEFEND the title to the Property tosaid Grantee and their respective successors and assigns, against the lawfulclaims and demands of all persons claiming through or under the said Grantor or its predecessor corporations by merger,consolidation, change of name, etc., except for the PermittedEncumbrances.

 

[Signature Page Follows]

 

2

----

 

INWITNESS WHEREOF, Grantor has caused its name to be signed to these presents bythe undersigned authorized signatory as of the day and year first abovewritten.

 

 
|                                                                                                                                                                                                                                                                             | Grantor: | **[ALLEGHENY  ENERGY SUPPLY WHEATLAND GENERATING FACILITY, LLC/LAKE ACQUISITION COMPANY,  L.L.C.]**, a Delaware  limited liability company |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------|--------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                             |     |
|                                                                                                                                                                                                                                                                             |     |
|                                                                                                                                                                                                                                                                             | By:      |                                                                                                                                       |   |
|                                                                                                                                                                                                                                                                             | Name:    |                                                                                                                                       |   |
|                                                                                                                                                                                                                                                                             | Title:   |                                                                                                                                       |   |
|                                                                                                                                                                                                                                                                             |     |
| STATE OF                                                                                                                                                 |     |
|                                              SS |     |
| COUNTY OF                                                                                                                                           |     |
|                                                                                                                                                                                                                                                                                  |          |                                                                                                                                            |  |  |  |  |

 

I, the undersigned, a Notary Public in and for theCounty and State Aforesaid, do hereby certify that                                               personally known to me to be                          of **[ALLEGHENY ENERGY SUPPLY WHEATLANDGENERATING FACILITY, LLC/LAKE ACQUISITION COMPANY, L.L.C.]**, a Delaware limited liability company,and personally known to me to be the same person whose name is subscribed tothe foregoing instrument, appeared before me this day in person andacknowledged that he signed and delivered such instrument, in his capacity as                of such limited liability company, as his free and voluntary act and as thefree and voluntary act and deed of such limited liability company, for the usesand purposes therein set forth.

 

Given under my hand and official seal this          day of                ,2005.

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

 

----

 

**EXHIBIT A**

 

**LEGAL DESCRIPTION OF THE PROPERTY**

 

[TO BE ADDED FROMFINAL TITLE COMMITMENT]

 

**TaxIndentification Numbers:  [            ]**

 

----

 

**EXHIBIT B**

 

**PERMITTEDEXCEPTIONS**

 

[To BeReasonably Agreed Upon by the Parties Prior to Closing]

 

----

 

**EXHIBIT D**

 

**CERTIFICATIONOF NON-FOREIGN STATUS**

 

Section 1445of the Internal Revenue Code of 1986, as amended, provides that a transferee ofa U.S. real property interest must withhold tax if the transferor is a foreignperson.  For U.S. tax purposes (includingsection 1445), the owner of a disregarded entity (which has legal title toa U.S. real property interest under local law) will be the transferor of theproperty and not the disregarded entity. To inform the transferee that such withholding of tax is not required uponthe disposition of a U.S. real property interest by Allegheny Energy SupplyCompany, LLC, a Delaware limited liability company (“Transferor”), theundersigned hereby certifies the following on behalf of Transferor:

 

1.         Transferoris not a foreign corporation, foreign partnership, foreign trust,  or foreign estate (as those terms are definedin the Internal Revenue Code of 1986, as amended, and the Income TaxRegulations thereunder);

 

2.         Transferoris not a disregarded entity as defined in Treasury Regulation §1.1445-2(b)(2)(iii);

 

3.         Transferor’sU.S. employer identification number is              ;and

 

4.         Transferor’soffice address is                                  .

 

Transferorunderstands that this certification may be disclosed to the Internal RevenueService by the transferee and that any false statement contained herein couldbe punished by fine, imprisonment, or both.

 

Underpenalties of perjury, I declare that I have examined this certification and tothe best of my knowledge and belief it is true, correct and complete, and Ifurther declare that I have authority to sign this document on behalf ofTransferor.

 

 
|                                                                                                                                                                                        | By:    |   |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|
|                                                                                                                                                                                        | Name:  |
|                                                                                                                                                                                        | Title: |
|                                                                                                                                                                                        |   |
| Dated:                             ,  2005 |   |
|                                                                                                                                                                                        |   |

 

----